Target Flexes New Expansion Muscles

Target Chairman and CEO Brian Cornell plans to spend $7 billion over three years on a wide range of initiatives to accelerate change, outlast competitors and establish a foundation for long-term growth.

"All across the retail industry many of our competitors are aggressively rationalizing their assets. They are closing stores, exiting markets and cutting costs just to keep their heads above water," Cornell told analysts and investors at a meeting on Feb. 28. "We've not seen this number of distressed retailers since 2009 in the Great Recession. This contraction will create opportunities for Target to pick up market share over the long term, but aggressive promotional activity will create pressure on our business in the near term."

From a rigid and consistent approach to one that is flexible and open-minded, Target has made a 180-degree turn when it comes to pursuing future growth opportunities. The philosophical shift is most evident with Target's new and accelerating flex format strategy. That strategy is part of larger effort to create what Target Chairman and CEO Brian Cornell calls a “smart network,” consisting of distribution centers, stores and digital channels.

The store component involves an emphasis on smaller locations in more densely populated urban and suburban areas and college campuses that can serve as pickup locations for online purchases while offering curated assortments and store experiences finely tuned to the community. It's a huge shift for Target, where for most of its existence there was a single store size of 135,000-sq.-ft. with little localization of merchandise. It was an efficient approach and gave Target guests a consistent experience whether they were in Miami or Seattle, whether they wanted it or not.

“We don't really have a prototype size that we look for now with stores,” said Mark Schindele, SVP of Properties at Target. “We look for what is the right location and we customize an experience that ranges from 10,000-sq.-ft. up to 130,000-sq.-ft. and anywhere in between. That's why we call our new stores flex formats because they are highly flexible and customized to the neighborhood.”

This summer and fall, Target will also open campus stores at the University of Florida in Gainesville, the University of North Carolina in Chapel Hill, the University of Southern California in Los Angeles, the University of Texas in Austin, the University of California in Irvine, North Carolina State in Raleigh and the University of Cincinnati.

“You are seeing us rapidly accelerate this format because of the positive reaction from our guests and positive results,” Schindele said. “We have a process that allows us to identify a site and then have the doors open for business within a year.”

As part of the process, Schindele's team involves merchants and operators early on to develop assortment, space allocations and operational approaches unique to different store sizes and locations.

“A key part of the flex format strategy is we curate the assortment for the neighborhood. We do a lot of research on guests, competitors, voids in the marketplace and how we can better serve the neighborhood. We then design the assortment and experience for the neighborhood,” Schindele said.

To learn more, click here for the full article in Retail Leader: " Target's BIG Bet"