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Target to test smaller stores in urban markets

By Anne D’Innocenzio
Assocoated Press / September 26, 2010

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MINNEAPOLIS — Target Corp. plans to open its first store in a new, smaller format in Seattle in 2012, with plans to expand to 10 other markets in such cities as San Francisco and Baltimore in the next few years.

“We’ve never been a cookie-cutter retailer, but we are increasingly realizing that one size doesn’t fit all,’’ John Griffith, executive vice president of property management at Target, said on Friday.

The new store will be about 90,000 square feet. The new urban prototype will range anywhere from 60,000 to 100,000 square feet. A typical Target store ranges in size from 125,000 to 180,000 square feet.

Target is no newcomer to cities. It opened its first urban store in Chicago in 1994 and now operates about 150 stores in cities with more than 100,000 people within two miles.

In July, it opened its first store in Manhattan, though the size was in line with the regular stores.

The new format represents Target’s new approach to urban markets. Now, as Griffith noted, the company is making the store fit the site, not the “site fit the store.’’ The new prototype will be in essence a mini-Target, offering a broad array of merchandise from fashion to home furnishings but focusing on daily essentials.

Like many retailers, Target faces tough challenges as shoppers deal with unemployment that’s still stuck at almost 10 percent.

While revenue at Target rose in the latest quarter, the chain didn’t generate enough business this spring to get back to 2008 levels on a per-store basis. But company officials reiterated that they are counting on driving traffic this holiday season and beyond with two key initiatives: a 5 percent discount for its credit card holders which will be rolled out Oct. 17 and heavier emphasis on food.

Company officials said Friday that they have noticed that the expanded food areas have brought shoppers into the store, and they are then shopping across the aisles, picking up fashions and home furnishings.

In April, Target began rolling out a new format in its existing stores that not only includes the new food concept, which was launched last year, but also better video game displays, more shelf lighting in the beauty department, and a revamped shoe and fashion department.

As for the credit offer, Target saw that in its test in Kansas City, Mo., the most loyal shoppers were shopping 50 percent more than they had previously.

“This will drive traffic. It’s a tough world out there, but we’re not sitting around,’’ said Doug Scovanner, chief financial officer.

Rival Wal-Mart Stores Inc. is expected to unveil more details on its urban strategy at its annual analyst meeting in Bentonville, Ark.

Real estate executives say Wal-Mart is looking to aggressively roll out a small format of about 20,000 square feet.