Target mixes in urban, tests P2004 - prototype store for 2004 - Company Profile

DSN Retailing Today, Oct 27, 2003 by Laura Heller

NATIONWIDE DSNRT REPORT--Target's fall opening schedule was less than typical as the chain opened two-story, subterranean and urban stores and unveiled its newest prototype, one that represents the company's look leading into 2004.

Located in Greeley, Colo., nearly two hours north of Denver by car, the prototype features new adjacencies meant to improve cross-shopping opportunities and an expanded food department intended to increase frequency of visits.

The prototype, dubbed "P2004" has four prominent departmental changes. Consumable baby supplies such as diapers, wipes and formula have been grouped with furniture, car seats, layette and toddlers in an area called Baby World. Consumers simply running in to pick up their regular supply of baby items may be more likely to buy a bigger ticket or higher-margin accessory.

Entertainment Central regroups sporting goods and toys with home electronics and media. And seasonal items are now being merchandised together rather than both near the entrance and in a separate department. In perhaps the biggest change of all, food, consumables and other convenience items (including pharmacy) are greatly expanded to include approximately 80% of the merchandise found in a supercenter.

"In the past you could get a salty snack and beverages--things you might want while watching a baseball game," said Bill Dreher, senior research analyst, Deutsche Bank. "Now, you're going to be able to buy enough to actually cook a meal; this will increase the frequency of shopping."

Target customers currently average 12 visits per year, per guest and according to Dreher, "this should help accelerate comps and help narrow the difference with Wal-Mart."

"With this new prototype, Target will be able to capture more of those incremental shopping trips, taking it away from the food retail sector," he said. "And hopefully, consumers will pick up something like a piece of apparel, one of the highest-margin things in the store, and the dramatically improved adjacencies will likely drive stronger sales and bettor margins."

The majority of these components will be rolled out to all new stores and remodels in 2004. Target typically averages 100 new units and 80 remodels a year.

But Target also peppered its thrice-annual store opening schedule with some other new or atypical formats, unusual for a chain known to be devoted to a standard layout. But the company has also been known to adjust its format to fit an unusual space, especially in dense urban environments--an effort reflected in this October store-opening schedule.

The company's White Plains, N.Y., store shares a main entrance--mall-style--with other retailers, including a newly opened Circuit City store. An escalator transports customers down to the discount store, which sits below ground. Located just outside of Manhattan, the area has a decidedly urban flavor.

In Chicago, Target opened a bilevel store in a former Montgomery Ward site. Just a mile west of Wrigley Field, the store is also a little more than a mile away from one of the company's busiest location nationally. The unit will likely alleviate some of the pressure on this store, which suffers greatly from out of stocks and negative customer impressions due to the heavily trafficked and stressed location.

The new store features many of Target's latest merchandising initiatives. Men's apparel, hardware and automotive have been downsized to reflect the chain's increased focus on its dominant female-oriented categories. Food has been greatly expanded to include nearly 40 "doors" of refrigerated or frozen items, including the chain's proprietary Archer Farms brand. A private label line of candy is neatly merchandised on hang tags alongside a selection of gourmet chocolates, and the company makes use of new merchandising in the form of white baskets hung on shelf backing to hold small items such candy and travel items in several areas throughout the store.

Home electronics has some slight changes, with more interactive displays for digital cameras and PDA's shifted to locked hang tags in an adjoining aisle. The store boasts an entrance on each level, with the second floor rear entrance accessible from a parking garage featuring a Starbucks and a separate register bank. Men's' and boys apparel, sporting goods, home electronics, hardware, infants and toddlers, and food are on this level.

The first or ground floor has housewares, soft home, women's and girls' apparel, accessories, cleaning supplies and health and beauty aids, which include an expanded assortment of ethnic hair care products for the store's city location. The pharmacy has been renamed the Wellness Center, with lower counters where customers can site for consultations.

Dressing rooms have been significantly upgraded with larger, more private rooms and nicer finishes. The jewelry department has a new look with fewer rotating cases on countertops and brighter backing inside cases. Product is displayed with more of a department store look, something the chain seems to be moving more towards in general.