Target, which has been working to return to its “cheap chic” strength, is struggling with grocery sales, the Wall Street Journal reports.
The retailer is finding it particularly difficult to stay ahead of spoilage, as Target finds customers aren't coming in often enough for perishable foods. A source told the Journal that Target is experiencing perishables losses higher than the industry average.
In May, Target executives discussed that customers tend to stock up, and that “fill-in trips,” as smaller grocery runs are called, had fallen off.
Profits may not be perking up for Target's grocery strategy, but the retailer isn't giving up yet. Last year Target hired Anne Dament, who once worked closely with current CEO Brian Cornell at Safeway when he was CMO there, to head the retailer’s grocery business.
It’s not the easiest task, considering the shake-up in the grocery business overall and Target’s challenge to figure out exactly how the category fits into its strategy. And change can be difficult, as Cornell noted in May.
“Short term, it certainly has an impact on our performance in grocery and food,” he said of Target's grocery revamp. “But, as we've made the changes, the response we're seeing from the guest is very encouraging. They're recognizing the new assortment, the new brands, more local items, the fact that we have more organic and gluten-free items on our shelves.”
But the Wall Street Journal notes Target’s board of directors has been reluctant to invest in options to improve groceries after failing to generate significant returns on previous investments. Sources add that Target is now exploring other options, including moving more of its persishables business from its own food distribution centers to infrastructure partner C&S Wholesale Grocers.
Target isn’t the only general merchandise retailer struggling with grocery: Wal-Mart, which gets 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.