In an effort to get a handle on its struggling food sales, Target Corp. is assembling dedicated grocery teams ranging from 10 to 60 employees depending on the store, the Wall Street Journal reports.
The employees will work exclusively in Target grocery sections and will receive the special training it takes to deal with packaged and fresh food and successfully interact with grocery customers, according to the report. There are also plans to increase grocery promotions and marketing efforts.
- Target has already rolled out the revamped grocery effort to about 450 stores, with another 150 to follow by October. Target declined to divulge the cost of the program or how it might impact employee wages.
Target moved more assertively into the grocery business under former CEO Gregg Steinhafel, but the effort began floundering by the time he exited under the cloud of the company’s massive 2013 data breach. The move to grocery — meant to boost traffic despite the thinner margins of that category — has spooked Target's directors, who have been reluctant to invest in options to improve grocery sales after failing to generate significant returns on previous investments.
Steinhafel's replacement, CEO Brian Cornell, spent three years as an executive at Safeway, and last year brought on Anne Dament, who worked closely with him there, to lead Target’s grocery business. But reports suggest that the retailer is finding it particularly difficult to stay ahead of spoilage, because customers aren't coming in often enough for perishable foods, leading to perishables losses higher than the industry average.
It remains true that grocery can help bring customers into the store, and lure already loyal customers more often. But it’s also true that it’s a tricky business, largely because of perishables and because the segment is fiercely competitive right now.
In fact, Target isn’t the only general merchandise retailer struggling with grocery: Wal-Mart, which generates more than half of its sales from the category, is struggling against grocery chains like Kroger and Aldi, which are beating the retailer's “always low prices” slogan, according to Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates Inc. To put it simply, the grocers are “eating [Wal-Mart’s] lunch,” Davidowitz recently told Retail Dive.
Despite its challenges with the category — and the falling grocery sales suffered in its second quarter — Target appears to believe that the upside is worth the investment it will take to boost grocery sales. But analysts seem to believe it’s an imperfect fit for the “cheap chic” retailer: The move “will probably help improve their groceries, but it doesn’t change the fact that there is friction for the shopper on what it means to go on a Target shopping trip,” Kantar Retail analyst Amy Koo told the Wall Street Journal.