Bloomberg Business week (Jan 13- Jan 19) did a piece on City Target and their expansion progress and plans. Small is the best way to describe them.
The article highlighted several interesting things which included the size of the stores (which are much larger than Wal-Mart’s city stores) and Target’s stocking philosophy for its City Targets, namely product packs should be smaller than in their suburban stores because their customers cannot carry a massive pack of kitchen towels onto the bus, for example.
And then it hit me. CityTarget does not deliver to its customers!
Target expect people to take their shopping home with a taxi, with a bus or by foot. Talk about a sales volume limiting factor!
There are two clear reasons Target should be offering home delivery from its CityTarget stores.
1. As detailed above, if you are expecting people to carry the products home by foot, by bus or by taxi, you are limiting the amount of products they are going to buy per visit.
2. Geography. If you are not going to deliver then people will shop at their nearest store and not at the one that has the largest selection of products or the one that is the cheapest or more importantly, people will not be shopping at the store they want to shop at.
Which begs the question, why is Target opening up such large CityTarget stores? The geographical reach of these stores is tiny!
The issue of home delivery for supermarkets is an ongoing one. In the UK at least, it is still not clear what is most cost-effective.
One option is to use the existing stores and employ people to pick the orders like normal shoppers would (stores which are laid out to be as inefficient for picking as possible)
The other option is to build dedicated warehouses which are set up for efficient picking but which lead to a doubling up of resources in areas ie a warehouse and a store.
The other main issue of home delivery is the cost. The cost of employing drivers and the vehicle they drive and all the paperwork that goes with it.
What would a City Target home delivery solution look like?
Shopping online for groceries can be a huge pain for 3 reasons.
1. With so many products it is hard to get to all the ones you need
2. Shoppers may only be buying what they need, the scope to expand their horizons is limited compared to a physical store.
3. A lot of people actually like the experience of going into a store, what they don’t like is the queuing and the carrying after.
Any solution will have to address these 3 issues.
I would propose the following.
The City Target app.
Customers who want home delivery can go into a City Target with the City Target app and scan any products they want to buy. When they have got all the products they want in their virtual basket they can go to the checkout with their phone/tablet and transfer their cart details to the cashier who will bill them for the products in their virtual cart.
During the checkout process the customer will supply a contact phone number for the delivery driver as well as selecting an appropriate delivery time.
CityTarget can then fulfill that order in whichever way they want. ie send products from a distribution out of the city or from the same City Target.
The virtual cart solution opens up unlimited possibilities and extra value services.
1. Running total of cost of products in virtual basket.
2. Unlimited amount of product information can be supplied on each product scanned.
3. Cross selling of products similar to the one in the virtual basket.
4. Upselling to more expensive items
5. Offering discounts on a product related to the product added to the virtual basket.
6. Better use of discount vouchers. No one likes pulling a coupon out of their wallet at the checkout, with the City Target app people no longer need to.
7. Customers could shop at any Target in the country and get the products delivered to their normal home address by their local City Target. For example people could go shopping with their friends, even if their friends live in another town miles away. People visiting elderly family members can shop for them as well as themselves at the same time, they could even run two carts simultaneously so everyone gets billed properly! (Apps and addresses on the app would stop people from buying products which could not be delivered)
8. The possibilities are awe inspiring The biggest risk is than you bombard people with too much information. And the beauty of this approach is that you get instant feedback on the methods you try out. Unlike an online store where people may not buy when they visit so you cant tell what was effective or not, when people are physically in a City Target they are going to go the checkout.
This data could have huge implications and benefits for Target’s online stores.
The delivery part of the process has a number of possible solutions.
Two man, small vans. Where stopping is an issue driver and passenger unload, passenger (driver’s mate) carries the shopping to the customers door while the driver goes around the block. Good delivery volume, expensive labour.
Scooters. With a large box on the back. Super flexibility, limited carrying capacity.
Micro 3 wheel trucks. Good access, good carrying capacity, slow.
Bicycle with trailer. Good capacity, cheap, plenty of qualified people riders
And there are probably countless more methods which I have not thought of which is why I think subcontracting the work out to begin with would also be a possibility. It would allow CityTarget to tap into the ideas and experiences of other businesses. They can always adopt the most successful methods and bring it in-house.
In Summary – City Target has the potential to be massive.
But the City Target execs need to put themselves in the position of their customers. Shopping in a city with massive parking restrictions or carrying groceries home can be a total nightmare, especially if you do not have the option of using a car to go out-of-town.
In short CityTarget MUST offer home delivery. And of course they must charge customers for the service.
Again, there are many ways how they could charge their customers but I think a flat fee would be a good place to start, say 5 dollars.
Where are the product delivered from? I think it is entirely plausible for the small City Targets to run the whole operation. They have the potential to be massively busy, as home delivery will hugely increase the catchment areas of their stores and hugely increase the volume of products flowing through the stores.
Who knows, home delivery may even justify the huge City stores that Target seems to have committed to already.
Like I said earlier in the article. At this point, with the limited geographic catchment of the city stores, I think it is a huge mistake to have large stores, there simply is not the customer base and volume per shopper. Home delivery will change all that.
And another huge benefit of home delivery is that it will massively cut down the number of stores Target would need to open to cover a city.
As you increase the catchment area of a City Target the less CityTargets you need to open to cover the city.
Instead of increasing overheads, home delivery could easily end up reducing overheads by reducing the number of stores required.
If people don’t have to carry their shopping home, they will be prepared to travel further to get to the store. In short, customers will go to the store they want to go to rather than the one they have to go to out of necessity and they will spend more.