The test takes off: SuperTarget cautiously picks up the pace

Discount Store News, April 1, 1997 by Laura Liebeck

It wasn't that many years ago that Target/Dayton Hudson chairman Bob Ulrich declared, "Target will get into food over my dead body."

As it turned out, Ulrich rolled over on the subject as food became too big an issue for him or Target to ignore. Also, once Wal-Mart and Kmart got going with their supercenter prototypes, Wall Street was pushing the chain hard to at least try the format, DSN has learned.

Also, the numbers got to him. Wal-Mart gets 33 shopping trips a year compared to Target and Kmart's 15. Shopping trips mean money. A traditional Target discount store doesn't compete effectively with a supercenter, Target has learned.

The chain found that it "can't compete with Meijer in Ohio," said George Rosenbaum, president of Leo J. Shapiro & Associates, Chicago. "Target runs a good discount store; it can live side by side with Wal-Mart. But that's not so when Wal-Mart or Kmart becomes a combo discount store. Food neutralizes Target's superiority."

Food, therefore, has become a priority test. Not only does Target now operate 10 SuperTarget supercenters, but the reluctant food retailer is also testing a convenience food program in its traditional discount stores that it calls The Market and bringing in popular fast-food chains to run the restaurant/foodservice part of its business (See story). Target has long offered customers a candy and snack program, which in the last few years has grown to include a wide assortment of foodstuffs, even some exclusives.

SuperTarget is still publicly a pilot program, but by the looks of the chain's development, Target is in the supercenter business to stay, even if it is so reluctantly.

When Target debuted SuperT in 1995 in Omaha, Neb., Ulrich said that the discounter would open 20 supercenters before making a final decision on the format's future. Apparently, he hasn't changed his mind. Expansion has been slow, about three to four units a year. This means that SuperT will reach that 20-unit count in about 1999. A final determination on the future of SuperT may not be available until 2000--when Wal-Mart could potentially have 1,000 Wal-Mart Supercenters in its arsenal.

SuperT will end '97 with 13 units. Target's 10 open SuperTs are located in the following cities: two in Omaha; one in Lawrence, Kan.; four in Salt Lake City and one in Orem, Utah; and one each in Mason City and Davenport, Iowa. The three SuperTs planned for 1997 are in Olathe (July) and Overland Park, Kan. (October), and in Salt Lake City.

In '98, SuperT may make a move into Atlanta, if it wins the sites. But it definitely plans to enter Independence, Mo., and add two more units to the Kansas City, Mo., market, in the midtown section and on the north side of the city, both on the Missouri side, DSN has learned.

At a recent retail analysts group meeting with Target executives, attendees failed to draw more definitive information on the future of SuperT from chain executives. Ulrich apparently stands by his original statement: SuperTarget is a test.

The stubborn insistence that the supercenter is a pilot program is classic Target.

"Target is a very conservative chain in one sense: They are never a leader; they're not innovators. They are very cautious about changing their fundamental offerings, so as a result they want to come up with the next generation of it," said Rosenbaum.

"They are trying to build the third generation supercenter. They don't want to come out with a supercenter that cuts the same pattern as Kmart or Wal-Mart. They are trying to have a store that is a quantum leap different than the Wal-Mart and Kmart supercenters because there are not going to be that many locations left for them [when and] if they decide to roll out, so they're going to have to do it with a superior store," he added. Target is employing the same game plan with. its Market test in the discount stores. Target really wants to understand how to sell convenience food, Rosenbaum said.

By most accounts, the SuperT prototype is among the best available today. It is bright, spacious and well merchandised with the design flair of the Greatland prototype--neon signs included. The company is committed to providing only the highest quality merchandise, in keeping with its image. The telltale fresh department is expertly done, well executed, well received by consumers, by most accounts, and performs well both saleswise and profitwise. The expansive fresh department with the hearthlike motif is the first merchandise area customers see when they enter the store. The department offers such traditional fare as a from-scratch bakery, service deli, meats and fish, self-serve and cut-to-order cheese, fresh squeezed juices and a typical assortment of fresh produce. The department also has some exotic skus.

Despite all this, various reports from shoppers and others don't yet tell a convincing tale that Target must be in the combo store business. It seems that Target's franchise as an upscale discounter is so strong with some consumers that the addition of food is seen as unnecessary and muddying the waters. A recent article in the Salt Lake Tribune announcing the new SuperT in Centerville, Utah, quoted one consumer as saying he liked the store but wasn't sure he would switch grocery retailers to buy his food at SuperT.