Report: Target May Give Supermarkets 'A Run for Their Money'

COLUMBUS, Ohio - In the next five years, Target could likely become a top 10 U.S. food player if it finds the right recipe, according to a new report from global management consulting and market research firm Retail Forward.

"A Moving Target," authored by Retail Forward VP Sandy Skrovan, predicts that Target's future growth will come not only from continued new store expansion, but improving performance at existing stores. The firm expects Target to add 500 more stores and double its sales volume by 2008. Target will likely continue to increase its market share in core areas such as apparel and home, newer categories such as food, and currently under-penetrated categories including consumer electronics, decorative home improvement, toys, and sporting goods, the report says.

"Target has hit the bull's eye with its differentiated offer, winning brand strategy and merchandising strengths," Skrovan states. "The company has developed a compelling strategy and business model that allows it to co-exist in the crosshairs of archrival Wal-Mart."

In the next five years, Retail Forward expects Target to be an even bigger and more critical competitor and customer than it is today. In five years, the company's apparel business could nearly double to $15 billion, its home textile and housewares business could exceed $10 billion, and the company could become a top 10 U.S. food player -- significantly raising the bar for grocery retailing if it can find the right recipe.

According to Retail Forward, likely growth opportunities for Target exist in the following areas:

-- New Store Expansion: Enough market opportunity remains in untapped and under-penetrated geographic pockets for Target to more than double its store base in the U.S. In five years, Target could be a $65 billion retailer with more than 1,500 units.

-- Global Opportunities: At projected growth rates, Target should saturate the U.S. in the next five to 10 years. In order to sustain the lofty growth rates expected by shareholders, Target likely will need to begin exploring cross-border opportunities in the next five years. Canada seems the most likely target.

-- Extend Unique Positioning Strategy and Strengths: To drive same-store growth, Target will need to apply its trademark marketing and merchandising skills to more categories and more consumer segments.

-- Drive Traffic and Shopping Frequency: Accelerated SuperTarget expansion is expected to drive store traffic, increase shopping trips, and foster cross-shopping behavior. In a slow-growth food environment, Target will need to grow through market share incursion, attracting shoppers away from traditional food channels. "Target has its work cut out in trying to develop a stand-out food offer that is not based on driving down prices, like its supercenter predecessors. But if it can get the formula right, the food business could represent a real coup in Target's future growth potential," according to Skrovan. "It could give supermarkets a real run for their money."

-- Hone Differential Advantages to Build Customer Loyalty: To keep its guests coming back for more, Target will continue to cement relationships through initiatives like multi-channel operations, guest relationship management, and smart card technology.

Target will likely continue to raise the bar across the competitive landscape. "Expansion efforts and the extension of Target's core strengths and strategy across more categories will wreak havoc for many retailers, driving smaller, weaker players out of business and forcing consolidation and innovation among the remaining competitors," states Skrovan. "Suppliers could have as much as 10 to 15 percent or more of their business on the line with Target," she adds. "Cooperation, collaboration, and customization of brands will be key elements in working with Target -- all translating into more complex business, brands, and relationships to manage."
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