Taking aim Avalanche: The Target discount chain is about to invade Maryland with nine new stores by the end of the month and three more in October.

THE BALTIMORE SUN

Big. Huge. Gargantuan.

Another name for what's coming: Target.

In the largest retail invasion ever in the mid-Atlantic region, Target is about to flood Maryland and Virginia with 21 cavernous discount stores over the span of eight months, creating thousands of jobs, tens of millions of dollars in construction investment and, not to be overlooked, an alternative for that perspicacious bargain-hunter.

Target Stores, a Minneapolis-based juggernaut of toothpaste, tube socks and other general merchandise, tiptoed into the market in March, opening its first two stores in Virginia's Fredericksburg and Woodbridge.

But the long-anticipated stampede will officially arrive July 28, when Target is expected to rock the natural order of retail things by simultaneously opening 13 stores in the region, nine in Maryland and four in Virginia.

"Demographically, it's our guest, it's our customer," said Tom Sands, Target's regional senior vice president for the East Coast. "We think that it's a good fit. This is really the last of the markets where Wal-Mart and Kmart are not competing with us."

Target welcomes the challenge: The chain has devised a successful high-volume, low-margin formula to ratchet up the competition in its relentless expansion, a retail version of manifest destiny.

Touting itself as an "upscale discounter," the retailer has managed to make sense of an oxymoron, offering merchandise of finer ilk than the typical off-price merchant, but selling it inexpensively -- a few cents more on the average than for those items found at Wal-Mart, the acknowledged low-price leader.

"Speed is life" is Target's mantra. "Fast, fun and friendly" -- so goes the retailer's motto.

Applied, it means that the company uses state-of-the-art technology. A "radio frequency locator system" pinpoints the location of merchandise in every store. A computerized "replenishment system" gets merchandise in stores quickly, ordered at the store-level, not from headquarters. Micro-marketing is employed to suit the tastes of each local environment, such as specific high school apparel, or for the Baltimore baseball fanatic, Orioles merchandise.

But that's merely prologue. Target, the nation's third largest discount retailer behind Wal-Mart and Kmart, is prepared to pull the trigger on six more stores in October, three each in Maryland and Virginia. Beyond that, the discounter plans to unleash another 40 to 60 stores in the region over the next two or three years.

"That's a complete penetration and domination of the market," said Mark A. Millman, president of Millman Search Group Inc., a leading retail consulting firm in Lutherville. "This is the largest domination I've ever seen of a 'category killer' completely dominating two major markets within a relatively short period of time. Even Wal-Mart didn't do that. Nobody's come in with that kind of punch. They're coming in to completely dominate every geographical region in this market."

There is no comparison. Kmart, the area's first discount behemoth, settled in Virginia in 1964 with three stores, and then in Maryland in 1972 with two stores. Wal-Mart moved into Washington in 1991, Baltimore a year later, opening stores one at a time.

Of more recent vintage, Best Buy, the consumer electronics retailer, entered the Baltimore-Washington market with eight stores in 1994. And a year later, Dick's Clothing & Sporting Goods opened three local stores.

By contrast, Target will hold sway over as many as 80 mid-Atlantic stores by 1999. Unprecedented expansion for a major retailer here -- but this much is known: The discounter's impact is expected to be atomic, generating millions in tax revenue, advertising and charitable contributions.

The first 21 stores in the region are expected to create more than:

Three thousand jobs and as many as 4,200. Each store employs about 150 to 200 workers, most hired locally, most as part-time sales clerks averaging 30 to 35 hours per week on an hourly wage that varies by region.

One hundred million dollars in the construction of all new stores, each costing from $5 million to $10 million to build, depending on size. In addition, the company expects to spend $200,000 a year per store on contractor services ranging from snow removal and floor cleaning to landscaping and maintenance.

Two million square feet of retail space -- equivalent to about seven Baltimore skyscrapers -- based on stores ranging from 96,000 to 126,000 square feet.

"They've never been afraid to go against competition, but I've never seen them go in like this," said Rene Daniel, president of the Daniel Group, a Baltimore-based shopping center consultant. They're going in with both barrels blazing."

Indeed, never before has Target entered a major market on such a grand scale. And it is doubtful that the retailer will do so again.

The company has already swamped most of the rest of the country, expanding in the West during the 1980s, building up market share in the 1990s: 47 new stores in 1992, 50 in 1993, 60 in 1994, 72 in 1995, more than 70 this year.

By grand-opening day in Maryland and Virginia, Target's bull's-eye logo will dot 714 stores in 37 states coast-to-coast with more than 140,000 employees -- 34 years after the first store was dreamed up by department store executives and opened in Roseville, Minn., the same year Wal-Mart and Kmart got started.

Target's search-and-build strategy has translated into big numbers for its parent company, accounting for more than 67 percent of Dayton-Hudson Corp.'s 1995 revenue with sales of $15.8 billion, leaving $719 million in operating profit.

But there is potential for more in what could be the retailer's greatest untapped gold mine -- the East Coast, home to about 40 percent of the nation's consumers. The drumbeat has grown louder as Target has swooped up the coast, opening 54 stores in five years in Florida, 13 stores in two years in North Carolina.

Now, in a mad dash to fill in the rest of the blanks, Target is taking on the mid-Atlantic, a region rich in potential despite a slow recovery from the recession, the rocky influence of the nearby federal government and a soporific retail environment.

"1995 was definitely sluggish, that definitely would be a kind phrase but I think the attraction that Maryland has for a lot of these companies, like Target, is if you're going to come to the East Coast, Maryland is smack dab in the middle," said Tom S. Saquella, president of the Maryland Retailers Association, citing the region's attractive demographics, a per capita income higher than the national average and a strong transportation network to move goods.

The attraction was just as great for Target in the Chicago area, which the retailer stormed in 1993 with 18 stores. What happened there is instructive for retailers here: Within two years, Target was operating 25 stores in metropolitan Chicago, attracting higher-income shoppers and increasingly contesting Wal-Mart and other discounters for retail supremacy, according to a Babson College survey.

Whether Target single-handedly forced Chicago competitors out of business remains debatable, industry observers there say, but the new player forced others to adjust their marketing and merchandising strategy.

"I would say that nobody should look the other way," said Gary P. Rejebian, vice president of the Illinois Retail Merchants Association in Chicago. "They're among the finer merchandising operations in the country, and they should be taken very seriously. Target has made everybody a better competitor."

But the retailer seems to do it better than most. Target stores carry the basic survival kit of everyday life -- T-shirts, hair spray, peanuts -- but try to stay ahead of the consumer curve with a company "trend department," whose troops travel the world, studying the next turn in home decor, apparel and the rest.

The stores are warehouse-like in size, but department store-like in atmosphere, brightly lighted with bold signs and wide aisles, evoking something more refined than the basic discounter. Hence the sophisticate nickname, "Tarjay," a French inflection on the name Target, a truly American creation.

"What you're going to see is a new, refreshing discount retailer. You're going to see a retailer do different things," said spokeswoman Carolyn A. Brookter.

For the politically correct, Target will do even more. For more than 30 years, the company has contributed 5 percent of its pretax profits to communities through grants, programs and donations -- more than any other retailer in America. In 1995, that translated into more than $25 million nationwide.

If it wasn't working so well, Target might seem too warm and fuzzy. Customers, typically young, fairly affluent and female, are called "guests." Store managers are "team leaders." Employees, trained in company ways at "Target University" seminars, are "team members," who are allowed to make on-the-spot decisions to address customer concerns.

"People don't need to be managed," said Target spokesman Jeff Spiegel. "We don't have managers because we have no need for managers. Our team members need to be led, not managed. In that kind of culture, they truly feel like a team."

The team approach has been effective: In 1994, Target drew more than 400 million customers -- more than the combined attendance in the NFL, NHL and NBA over three years. And this year, Target expects that more than 475 million customers will purchase more than $17 billion in merchandise.

Still, for all its fans, the retailer remains a vague name for at least some merchants here.

Target? "It's ringing a bell, but I can't bring to mind what it is," said Judy Taylor Orlinsky, owner of Japonaji, a Japanese arts and crafts boutique in Fells Point.

Briefed on the giant discounter, the proprietor shrugged it off. "I don't think they'll hurt us," Orlinsky said. "It's just a whole different world. I think there will always be room for stores like ours."

So, too, say Target's direct competitors: "Typically, from what we've seen with our major competitors, our stores are performing very well, so we welcome our competition," said Les Copeland, spokesman for Wal-Mart, which operates 24 stores in the Baltimore-Washington region. "Ultimately, the local consumers are the winners."

Kmart is just as magnanimous, even if it seems to be reading from the same script. "Our stance is, we always look at competition as good because consumers always benefit," said spokesman Stephen Pagnani of Kmart, which runs 36 stores in Maryland and 54 in Virginia.

Wall Street analysts, however, view competition with more caution, particularly in a bruising industry that has piled up a retail body count in recent months.

In June 1995, Bradlees, the Massachusetts-based discounter, filed for bankruptcy protection. In September, Caldor, the nation's fourth largest discount department store chain, followed suit in Connecticut. Then in October, Jamesway, a discounter from New Jersey, did the same.

The local retail environment has been just as unforgiving. Merry-Go-Round Enterprises Inc., the Joppa-based apparel chain, collapsed in February. And Hechinger Co., the home improvement chain out of Landover, has struggled to emerge from a yearlong slump. It won't get any easier, observers say, with Target's expansion along the Atlantic.

"For the most part, they're going to win market share, and that's going to come at someone's expense," said John P. Hughes, a retail analyst with Piper Jaffray Inc. in Minneapolis. "Retailing will become more competitive than already it is."

Pub Date: 7/14/96

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
45°