August 15, 2016, 23:59 / Business

Retailer Target is struggling to sell perishables

They are bought too rarely Khadija Safdar

Buyers do not come often enough for fresh meat, fruits and vegetables / E. Razumny / Vedomosti

One of the largest retailers in the world, Target, has a problem with food sales: customers do not come often enough to buy fresh meat, fruits and vegetables for the company to sell them before the expiration date.

Perishable food is one of the main sources of customer traffic in stores, but for Target it has become an obstacle when it comes to growing profits, people familiar with the situation at the company know. In May, Target management said that shoppers were coming in less often and making smaller purchases. For example, Lauren Scheber, a resident of Tualatin, Oregon, comes to Target once or twice a month to buy household goods, household chemicals, etc. “But I don’t go to Target for food; there are many other specialty stores for that.” , she says.

The average customer visits Target once a month, and to successfully sell perishables, the company needs to double its traffic, said Curt Jetta, executive director of TABS Analytics.

Million dollar repair

Target spent $1 million per store to improve appearance and inventory management at its 25 Los Angeles stores. Renovating all 1,800 Target stores in the United States will require large expenses, analysts say

Target Chief Executive Officer Bian Cornell has made several attempts since joining the company two years ago to turn around the retailer's grocery business, which generates a fifth of Target's annual revenue, or about $18.5 billion. The company has changed executives and added more organic and gluten-free products to its lineup. , invested in the design of stores. But in the end, Target warned investors that comparable-store sales could decline by 2% in the second quarter of 2016 (the company will report results on August 17).

Target executives admit the problem is food inventory. “We are neither a specialty store nor a grocery store. And here we are sitting in the middle of no-man’s land,” Target Chief Operating Officer John Milligan previously said.

Target's board of directors has been wary of big-ticket proposals to improve its grocery stores after failing to see a significant return on past investments, people close to the company said.

Part of the problem is that Target's logistics system was not originally designed to handle perishable goods. Such products are now supplied to the company's stores through four grocery distribution centers or through the infrastructure of C&S Wholesale Grocers. The share of losses of perishable products is, in principle, quite high, but Target's loss rate was higher than the market average, says a knowledgeable source. In recent months, the retailer has been exploring the possibility of increasing the supply of fresh food through C&S or other partners, the publication’s interlocutors add.

“We recognize that we need to handle food differently. And this is much more than just remodeling part of the store,” a Target spokesman said. The company is in the early stages of "trying to reposition" perishable goods sales, including figuring out how to sell more and how to improve logistics, he said.

Unlike Target, which can offload much of its distribution to partners, its biggest competitors, including Walmart Stores, are investing in their own logistics infrastructure.

Translated by Natalia Ishchenko