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CVS-Target: More than just store within a store

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The CVS-Target partnership represents the next generation of retail, for both the industry and the shopper.

Naturally, the agreement — under which CVS plans to buy Target’s pharmacies and clinics — is geared to accelerate business for both companies. CVS/pharmacy has been flat, or losing, on front-end sales. Conversely, Target Stores has been flat, or losing, in its pharmacy operations. But together, they both win.

Liz Crawford_MATCH MG_headshot

Liz Crawford, MATCH MG

Each company brings the requisite competency, infrastructure and traffic to create a neatly dovetailed solution. Through this arrangement, each retailer will sharpen its competitive edge. And both brands will be stronger as a result.

But this arrangement is more than just another store-within-a-store. The nesting of the CVS brand within the walls of Target is significant because it evolves the meaning of retail to the shopper.

One retailer is a host, a shopping destination. The other is an expert specialist. Target houses many categories; CVS owns one. They are stronger together as a shopper’s destination. It showcases a new dynamic, even paradigm, for future partnerships and alliances across the industry.

Mass merchandisers, department stores and warehouse clubs offer so many categories, and so many products, that it becomes nearly impossible to offer optimal experiences in each area. Enter the specialist retailer. And why would this be a retailer and not a branded product line? I believe there are so many SKUs today that an occasion can only properly be owned by a retailer.

Consider this: A typical drug store in 2015 may carry more than twice the number of items as an entire grocery store did in 1974. The point is that shoppers are inundated by brands and choice. In fact, according to a Consumer Reports survey, 36% of shoppers said they were “overwhelmed by the information they had to process to make a buying decision.” Further, 5% walk away because they are paralyzed by indecision.

cdr-filler-opinion-750In the 1970s a product line could more easily own a category or occasion, such as cosmetics, than it can today. Again, this is because of sheer brand and SKU proliferation. So it stands to reason that now many consumers turn to retailers, rather than product lines, to provide a category solution.

Specialists are product “aggregators,” with an organic immersion experience built into their retail touch points. Examples of these specialist retailers include Starbucks, Victoria’s Secret and American Girl, which deliver a complete experience on a variety of platforms — mobile, brick-and-mortar and social media.

Relative to a larger house of brands, these retailers may have been merely “category killers” in the past. But today these specialists are expanding the experience and meaning of their brands to own a comprehensive occasion, or even lifestyle. In contrast, a national brand without the benefit of dedicated retail, is hard pressed to compete with the immersion experience of a specialist, branded house.
So, what does this mean for the evolution of retail? I believe that we’re entering an age where retailers will be one of two types. First, there are the specialists. They own an entire consumption occasion. Their offering is narrow and deep. Second, larger mass retailers such as Target may be morphing into a modern bazaar, housing many specialty retailers, like stalls in a market. Here they are not only offering their own brands and national brands, but also providing specialty experiences under their roof, such as a CVS pharmacy or a Starbucks.

We might imagine more like this, for example, Pet Smart Grooming or a Crumbs Bakery. Target could continue to offer rich experiences for its customers by bringing in even more specialty retailers, evolving their own proposition.

While the idea of the store-within-a-store isn’t new, the meaning of branding in context is. A house of brands today means more than various branded product lines. It means offering a variety of branded experiences. And that means retailers.

Target and its ilk are specializing in shopper destination fulfillment. As a host-type retailer, its competitive edge is based on its deep understanding of satisfying shopper missions, beyond just selling product. It is selling experiences.

Consumers are being trained to expect these rich relationships with their retailers. And while manufacturer brands will continue to thrive for niche positions,  specialty retailers will increasingly own our consumption occasions — holistically. This turns Target and other host retailers into theaters of experience and fulfillment.

To paraphrase Pine and Gilmore in “The Experience Economy,” they are staging theater and scripting the customer into the play. In this light, the question for future retailers to ask is, “What productions do we want to stage?”

Liz Crawford is senior vice president of insights and strategy at MATCH MG and author of The Shopper Economy.


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