From Roseville to Greatland, Target still hits the mark - Dayton-Hudson Corp. Target Stores - Growth Retailer of the '90s - company profile

Discount Store News, Sept 17, 1990 by Arthur Markowitz

From Roseville to Greatland, Target Still Hits the Mark

Target burst on the American retailing scene in 1962, a pivotal year in the history of the discount store industry, but its origins go back two years earlier.  In 1960, Dayton's, a family-owned Minneapolis-based upper Midwest department store chain, began looking at new retailing concepts as possible growth areas. The company's investigations included a report prepared by one executive, John Geisse, that detailed the strengths and weaknesses of the discount stores then taking the nation by storm.  Geisse's study, based on his own observations, his retailing experience as Dayton's general merchandise manager and a University of Denver business school research paper on retailing formats, triggered the department store's decision to launch a discount operation. Douglas J. Dayton, the youngest family member and a key company executive, headed up the venture. Geisse was named vice president and general manager, responsible for day-to-day operations.  The discount industry in the early `60s was in flux, with the various companies - only a handful of which are in business today - seeking viable marketing roles. Geisse's report insightfully positioned discounters and department stores are complementary merchants; it prognosticated Dayton's using the projected discount operation to target a consumer market the department store chain was missing.

Dayton's proposed venture didn't follow the concept of other discounters that focused on low-priced goods, with seconds and irregulars part of the mix. Instead, Dayton said, "We will offer high-quality merchandise at low margins, because we are cutting expenses. We would much rather do this than trumpet dramatic price cuts on cheap merchandise."  The new store, called Target, offered a broad selection, including higher-priced staples, eschewed seconds and irregulars, and used its low-cost operation to reduce prices to sell goods every day at very competitive prices.

The chain's name was originated by Stewart K. Widdess, then Dayton's publicity director. He noted in a company reminiscence that more than 200 names were considered but didn't include any that involved the word "Dayton's" so that consumers wouldn't associate the new chain with the department store.  Various motifs of "targets" were considered as logos, one artist even drew a design with bullet holes. Another artist finally came up with the original bull's eye logo.

Dayton's married its department store heritage and Geisse's insights to launch Target as the first upscale discounter, featuring an attractive shopping environment, an innovative racetrack layout and a mix that included higher-priced merchandise. With its chain-orientation, Target's merchandising and operating decisions were made at headquarters, rather that at the individual stores as most discounters were then doing.  The first Target opened its doors May 1, 1962, in the St. Paul suburb of Roseville, 60 days after K mart began its operation and a few months prior to Wal-Mart's debut. The launching of these three chains, today the nation's dominant discounters, made 1962 a landmark year in retailing history.

Discounting in 1962 was a turbulent industry, with some founding companies failing while newcomers entered the business. That first Target was a signpost of subsequent events for the chain and the discount industry.  Another discounter had planned to open in Roseville, but when that troubled company called off its expansion, Target took the building. Recycling stores would later play a key role in the development of many discounters, including Target's growth in the Midwest, South and Southwest.  Dayton's launched four Targets in 1962; the move spurred other department stores to consider similar steps. In 1968, Federated Department Stores began Gold Circle, Rich's started Richway, and Strawbridge & Clother followed in 1970 with Clover.  Dayton's executives were uncertain about Target's viability as the discounter at first lost money at first. They limited its growth to just one more store in 1965, by which time the first group of Targets were showing 30% to 40% sales gains, with volume that year reaching $39 million.  The next year, Target ventured out of Minneapolis to Denver, with two stores; the seven-store chain's sales passed the $60 million level in 1966. The chain grew to nine as two more stores were opened in Minnesota in 1967.  1968 marked a key transition stage in Target's history. Dayton moved to the parent Dayton's, to be succeeded as Target president by William A. Hodder, while the discounter expanded into St. Louis with two stores, the 11 units reaching $130 million in sales. Target also started its own advertising department in 1968 and streamlined its bull's eye trademark to the version currently in use. 

The chain's move into St. Louis triggered a reaction by the local department store powerhouse, The May Department Store Co. May signed on Geisse, then Target's senior vp, gmm, to develop its discount chain, Venture. Geisse became president of the new retailer. Venture debuted with two stores in St. Louis in 1970.
(Geisse note:  John F. Geisse had resigned from Target Stores several months before May Co. contacted him.  Thomas Geisse)
As the '60s ended, Target expanded into Texas and Oklahoma with six stores to become a 17-store chain. It also launched a regional structure with districts in St. Louis and Dallas, and opened its Northern Distribution Center in Fridley, Minn., that included a computerized distribution system. Its parent, meanwhile, merged with Hudson, a Detroit-based department store chain, to become Dayton Hudson, a retailer composed of Target and five major department store chains.  In 1970, the chain added seven stores, including its first two in Wisconsin, with the 24 units hitting the $200 million mark. The next year, Target acquired 16 former Arlan's in Colorado, Iowa and Oklahoma, opening two takeovers, plus four new units. In 1972, the other 14 takeovers and two new stores were added. Target that year moved its headquarters to the IDS Center, Minneapolis' tallest building.  But the rapid expansion to 46 stores, along with the chain's new top executives' inexperience as discounters, resulted in a decrease in operating income and profits. A key error was a combination of overstocking and carrying the goods from year to year without regard to the inventory and storage costs.  In 1973, Stephen L. Pistner, who had revived another troubled retailer, was named chief executive officer, with Kenneth A. Macke, senior vp, merchandise manager of soft lines. Pistner became known as a turnaround specialist because of his success at Target, and later was asked to do the same at Montgomery Ward and now at Ames.  Target's new management took tremendous markdowns to clean out the overstock and halted its growth to just one store; then they focused on reviving and refining merchandising and operations. The two-year remake of Target included a retreat by company executives to a Minneapolis hotel in 1974 for a over a week to develop Decision Guides - the operating policies and philosophies for the chain's future growth. With modifications and updates, Target has continued to use that blueprint, now called Guides for Growth, to direct its destiny.
(Geisse note:  Guidelines for Growth were developed using John Geisse's original philosophies for Target Stores and were similar to Geisse's original 1962 documents.  Thomas Geisse)

The two-year revamping paid off in 1975 as Target's recovery turned the discounter into Dayton Hudson's top chain in revenue. The chain opened two stores, reaching 49 units in nine Midwestern states and $511 million in sales.  There was no stopping Target now. The discounter added four stores in 1976 as sales reached $600 million and then seven more units in 1977. That year, Macke, named Target president and ceo in 1976, was promoted to chairman and ceo to succeed Pistner, who became president of parent Dayton Hudson; Bruce G. All-bright-moved from the parent firm, where he was senior vp, specialty stores, to succeed Macke as Target president.  The decade came to a close with Target opening eight stores in 1978, including its first as a shopping center anchor in a Grand Forks, N.D., mall, and then 13 the next year to end 1979 with 80 units and $1.12 billion in sales.  The decade began with Target unveiling 17 stores, along with expansion into Tennessee and Kansas. Then, as 1980 ended, Target acquired the 40-unit Ayr-Way chain which became the discounter's fourth region.
(Geisse note:  John Geisse sold his interests in Ayr-Way Stores several years prior to Target acquiring it.  Thomas Geisse)

 The Eastern Distribution Center in Indianapolis was obtained as part of the Ayr-Way deal. Sales, meanwhile, rose to $1.53 billion, making the discounter Dayton Hudson's leading business operation, surpassing the combined volume of all the department stores.  Target in 1980 won its first DISC (Discounter in Service to the Community) award, presented annually by Discount Store News to a chain for its community service activities during the year.  The 40 Ayr-Ways were remolded during 1981, while 14 new stores were opened, including the chain's debut in Louisiana, and the Southern Distribution Center was unveiled in Little Rock, Ark. The chain's size: 151 stores and $2.05 billion in sales.  On the executive front, Floyd Hall was named chairman and ceo as Macke moved to Dayton Hudson to become the parent's president, while Allbright went to Woolworth as chairman and ceo of its Woolco discount arm.  "Go West" became a reality for Target in 1982; the discounter acquired 28 FedMarts in Southern California, with four others obtained in Arizona - another new state - and one in Texas. The California thrust resulted in Target relocating the region headquarters in St. Louis to Los Angeles and placing its fourth distribution center in that city. The year ended as All-bright rejoined Target as vice chairman and chief administrative officer and the chain grew to 167 stores and $2.41 billion in sales.  The FedMarts were converted to Targets by mid-1983, but the acquisition temporarily slowed down the chain's growth as it struggled to adjust its merchandising to the West Coast consumer market from its new home in City Center in downtown Minneapolis. Target resumed its momentum in 1984 as the California stores hit their stride and nine new stores boosted the chain's count to 215, while sales went to $3.55 billion. In 1984, Allbright became chairman and ceo as Floyd Hall left, with Robert J. Ulrich switching to Target president from head of the Dayton Hudson Department Stores group.  1985 was marked by Target unveiling a new prototype, its first in a decade, featuring three segregated merchandising environments - Fashion World of apparel on the left, Home World of home goods in the center of Basic & Leisure World of hard lines on the right.  The headlong growth during the first half of the '80s saw Target add 166 stores through 198 - growing to 246 units - topped off by its becoming the dominant Southern California retailer by acquiring 50 Gemcos that year. The fifth distribution center was opened in Pueblo, Colo., with computerized technology that can sort up to 110 cartons per minute.  In 1987, the Gemcos were unveiled as Targets, while the discounter opened six stores in metropolitan Detroit to directly battled K mart on its home ground. With Michigan and Nevada as new markets, Target's national presence grew to 24 states with 317 stores and $5.3 billion in sales by the end of the year. Ulrich, meanwhile, became chairman and ceo as Allbright moved to the parent retailer as president.  The 1980s saw continued Target growth and expansion, first into California, then into rival K mart's home base, Detroit, and finally the Pacific Northwest.  As the decade wound down, Target in 1988 moved into the Pacific Northwest with eight stores in Washington and three in Oregon, while nationally it reached 341 units in 27 states. It also completed installation of scanning systems in all its stores and opened distribution centers in Sacramento and Indianapolis, the latter a replacement for an older facility.  In 1989, Target added 60 units, including further expansion into the Southeast with 14 Georgia, six in Florida, five in North Carolina and three in South Carolina. It also inaugurated satellite voice and data communications to all its 399 units in 30 states. Sales at the end of the decade reached $7.51 billion.  The chain's community service activities during the year - over $5.2 million contributed to more than 800 non-profit organizations - resulted in it again winning DSN's annual DISC (Discounter in Service to the Community) award, the second time it had done so.  The '90s began on a bright note as Target disclosed plans to open a new prototype, a customer-friendly 1660,000-sq.-ft. superstore called Target Greatland. Merchandise will be displayed in groupings that relate goods to consumers' lifestyles and interests. The firm Target Greatland is set to open this month in Apple Valley, Minn., almost directly across St. Paul from where the first Target opened in Roseville 28 years ago. 

VENTURE STORES FOUNDED BY JOHN F. GEISSE IN 1968
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