Technology Strategy
for Target Grocery Guests
“We have done an enormous amount of research with our guests on what would make their
Target experience better, and we consistently heard feedback that if we would have fresh food
as part of our product offering it would just make their life much easier and convenient.”
~Annette Miller, Target Senior Vice President, Grocery
K
nowing that customers want fresh food is not the same as
knowing how to align the category with a company’s
longstanding brand. With a brand position as an upscale
discounter of high-quality, on-trend merchandise, Target
Corporation faces several challenges when trying to align meat and
potatoes with fashion and design.
The phrase Grocery Tech had inhabited Target Senior Vice
President, Grocery Annette Miller’s mind like a mantra since the
day she was charged with leveraging technology to grow the
company’s grocery business. Her long experience with food sales’
notoriously low margins—at least when compared with designer
clothing—convinced her that she needed an ongoing strategy for
harnessing technology to identify shoppers’ needs, and help meet
those needs, while reducing costs.
One immediate problem: with so many tools and apps and
enterprise systems designed to exploit efficiencies, it could take
months to analyze opportunities and map a strategy.
The Client
The
Merchandising
Mission
of Target is to drive profitable
market share growth by
fulfilling its brand promise―
Expect More.
Pay Less.
Target is dedicated to
providing guests with the right
merchandise mix, from
everyday commodities and
grocery offerings to trend-right
home and apparel lines.
Minneapolis-based Target Corporation (NYSE:TGT) serves guests at
more than 1,700 stores in 49 states nationwide and at Target.com.
Target is a publicly-owned, U.S.-based company with a global
presence including a headquarters location in India and sourcing offices around the world. In
addition, the company operates a credit-card segment that offers branded proprietary creditcard products and rewards programs.
2013 CoMIS Case Competition
Joseph Moses wrote this case under the supervision of Professors Ravi Bapna and Norman Chervany for the 2013
CoMIS Case Competition. Content is a hybrid of historical fact and fiction designed for instructional purposes only
and is not intended to illustrate effective or ineffective handling of managerial situations by anyone named in the
case. Copyright 2013, Carlson School of Management
2013 CoMIS Case Competition
2
The Case Question
How can Target better leverage technology to define and implement a food strategy so guests
think of Target first when it comes to food?
Target Stores
The first Target store opened in 1962 in the Minneapolis suburb of Roseville, Minnesota with a
focus on convenient shopping at competitive discount prices. Today, Target currently is the
second largest general merchandise retailer in America, with Target.com consistently being
ranked as one of the most-visited retail Web sites.
Target provides quality merchandise at attractive prices in clean, spacious and guest-friendly
stores. Target opens new stores three different times each year—in March, July and October—
to align with the major merchandising themes: Spring, Back-to-School, and Holiday.
New stores range in size from approximately 127,000 square feet to approximately 174,000
square feet. Additionally, Target
operates 37 distribution facilities
nationwide.
Since 1946, the corporation has
given 5 percent of its income to
communities through grants and
a variety of programs like Take
Charge of Education®. Today,
that giving equals more than $3
million a week, largely directed
towards supporting education.
As one of America's largest
corporate philanthropists,
volunteerism is at the heart of
Target. Since Target first opened
its doors, team members,
retirees, family and friends have
volunteered millions of hours to
community projects. Additional
information regarding Target’s
commitment to corporate
responsibility can be found at
Target.com/HereForGood.
Price
Product
Economy
Target
Grocery
Guest
Trends
Presentation
Brands
Annette Miller reviewed the
history of Target and crafted a
schematic of variables impacting Target grocery guests
(Fig. 1).
Marketing
Competitors
Guest
Experience
Fig. 1. Variables impacting Target
Grocery Guests
2013 CoMIS Case Competition
3
Annette’s Synthesis: The Typical Target Guest
Target works to appeal to a range of guest segments, including women, kids, teens, young
singles and families. Guests are young, well-educated, moderate-to-better income families who
live active lifestyles. The median age of Target guests is 41, the youngest of major discount
retailers. They have a median annual income of $63,000. 56 percent have completed college
and 44 percent have children at home. As Figure 2 illustrates, Target retail sales, exclusive of
credit-card revenues, break down into five major categories (Fig. 2).
Fig. 2. Target retail sales. Does not include credit-card revenues.
25%
Household
Essentials
18% Home
Furnishings
& Décor
19% Food &
Pet Supplies
2011 Sales
Mix: $68.5
Billion
19%
Hardlines
19% Apparel
&
Accessories
Much of the information Annette had about customers came from existing enterprise systems
and initial strategies for reaching retail customers with grocery promotions:
•
Mobile marketing: Apps for iPhone, iPad and Android, and at m.target.com make it easy
for guests to find the nearest Target store, check product availability, view a Weekly Ad,
create shopping lists, and refill prescriptions from mobile devices.
•
Digital coupons: Target.com/grocery offers weekly coupons and specials on food
products available at SuperTarget and select Target stores. Guests can opt-in to the
mobile coupon program on their PC at Target.com/mobile, on their phone at
m.target.com or by texting COUPONS to 827438 (TARGET).
2013 CoMIS Case Competition
4
•
Guest ID tracking: records everything guests buy, based on credit card or coupon
information, surveys, mail-in refunds, calls to customer help, pushed e-mails or Web site
visits.
•
Predictive analytics: behavioral research into shopping habits and personal habits that
help the store understand how guests think.
Annette drew up Target’s digital capabilities (Fig. 3) and app/store functionalities (Fig. 4)—
which were well-established for retail operations—in order to analyze how they could be
further leveraged for growth in the grocery business.
Fig. 3. Target’s Digital Capabilities
Supply Chain
Management
Mobile Web
Data
Warehousing
Andriod App
WiFi in all Stores
Predictive
Analytics
Iphone App
In-Store
Customer
Relationship
Management
Ipad App
Text Alerts
Point-of-Service
Applications
2013 CoMIS Case Competition
5
Fig. 4. App/Store functionalities
Barcode
Scanner
Store Finder
•Price check
•Product details
Voice
Recognition
Mobile
Coupons
Weekly
Circular
Mobile
Giftcards
TargetLists
•See if item is in
stock
•Prescription refills
•iPhone Passbook
Product
Reviews
Inventory
tracking
Mobile
Pharmacy
App/Store
Functionalities
QR Codes
2013 CoMIS Case Competition
6
To round out her analysis of strategies past and present, Annette also reviewed three recent
research findings that suggested paths to the future.
1. Demand for self-service is growing
Retailers in North America are expected to boost their use of self-service checkouts 8% to 10%
in the next few years, according to IHL Consulting Group. A recent survey conducted for NCR
Corp (a developer of self-service systems) by the NPD Group found that a majority of U.S.
consumers believe the technology improves their store experience. About two-thirds of
respondents want self-service options when shopping – and that figure is even higher for
younger customers: nearly half of shoppers under 45 want self-service.
Source: http://www.stores.org/STORES%20Magazine%20January%202012/man-vs-machineaff
2. Mobile Apps Pair Supply with Demand
Grocery retailers are using technology worldwide. Minneapolis-based SuperValu began testing
a mobile app with Cub Foods stores in November 2011 and equipped all SuperValu grocery
chains with apps in February. One of the main features of the app is that it aggregates weekly
ads for shoppers in one place. To find local deals, consumers can type in their ZIP code or use
their device’s GPS to store nearby locations to the app. Consumers can also create lists to help
manage their in-store shopping experience.
Source: http://www.mobilecommercedaily.com/2012/03/06/supervalu-speeds-up-grocery-shopping-viamobile-app break a mostly shop for groceries in person.
3. Store Staff Still Matter
PWC research states store staff can make or break a shopping experience.
Customers still mostly shop for groceries in person. They value help from staff—and not just
behind the register anymore. Promotions and high-tech gadgets draw customers in, but good
experiences with staff all over the store are what keep customers coming back. Despite the rise
of e-commerce, 98% of grocery shopping is done in store. As the #1 influencer, staff quality
impacts where customers shop one-third of the time. Twenty-one per cent of customers do not
repurchase after a bad experience. Rude employees have a permanent impact on business.
Source: http://www.pwc.com/us/en/advisory/customer-impact/publications/2013-retail-grocery-
experience-radar.jhtml
About Target’s Grocery Offerings
To answer the question, What technologies had Target yet to fully exploit in the service of
guests and financial targets? Annette reflected on the cornerstone of any retail strategy:
product.
Since the former Dayton Co. department store chain opened its first Target discount store on
May 1, 1962 in Roseville, Minnesota, food—namely snacks and beverages—has been a part of
the mix. In 1995, the first Super Target opened in Omaha, Neb., featuring a full-scale grocery
store attached to a Target general merchandise store. Today there are about 250 Super Targets
nationwide, with each store averaging around 174,000 square feet. In 1995, Target also
debuted Archer Farms as its first food private label.
2013 CoMIS Case Competition
7
PFresh: Easy Access to More Fresh Offerings
In 2008, Target began testing a new format selling a more extensive line of grocery within the
four walls of a conventional Target store, dubbed PFresh [P for prototype]. The first test stores
were in Minnesota, and were remodeled to add about 10,000 square feet of food space to the
conventional 135,000 square foot traditional Targets. No departments were eliminated, but
home, apparel and accessories areas were shrunk. PFresh stores carry 90% of the product
categories that are carried in Super Targets.
An expanded selection of the freshest grocery offerings is available at many general
merchandise Target stores. At these PFresh Target locations, guests find a selection of fresh
produce, meat and baked goods – making fresh groceries even more accessible and convenient.
The expanded food layout includes an open-market grocery feel, creating an environment that
provides greater ease of food shopping.
A Lot of Choices for Very Little
New food additions include items that are on Target guests’ shopping lists every week, such as
bananas, strawberries, and bagged lettuce, ground beef, chicken, pork, and baked goods such
as breads and pastries. Stores also offer a dairy and frozen assortment, snacks, and beverages.
Do More in One Store
The expanded fresh food selection offers families grocery shopping in the convenience of their
local Target store. Busy guests can pick up a handpicked selection of fresh food during midweek
shopping trips.
Analysts cited in Grocery Headquarters say PFresh remodels have resulted in a 6% lift in sales.
Currently Target has five Own-Brand lines
Archer Farms. Premium, affordable brand that offers more than 1,600 items
including premium groceries, fine cooking ingredients, organics, baked goods,
frozen pizzas and appetizers. Contain zero grams of added trans fat.
Market Pantry. More than 1,900 items offering the quality of national brands
at 10% to 30% lower price. Includes cheese, milk, eggs, flour, sugar, cereal,
poultry, seafood, fruit snacks, and granola bars.
Sutton & Dodge. This brand offers a full menu of marbled, premium quality
USDA Choice Angus beef, naturally aged and hand-trimmed.
Wine Cube. Boxed wine available in varietals—many of them award-winning—
including Merlot, Chardonnay, Cabernet Sauvignon, Pinot Grigio, Sauvignon
Blanc, Cabernet/Shiraz blend, Red Sangria, White Sangria and Riesling.
2013 CoMIS Case Competition
8
up & up. More than 900 non-grocery products span more than 40 categories,
including household cleaners, paper goods, health care, beauty, baby and
personal care.
Target’s Positioning Statements
In order for all Target personnel to literally be on the same page, Target distributes the
following statements to individuals who are assigned to speak about grocery with the media.
Positioning statements are designed to promote distinctive features or benefits of the Target
brand.
•
It’s easy to stock-up on grocery essentials at Target throughout the week. Every Target
location carries milk and bread.
•
New Target PFresh stores also include an expanded food section where busy moms can
fulfill their weekly shopping lists. Guests will find an expanded food layout that includes
bananas and bagged lettuce, fresh meat and bakery-fresh breads. PFresh stores are
convenient for midweek fill-in trips, too, offering pre-packaged, pre-priced fresh foods
that let busy families and household chefs “grab and go.”
•
In 2006, SuperTarget became a certified organic produce retailer, offering superior
quality and prices on produce such as strawberries, apples, and other fruits and
vegetables. As a certified organic produce retailer, SuperTarget adheres to strict U.S.
Department of Agriculture (USDA) compliance guidelines to provide the best in organic
produce for its guests.
•
Target Wine Cubes are not only a perfect low-cost answer for everyday wine lovers, but
many varietals have won numerous awards:
•
A gold medal and Judge’s Choice for the Cabernet/Shiraz Wine Cube at the January
2010 San Francisco Chronicle Wine Competition
•
A platinum medal for the Riesling Wine Cube at the March 2010, New World
International
•
A gold medal for the Sauvingnon Blanc Wine Cube at the January 2009 San Francisco
Chronicle Wine Competition
The Media Release
With Annette’s analysis and Target positioning strategy in mind, Shawn Gensch, Senior Vice
President, Marketing, asked for a media release that would make the strategy accessible to the
public at the first of the year, 2013. Fox Business New picked it up and ran with the following
article (on the next page):
2013 CoMIS Case Competition
9
Target wants to make groceries fashionable
With a new ad campaign that carries its "cheap chic" message to food and other necessities, Target
Corp. (TGT) is crossing a divide that was once only used to sell apparel.
Ads, which began airing at the start of the year, feature models swathed in white against white
backgrounds holding everyday grocery items in a tongue-in-cheek take off of high-fashion
advertisements.
The ads, which air on television as well as a myriad of other venues, are meant to build awareness and
sales.
"We want to surprise and delight our guests and bring them into stores," said Target spokeswoman
Jamie Bastian.
Target would not disclose cost of the ad campaign, which will run all year [2013], including four new
spots on the Golden Globes, but the price is easily in the millions of dollars. Aside from television, the
ads will take the form of newspaper inserts, radio spots, and digital films that will appear online.
The ads are the latest salvo for Target's grocery efforts that consist of the PFresh program which was
started in October 2008 at general merchandise stores with a test run. Target had been offering snacks,
beverages and candy, and under the PFresh program [the P stands for prototype] it remodeled stores to
add such foods as fresh produce, meats and baked goods. Target has 1,100 stores under the PFresh
model and 250 SuperTargets that offer a full range of groceries.
Groceries may seem an odd pairing with a retailer that goes out of its way to play up its fashion acumen.
The merchandise also tends to carry low margins--at least a lot less than a Missoni dress, a limited
edition line that Target famously carried. But groceries are neck-in-neck with apparel at the retailer,
according to its latest annual report. Food, along with pet supplies, and apparel each accounted for 19%
of sales. Two years before food and pet supplies were 16% of sales to apparel's 20%.
Carrying groceries "is a good strategy because driving traffic and building the basket is the name of the
game," said Jim Hertel, a supermarket consultant with Willard Bishop LLC.
And the ad campaign is like a cherry on the cake, said Thom Blischok, chief retail strategist for Booz &
Co. "Target is beginning to extend its banner promise of chic to food," Mr. Blischok said. "They're making
food shopping aspirational--in advertising I believe it is the first of its type."
Target could use the positive play. The retailer recently appeared to strike a sour chord in a holiday
merchandising partnership with Neiman Marcus. Designers were engaged to produce one-of-a-kind gifts
that appeared in both stores, but just days before Christmas Target marked the products down by 50%.
The food business proved its mettle in December, though, with the category having the strongest
comparable-store sales--amid single-digit increase. Apparel experienced a low single-digit increase.
Source: http://www.foxbusiness.com/news/2013/01/11/target-builds-grocery-business-with-unusualads/#ixzz2KRLHJFlh
2013 CoMIS Case Competition
10
Focusing Questions for Case Competitors
The following topics and questions are derived from Annette’s initial analysis and define a
number of perspectives that could be used in making recommendations. The list is not meant
to be exhaustive, and you may decide that others should be considered instead or in addition.
Most importantly, students must determine which topics and questions are most critical to the
case and prioritize them accordingly.
Price: What factors drive price the most in food? How does the grocery guest assess value?
How can Target remain competitive on price while upholding its commitment to freshness?
How can technologies be used to manage, control, or alter factors that drive food prices?
Product: What food categories drive consumer loyalty? How can Target continue to
differentiate its assortment while ensuring guests find the brands they expect? What role
should regionalized food preferences or specialties play in each store’s food assortment? How
can technologies be used to analyze customer decision making and habits?
Presentation: How can Target use presentation to better highlight its upscale offerings as well
as its commitment to freshness? How does presentation drive sales in food? How can
technology enhance food presentation?
Marketing: How can Target leverage technology to better execute its food strategy? What
additional marketing tools should be employed?
Guest Experience: How does the grocery guest shop? What do guests value in a grocery
shopping experience? How can Target use technology to improve the shopping experience in
food?
Competitors: Who are the competitors in the grocery industry? Whom should Target
benchmark? How are these competitors leveraging technology?
Brands: Do brands matter in all food categories? How can Target better position its ownedbrand items alongside national brands? Which external brands complement Target’s brand
image? How can technology be leveraged to capture and analyze guest preferences?
Trends: What are some current and emerging trends in retail grocery technology? Which trends
complement Target’s brand image?
Economy: What economic factors will drive change in the grocery industry? How can social
media or other technologies assist in predictive analytics for grocery shopping?
Target Executives
Annette Miller
Shawn Gensch
Senior Vice President,
Merchandising, Grocery
Senior Vice President,
Marketing