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Target Opening More Stores on (or Near) College Campuses

By Daniel B. Kline - Jul 5, 2019 at 7:46AM

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The retailer has found an audience that has immediate shopping needs.

If the customers won't come to you, bring your store to the customers. That's what Target ( TGT -1.42% ) has done with its smaller-format stores.

These 20,000 to 25,000 square-foot locations have been built in cities and near college campuses. They offer a selection of items tailored to the people who live closest to the stores.

A city Target may feature smaller quantities of household staples. Locations near or on college campuses, however, have grab-and-go food, as well as other student staples. It's a brick-and-mortar strategy that has been successful even as digital sales have expanded. Now the retailer has a number of new college campus and college campus-adjacent locations planned.

A smaller-format Target store

Target is bringing its stores (a version of them) to college campuses. Image source: Target.

What is Target doing?

A typical Target store comes on at around 120,000 square feet. That's not a practical footprint for a city or a college campus, so building smaller locations lets the company put stores in places it otherwise might not have been able to go -- generally areas not served by Walmart.

Putting stores near or on college campuses gives the company a captive audience. In many cases, college kids have limited transportation options, and the items they need (thinks snacks and meals) aren't practical to order online. That's why the chain has 23 stores on or near college campuses, with three more opening for the start of the school year.

"Going off to college is a new life stage. Students are making their own shopping decisions for the first time," Target Senior Vice President Schindele told Supermarket News. "We want to help make students' experiences fun and easy, serve up products and services they'll love and show them the best that Target has to offer so they become lifelong guests."

Target plans to open small-format locations on the campuses of the University of Kentucky and Michigan State. A third location is planned for near the University of Washington in Seattle. The chain also has a number of other non-college smaller-format stores planned for 2019 and 2020.

Here's why this makes sense

Clearly, delivery and digital have become increasingly important to Target and its rivals, but that has not eliminated the need for stores. By going small Target can bring its brand into under-served markets. Cities often lack good supermarkets and retail in general.

College campuses traditionally have little in the way of retail aside from campus-run stores and restaurants. By going onto college campuses (or near them), the retailer has a captive audience with predictable needs.

In each market, Target can tailor its offerings to the population that lives there. College kids, for example, probably buy a lot of toothpaste and toilet paper, but very few adult diapers. The same logic applies to how these stores stock clothing, household goods, and everything else.

It's also important to note that these smaller-format locations can also serve as same-day delivery hubs. And if the market shifts to retailers using drones or robots for urban delivery, having stores in cities or on college campuses will work well for that.

Target is building locations that make sense for both now and the future. It shows that the company fully understands the needs of its customers, but it has also prepared for those needs to possibly shift.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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