Moving Target

With less than six months to go before Target leaps into Canada, all eyes are on the U.S. discounter’s latest pilot project: CityTarget. The stores not only represent a step-change in Target’s strategy; they provide the company with early learning opportunities that may shape its Canadian operations.

CityTargets are designed to meet the needs of urban shoppers. They operate off smaller footprints, thereby providing  flexibility for site location.

At 80,000 to 110,000 square feet, the stores are much closer in size to the acquired Canadian Zellers stores than they are to Target’s standard 130,000-square-foot stores in the U.S. Also, CityTargets’ downtown locations are more typical of the urban environment the retailer will face in Canada. Zellers stores, after all, are mainly found in city shopping strips and malls.

A good example of CityTarget in action is the Seattle location.The store is located one block from the renowned Pike Place Market in the city’s shopping core.

With residential units sitting on top of the store and a number of key bus stops located just outside, CityTarget is likely to gain customers from three key target groups: downtown residents, commuters and tourists. 

The store is three floors tall and perched on a sloping street, which puts the food section in the basement. Because it’s self-contained, the food and grocery area feels like a traditional supermarket, with the range of products to match.

As Target rolled out its expanded food and grocery service to almost 1,100 U.S. stores this year, it developed extensive ranges of both branded and private labels.

At CityTarget, the company’s fresh meat offerings are particularly impressive and cleverly located in the main fresh foods area (since many shoppers build their meals around protein). Many of the products are designed for quick shopping missions, but they can also serve customers planning bigger hauls.

With limited backroom space at Seattle’s CityTarget, workers carefully manage their products with multiple facings to economize space.

The retailer’s private label tiers are prominently displayed, including its cheaper “Market Pantry” line and more premium offerings such as “Sutton and Dodge.”  These are supported by a broad range of national brands.

While the lack of counters and specialty-food aisles creates a more sterile shopping experience, CityTarget’s functional layout makes buying easy. In such a high-traffic location, this strategy should serve the retailer well: The majority of its customers will be basket shoppers who value speed over wide selection.

Overall, CityTarget is an impressive new format and likely to broaden the retailer’s appeal. While the range of products has been downsized, all of Target’s food and non-food categories are well covered. Customers should expect product changes over the next few months as the retailer gains a better understanding of shopper preferences in downtown locations.

Given the similarities between CityTarget and Zellers’ sites in terms of store size and location, Target executives will likely incorporate the lessons they learn from these smaller-format stores into the Canadian stores.

The initial response to the pilot stores has been positive, but the success of this format ultimately depends on whether Target can make the model work financially.

Both occupancy and operational costs are likely higher than their standard format, while the average amount customers spend per trip will be lower. The strength of Target’s food offer will be the main factor driving traffic to the store on a regular basis.