Target plans to open 30 of its smaller-footprint stores this year as a part of its successful strategy to keep customers buying online and in-person.
Target isn’t the only big-box store to start thinking small, but it has a serious advantage in its efforts to keep customers coming through the door and buying as much as possible as it battles Amazon and Walmart. Over the past five years, the store has been dropping smaller-footprint stores onto college campuses and in urban neighborhoods.
Currently, Target has just under 100 of these stores, which average about a third of the square footage of a traditional store.
It seems to be working.
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According to Target, these small-format stores are the company’s most productive. In fact, the best performing store per-square-foot is its urban store located in Herald Square in Manhattan. These outposts are working so well, the company plans to open as many as 30 per year over the next few years, in contrast to only two traditional-format stores opening this year.
Know your audience.
One of the biggest benefits of a strategy like this is allows you to fine-tune who your audience is. Instead of trying to offer a little less of everything you might find in a traditional store — which is a mistake made by more than one retailer — Target has tailored each location to the needs of its specific area.
In a college town like East Lansing, Michigan, home of Michigan State University, where Target’s latest small store opened last weekend, the shelves are stocked with dorm essentials, supplies, and products college students need, along with school gear. In an urban location, the store might include items more geared toward tourists or commuters.
Having multiple types of locations mean that Target has a huge advantage over both Amazon and Walmart, which leads to the second reason they’ve been such a success.
One, two, three, easy.
With more stores closer to its customers, one-hour in-store pick up, and same-day delivery through its Shipt service, Target is making its stores the center of its delivery network, which is something neither of its main competitors can match in urban locations.
Amazon has toyed with a dozen or so physical locations, and Walmart has experimented with smaller stores, but neither has worked nearly as well as Target’s strategy. That’s at least partially because of the brand, and people’s perception.
Amazon is the place you go to order basically anything and have it shipped for free in one or two days if you’re a Prime member (which costs $119 annually). The company’s few physical stores are interesting but for most customers, the idea of walking through a cashier-less store is more intimidating than novel.
Also, about that $119 Prime membership. One-day delivery is impressive, but you know what’s even better? Same-day delivery. Oh, and Shipt is only $99. So, for $20 less, you get your stuff 24-hours faster.
I’ve never been very good at math (which is probably why I’m a writer), but that seems like a pretty good deal — especially if free delivery is your primary reason for joining Amazon Prime.
Walmart, on the other hand, sells more than any other business but is mostly known as the discount retailer found amid giant seas of concrete parking lots in the suburbs.
Target is the cool place to shop.
Target is the “cool” retailer. It actually fits in on college campuses or densely populated urban areas. It’s a place people actually go to, and that doesn’t change just because they went off to school or on vacation to a place like New York City or Los Angeles.
Target’s combination of brand appeal, proximity to its customers, and ease of shopping — whether online or in-person — has proven a killer combination against its competitors, and the results have paid off. That’s true despite the fact it had back-to-back store outages earlier this summer, and suffered a major data breach a few years ago.
Same-store sales are up over 4 percent year over year, revenue is up over 5 percent in the last quarter, and Target’s stock is up almost 33 percent this year. Online sales grew over 40 percent, and at least half of those involved either curbside pickup or same-day delivery.
I know that I said I’m not a math guy, but even I know those are solid numbers that are fueled, at least in part, by Target’s big focus on smaller stores.
Make it easy.
If you only take one thing away from this, let it be this: make it easy. Target made it easy to shop at Target (although, to be honest, the restrictive return policy could still use some work, since it’s easier to have a root canal than to return most opened items or anything without a receipt).
Make it easy for your customers to buy from you. Make it easy for them to find your locations. Make it easy for them to fit you into their life. Make it easy for them to get exactly what they need or want, and make it easy to get things quickly.
Date: July 25, 2019