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Target to add fresh food, alcohol to same-day pickup at some stores

The grocery section of a redesigned Target store in Duarte, California.

Source: Target

Target is adding fresh food staples and alcohol to same-day services at hundreds of its stores this year. That means along with paper towels or bags of chips, many customers can pick up a gallon of milk, a bunch of bananas or a six-pack without getting out of the car.

The Minneapolis-based retailer also plans to test convenience store-sized brick-and-mortar locations in some markets.

Target announced the new offerings in a Tuesday earnings call. It will start testing fresh food pickup and drive up in the Twin Cities in late March and then add it to Texas and Florida stores. The company said it will expand the fresh food service to nearly half of its stores by the holiday season.

It will test pickup and drive up of alcohol in Florida and Oregon in late March and roll it out to most stores by the fiscal fourth quarter of 2020.

Target has been focused on making it quicker and easier for customers to buy items, whether they’re browsing aisles in a store or driving to a child’s soccer practice. Same-day services have played a significant role in the retailer’s growth. Customers can pick up online orders inside the store, by drive up or through Shipt, a delivery service owned by Target. The company is also using tools, such as robots and machine learning, to reduce out-of-stock items.

Target’s same-day services grew more than 90% and accounted for nearly three-quarters of the company’s comparable digital sales growth in 2019. Its same-day drive up service had sales growth of more than 500% and its order pickup service had sales growth of about 50% in 2019.

Target CEO Brian Cornell said same-day services have inspired greater customer loyalty. When a customer tries a same-day service, he said 3 out of 4 times they’ll do it again within 3 months. And, he said, nearly 1 in 3 people who placed same-day orders had never shopped on Target.com.

Target has been opening dozens of small-format stores in densely populated cities, such as New York City and Los Angeles, and on college campuses. It plans to open them near three major tourist attractions, too: Times Square, Disney World and the Las Vegas Strip.

The small-format stores range from 12,000 square feet to 40,000 square feet. They contributed more than $1 billion in total sales in 2019.

Target Chief Operating Officer John Mulligan said it plans to open nearly three dozen new small-format stores in 2020.

He said the retailer may shrink that footprint even further. Target plans to test an approximately 6,000 square foot store. The company plans to sign a lease for the store this year and open it in 2021.

Mulligan did not say where the store will be, but said it will have a mix of items, such as grab-and-go food and beauty products. It’ll also be a place where customers can pick up online orders.

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