Whose category will creep next?

I’ve written on many occasions about the ‘category creep’ that is the effect of offering shoppers items that retailers haven’t traditionally carried and the resulting impact this has on sales growth.

Retailers do this in order to make items more accessible to shoppers by providing a range of products in the one location, saving shoppers time and travel costs.

Several years ago in the UK, Asda began offering electronics in addition to its traditional grocery items, supporting it with an ‘electronics own brand’ strategy. It’s proven very successful.

In the US drugstore sector, almost all the growth over the past decade has been driven by Walgreens Pharmacy and CVS Pharmacy adding food, giftware and grog to their ever growing stores. The result: US drugstores are now four times bigger than a decade ago. This allows shoppers to buy other items while shopping for their weekly or monthly prescriptions. It has been a hugely successful, sector wide ‘category creep’ strategy.

I mentioned some months ago that Target in the US had also embarked upon a roll out of a ‘category creep’ strategy, adding grocery items to its traditional offering, calling it ‘PFresh’.

Target in the US is very similar to Target in Australia. Mid-price sector family clothing, electronics, entertainment and durables with a clear focus on mum and the family. After almost half a year of roll out and now over 30% of US Target stores have some form of ‘PFresh’ offering. We now have access to sales data that shows that Target’s regular shoppers have reacted well to these new grocery offerings. The results are looking very good indeed.

Remember, the US retail sector is showing signs of growth, but it is fragile. In spite of this environment, Target’s sales have increased considerably.

In November, overall same-store sales comfortably beat predictions, growing by 5.5%. More importantly was the fact that food had contributed significantly to growth with more than 10% sales increase in the category. Even more importantly was that this is the fourth consecutive month of food sales growth above 10%, proving beyond a doubt that a key driver to sales growth was the food ‘category creep’ strategy.

So far, Target shoppers have welcomed the offer to save them time by picking up food items while shopping for clothes and home entertainment. Target has moved its offering closer to Walmart. Not to be confused, it’s done it on the back of deep promotional discounting, catalogue drops and reward program support during the Thanksgiving period. This period is the busiest for US retail, a time when people really do SHOP, and still Target has stood out.

In Australia we have Coles, Woolies, IGA and Aldi offering us food. I wonder if we might see Big W, Target and Kmart moving into this space as time goes by?

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.

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