Target in Battle of the Supercenters

MINNEAPOLIS-When SuperTarget opened a store in Eau Claire, WIearlier this month, one of its competitors had alreadygone out of business in anticipation of its arrival.

It’s a scene that is being repeated all over thecountry, and will be played out in Rochester, MN, andthe Twin Cities next year: Wal-Mart and Target goinghead-to-head in market after market, vying for anever-increasing slice of a supermarket pie that’s notgetting much bigger.

Target is ramping up plans toroll out its SuperTargets. The 30 stores it plans toopen next year will double the 30 it has open now.Bentonville, AK-based Wal-Mart, with 835supercenters, has plans next year of adding from 170to 180 supercenters in the US. Even financiallystruggling Kmart, with more than 100 Super Kmarts, hasplans for growth.

Given that the grocery business is basically a zerosum game, the supercenters will pirate sales fromexisting competitors, says George Dahlman, a foodanalyst with US Bancorp, Piper Jaffray. The typical175,000-square-foot SuperTarget produces a hefty $48million in annual sales, about 70% more than aregular Target, Dahlman notes. That’s means the newstore will suck about $20 million in supermarket salesout of the Eau Claire market that had $204 million insupermarket sales last year, according to a rankingfrom Demographics USA.

The supercenters haven’t had it all their own way.Finding sites large enough for their mega-stores is atough task, especially in metropolitan markets thatare already densely developed.