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Eataly’s Secret Formula: Founder Oscar Farinetti Will Tell You It’s a Peach

We recently had the pleasure of hearing Eataly founder Oscar Farinetti share the secrets of the development of Eataly at the Latam Retail Congress held in Sao Paulo, Brazil.  It was one of the more inspiring retail stories we’ve heard in some time, and it perfectly exemplifies the passion for food and life that is evident in their stores.

It also comes on the heels of the opening of their 32nd store around the world, in the Westfield World Trade Center in New York. Additional US locations are scheduled for Boston later this year and Los Angeles in 2017. Farinetti resists calling Eataly a chain, with each individual store reflecting the character of the country and neighborhood. While the original New York Flatiron store features nearly a 50/50 mix of market and foodservice, the World Trade Center location will likely lean more heavily on foodservice, reflecting the clientele of the area.

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Oscar Farinetti Speaking About Eataly

Oscar Farinetti Speaking About Eataly

Farinetti’s passion is evident when he speaks of the origins and aspirations of Eataly. As the headline discloses, his strategy can be condensed down to the image of a peach. At the core, is what he refers to as his “poetic target”. We would call it a mission statement. Farinetti’s aspirations were far greater than building a successful retail store. He wanted to provide employment for the country, celebrate Italy’s diversity and stem the decline of the country by focusing on the incredibly abundant assets around food and wine.  The core of all this, however, was about people and using Eataly to promote and celebrate people.

He then speaks to the many promises that Eataly wanted to deliver. As he describes each, the vision of what Eataly is about truly comes to life.  It’s about creating a wow, teaching customers and celebrating the beauty of the food. By tying product to the producer, it makes the experience more special.

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Eataly's Sixteen Promises

Eataly’s Sixteen Promises

The final product of Eataly is then very easy to imagine. Creating a unique fusion of market place, restaurant and education, seamlessly blended together.

By the way, Farinetti encourages copying just as he encourages taking photos of his presentation. Copying is a form of learning and form of flattery. What can’t be copied, however, is Farinetti’s passion. His zest for life, for reinvention, for celebration must be experienced. And it won’t be easily replicated. And this vibrancy resonates in the Eataly stores, from New York to Chicago to Sau Paulo to Milan and beyond.

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Eataly Milano

Eataly Milano

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Showcase at Sears?

Here’s a clever way to more effectively use excess big box store space:  Develop a destination section that brings together an exclusive set of unique, fashionable apparel and accessory brands that were previously unavailable in the market:  a great idea.  Surprisingly, Sears announced yesterday that they are doing just that.   In five East Coast Sears stores, the company will carve out a 10,000 sq. ft. “Showcase” section highlighting 10 brands from Latin America and Europe.   Participating brands range from familiar labels like Mango, that recently abandoned their shop-in-shop venture with JCPenney, to brands very new to the U.S. like Ilusión and Fiorentina – two intimates labels from Mexico.

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Sears Holdings/PR Newswire

Sears Holdings/PR Newswire

This all seems compelling but there are reasons to be skeptical.  The assortment is far from cohesive as Showcase will offer everything from bright Latin fashion at a low price point, to expensive and functional Danish menswear label, Jack & Jones .  It’s unclear what target customer group this is meant to attract.

Raising awareness about Showcase and convincing customers to cross the threshold into a Sears store to check it out will be another challenge.  Once they are there who will be selling these products?  Hopefully Sears will learn from JCPenney’s missteps and will have sales people and selling tools that are equipped for the job – ready to help customers understand the fit and features of these unique products.

Great retailing today requires more than outstanding products – it’s delivered through a combination of great product along with a differentiated brand position, great execution and a customer experience that connects with the target customer – and that’s after you get the customer to enter your store either physically or digitally.

Good luck Sears – We hope it is a winner – it’s been a long time since there’s been a success story to celebrate coming out of Hofmann Estates.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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Will Macy’s 100 Store Closings Help the Retailer Open a New Door?

In an effort to refocus resources on high-performing stores and improve its online shoppingexperience, Macy’s announced recently that it will close 100 stores, thus reducing the retailer’s total brick-and-mortar footprint by about 15 percent. The company will shutter these stores—whose specific locations they have yet to identify—by early 2017. macys-photo-drew-angerergetty-images-588424838

While the Macy’s announcement comes at a time when many other retailers are closing shop, this is big. For perspective, the department store will close more stores in 2017 than it has in the last six years, a period in which 90 doors closed. Also, Macy’s, despite its recent struggles, has been considered one of the better performing companies in the retail sector. This announcement sent shockwaves through the industry and will likely have other retailers reconsidering their long-term real estate strategies.

The company’s dramatic change in channel strategy is indicative of two key retail themes.

The first is that e-commerce continues to change the game faster than players heavily vested in brick-and-mortar can keep up. Foot traffic at physical stores—particularly at mall stores—continues to drop as consumers increasingly shop online. And even though Macy’s e-commerce channel has grown at a compounded double-digit rate over the past 15 years, this growth hasn’t been enough to take the pressure off declining same-store sales, which are expected to fall between 3.0 and 4.0 percent this year. Investments in improving the online shopping experience are a must, but so is retooling the physical store experience to capitalize on opportunities within the company’s real estate holdings.

A second key theme relates to vacancy. When a retailer with a behemoth footprint pulls out of a center, it leaves the mall operator with a gaping hole to fill. Operators and developers will need to rethink these former anchor spaces in new and existing centers. While the loss of a Macy’s is painful enough on its own, the cascading effect it might have on the overall viability of a center is highly significant, particularly as other anchors, like Sears and J.C. Penney, are also closing units.

Macy’s press release made mention of talks with various potential partners in rolling out joint ventures and strategic alliances to better utilize locations where real estate value exceeds the value of its existing use. We’ve seen other retailers economize through this approach. Sears has sold off stores to the fast-fashion retailer Primark at select locations in the Northeast. Sephora, Hallmark and Disney operate mini-stores with their own staff inside hundreds of J.C. Penney locations. Staples is partnering with an office-sharing start-up to open communal workspaces at a number of locations. If Macy’s wants to avoid closing more stores, it might need to take on a roommate or two.

Branded retailers are also feeling the heat. Michael Kors is pumping the brakes on its department store sales—more bad news for Macy’s—in an effort to decrease promotional sales and ramp up full-ticket purchases. Coach has also announced a significant pullback from the department store channel. Ralph Lauren, whose North American sales have seen a steep decline compared to last year, plans to lay off 8 percent of its team and close more than 50 stores.

No matter how you spin it, closing stores is tough. As CEO Terry Lundgren put it, operating in a fast-changing world “involves doing things differently and making tough decisions.” This is likely the beginning of a major shift in the world of retail as we know it. Macy’s is deserving of credit for making a move of this gravitas to right the ship. But in the choppy seas of physical retail, retailers must move faster in order to stay afloat.

Brian Dondanville for National Real Estate Investor (NREI)

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Technology Makes The Difference

Although technology is only a facilitator, many innovative concepts could not exist without the amazing technological progress that we are experiencing.  As we have seen over the last few years, many of the most disruptive ideas in retail are “technology-intensive,” directed at providing increased access to product, an augmented experience, greater convenience, or more of anything that generates excitement.

As an enabling tool, technology allows customers to bring things together, have more choice, more access and more information than ever before. Customers are experiencing new solutions such as seamless check out, touchscreens which access detailed product information, sharing on social media, and many others.

Several cases featured in Retail Innovations 11 demonstrate this key driver of innovation.

Fashion icon Rebecca Minkoff ‘s partnered with eBay to develop the technological wizardry behind the NY Soho flagship store’s special technology and digital features:

  • A large multi-screen digital wall dominates the front entry. Three panels on the touchscreen enable customers to perform a variety of tasks or access detailed information. The product, Look Book, offers customers an opportunity to take photos and post on social media, reserve a product for the dressing room or even order a free beverage. Customers are invited to enter their mobile number so they may be contacted inside the dressing room.
  • Touchscreens in the dressing room. Via touchscreen, lighting can be adjusted to showcase multiple environments in which a woman would like to see herself. RFID tags on products are detected when a visitor enters a dressing room; the items pop up on a mirror with suggested accessories and the option to summon a different size. Sales associates check customers out on iPads, allowing sales to close in the dressing room, facilitating impulse buys. A stylist can be called for assistance, different sizes can be requested, and further product information can be called up for an item under consideration.

Rebecca Minkoff

In London, Google opened its first physical location in 2015 to allow customers to seamlessly experience Google’s online world in a physical setting. Customers can play, experiment and learn about the company’s physical products and online applications.

  • A large screen called a “portal” allows users to fly around the world using Google Earth. Budding artists can paint their own Google logo to share on social media on a digital “Doodle Wall”, and a “Chromecast Pod” invites customers to watch Google Play movies and YouTube. Every service that Google offers can be experienced in store.
  • Customers can touch, feel and experiment with the full range of Google products, including Android-based phones, tablets and chromecast, for those who want to try before they buy.
  • Classes and events are hosted regularly in store, including tutorials about online security, as well as how to use Google devices. Potential educational tools are tested by teachers at open-house events, and experts are always present to provide help and support for all of Google’s devices and services.

Google map

As retailers look to understand the connected store, experiments like the Rebecca Minkoff flagship and The Google Shop are an intriguing way to gauge what works and what doesn’t. These technology-driven stores are helping retailers connect to customers via an enhanced shopping experience.

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Walmart And Jet.com Tie The Knot

Last week, I weighed in on the potential deal between Walmart and Jet.com.

Today, the companies officially announced the $3 billion deal with Walmart CEO Doug McMillon weighing in as follows:

“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” said Doug McMillon, president and CEO of Walmart. “We believe the acquisition of Jet accelerates our progress across these priorities. Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart.”

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Jet.com

Walmart seeks to even the playing field against a dominant Amazon.com through the acquisition of Jet.com. Photo: Daniel Acker/Bloomberg News

While there may be eyebrows raised concerning the price Walmart is paying for a company that barely has $1 billion in revenue and no profitability, I applaud this deal as the kind of bold step that existing brick and mortar companies can and should take to try and even the playing field against a dominant Amazon.com.

Not only is Walmart buying an innovative e-commerce platform that attempts to lower prices to the consumer by focusing on crowdsourced deal participation and a new way to think about fulfillment, they are also acquiring the services of a visionary entrepreneur in Marc Lore, who thinks about e-commerce models differently. The synergies between Walmart’s merchandising, sourcing and financial muscle combined with Jet’s innovation could help further redefine e-commerce over the next decade.

While Walmart is paying a steep price, a healthy balance sheet, deep pockets and access to capital is one of their main strengths. It makes sense to leverage this in an effort to jump-start their e-commerce efforts. This infrastructure is already in place with Walmart Labs, which has made multiple acquisitions in the technology space. This puts that idea on steroids.

Acquisitions, by themselves, are almost never the answer. And certainly, at Jet.com’s current size, it barely makes a dent in Amazon’s lead. It will be up to Walmart to truly mine the synergies in the deal to show a demonstrable ROI.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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Will Walmart Turn On The Jet?  Jet.com That Is…

On the heels of Jet.com’s first birthday comes news that Walmart is reportedly in negotiations to acquire the online discount retailer. Sources close to the deal say it could be worth as much as $3 billion.

Walmart technology

While Walmart has struggled to translate its winning brick-and-mortar formula to the web, Amazon captured $82.8 billion in e-commerce sales over the last year, compared to Walmart’s $13.6 billion during the same period.  I have been critical in the past of Walmart’s e-commerce efforts. While $13.6 billion makes them the second largest retailer, the business needs to be much much bigger to be meaningful to Walmart’s overall business and to be a significant competitor to Amazon. Additionally, Walmart’s e-commerce sales growth has actually decelerated. A deal with Jet could be a game changer.

The deal could help Walmart follow in Amazon’s footsteps and be the No. 2 online retailer, providing a threat to Amazon’s e-commerce dominance. Late last month, Jet’s CEO and founder of Diapers.com, Marc Lore, announced that Jet sold $90 million in merchandise in May, versus just $33 million back in December. And although Walmart.com only offers around 11 million products, versus Amazon’s 260 million, they recently announced plans to add 1 million products per month, primarily through third-party vendors selling via Walmart.com.

In addition to adding 1 million products to its selection, Walmart has also recently integrated several technological innovations, including e-commerce, mobile payments, premium fulfillment memberships, drones and robotics, providing a boost to its business model. A partnership with Jet would give Walmart insight into Jet’s sophisticated e-commerce pricing, as Jet is known to use factors like basket size, shipping options and product proximity to customers to offer lower prices.  Walmart would also gain customer data and additional warehouses in the acquisition.

On the flipside, Jet.com has taken on the daunting task of taking on Amazon.com as a direct competitor. They raised an enormous amount of private equity funding (around $450 million) but this has always been an all or nothing proposition. They need to scale, and scale fast, to be viable. While the revenue run rate is improving, it seems fairly clear that having a big pocketed big brother like Walmart would come in handy in this battle.

Catching up to Amazon will be challenging, given the size and momentum of their business; last week Amazon reported second quarter net sales up by 31%, with $30.4 billion in sales.  This was the fifth consecutive quarter that the e-commerce leader has been profitable, and third straight quarter of record breaking profit.

While a combination of Walmart and Jet doesn’t immediately change the playing field, it does make the race a lot more interesting!

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Seeing Innovation Evolve through the Lens of the Eyewear Industry

Innovation continues to see its way into new concepts and formats across the globe. There has been significant evolution within the eyewear industry that has caught our eye, pressuring us to ask the question, what will be next? Warby Parker has been the purveyor in a pure play concept that successfully entered bricks & mortar addressing a gap in the market for affordable eyewear. While reinventing the wheel offering low prices and an online home try-on system, they have continued to excel in the market through technology innovation and encouraging other countries and players to follow suit. There are other innovators in this space that have caught our eye:

Chilli Beans (Sao Paulo, Brazil) was one of the first retailers to innovate in eyewear with their experiential store and new business model.   Chilli Beans introduced the fast fashion model to the sunglacbss world by launching a new collection every 15 days. The new collections are themed and often in partnership with a designer or other famous brand, with each release having a special display feature at the store. Chilli Beans has created a place for customers to shop for sunglasses in an environment that combines music, customization, interactions with other cities and cultures, while encouraging sharing the experience with friends. The retailer invites customers to experiment with products, and share through social media. This was one of the first concepts in recent years to integrate social media into the store experience.  The store also offers events, and blends the idea of retail and foodservice with a Coffee kiosk, all the more reason to keep customers shopping and playing around in the store.

 

Lunettes Pour Tous (Paris, France) otherwise known as “Eyeglasses for Everyone,” is a concept that was developed to offer customers eyeglasses at prices that are four times cheaper on average than the market price, while producing these prescription glasses “for less than 10 euros in 10 minutes”. The retailer has reinvented optical retail in a country where eyeglass prices are at a premium, and uses the combination of low prices, technological innovation, and an unrivaled speed of delivery to compete in the market by offering private label and recognizing lower margin on lenses. Lunettes Pour Tous is offers 35 different frames between 5€ and 20€.

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JINS (Tokyo, Japan) pioneered the concept of affordable, high-quality eyewear nearly a decade ago in Japan.   JINS strategy reinvents the in-store eyewear shopping experience by creating glasses in minutes vs. hours or weeks.  Customers can browse, purchase and receive their prescription eyewear with custom fitting all in the same visit. The retailer recently expanded their presence into the U.S. market with an outpost in San Francisco, offering more than 1,200 difference styles offered at accessible prices ranging from $60-120.  JINS challenges the conventional notion of eyewear as strictly for vision correction and  the in-store experience focuses on delivering fashion, efficiency and price transparency for the customer.  By embracing technology, JINS is disrupting the eyewear market with unique innovations that are paving the way for a new class of smart eyewear to enhance people’s lives.j

The eyewear industry continues to evolve as private label, customization and technology continue to revolutionize retail. What new concepts have you seen? Please share with us with a chance for your concept to be featured in next year’s issue of our publication.

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Sell More, Mark-down Less

For many retailers and brands, projects on the docket for the coming year are focused on tactics to support an omni-channel shopping experience.  Often overlooked in this flurry of activity are big picture opportunities to leverage the direct to consumer channel as a platform for enabling core strategies.   Here are two success stories:

  1. Separate models for Full-Price vs. Markdowns – a fashion footwear company’s merchandise strategy is “fashion footwear at full price.” To support this fashion strategy, aggressively timed markdowns are taken both in-store and on-line to quickly turn styles and maintain excitement for the core full price customers.  In this model, eCommerce with store-to-customer fulfillment is essential to support the churn in footwear styles necessary to “clean up” a style once the size run is broken.  During the markdown period, the company’s on-line site helps customers interested in last seasons’ style to find their correct size.  Both in-store or on-line ordering are enabled with robust Order Management software that will not only find the correct size somewhere in the chain but also does this while looking for the closest store that has the complete customer order.  This strategy does result in slightly higher supply chain costs than a pure centralized fulfillment but this is more than offset by the merchandising advantages of lower markdowns.  More importantly, each store clears out aging styles faster and therefore can bring in additional styles sooner supporting the core fashion strategy.   In contrast, during the initial introduction of a style while the style is at full price, this retailer enables Centralized DC fulfillment of on-line orders – keeping stores in stock with the latest style and size while at full price.  This is a tale of two direct to consumer supply chains:  One for full priced beginning of life (maintains store in-stock on full price merchandise at the style-size level) and another for End Of Life (cleans out the stores so they can be refreshed) that satisfies customers and maintains margins.
  2. Segment Shopping Occasions – a beauty supply retailer is positioned to provide “easiest” service to customers.  The core strategy is to offer service levels comparable to a department store cosmetics counter in a specialty store setting.  An analysis of loyalty card data provided evidence that customers used the on-line channel differently than the store: web orders generally supported replenishment of previously purchased items, not emergency replacement of an empty eye liner or purchase of a new category.  These are two very different shopping occasions, requiring two very different service models.  As a result, the company has adopted 100% centralized DC based direct to customer order fulfillment in order to keep web fulfillment out of the store and store personnel focused on providing very high levels of customized customer advice. The web experience has been optimized to support market basket replenishment as well as to drive promotional impulse purchases.   This model has built customer loyalty and full price sales.

In both cases, these companies looked beyond typical omni-channel tactics to figure out how digital retailing and direct to consumer supply chains could significantly add value to the business and their customers – something to consider when planning for 2017.

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The Wild Retail Ride of 2016

2016 has been quite the year for retail.  Retailer share prices have taken a beating over the past 12 months.  The S&P Retail Select Industry Index is down 16.57% since June 2015, and the decline is affecting retailers nationwide and across all categories.

If you’re an investor, you have to either run for the exits or you have an iron will to hang on – most retail shares are down 10-20% for the year.  If that’s not bad enough, daily headlines add to the malaise.  The only chains reporting positive Q1 results are in the DIY (Home Depot, Lowe’s), food retail, and dollar store sectors.  The rest are in the red, reporting flat to negative sales and earnings.

All of this however is counter to macro-economic trends.  Economists are reporting a 3-4% rise in consumer spending.  Fuel prices, while starting to rise, are still pretty cheap.   The National Retail Federation is projecting retail sales to increase 3.1%, higher than the 10-year average sales growth of 2.7 percent.  Online sales are predicted to swell between 6-9% during 2016.

So what’s happening?  The malaise hasn’t engulfed the entire sector, and we see three trends driving the latest results.

  1. Segment Shift: The DIY segment including Home Depot and Lowes is doing quite well.  Home Depot reported comparative store sales up 9%, and with Lowes up 7%.  Sure, it’s now summer, but those are big numbers given both retailers’ scale.  Clearly the consumer has shifted a good portion of spend to housing and home improvement.  We are also seeing growth in specialty grocery and food retail, where interesting innovations in this category are occurring and are performing quite well.  Other bright spots are in the dollar store, off-price, and factory outlet retail segment.  Retailers are continuing to grow the outlet channel as a way to supplement their core business.
  2. Experiences are Winning Out Over Shopping: This is certainly a trend that has been well publicized; that the consumer is more interested in an experience versus a day at the mall.  The numbers seem to agree; according to Adobe’s digital index, airline and hotel bookings this summer are up 5.5% over 2015.  The National Restaurant Association has predicted a 5% increase in restaurant sales in 2016 over 2015, the highest percentage increase in a decade.  Clearly many consumers would rather be at the beach or dinner with friends and family versus shopping at the mall.
  3. e-Commerce: A Channel of “Painful” Growth: Representing 10-12% of the business, US e-commerce continues to be a growth engine for retailers; sales in this channel were up 15.1% in Q1.  However, many retailers have learned this growth is coming at the expense of their brick and mortar channel.  As a result, retailers are closing unproductive stores (or better be) and launching buy online / pick up in store programs to give customers the convenience and a reason to come into the store – and hopefully buy something else.  In addition, in this world of Amazon, ultimate price transparency, and the new normal of free shipping, many retailers are struggling to squeeze any margin possible from this channel.

We believe 2016 will continue to be a wild ride for most retailers, and a painful reminder that you either adapt to these trends – or gradually, then sometimes suddenly – become irrelevant and die.

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Assessing LA25, Target’s innovation initiative

There’s no question that Southern California is the epicenter of food retail innovation right now. From the widely reported upon opening of Whole Foods’ 365 concept in Silver Lake to Aldi’s impressive West Coast push, Southern California seems the place to look for new ideas.

Of course, California can also be a tough and unforgiving market. It is vast, ethnically diverse and extremely competitive. Just look to Fresh & Easy, Tesco’s failed U.S. entry, as one example.

It is not a surprise, however, that Target targeted the Los Angeles market as a place to showcase and test a number of innovations in a group of 25 stores. Target claims that there are over 35 different initiatives at play in these stores. Some are clearly visible to customers while others deal with how they internally operate these stores.

For all retailers, immediately noticeable are the upgrades in presentation techniques throughout the store, from home to apparel to food. And, an increase in omnichannel initiatives, with a huge push to directing consumers to Target.com.

Within the food area, some key focal areas stand out:

  • A visual upgrade to fresh.New fixtures have been added in this area and are now clad in a more attractive wood. There does seem to be added capacity and SKUs in produce, as an example. But, they are still constrained from a physical space standpoint to be considered a significant perishables competitor.

s1

  • Upgraded displays in grocery. Target has done a great job in adding interest back into the grocery aisles. More impactful endcaps and upgraded information within the aisles starts to show how retailers can differentiate in-aisle. There is a focus on local products and exclusive products and their commitment to wellness is clearly showcased.

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  • Expanded foodservice. In addition to Starbucks, Target is experimenting with adding other branded foodservice operators, like Which Wich?

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What is clear is that no one is standing still. Target is working to reinvigorate its grocery business. The LA25 initiative provides a pretty good glimpse of what they might look like in the future.

What do you think of Target’s test concepts?

Neil Stern for Supermarket News

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