Target Builds Sales Volume With Food

Target’s fight against show-rooming presents instructive fodder about how one retailer has endeavored to conquer the problem.

But for food retailers there’s something more immediate going on: Target is emerging as a competitive threat in its own right because of its rapid rollout of PFresh grocery sections. Let’s see how big a threat it is.

Target got off to a slow start in 2008 by adding PFreshsections to a few of its smaller-model stores. Larger Super Targets had grocery sections earlier.
But the pace of PFresh rollouts accelerated, mainly because they could be added to the existing four walls of the store: No vast rebuilds or zoning fights were required. This stands in contrast to Walmart’s large-scale and costly replacement of smaller stores with behemoth Supercenters containing food sections. Walmart had to fight many a battle to accomplish the transformation.

Target now has food sections in well over half its 1,800 locations. Many of those locations are of about 135,000 square feet, net; about 12% of that space is now a PFresh featuring categories such as dry groceries, refrigerated, frozens, baked goods and produce. Target has also developed a strong array of private label food product ranging from the upscale Archer Farms to the value-priced up & up.

PFresh presents a tightly edited selection of fast-moving products. No effort is made to offer shoppers a full supermarket line, which means PFresh is seen by consumers as a food fill-in opportunity if they happen to be in the store anyway. Again, this contrasts with Walmart’s Supercenters, which offer a limited, but full line of supermarket products.

Target achieves more than $13 billion per year in food sales, with sales increasing as time goes on.

Many food-trade observers acknowledge that Target’s sales in the food sector are substantial but, at the same time, Target stores are thinly spread across many markets, effectively limiting PFresh’s ability to divert big proportions of sales from conventional supermarket chains.

Food-sale market shares for Target tend to range from 2% to 3% in many markets, not enough to pose a worrisome threat to incumbent food retailers.
Nonetheless, with Target’s food sales pointed upward, the threat shouldn’t be ignored altogether.

David Merrefield About David Merrefield

David Merrefield is principal of DRM Initiatives, Inc., a retailer consulting group. He is the former Vice President and Editor of trade publication Supermarket News. He is based in New York City.