Target: No Longer Throwing Darts at Consumer Electronics

Target did an amazing job of regrouping and re-messaging its value proposition after it woke up and smelled the recession, and the company’s relentless focus on food-focused formats ala P-Fresh, is starting to pay off in hard numbers. However, consumer electronics has seemed like an afterthought at Target over the past few years. Even in the wake of Circuit City’s demise, Target appeared to be sitting on the sidelines as Walmart marched on with remodels, acquisitions and brand gets, and as Best Buy aggressively plumped up its already-robust private label product portfolio by layering on more proprietary services.

Format consistency has been an ongoing Achilles heel for Target as well. Even some of the company’s newest stores have consumer electronics crammed over in a corner, with the grooviest of interactive displays hidden in far-off aisles. Lacking the teeming activity of a typical Walmart Electronics section or the whole of Best Buy (or, for that matter, Target’s own apparel and home areas), the gorgeous layouts of its re-jiggered formats look like futuristic ghost towns. Target hasn’t gained the traction in CE that it has in other areas, and a series of sporadic announcements regarding new service offerings and partnerships have done little to correct the imbalance. In true Target style, all were revealed months in advance, and results have been slow to roll out—making the moves seem like isolated dart throws rather than parts of a cohesive game plan.

However, recent trips to Target stores have begun to give me hope. Slowly, but surely, I see Target’s consumer electronics story coming together, and I think the timing actually couldn’t be better. Other retailers have just begun to squint at the light outside of their big box bunkers in time for the holidays: Toys“R”Us is promising to populate malls with pop-up shops, Sears is beginning to show signs of life, Sam’s will have Wi-Fi in all stores by the end of the year and Game Stop may be on the hunt for acquisitions that will solidify its digital differentiation strategy. Consumer electronics is poised for another round of one-upmanship, and this time, the game won’t be a threesome between Best Buy, Amazon and Walmart. I now see Target as a player with real potential to turn CE from an accidental business into one that is intentional and destination-driving.  Their strategies might seem derivative at first blush but, upon closer examination, I think they are quite differentiated from Best Buy and Walmart.

For starters, Target’s announcement that it, too, will be dipping a pinkie toe into the used-game business demonstrates a new maturity and appreciation for playing close to the vest. Target isn’t harboring delusions of annihilating the competition with this move; instead, they are participating in a niche opportunity that promises to drive traffic to stores without alienating major gaming studios (unlike Best Buy, and just-announced moves by Toys "R" Us, Target is keeping its post–trade-in strategy under wraps; they haven’t stated whether used games will make their way back into Target stores as repurposed merchandise). Target will further differentiate by taking in used mobile phones and iPods as well, leveraging its Radio Shack-operated Bullseye Mobile in-store kiosks to facilitate the program rather than going the online-only route as Walmart did.

After visiting Best Buy Canada’s touch-screen–littered Future Shops over two years ago, I wondered when someone was going to step up stateside (and, of course, why Best Buy U.S. hadn’t yet raised a hand). Target’s new video game “learning centers” (announced in May) have finally started to roll out, and they are beauties. The 40-inch high, color-changing touch-screen units offer easy to follow guidance on consoles and game choices, with the option of summoning an associate if you get flummoxed. It is one thing to have first-mover advantage in in-store technology, but the real differentiator is Target’s family-friendly focus. By offering the option of sorting by ESRB (Entertainment Software Rating Board) ratings, Target positions itself as a safe and female-friendly alternative to Game Stop and Best Buy.  After all, Game Stop is still focused on hard-core gamers, with stores that only the hippest of moms would dare enter, and Best Buy is still stumbling with the ladies through its chick-repellent service and still-man–cave-ish store environments.

With Target’s Radio Shack-provided Bullseye Mobile kiosks hitting critical mass by mid 2011, and its myTGTtech and Target Mobile websites already up and running, Target is poised to once again play with the big boys, offering a robust and connected consumer electronics proposition. The considerable strides that Target has made with frequency-driving categories, combined with its existing strength in home and apparel, means that the shopper footprints will already be in the store . . . now there's an incentive to take a few extra steps!

Join me at the Toy, Tech and Game Summit, September 22nd and 23rd in Santa Clara where I will be presenting "The Game Has Changed: 3 New Rules for Winning at Retail."  I'll talk about what these and other developments mean to your direct-to-retail strategy.