GO
Loading...

Off Target?

Tuesday, 19 Jan 2010 | 4:17 PM ET

If you've been into a Target store the last couple of weeks, you may have noticed some space set aside for "The Great Save." This is Target's experiment with bulk sales you might find atCostco or Wal-mart Stores' Sam's Club.

Photo by: Patty Edwards

The results are leaving most analysts unimpressed.

"I walked into Target, looked at what they had set up, and frankly was incredibly disappointed," says Patty Edwards of Storehouse Partners.

Edwards snapped the photos you see here. She visited two Targets on more than one occasion in Seattle neighborhoods where the stores are popular. Bins in the warehouse-style area were not even half full, and there was a lot of depressing-looking open shelf space.

As for customer? "There was no one in the area, it really was not appealing," she says.

Edwards credits Target with recognizing the need to evolve, but "bottom line, the execution is not there." She says warehouse clubs have three advantages Target does not have:

1) membership fees help Costco and Sam's Club and BJ's Wholesale afford thinner margins on merchandise, so they can charge even lower prices.

2) discount stores like Target can have anywhere from 50,000 to 150,000 different items, while warehouse clubs have 4,000 items that have been heavily edited through years of experience.

3) warehouse clubs have cut long-term deals with manufacturers for special packaging to sell more of one item or put in extra add-ons.

Richard Hastings, a consumer strategist at Global Hunter Securities, isn't a big fan of Target's strategy either, although he has feared that Target shoppers could migrate to Costco. "TGT has a lot of work ahead of them."

But Citigroup's Deborah Weinswig sees it differently. "The Great Save is doing 4x the sales volume of Global Bazaar, the event it replaced," she writes. "We believe this event has drawn traffic away from the supermarkets, and we expect TGT to make the Great Save permanent."

Photo by: Patty Edwards

Meantime, Weinswig believes Target shares could shoot up later this week after the company updates analysts Thursday on its "P-fresh" initiative, the remodeling of stores to sell more groceries.

Citi expects that stores that have already remodeled are seeing same-store sales growth in the mid-single to mid-teen range.

Jan Rogers Kniffen, who runs his own financial and consulting company for the retail sector, says you can look at Target's warehouse experiment as both a success and a potential failure. He says both Patty Edwards and Deborah Weinswig are right.

"How can both be true? Target has to sell 'cool'. They cannot compete with Walmart on price...(but) all of that was blown away in the downturn. They have lost their mojo."

In other words, four-times the volume of the Great Bazaar is accurate, but four-times of not very much is still...not very much.

We've asked Target about how the concept is doing and will update with any information the company may give us.

Update from Target: Target's Jana O'Leary tells me that "sales are exceeding expectations" in the Great Save area of Target stores. "Anecdotal feedback from guests is extremely positive...they appreciate the one-stop shopping." While the company will not break out specific numbers, O'Leary says Target is "pleased with the early results." However, she says it's too early to say whether Target will bring back warehouse-style concept next year to again replace its seasonal Global Bazaar.

More from Consumer Nation:

Questions? Comments? Email us at consumernation@cnbc.com

  Price   Change %Change
COST
---
TGT
---
WMT
---

Featured

Retail