Grocery sales propel Target growth

Target is still the home of cheap-chic blowout sales such as last year's Missoni collection, but as this article from Minneapolis points out, it's a shift to far more prosaic items that's fueling the mega-retailer's growth.

The push to increase the number and types of fresh groceries and food in Target stores (initially called "P-Fresh")appears to be paying off. Target has been renovating hundreds of its stores, adding more produce and increasing the amount of floor space devoted to consumable goods.

The retailer completed making over its Charlotte-area stores last year; here's an article from last year with a price comparison between Wal-Mart, Harris Teeter and the new Target groceries.

As the Star-Tribune article points out, non-discretionary items (household goods and food) have gone from 39 percent to 44 percent of total sales at Target since 2009. That means more people are doing their shopping for necessities at Target.

The theory retailers are operating under is that groceries and other consumable goods drive frequent trips to the store. You might buy a shirt or other clothing once a month, but you probably go to the grocery store at least once a week. So, even though groceries tend to have a lower profit margin than other items, they generate more store traffic. Having more groceries can thus equal getting more money out of your existing customer base - and maybe, while picking up bananas and milk, they'll buy a scarf or set of plates that catches their eye.

Target isn't the only store to take this approach. Notably, Matthews-based Family Dollar has been ramping up the amount of floor space devoted to food, which has been a big contributor to the chain's recent growth.