Market Visit Report - Target Corp.

Minneapolis, USA
February 2011

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Summary
overview:
the goal of this report to is share with the Canadian CPG / Retail industry some observations we made during our visit to Minneapolis, MN to scope out Target and to give you an idea of what you might expect to see once this unique retailer arrives in Canada in 2013. we hope that you nd these insights useful in your day-to-day work and that you can draw inspiration from them. if you would like any more information on what you see in this report please feel free to reach us at jdoucette@salesisnotsimple.com

Minneapolis, MN - Target Town

overview:
Target is coming to Canada in 2013. If that is news to you, you have been living under a rock. SINS ventured to Minneapolis, the home of Target to check out a few stores and see what we can expect north of the border. Target is the worlds tenth largest retailer with operations solely in the United States. The move to enter Canada comes at a time when growth in US retail is difcult. Target is an exceptional retailer that makes an emotional connection with its shoppers through great products, great service and great merchandising - some of which you will see in this Market Visit Report. Enjoy the tour!

Key Facts
2009 Highlights
Sales results and prots both grew reecting the strongest retail prot in history. In Fiscal 2009 Target remained focused on initiatives to deliver a superior guest

Key Figures Fiscal 2009

2009 Sales (Millions $USD) Operating Income Net Earnings Per Share Share Price ($USD) # of Stores Employees
Year End January 30, 2009

% Change +0.6% +6.2% +15.4% +63.8%

$65,357 $4,673 $3.30 $51.09 1,740 351,000

experience, drive growth, enhance gross margin and protability, improve expense management and invest capital productively. Added the PFresh design which includes expanded fresh grocery in general merchandise stores to 108 locations including all stores in Philadelphia. Dedicated more space to trafc driving categories. Repositioned the Target PL brand as up & up in line with the Expect More. Pay Less. brand promise. Introduced the Low Price Promise to address the perceived gap vs. competitors. Opened rst three stores in Hawaii and its third store in Alaska. Store Count: General Merchandise 1,489 (+46); Super Target 251 (+12). 38 distribution centres, including 4 food distribution centres. California (244), Texas (148), Florida (126), Minnesota (73) and Illinois (86) make up 40% of stores. Promoted a limited-time-only fashion collection by Anna Sui offering high-end design at low prices. Merchandise Split: Household Essentials 23%, Hardlines, 22%, Apparel & Accessories 20%, Home Furnishings & Decor 19%, Food & Pet Supplies 16%. Loyalty programs offered through Target Visa and Target card (REDcards). Named one of the Top 25 North American Companies for Leaders by Fortune. Supports the community by consistently donating (since 1946) 5% of income toward education, the arts, social services and volunteerism.

2010 Priorities
Intensifying the commitment to make Target the place to shop, the place to work
Source: Target Stores Inc. Annual Report 2009

and the place to invest. Expand the PFresh concept to an additional 350 stores. Revamping of merchandising in Home, Beauty, Video Games, Electronics & Shoes. Continue to evolve the store format for dense urban markets. Examine the possibilities for international expansion. Expand the mobile capabilities and solutions available, providing greater convenience and allowing shopping anywhere, anytime.

Target Store Formats

Three main formats:
General Merchandise:
Classic store format within the Target chain ranging from 95,000 to 130,000 square feet with a range of hardlines, softlines and a small pantry selection of groceries. Store Count: 1,381

PFresh:

The future growth format for the company, these stores are classic general merchandise stores that have been renovated to include an expanded food assortment including a selection of fresh food. Store Count: 108

Super Target:

Super Target store average 175,000 squre feet with the incremental space committed to a full service grocery store with services such as deli, fresh meat, and in-store bakery. Store Count: 251

Summary
observations:

1. Inside Target Headquarters 2. The Red Cart 3. Exclusive Products 4. Innovative Merchandising Solutions 5. Store-Wide Events 6. Focus on PFresh & Low Prices 7. A Blast From The Past 8. Canadians Already Doing Business at Target!

Inside Target Headquarters

You really get a sense of a company - its culture, its values and its spirit by visiting its headquarters. Targets headquarters is located in downtown Minneapolis and the feel in the building is youthful and vibrant - a far cry from the spartan and gloomy feeling I have had in many retailers ofces. The feeling at Target was more like what you would experience at a large advertising rm or fashion / design company. Lots of well dressed, young and happy executives wandering through the building; from its company restaurant, to the wide-open meeting space complete with town clock and replace, the company museum and a conveniently located Target store just steps away.

Main Entrance - Target Headquarters - Minneapolis, MN

Inside Target Headquarters

Spot - The Ever Present Company Mascot

Target Mission and Strong Company Values

The Target Brand - Its Greatest Asset

The Red Cart

The famous red cart at Target is almost as fashionable as its shoppers - call it the Mini Cooper of shopping carts. Red is the dominant color in a Target store and it gives the environment a unique feel. Speaking of the environment, these carts are fully recyclable with old carts nding their way back to the store as merchandise including bright red bowls for your do. How neat is that? Zellers carts were red too. Somehow Target just does it better.
Fully Recyclable Shopping Cart

Exclusive Products

Most people put their Swiffer away in a closet before their guest arrive but maybe not Target shoppers. With this limited edition, exclusive Swiffer collection in Target red, one might be tempted to leave it discretely in the corner - invoking questions from jealous clean freaks. Where did you get that?. Tarzhay of course! This end aisle display dominated the household cleaning section and could not be missed. A great initiative from P&G.

Target Exclusive Swiffer Collection

Innovative Merchandising Solutions

Target prides itself in being more of a self-service department store than a discounter. Here we see a full four foot section of the plan-ogram dedicated to helping guests nd the right product for their needs. Not sure which car seat is safest for your child? Measure them and nd out which stage they are currently in. Then nd the products for that stage smartly merchandised in color coded sections next to this information station. Need more help? No problem. Staff have 60 seconds to respond to your call from one of many service phone locations around the store.

Car Seat In-Section Information Station

Innovative Merchandising Solutions

Video games present a problem for retailers as they are a target for theft and are labour intensive to merchandise and serve shoppers from locked display cases. This simple but effective solution allows the shopper to browse both sides of the game and only requires a staff member to unlock the case once a purchase decision has been made. Anti-theft systems often have the impact of making all shoppers feel a little bit like a criminal. This solution enhances the shopping experience by removing the hovering staff member away from the situation and allowing the shopper to browse leisurely - with a probable increase in shopper conversions and sales volume.

Shopper Friendly Video Game Merchandising

Innovative Merchandising Solutions

This amazing interactive video game catalog allows the shopper to sort through game titles by game system, age rating and player rating and then provides in-depth details about the game. In the off chance Target is out of stock at this location a shopper can nd copies at a nearby store and even get a map of how to get there.

Innovative Merchandising Solutions

Target understands brands. Throughout the store you will nd these insection billboards that take up a four foot section to advertise to the shopper at the purchase decision point. This program for Archer Farms, Targets premium private label in food; appeared at the leading end of the bread section. What other retailer would dedicate this type of valuable space to brand messaging? Very few. These types of executions are not only the purview of private labels. I saw several examples of national brand billboards in-section as well. The key: the message must be worth the investment of space!

Archer Farms - Target PL - In-section Billboards

Innovative Merchandising Solutions

Sometime the best ideas are the most simple. This Play-Doh gravity feed sidewinder was doing a brisk business at the leading end of the toy section. Bright, simple and easy to load. Merchandising 101. Note that the display is nearly empty - not a regular occurrence at Target which prides itself on in-stock positions, measuring out-of-stocks once the shelf inventory falls below its presentation minimum. There may be two units on-shelf but if the presentation minimum is three units - its out-of-stock in Targets eyes. We feel the display was working as there were no out-ofstocks in the Play-Doh section of the plan-o-gram.

Play-Doh Gravity Feed Sidewinder

Store-Wide Events

Consistency is critical in building a brand. Target is the king of consistency with a common theme being pervasive across the store at any one time. Love Sweet Savings, the Valentines Day event, could be seen in almost every section of the store from candy to housewares to apparel.

Focus on PFresh & Low Prices

PFresh is the future of Target. There will be 350 more rolled out across the US in 2011. These efcient food / general merchandise models will out number Super Targets in 2011 after successfully rolling out the format in 108 stores. Targets premium feel and brand does trigger price perceptions to be be higher for Target vs. their competitors. Target is battling back with its Low Price Promise which you will nd all around the store including in PFresh.

PFresh - Low Price Promise End Aisle Signage

HABA - Low Price Promise End Aisle Signage

A Blast From The Past

I had to throw this one in my basket. This product was not a Target exclusive but it is a great t with what you expect to nd when you are shopping at Target. Unique, cool, hip and available for a limited time. If you want to try it too theres good news: Pepsi Canada has announced that it is bringing Pepsi Throwback to Canada for a limited time offer in 2011. Get it while it lasts.

Pepsi Throwback - Coming To Canada!

Canadians Already Doing Business at Target!

Why wait until 2013? This thought must have struck Liberte Foods from St. Hubert, Quebec which had a great presentation of product at Super Target. Liberte is now part of the Yoplait group. Is your product unique, hip, cool and match the Target shopper? What are your opportunities with them in the United States? How can you get a head start on your Canadian competitors?

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