Target Poised for Robust Growth

Even as Wal-Mart moved to regroup at year end -- reporting tepid sales, elevating then jettisoning Draft FCB and re-opening its ad review, and firing head of advertising Julie Roehm -- a new report from Retail Forward says that Target, one of Wal-Mart's top competitors, could be on track to reach $100 billion in sales in 2010, nearly doubling its current size and becoming an even bigger competitive force.

According to Columbus, Ohio-based Retail Forward, much of Target's sales growth will come from adding about 600 new stores in the next five years. However, in order to meet its growth goals, Target must follow a multi-pronged approach in the next five years: open new stores, grow sales at existing stores, get more from existing customers, and generate more sales from its online business.

In its recently released report "Target 2010: Growth and Outlook," Retail Forward assesses Target's outlook and provides key insights into the company's growth challenges and opportunities. Key findings of the report include:

Expansion Opportunities Remain, For Now. There is plenty of runway for Target to expand domestically in the next five years. However, post-2010, Retail Forward's market saturation analysis indicates that Target will need to look beyond the biggest metro areas for growth. This means exploring more mid-sized markets, and possibly new formats and global opportunities in markets such as Canada and Asia.

Plenty of Room to Raise Key Metrics. Raising store productivity and shopping frequency should help Target get more sales out of existing stores. Moving toward 2010, Target remains challenged to raise year-to-year store productivity levels in order to meet growth objectives. Target needs to figure out how to convert monthly shoppers into more frequent shoppers.

To get more from existing stores and shoppers going forward, Target will need to maintain its focus on brand management, new categories, and new processes, as well as continue to develop well-executed marketing, merchandising, and multichannel initiatives. "During the next five years, expect to see Target boost its multichannel efforts, further strengthen its customer loyalty programs, and continue to push the envelope with buzzworthy marketing efforts that convey the retailer's uniqueness," comments Jennifer Halterman, Retail Forward consultant and author of "Target 2010: Growth and Outlook."

Competitor and Supplier Implications. In order for the $100 billion mark to be within its grasp by 2010, Target will need to be in more geographies, grab increasing share in more categories, and take sales from other competitors and channels. Apparel and accessory stores, drug stores, supermarkets, and department stores should be on guard. "Competitive channels need to look for ways now to combat Target's initiatives or risk losing further sales to the mass channel," adds Halterman.

"Suppliers could hit the bull's eye by teaming with Target to grow their businesses," she continues. "Suppliers wanting to work with Target or protect their positions need to look for ways to spot trends quickly, deliver the unique and different, design store-specific strategies, and provide shopper insights," Halterman concludes.

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