CityTarget: Major Disappointment, but Is It An Epic Failure?

NEW YORK (TheStreet) -- I'm not much of a bricks-and-mortar shopper.

Unless there's something unique or otherwise stimulating about the physical retail experience, I stay away. By and large, it's a soulless proposition. There's little reason to do anything but stay home and shop online.

On a regular basis I visit the retail presences established by brands such as Apple ( AAPL), Tesla Motors ( TSLA), Lululemon ( LULU) and Restoration Hardware ( RH).

Why?

Because these stores have something to show me. I have never bought a darn thing from three of them, but I still visit regularly. And I'm hardly the only one. There's something powerful about that, at least when you're thinking about retail's hard times and how to transform the space.

We're morphing into a world where, increasingly, you do not need to go to physical stores for much. Amazon.com ( AMZN) and other e-commerce successes have the things that do not spoil, but you must replenish covered. I bet it's not long before Amazon expands Amazon Fresh out of its Seattle-area pilot phase. Soon, they'll have the nation's groceries taken care of.

In the meantime, there's something to be said for keeping bricks-and-mortar retail alive.

It would be a shame to see it die. With a little vision and real risk taking, it can come alive again. Shopping can become something other than an online experience or, when done in person, a chore or urban sport.

Retail absolutely must step up its game.

This past weekend, I was excited to visit Target's ( TST) new urban "concept" CityTarget.

The idea of a Target that appeals to city dwellers has always intrigued me. It has the potential to be something special. To leverage the unique sense of place retailers such as Whole Foods Market ( WFM) use to layer their atmospheres in dense city centers.

With the qualifier that I have only visited the Westwood location (in West Los Angeles adjacent to the UCLA campus), it seems that Target has failed miserably, at least to breathe any new life whatsoever into bricks-and-mortar retail.

I always wondered why company executives don't say much about CityTarget on conference calls. And the analysts don't ask too many questions. While "urban" is not a major revenue generator today, it represents a massive opportunity that Target should hyper-focus on.

Here's pretty much all Target had to say about CityTarget on its most recent conference call:

... After 2 additional third quarter openings, we now have five CityTarget stores operating in four different metropolitan areas: Chicago, Los Angeles, San Francisco and Seattle. As expected, initial traffic to these stores have been strong, while gross margin mix has been slightly better than expected. The CityTarget team has done an outstanding job, accomplishing a virtually flawless launch of this new format. We plan to open three more CityTarget locations in 2013
.

Woo-hoo.

Initial research indicates that the typical guest in this new urban format is younger and more affluent than we see on average across the chain. And as expected, these stores are attracting many new guests
.

And, like, duh!

If city governments and urban planning departments rolled over, found some space, loosened ever-tightening parking restrictions and permitted Target to place suburban-sized stores in urban areas, that's exactly what Target would have done.

That's just another verbal specimen of why bricks and mortar is such a depressing space.

The CityTarget in Westwood is hardly different, at least in the way it "feels" and, for the most part, "looks" compared to any run-of-the-mill suburban and/or mall Target. Knowing the physical characteristics of its Downtown San Francisco and Los Angeles locations, I do not expect anything meaningfully different there.

Of course the Target in a place such as Westwood draws a younger, more affluent demographic. I can guarantee that, by statistically significant margins, it also draws more people who get to the store by walking, bicycle or public transportation than the standard suburban shops. I bet the education level and median income of the Westwood CityTarget shopper far exceeds that of the typical shopper at the Niagara Falls, New York Target near where my parents live.

That's the type of thing Target has to tell us about on their conference call? The painfully obvious. The type of stuff you learn when you take your first college course in research methods or data analysis.

That's because CityTarget isn't a "concept" or, as the company called it on the aforementioned call, a new "format." The fact that Target executives would refer to CityTarget as something novel illustrates a mix of disingenuousness and proof of how bad things have become in bricks-and-mortar retail.

Figuratively speaking, CityTarget is a fraud, a major downer. It's a way to work around city planning rules and regulations.

Where Target had the opportunity to innovate, it decided to make barely noticeable tweaks to the plans for its store so it could tap the urban market. While that might work, it shows little foresight on Target's part, zero respect for the state of retail and no desire whatsoever to disrupt, transform or progress in any worthy way.

Target does nothing more than degrade the urban environment with CityTarget. They're bringing suburban accoutrements to the city. Kill me now.

Plop your above-average American down in the middle of the CityTarget I visited without a view of the entrances and exits and they would not be able to tell you if they were in Target Westwood/UCLA or Target Parma, Ohio.

There's no distinction. Want to know the difference? Fewer toys. Fewer kids clothes. Why? Because young children tend not to populate the UCLA campus area and Downtown LA, San Francisco, Seattle and Chicago.

In fact, the numbers bear out what I'm saying here. In its latest quarterly report, Target breaks down how many square feet of real estate it uses by store type: Target general merchandise stores (395 stores, as of end of Q3); expanded food assortment stores (1,130); SuperTarget stores (251); and CityTarget stores (5).

On average, SuperTargets take up the most square footage at 177,291 apiece. Expanded food stores come in at 129,281 per. General merchandise stores run 119,084 square feet each. And CityTargets are not too far behind thus far at 102,800 square feet per location. Once inside you really cannot tell the difference between the stores, with SuperTarget the obvious exception.

Near-term, CityTarget should help the company drive traffic and sales. There might be a little cannibalization -- the San Francisco resident who usually drives out to suburban Daly City will now take the shorter trip downtown. But that likely will not trigger much of a drag.

From a long-term standpoint, Target provides another painful and pathetic example of what little vision it and its equally-as-inferior peers possess. Maybe the company is not concerned with such big picture stuff, but it should be.

--Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.

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