Target (TGT) will further penetrate America's cities, roll out full grocery departments to more stores, invest in its REDcard savings rewards programs, and nurture its trendy-discounter edge with hip new merchandising programs like the Shops at Target, its executives told investors this week.
At the company's annual meeting, the management team also addressed shareholder complaints; among them, that Target was taking sides in the "culture wars" by selling gay pride T-shirts.
Although a "slow and uneven economic recovery" has challenged low- and moderate-income shoppers, the cheap-chic discounter, which celebrated its 50th anniversary last month, generated "the largest comp-store sales increase in more than six years" during the first quarter, CEO Gregg Steinhafel told shareholders. And its 3% comp-store sales growth in fiscal 2011 was its "strongest annual performance since 2007," he said.
The $69 billion chain has set its sights on growing to $100 billion in sales by 2017, and it's evolving on several tracks to reach that goal:
Target is opening 20 to 25 new stores this year and expanding grocery departments to more units. In March, Target completed the remodels of 100 stores, bringing to 900 the number of Target stores currently offer the expanded food department, which includes fresh produce, fresh packaged meat and pre-packaged baked goods, as well as dry and frozen offerings. The retailer expects to remodel about 200 more stores this year with the fresh food layout.
The retailer is also counting on converting more shoppers to Target REDcard holders. The card offers users a 5% discount on all purchases. "This year, penetration [of cardholders] jumped to 11.6% ... mostly coming from debit-card holders, which increased spending with us 50% once they received their cards," Steinhafel said.
Target is wooing urban shoppers with the expansion of its CityTarget format to cities such as Los Angeles, San Francisco and Seattle.
And it's taking its brand overseas for the first time with the first Target Canada next spring.
Beyond store expansion, the company will continue to put the Tar-zhay in Target, building on its trendy, proprietary designer partnerships, such as the Missoni fashion line -- demand for which crashed its websitelast year.
The Shops at Target, for one, which launched last month, reflects the company's partnership with independent specialty stores to offer affordable versions of those boutiques' products.
The series of revolving shops -- one if Target's biggest merchandising programs in years -- currently includes five chosen for their uniqueness, design-acumen or tony sheen -- from The Webster, a Miami-based boutique that sells luxury apparel, footwear and jewelry, to Boston's Polka Dog Barkery, a canine accessories shop. A new set of featured shops will take their place in September.
Today, Target's "10 owned and exclusive brands generate $1 billion each, and are a reason why guests shop at Target," Steinhafel said.
But the retailer will continue to employ "thoughtful risk taking" to grow its business, Steinhafel said. It's an approach one shareholder took issue with at the meeting, accusing the chain of joining the "culture wars" by selling gay pride T-shirts. The shirts raised money for a group working to defeat a gay marriage ban in Minnesota.
Target would better serve the interest of shareholders by "not getting involved in the hot button, cultural issues," the shareholder said.
7 Ways Stores Get You to Make an Impulse Purchase
Target Talks Growth, Groceries and Gay Pride at Annual Meeting
Stores pull together color-coordinated items in matching or complementary hues as part of a thematic display designed to spark impulse purchases and multiple sales.
A retailer will spotlight a spring-themed bathroom display, for example, grouping blue, yellow and green shower curtains, bath towels, a rug and bath mat "so that it makes a really nice statement," Steve Ryman, the former vice president of home for both Sears and Kmart (SHLD), who now runs retail consultancy Ryman Consulting, tells DailyFinance.
The display is so nice that a shopper who's in the department simply to buy some new shower hooks suddenly thinks, "'It's time to refresh my bathroom -- and I can do it for $25!' -- and they throw it all in their cart," he says.
Everything from pineapples and palm trees to owls and peace signs have at one time or another captured the imagination of the American consumer -- prompting them to shell out cash for all manner of merchandise sporting the motif du jour.
Often a trendy motif starts at the high end, "then filters its way down to every store in the nation," Ryman says.
When a look is at the height of its popularity, retailers know shoppers are under its odd spell -- but only for a limited time. So while the going's good, they conjure up store displays that enshrine the motif, often featuring "totally unrelated products," Ryman says.
Accordingly, a shopper might find they've brought home a pineapple-themed wreath, bath accessory, doormat and candle.
Retailers use "punitive pricing promotions" to spark impulse sales, says Mark Cohen, professor of marketing in the retailing studies department of Columbia University's business school, and a longtime retail veteran who was the former CEO of Bradlees and Sears Canada and has held positions at the Gap (GPS) and Lord & Taylor. Such promotions include buy one and save 20%, buy two and save 30%, buy three and save 50% type sales.
Stores trick shoppers into thinking, "'the more you buy, the more you save' -- without regard to how much you actually need," Cohen says. "Consumers love these deals, which in fact reward their impulsive behavior."
Call it retail theater: Stores hire well trained and bubbly marketing experts to draw you to their product demonstrations by staging tempting, multi-sensory experiences.
The seduction begins with the overall look and feel of the demo area, with a display that "catches your eye," Ryman says.
Then stores further hook shoppers with food and drink. So a browser sampling, say, a new cheese cutter, is also fed "cheese and sausage, and at the same time they're selling you the cheese cutter, they're selling you knives, six new wine glasses and a bottle of wine," Ryman says. "Retailers maximize the sale by putting together as much related product as they can."
So the now semi-tipsy shopper who didn't even think he needed a cheese cutter has not only purchased that implement, but all the other accouterments, too.
Out with the old, in with the new: Stores send this message to shoppers by playing up new merchandise -- even when its newness is dubious -- by showcasing the goods in a fresh setting, prompting shoppers to make an unplanned purchase.
Retailers highlight presentations of current-season clothing, for example, "which by virtue of fashion, silhouette, or features and benefits, makes last season's merchandise appear to be dated or obsolete," Cohen says. "It plays to a customer who doesn't want to be considered behind the times, without regard to whether or not this new merchandise is actually better or truly different. This is why new season merchandise is invariably different in the way it's colored/packaged and presented so as to make last year's version less attractive." Retailers know that "new and engaging, if only by way of packaging, promotes impulsive buying," Cohen says.
And with consumer packaged goods like cereal, stores can accomplish the same thing "merely through the use of the word 'new' on a package, insinuating the importance of what is typically an insignificant reformulation."
Stores will also try to coax an unplanned purchase from a shopper's planned purchase, a common ploy at electronics chains. Brent Shelton, a spokesman for money saving shopping site FatWallet.com, tells DailyFinance, "Electronic accessories such as cables, as well as extended warranties, are two common up-sells."
"At many electronics stores, if you're purchasing a big-ticket audio-visual item like an HDTV, computer or home theater system, one retail tactic is to try to get you to buy over-priced audio-visual cables -- HDMI, USB adapters, connectors, Monstercables, etc. -- [as well as] speakers, remotes," he says.
These stores also push shoppers to buy extended warranties, which consumer advocates say are mostly a waste of money for a variety of reasons. For one, products rarely break within the extended warranty period, but instead after they've long expired.
What's more, "many credit cards will extend the warranty just for using their card," Shelton says. "And you should find out before swiping a big ticket item at the register."
These displays, featured in prominent areas on a store's selling floor, scream: Buy this merchandise!
Strike zones are "in-your-face, impossible-to-miss displays of merchandise that [the retailer] wants you to notice whether you're looking for something or not," Cohen says. The implicit message is, "It's new, it's special and you've got to check it out, and hopefully, [buy] it."
Executives disagreed, and Steinhafel fired back: "I can assure you that this board has our shareholders in mind... [You're taking] an unfair shot at a team that works so hard to deliver a great guest [shopper] experience."
Kathee Tesija, executive vice president of merchandising, said Target was just giving shoppers what they wanted. "We were asked by our team members and our guests to carry pride merchandise. This year, we decided to carry a limited assortment online [of gay pride T-shirts] only to address that request."
Target's website now says those T-shirts, marketed to recognize June as Gay Pride Month, had sold out, and that the inventory would not be replenished.