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Target’s Next Target: 'Convenience' Stores

Small-format push to include 'hundreds' of locations
Photograph courtesy of Target Corp.

MINNEAPOLIS — Target Corp. is honing its small-format strategy and will open new, 6,000-square-foot locations resembling convenience stores, the company said in an update on its initiatives for 2020 and beyond. Other plans include the addition of fresh grocery and adult beverages to its Drive Up and Order Pickup services and ongoing remodeling and supply-chain transformation.

The retailer will begin exploring sites for stores that are roughly half the size of its smallest small-format store, it said, to reach more customers in urban neighborhoods and on college campuses.

“While our smallest location today is about 12,000 square feet, our team is exploring sites half that size,” said John Mulligan, Target's executive vice president and chief operating officer, on the 2020 financial community meeting and fourth-quarter and full-year 2019 earnings call March 3. “Think a convenience store-sized box nestled in neighborhoods across Chicago, Philadelphia or New York or right in the middle of a bustling campus, with still enough space to offer the categories guests want from Target, like beauty, home and grab-and-go food. This design could open up hundreds of additional site options to serve even more people in new trade areas and to give guests a nearby pickup spot for online orders. We expect to sign the first lease of this kind this year, with plans to open and test in 2021. And just like our first small formats, we'll go slowly at first to learn and refine before moving faster.”

In 2019, Target’s small-format stores contributed more than $1 billion in total sales. Following the opening of its 100th small-format store last year, 2020 will be the biggest year to date for Target’s small-format expansion, with nearly three dozen new stores.

Target will also add Drive Up to dozens of small-format stores across the country that have parking lots, the company said.

In 2019, Drive Up experienced sales growth of more than 500%, and Order Pickup saw sales growth of nearly 50%. In 2020, Target will enhance these same-day services by offering an assortment of fresh grocery and adult beverage items via Order Pickup and Drive Up fulfillment. Customers will be able to order popular grocery items such as milk, eggs, bananas and more, and have their items delivered directly to their car or ready to pick up at a Target store.

Testing will begin in Minneapolis-area stores in the spring, with plans to expand this service to nearly half of Target’s stores in time for the holiday season. Target also will test adult beverage fulfillment through Order Pickup and Drive Up in more than 100 stores in Florida and Oregon this spring, with plans to expand the service to the majority of its stores by the holiday season.  

Target said it is on track to complete more than 1,000 store remodels nationwide by the end of 2020, with plans to remodel about 300 this year. As part of its remodel program, Target will test a new front-of-store layout that creates a welcoming first impression, with fresh flower displays, a curated product assortment and lower walls and counters to make it easier for team members to help customers.

To increase the speed and efficiency of its supply chain, Target will begin scaling robotics solutions that have been in development and testing across the country to replenish inventory to hundreds of stores by the summer of 2020. The technology enables precise sorting on an aisle-by-aisle basis to help store team members fill shelves easier and faster while reducing back-room inventory. In 2020, Target also will open new warehouses near key markets, including New York and Southern California, to more efficiently replenish stores in high-volume areas, it said.

“Target is winning in the marketplace because of our differentiated investment strategy, durable financial model and our team’s incredible work in reinventing the Target run to deliver a shopping experience like nothing else in retail,” said Brian Cornell, chairman and CEO of Target. “As we look to 2020, we’ll continue to elevate our popular same-day services and expand our ambitious small-format and remodel programs to create an even easier and more convenient experience that inspires our millions of guests to keep shopping Target in new and different ways.”

Minneapolis-based Target has more than 1,860 stores in the United States.

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