Target matches its stores to where the customers are

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MINNEAPOLIS — Target Corp. believes that its smaller stores represent a big opportunity.

The retailer’s flexible format — which allows for stores that range in size from 20,000 square feet to more than 100,000 square feet — is allowing the retailer to expand into urban neighborhoods and college towns, as well into densely populated suburban communities.

Target opened five flexible format stores during the third quarter, including a store in New York City’s Tribeca neighborhood.

“We are now operating nearly 30 of these new-format stores,” says Target chairman and chief executive officer Brian Cornell. “Based on their performance, we are increasingly confident about the opportunity for Target to profitably operate hundreds of urban and flex-format stores over time, reaching new neighborhoods where consumers have a strong affinity for our brand.”

As it expands with these stores, Target is initially focused on 11 markets: New York; Boston; Washington, D.C.; Philadelphia; the San Francisco Bay area; Los Angeles; San Diego; Seattle; Chicago; Miami and Minneapolis.

The approach is allowing Target to reach Millennial shoppers where they live and work.

“By adding Target stores centrally located in dense urban neighborhoods or on college campuses we’re making it more convenient for guests to shop Target,” says Mark Schindele, the retailer’s senior vice president of properties. “For some locations, we are able to acquire new guests and provide an easier option for loyal guests to shop us more often as part of their daily routines.

“For several of Target’s college campus stores, we’re located in a mixed-use development, with retail and restaurants on the street level and housing units above, which provides college guests with a store that they don’t have to drive to and allows us to easily serve guests where they live.”

Anne Stanchfield, Target’s vice president of flexible formats and localization, notes that the retailer’s flexible-format strategy allows it to fit stores into less-traditional, smaller spaces. That creates opportunities, but also some challenges.

“We have to be really thoughtful about the merchandise mix in these stores, because they’re sometimes one-third the size of a traditional Target store,” Stanchfield says. “We focus on offering locally relevant, catered assortments to meet the needs of urban and college campus guests. We continue to listen to guests and adjust accordingly in the flexible-format environment — such as adding more of the categories they expect from Target, like apparel and home.

“Because each flexible-format store is unique, the exact merchandise offerings will vary by location. And while there are a lot of similarities in the categories we offer at these stores, we keep the guests’ needs in mind for each location when determining the assortment mix.”

Stanchfield adds that Target’s teams continue to learn lessons with each store opening that will inform decisions about future locations. And several months after a flexible-format store opens, Target reviews guest feedback and makes adjustments to product assortments.

“The Minneapolis Dinkytown store is a great example of that,” Stanchfield says. “When this store first opened we didn’t offer apparel. We immediately heard from guests they wanted some basic apparel and accessories, so we quickly added it to the assortment. This fall, we reconfigured the space at the Minneapolis Dinkytown and College Park, Va., stores to add racks with hanging apparel.

“From an operational standpoint, we’re learning and evolving how to manage stores with smaller backrooms and unique dock configurations. Having stores in downtown settings comes with operational and logistical challenges that we continue to learn from to improve efficiencies.”

Target has been expanding into urban areas for years, although initially it did so without a dedicated small-store format. For example, Target opened a large store in downtown Minneapolis in 2001, made its debut in Brooklyn, N.Y., in 2004, and opened its first Manhattan store, in the neighborhood of East Harlem, in 2010.

But in 2012 Target debuted the CityTarget format with store openings in Chicago, Seattle and the Westwood section of Los Angeles. Those first CityTarget stores targeted the same kind of markets Target is addressing now, and with similar flexibility.

For instance, the Chicago City-Target measured about 124,000 square feet, about 10% smaller than a typical Target. The Westwood store in Los Angeles, on the other hand, was located in a single-level 98,000-square-foot space formerly occupied by a Home Depot unit. That store also happened to be adjacent to the UCLA campus.

In 2014 Target debuted its smaller TargetExpress format with the opening of a 20,000-square-foot store near the University of Minnesota, in the Dinkytown neighborhood of Minneapolis.

In 2015 Target rebranded the 14 CityTarget and TargetExpress outlets it then operated, so that they simply became Target stores. The retailer is now focused on growing in dense urban, suburban and college locations, with stores tailored — both in size and in merchandise assortment — to meet local needs.



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