Target sees future in urban neighborhood stores

Company undertakes move to a small format

NEW YORK — Target sees its new smaller stores in mainly urban areas as a symbol of its future, hoping that shoppers will step away from online buying for trips to stores tailored to the neighborhood.

The two-level store in Manhattan’s Herald Square, not far from the Macy’s flagship, is about one-third the size of Target’s average store. It’ll offer same-day delivery, more self-serve checkouts than usual and a small grocery area near an entrance so shoppers can quickly grab an item or two. It also will be the first to sell Target-branded merchandise like mugs and T-shirts emblazoned with the Bullseye mascot.

Target is spending $7 billion over three years to remodel old stores, open small ones in cities and college towns and offer faster delivery for online orders. The Herald Square store is among 12 mostly small-format stores opening this week in urban markets like Chicago, Los Angeles and Philadelphia. That will bring the number of small-format stores to more than 50, with plans to operate more than 130 by the end of 2019.

While all retailers need to worry about online growth and the expansion of Amazon, Target CEO Brian Cornell said late last week that, with the new urban stores, Target is seeing it can attract new customers.

“Our stores are the drivers” of digital growth, he said.

Cornell said sales per square foot at small-format stores in urban markets and college towns are twice that of regular stores. So that would make it about $500 to $600 per square feet. He added that the remodeled stores have been well-received, and the company is accelerating plans to remodel 1,000 of its 1,800 stores by 2020.

Target had started testing same-day delivery at a store in Manhattan this past summer, letting shoppers have purchases made in the store delivered to their homes for a fee. Cornell said shoppers are spending six times more than the average shopping basket at that store when they use the same-day service. It planned to start same-day delivery service at two other stores in Brooklyn this weekend.

As it works to freshen up its stores, Target is also adding more clothing and furniture brands, and it said that its children’s line Cat & Jack brought in $2 billion in sales since its launch a year ago. The company has raised its minimum hourly wage for its workers to $11 and will increase it to $15 by the end of 2020, which it said will help it recruit better workers and make shopping a better experience.

Target is also testing store-curb pickup for online grocery customers at 50 stores in the Minneapolis area. In comparison, Walmart has 1,000 stores that offer curbside pickup for online grocery shoppers, and it plans to double that figure next year.

Cornell said his company’s nextday delivery of essentials like detergent will be expanded nationwide by the end of next year.

It had been testing the service in Dallas, Texas, Minneapolis and Denver, then started expanding it to the Atlanta, Chicago, Los Angeles, New York, Philadelphia, San Francisco, St. Louis and Washington, D.C./ Baltimore areas. The service, a rival to Amazon Pantry, allows online shoppers to fill a box that weighs no more than 45 pounds with essentials like toilet paper and peanut butter for a shipping rate of $4.99.