Despite disappointing sales in the grocery aisles this summer, Target (TGT) CEO Brian Cornell thinks customers will eventually come around to all the changes the retailer has been making to that side of its business.
Resetting Target’s grocery offering, a $15 billion a year business, has been a key priority for Cornell since he became CEO of the Minneapolis-based discount retailer two years ago.
The company has been looking to stand out in the ever more competitive grocery market to generate more shopper traffic. To that end, the retailer has added hundreds of new items such as organic, natural and gluten-free products as well as yogurt, and even craft beer.
But customers have not paid much attention: last month, when Target reported its first comparable sales decline in nearly two years, Cornell said,” Our No. 1 problem was traffic.” Meanwhile, Walmart, helped in part by the ongoing remodel of the fresh food areas at hundreds of stores, and improvement to its assortment with more organic food, reported a 1.6% increase
“It’s just going to take time for us to get credit for those changes,” he told a group of reporters at Target headquarters ahead of retailer’s national meeting Thursday afternoon.
Target has never intended to be a full-service grocery, instead eyeing stylish apparel and home goods, kids and baby goods, and wellness products as categories it wants to own.
But it needs a clear point of view to compete with a resurgent Walmart (WMT), the nation’s largest grocer, and chains like Whole Foods Market (WFM) and Kroger(KR) to give shoppers a reason to buy some food at Target.
To make sure customers notice its improved grocery offering, Target is putting greater emphasis on its food in its mid-week circular. And it is testing improved presentations with tweaks to flooring, lighting and store displays in Los Angeles. (Earlier in his career, Cornell had great success at Safeway with such efforts.)
In seven markets, Target has created dedicated grocery teams that work just in that department and is giving those workers more training so they can better answer customer queries.
At the same time, food is meant to be a complement to what Target customers are shopping.
“It’s not one of our signature categories nor will it be,” Cornell said. “We’re not a grocer.”
So don’t expect Target to add features like butchers, rotisserie ovens and sushi chefs as specialty grocers would. The idea is for Target to offer extras to a customer while they are buying other products at Target, like household goods or clothes or electronics.
“We’ve been able (in the past) to drive traffic without having a sushi chef,” Cornell said.
