THE SUPERCENTER JUGGERNAUT 1995-07-24 (10)

ELLIOT ZWIEBACH

MINNEAPOLIS -- With one SuperTarget under its belt, Target Stores here contemplates a major expansion for its supercenters in 1996 and 1997. Target, a division of Dayton Hudson Corp. here, said it plans to open up to 22 supercenters in the next two years "that will provide data to determine the prospects for future expansion." Speaking at the parent company's annual meeting, Bob Ulrich, Dayton Hudson's chairman and chief executive officer, said the company's supercenter expansion beyond 1997 would hinge on the success of the units built over the next two years. The first SuperTarget opened last March in Omaha, Neb., and the second is scheduled to open in October in Lawrence, Kan. Target plans to open a third supercenter next March very close to the first -- in Papillion, Neb., five miles away from the original SuperTarget in Omaha. Target is also exploring possible supercenter sites in Utah and Iowa, Ulrich said, and the company reportedly has applied for rezoning to accommodate a supercenter in Newport News, Va. An entry into Utah would send Target into Fred Meyer supercenter territory there.

Ulrich said Target has been pleased with early results at the Omaha supercenter, and one industry observer told SN sales there are running ahead of expectations. The store reportedly took in $1.5 million in sales during the first three days it was open. However, local observers point out the pace doesn't appear to be continuing and they question whether the store is living up to its potential.

"The SuperTarget was swamped during the first three weeks it was open as consumers sought to satisfy their curiosity," an Omaha resident said. "But since then, it doesn't seem to be doing nearly enough business to support Target's goals." Another local observer said a Baker's supermarket directly across the street from the supercenter had considered going to special pricing to compete with the SuperTarget, "but Baker's decided it didn't need to do that because the store is pretty close to maintaining its historic volume and the supercenter has impacted that store only minimally." Observers also said Hy-Vee Food Stores, West Des Moines, Iowa, which operates eight stores in Omaha, got its stores there into shape prior to SuperTarget's opening, including putting more emphasis on perishables and in-store service, "and sales there haven't been impacted as deeply or as long as Hy-Vee had anticipated." Officials at both Hy-Vee and Omaha-based Baker's declined comment. Target generates $12 billion in annual sales and is the nation's third-largest discounter, trailing Wal-Mart Stores, Bentonville, Ark., and Kmart Corp., Troy, Mich. It is also the last of the three discounting giants to open supercenters, although company officials have said they view that as an advantage, since they have been able to learn from their predecessors' mistakes. The company describes SuperTarget as a "quality discount supercenter [whose] high-quality grocery offering is consistent with the Target image and priced with the best competitor in the market." Target said it studied "the best grocery stores across the country, developed its own unique prototype and combined it with the already successful Target Greatland," a discount-store format with expanded selections and a strong consumer focus that the company has been

opening since 1990. The Omaha SuperTarget features wide aisles, separate entrances for both the grocery and general merchandise sections, color-coded signs to delineate merchandise areas, bright lighting and upscale fixtures -- all typical of the Greatland stores. The store is 192,000 square feet, with 62,000 square feet for food and 125,000 square feet for general merchandise, with the balance allocated to various services across the store's front concourse, including pharmacy, floral shop, bank, portrait studio and one-stop photo laboratory. The store's upscale food orientation includes an emphasis on fresh foods and service departments -- closer in concept to a Super Kmart Center than a Wal-Mart supercenter, observers said. According to industry sources, the Omaha SuperTarget is strong in food service as well as general merchandise, though customers have complained about the slow checkouts. "I sense Target is trying to present more of a high-quality food offering than the more serviceable offering at Wal-Mart's supercenters," said Gary Giblen, managing director for Smith Barney, New York. "Wal-Mart is so strong on the general merchandise side that its approach seems to be to put in basic food and see what happens, whereas Target is striving to make more of a quality statement." The Omaha SuperTarget is being supplied by Supervalu here. It was unclear whether the wholesaler will supply other Target supercenters. The Lawrence, Kan., store due in October will be 165,000 square feet, and the Papillion, Neb., store reportedly will be 178,000 square feet. Industry sources said Target could open its first Utah supercenter -- reportedly a 180,000-square-foot store in Sandy, just south of Salt Lake City -- sometime between March and July 1996. Other SuperTarget locations in Utah could include Canterville, north of Salt Lake City; Orem, north of Provo; Ogden; downtown Salt Lake City, and suburban Salt Lake City sites that include Layton, West Jordan and West Valley City. The Utah supercenters would go head to head with Fred Meyer Inc., the Portland, Ore.-based supercenter operator that's been adding food at five of its 12 discount stores in Utah.