Retailers

How Target Turned Grocery Into a Strength

EVP Rick Gomez delivers Groceryshop keynote
Target's Rick Gomez at Groceryshop 2021
Photograph by WGB staff

Target owes its widening momentum in grocery sales to investments that have turned the merchant from a "retailer that simply sells food and beverage to a retailer that celebrates food and beverage," Rick Gomez, Target's EVP of food and beverage, said Monday in a keynote address at the Groceryshop conference in Las Vegas.

These investments—which included addressing the look and feel of grocery departments in its stores, reintroductions of private brands, merchandising that captures buying opportunities in key moments, and national-brand partnerships emphasizing new and exclusive products—have upgraded the category to be “unapologetically Target” and have dovetailed with a larger shift the company has made to adapt its overall offering to omnichannel, giving consumers the convenience they needed as the global pandemic accelerated change in their preferred methods of shopping.

Since the beginning of 2020, Target has gained more than $2 billion in U.S. grocery market share and more than doubled the rapid growth of its peers in the space, Gomez said. That has made Target the country's 10th largest grocery seller by sales volume and the fourth largest omnichannel merchant in the space.

"We recognize there's plenty of work ahead of us—we're definitely in the midst of this journey—but our food and beverage business has a ton of momentum right now, and our team is not resting on our laurels," Gomez said. "We're committed to rewarding the trust our guests have placed in us by raising the bar on ourselves so we can deliver an experience that only gets better and better.

"Our success is rooted in being unapologetically Target," he continued. "We're growing our business and generating guest love by leaning into the strengths that differentiate us."

Gomez's address was one highlight of a busy day Monday at the Mandalay Bay, which hosted the first live Groceryshop event in nearly two years. The conference brings together retailers, brands and technology companies focused on the consumer shift to omnichannel that accelerated amid the pandemic, which had delayed gathering to discuss it. Other keynote addresses Monday came from Tony Xu, CEO of the delivery platform DoorDash; Ahold Delhaize's Europe and Indonesia CEO Wouter Kolk, joining remotely from Amsterdam; and Mike Del Pozzo, Pepsico's chief customer officer. Each of those speakers shared how their companies are playing a role in the the ongoing omnichannel shift.

A series of concurrent panel sessions and a show exhibit floor highlighted a range of technology solutions enabling those companies to make those changes.

Target's grocery momentum was evident before the pandemic arrived, Gomez emphasized, as investments in hiring experienced food retail industry leaders to lead the company's departments and an extensive store-remodeling program provided a stage for introductions of private brands such as the flagship Good & Gather food brand and Favorite Day, a specialty label. Integration with the delivery specialist Shipt, now a wholly owned Target subsidiary, and expansion of the company's popular Drive Up offering in the meantime added more convenience for shoppers preferring to tackle their Target runs online.

A move to expand pickup to fresh food and frozen goods for the first time had only begun what was intended to be a gradual rollout before the pandemic arrived in March 2020, bringing with it a surge in demand. This event triggered a brief pause in that rollout while Target hustled to prepare to resume grocery pickup on a much larger scale three months later.

"In the spring of 2020, it became vital to remove complexity from our stores so our store teams could focus on unprecedented demand," Gomez said. "At the same, time we knew we couldn't let our intense demand-driven growth come at the expense of our plan for the future." 

Over the same period, Gomez said: "We could see that our guests were consolidating trips and looking for safe and easy shopping options. And we also knew that free service, with no minimum order requirement or arbitrary pickup times, would be an amazing complement to our same-day delivery business, Shipt.

"Doing this says a lot about our team, because in the midst of nonstop, peak-level sales, we undertook a massive, enterprise-wide effort to install order-pickup coolers in hundreds of stores nationwide, raise guest awareness of our expanded order pickup services through our marketing channels, and train countless team members on picking and packing groceries."

Target's assortment in food has evolved to reflect its customers' trust in the brand to offer affordable style and innovation elsewhere in the store and the company's positioning of Target as a comprehensive lifestyle solution, Gomez explained. In milk, for example, half of the company's assortment consists of specialty products (such as oat milk and almond milk) and organics. The newly launched sweet-and-savory label Favorite Day joined Good & Gather in providing a differentiated owned brands base, and that positioning is helping to make Target an outlet of choice for national brand partnerships—particularly in conjunction with new product launches.

Target's momentum, Gomez added, is also due to having sought out unique brands and products, including a program known as REACH—Racial Equity Action and Change—that highlights minority-owned businesses.

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