We’ve only been here six months. We’re just starting,” John Morioka says, standing near the refrigerated section of a new Target store in Ottawa. It’s a cold morning in September and we’ve just finished the media tour with local reporters. The store is looking…well, shiny, ready for its grand opening tomorrow. Not a hint of its former scruffy life as a Zellers remains.
Morioka, Target Canada’s senior vice-president of merchandising, is right. Target is just starting here. After more than two years of hype, Target unveiled its first Canadian stores, in March.
With a slew more opened this fall, in Ontario, Quebec and Nova Scotia, Target is working toward a goal of 124 stores running by year’s end.
Canadians love Tar-zhay!, but complaints have been heard. A much publicized Forum Research survey this summer found only 27% are “very satisfied” with Target so far. Target Corp.’s CEO, Gregg Steinhafel, said his company needs to do a better job to “drive trips” on high-frequency items such as groceries, health and beauty.
As merchandising head, Morioka is the guy to make it happen. Target Canada’s second-ever employee, Morioka is, in fact, a company vet. The art-history major grew up in Target’s backyard of Minnesota. After a stint in luggage retail, he joined the discounter in 1994.
Morioka worked on Target’s first grocery format, SuperTarget, back in the 1990s, and, more recently, helped launch its urban store, called CityTarget. In between, he worked on a bunch of categories from home to grocery.
In a wide-ranging interview, Morioka answered Canadian Grocer’s questions about everything from how Target set up shop in Canada, to its supply deal with Sobeys, to delighting its customers, or “guests,” as company officials call them. Edited excerpts:
TELL ME ABOUT THE PLANNING STAGES OF OPENING IN CANADA.
We announced the deal to come to Canada in January 2011 and quickly put a team together. Then we started asking the questions we needed to enter Canada. Since this was our first international expansion, we engaged partners and suppliers to help us.
We talked to a lot of the big players and multinational companies in Canada, and we put together all the things we needed to consider for the launch. The list got pretty long pretty quick: What do we want to stand for? Who do we want to be? How much do we have to tailor assortment?
And then we needed to figure out how we were going to open the 124 stores in one year. This is Target’s largest single expansion in any given year, ever, and we were doing it with a brand new team, brand new systems and infrastructure, and then the remodelling process of all these [Zellers] stores…We couldn’t find a Harvard case study on what we were trying to do.
DID YOU LOOK FOR A CASE STUDY?
Yes, we did look! [Laughs.]
HOW DID SUPPLIERS HELP YOU IN THE PLANNING STAGES?
We talked to about 30 partners. The first part was, educate us on Canada from your perspective. What do you think are some of the unique nuances of your category, and how do you think our value proposition is going to play here, in Canada? What things should be different and what things can we keep. Our relationships with our key suppliers are very strong and very collaborative. They’ve really helped us through a lot of things.
GREGG STEINHAFEL, TARGET’S CEO, RECENTLY STRESSED THAT IN CANADA, TARGET NEEDS TO “DRIVE TRIPS.” DOES THAT MEAN PUSHING GROCERY AND OTHER CONSUMABLE CATEGORIES MORE? HOW WOULD YOU DO THAT?
The biggest opportunity we have in the frequency categories, or traffic-driving categories, is to clarify our value proposition. I don’t think we get credit for the pricing that we have and how competitive we are and how disruptive we are in many cases.
And with our RedCard [loyalty program] and the 5% off, it’s an added bonus. The key to many of those items is having the right items and the right value proposition. We need to be more clear from a value perspective. A lot of our focus will be to educate Canadians on that value proposition.
LET’S TALK ABOUT THE REDCARD. IN THE U.S., 19% OF PURCHASES IN YOUR STORES ARE MADE USING THAT CARD. IN CANADA, SO FAR, IT’S 2%. DO YOU ENVISION A DAY WHEN ONE IN FIVE DOLLARS SPENT AT TARGET HERE WILL BE THROUGH THE LOYALTY CARD PROGRAM?
Again, we’re only six months into this so I’m not sure I could make a prediction. Certainly we’re excited about RedCard. Before we even started, 30,000 Canadians had Target RedCards. Now we have 73,000 in Canada as well.
RedCard is the richest program in the industry relative to all the other programs that are available. You get 5% off every day, without having to collect this or that or having to redeem this or that. Once Canadians get to understand that, they’ll start to look to that program to help save money.
YOU DIDN’T BRING FRESH FOOD, SUCH AS PRODUCE, INTO CANADA, EVEN THOUGH YOU SELL THESE ITEMS IN THE U.S. WHY NOT?
Based on what I described earlier, in terms of our launch and all of the activity involved, our first priority was to open our stores as best as we could. As we got to some of the questions you have around fresh, the idea was: Can we do that with all the other things we had to do? Fresh is complex.
Our assortments are going to evolve and our strategies are going to evolve. In the U.S., we are a much different company today than we were 10 years ago, and that’s the way we’re going to be in Canada. We’re going to listen to our guests and we’ll find strategies that best meet their needs.
SO WE COULD SEE A FRESH ASSORTMENT AT SOME POINT?
That’s not off the table. We’re learning and listening and we’ll continue to consider those questions. We want to make sure we have enough data and enough evolution of how our guests are shopping our stores before we make big changes in our assortments.
WHAT KIND OF RESEARCH DID YOU DO ON THE CANADIAN CONSUMER?
We did a lot of research initially. As we talked to guests it was pretty consistent: “Bring us Target!” They wanted the experience of the stores they had visited. That has been our mantra and some of the things we focused on was making sure that we brought the elements that make Target Target.
In grocery, guests talked a lot about Target’s own brands, whether that’s Market Pantry, Archer Farms or Up & Up. We found people liked what we were doing in those spaces.
SO CANADIANS WERE FAMILIAR WITH YOUR PRIVATE LABELS?
They knew the products were something different. So whether it was the value of Market Pantry or the unique flavours in Archer Farms, the products resonated in our research and they’ve resonated in sales as well.
Plus we’ve come up with some unique flavours for Canada. For instance, in our Archer Farms chips, we have a Maple Bacon flavour and Massaman Curry flavour. And of course we have Ketchup chips.
WHY DID YOU DECIDE TO USE SOBEYS AS A FOOD SUPPLIER?
In our early days in food in the U.S. we had a warehouse partnership with Supervalu and, at the time, Fleming. So taking on a third party to help us get started in food was not new to Target.
When we came to Canada we reached out to Sobeys and had a lot of meetings with them at a high level: Strategically, are we aligned? Culturally, are we aligned? And they’ve been a strong partner in helping us get the grocery part of the store up and running.
They’re distributing to our stores and they’re helping us with some private label, Market Pantry primarily, sourcing and that side of it.
WHAT ABOUT USING METRO’S BRUNET PHARMACIES IN YOUR STORES IN QUEBEC, STARTING NEXT SPRING?
The pharmacy model is unique in Canada, with respect to the franchise agreements we have across our stores outside Quebec. (Target’s U.S. pharmacies are corporately run.)
As we started to learn more about Quebec and the uniqueness there in pharmacy, relative to even the rest of Canada, we felt like we needed some expertise in that space. The Metro-Brunet deal allows us to have instant credibility. It provides us with a partner to rely on to help us get up to speed very quickly.
WHAT ELSE ARE YOU DOING IN QUEBEC THAT’S DIFFERENT?
In grocery specifically, we’re going to be part of the Aliments du Quebec food program, which means we’re sourcing products from Quebec. We’re supporting as many of those brands as we can.
EXPLAIN HOW TARGET GOT INTO GROCERIES IN AMERICA, FROM SUPERTARGET TO P-FRESH.
Grocery is a traffic driver and it was a big opportunity to drive trips into the store. We started, with SuperTarget, in 1995. There are about 275 today. Then we looked at how we could help guests do more.
That was the idea of P-fresh: How do we take our traditional format, add grocery to it and really be that convenient fill-in so Mom can not only buy apparel and home goods and her basic commodities, but she can fill up at Target in between big grocery trips?
We started P-fresh early in the recession of 2008 and we’ve rolled it out at a pretty rapid pace.
DOES THE GROCERY STRATEGY DIFFER IN CANADA?
No, we’ve basically borrowed the same layout. We wanted to bring all the principles of P-fresh to Canada so guests can do more in one store. They can do some simple meal solutions with what we have here today, as well as get all the basics. And that’s an important part of the Target strategy back in the U.S. as well as in Canada.
WHAT GROCERIES DOES YOUR TYPICAL CUSTOMER BUY?
Mostly it’s convenience shopping and it’s that fill-in trip between the big grocery trips. But we’ve found that a lot of guests are [also] doing their entire shop.
YOUR GOAL IS TO REACH $6 BILLION IN SALES IN CANADA. DO YOU ANTICIPATE 20% OF THAT WILL BE FOOD AND PET SUPPLIES, WHICH IS YOUR U.S. PROPORTION?
The $6 billion remains our overall target. How we get to that six billion is going to be an interesting journey as we continue to learn how we can be relevant here in Canada. We don’t want to state category goals necessarily at this point.
We definitely know we need to have these categories that drive trips to the store, so that will be an important part of how we reach $6 billion. We just know we need to get better and we want to get better.
And we need to make sure that guests know all that they can do in our stores, or, as we say, “do more in one store” If they understand that, we’ll do fine.