Target’s investment in restaurant operations surged this past July. The number of open hospitality-restaurant job postings increased 74% MoM, from 1,274 open postings in June to 2,218 postings in July. This is in stark contrast to open postings in retail which dropped -40% from 11,190 to 6,671.
It appears Target is doubling down on restaurants nationwide. The retail giant has been hosting Starbucks cafes since the beginning of the millenia. It now hosts more than 1,300 cafes. The two giants are such intimate partners Howard Schultz, Starbucks CEO, gave a motivational speech at Target headquarters in 2016.
In-store restaurants are not unique to Target. Many Walmart stores host McDonald’s restaurants as both brands offer low-prices and value to customers; McDonald’s CEO even sat on Walmart’s board up until his recent firing. Even higher-end establishments such as Nordstrom and Crate and Barrel now serve food.
The goal is to attract store traffic with unique in-store experiences. Experiences one cannot replicate online. Read: Amazon can’t offer. Of course, Whole Foods offers food and beverages, but they don’t sell toys, clothes or furniture.
Whether in-store restaurants actually drive traffic is unclear. Target’s 2019-Q2 report shows a YoY traffic increase of +2.4%. Yet in a survey by Retail Dive, only a minority of consumers visit stores for the experience. Most shop at physical stores to feel the product first or get their purchase right-away rather than wait for it to ship:
This means shoppers are much more likely to have visited a Target store to pick up their online purchases. Not for coffee. Target’s strategy of opening smaller, convenience focused stores in high density neighborhoods is much more likely to have driven the increase in foot traffic.
Now, selling beverages with a 35%+ operating margin (10X Target’s retail operations margin) can’t hurt.