Case in point is a Target store in Denver, which was one of the first in the retailer's network of more than 1,790 stores to sell alcohol. At the end of February, Target finished moving the beer and wine section to the front of the store, making it easier for customers to get in and out quicker. The company added whimsical, large red signs (see first photo below) above cooler doors to help grab a shopper's attention to the expanded selection of wines and craft beers.
Part of the department's remodel included what Target calls its first-ever (and only) walk in "beer cave."Target isn't new to selling alcohol.
The discount retailer sells alcohol in almost 1,400 stores in 37 states. It has offered alcohol to customers for more than 15 years. About a year ago, Target promoted Dan Connell -- a long-time grocery supply chain executive -- to become its first regional beer buyer. Connell's job is pretty fun and rather straightforward: search the country to see what beers are hot among the locals and get the suds into Target stores.
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The fruits of Connell's work seem to be paying off.
At a Target store in Richmond, Va., a craft beer called Devil's Backbone from a local brewery is the store's top-seller, outselling the bigger more well-known brands, said Connell in a recent blog post. Meantime, at Target locations in Illinois, craft beer sales are up about 40% from the prior year due to additions of local favorites such as Revolution, Two Brothers and Goose Island.
Over the past year, Target said it has grown its local craft beer portfolio from 100 brands to more than 300. It's also likely that Connell's expertise in beer selection is being tapped (pun intended) in the 25 Target stores in Los Angeles that are currently being remodeled into the retailer's store of the future.
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The Denver store's alcohol department -- which resembles a mix of a local liquor store and beer distributor -- is part of CEO Brian Cornell's broader effort to offer more locally relevant food and enhanced shopping environments.
"The beer cave is an extension of the company's localization concept and, more broadly, its strategic brand transformation in which Target has shifted its focus (and resources) away from commoditized items and towards high-margin signature categories (i.e. branded apparel, beauty and baby products) along with other on-trend offerings (on the grocery side, has stocked up on its healthy/organic food offerings)," said TheStreet's Jack Mohr, research director of Action Alerts PLUS, which is Jim Cramer's Charitable Trust portfolio.
Mohr added, "These initiatives -- along with a beefed up and dominant digital presence -- have helped Target differentiate itself amidst an unforgiving competitive landscape for large box retailers, which have been paralyzed by inertia, promotions and commoditization."
While Target's same-store sales in the fourth quarter rose 1.9%, sales of food -- which represents about 21% of the overall business -- grew by a quicker pace, said Target on a Feb. 24 call with analysts. Further, sales of food during the quarter increased by a faster rate than in the first half of the year.
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For Walmart's U.S. operations, same-store sales in the grocery business only increased by a low-single digit percentage in the fourth quarter.
Meantime, while Target has moved forward with more eclectic wine and beer selections, it hasn't yet opened another "bar."
Currently, there is only one Target location -- a store in Chicago that opened last year -- that offers Starbucks (SBUX - Get Report) new "Evenings" menu, which includes wine and craft beer, a company spokeswoman tells TheStreet. Alcohol purchased at the Starbucks is not permitted to leave the coffee shop's limits, which means customers are not able to sip wine as they shop Target's aisles.
According to the spokeswoman, there are no plans right now to include Starbucks "Evenings" menu in any other store.