Target sets test of new Smarts closeout store

Discount Store News, May 3, 1993 by Richard Halverson

INDIANAPOLIS -- Target is set to open a test closeout store called Smarts as a way to recycle part of a small store it closed here Jan. 4 and to clear out merchandise that doesn't sell in its regular stores.

Smarts will open May 29 and operate only four days a week, from Friday through Monday. It will handle clearance merchandise, especially private label apparel, but also hard lines, from other Target stores but no damaged goods or vendor samples will be sold.

Since much of the apparel Target offers is its own private label, any soft lines surplus would not have much appeal to closeout chains, such as Value City, Consolidated Stores and MacFrugal's--Bargain Closeouts. Closeout chains want national brands, explained Dean Ramos, retail analyst for Dain Bosworth, Minneapolis.

Target indicated its test strategy will be to locate a Smart store in no more than the seven towns in which it operates a distribution center, Ramos said. Besides Indianapolis, which supplies the new Target Greatland stores in Chicago, Target also operates DCs in: Maumelle, Ark.; Fontana and Woodland, Calif; Pueblo, Colo.; Tifton, Ga.; and Fridley, Minn.

The test store will occupy 26,000 sq ft., or about one third, of the 79,000-sq.-ft. store on Michigan Road in northwest Indianapolis. A supervisor for Target Construction, which cleaned out the interior of the store last month, said he was unaware of what Target plans to do with the rest of e store. Target owns the building.

Target has not relocated the Michigan Road store but still operates nine stores in Indianapolis.

The standard Target prototype is 115,000 sq. ft, while a prototype designed for small markets covers 88,000 sq. ft.

The manager of Smarts is Nancy McLaughlin, who declined to comment on the new venture.

Target also is testing two Minneapolis units of an apparel only store, Everyday Hero, which measures about 33,000 sq ft. But they operate in strip mall locations, rather than in former Target stores.

As workmen mopped up the Indianapolis store shell in mid-April, Target was beginning to hire employees for Smarts who were willing to work only four days a week.

By operating only during peak selling periods, a closeout store stands a better chance of turning a profit, thanks to reduced expenses, Ramos said. Conceivably, benefit costs will be less for part-time Smarts employees, but a Target spokeswoman declined to comment on what benefits it will give the part-time Smarts employees.

Tuesday Morning, Dallas, pioneered the concept of operating only during peak selling seasons. It opens its 172 closeout stores, which specialize in upper-end giftware, only 180 days a year during four key seasons, including Christmas.

Clearance stores, of course, are a fixture in retailing. Sears and JCPenney each operate dozens of closeout stores to clear unsold merchandise from their regular stores. Even high-end department stores such as Nordstrom and Saks Fifth Avenue have opened closeout stores to dispose of surplus inventory themselves, instead of selling it to a closeout chain, such as Schottenstein Stores. The majority owner of Value City, Schottenstein specializes in high-quality closeout apparel purchased both from other retailers and directly from vendors.

In recycling a small, obsolete store into a new retail concept, Target is following the lead of Wal-Mart.

Over the past two years, Wal-Mart has converted 70 of the small stores it closed into a closeout concept called Bud's Warehouse Outlet to clear out surplus Wal-Mart store goods. In addition, Wal-Mart converted its 70,000-sq. -ft. discount store in Kirksville, Mo., into a farm-store test named Country Farms' Farm, Home and Garden Store.