* First CityTarget stores open July 25
* Smaller trucks, back rooms designed for urban stores
* Wifi, Apple displays among features in new shops
By Jessica Wohl
CHICAGO, July 18 Target Corp is tweaking its playbook to appeal to city dwellers and others who already shop in busy downtown locations as it tries to boost sales growth in a weak U.S. economy.
The first slimmed-down CityTarget stores will open in late July after two years of planning that included talking to shoppers, creating slimmer checkout lanes and testing how to use smaller back rooms for deliveries.
Big box retailers like Target and Wal-Mart Stores Inc have been looking for ways to reach more customers in tighter urban locations. But unlike Wal-Mart's smaller Walmart Express shops, which focus on groceries and other basic goods, CityTarget will carry everything from jelly to jeans.
The first CityTargets, which are about two-thirds the size of a typical Target, open on July 25 in Chicago, Los Angeles and Seattle, where the company already is already well established.
CityTarget gives Target a chance to learn how to operate in existing locations that are smaller than its typical stores, knowledge that should help the Minneapolis-based chain as it gets ready to open its first Canadian stores in 2013.
"The Canada team and the CityTarget team talk almost weekly," said Mark Schindele, senior vice president of merchandising, as he walked around the Chicago store.
The average size of a CityTarget is about 80,000 square feet to 100,000 square feet, Schindele said, compared with Targets that average 135,000 square feet and Super Targets that are about 175,000 square feet.
Target has been working for almost two years on fitting into smaller spaces. It roped off parts of the back rooms in three stores in Minnesota, New Jersey and California to test how to handle deliveries and storage with less space and came up with new signs and displays to have a more sleek, urban look.
Trucks delivering goods to CityTarget are six inches shorter than usual to fit into tight spaces such as under the elevated train tracks in Chicago. The trucks also measure 28 feet long, significantly smaller than the typical 53-foot trucks Target uses, Schindele said.
The Chicago store is housed in a 113-year old historical landmark constructed by architect Louis Sullivan in the heart of the city at the corner of State and Madison Streets. Nearby retailers include H&M, Forever 21, Office Depot, Nordstrom Rack, Sears and T.J. Maxx.
CityTarget stores are more expensive to operate and build, as they are housed in pre-existing spaces, Schindele said. In Chicago, for example, Target had to rip out old floors and strip dozens of coats of paint off of columns to give the store the CityTarget look.
CityTarget shelves are bright white rather than almond-colored. Mannequins, tested in one Target store, and brushed silver racks are used to display clothing. In a first for the Target chain, music plays in the Chicago and Seattle locations.
That focus on design is one thing that can set Target apart from Wal-Mart.
"They're very good at profitably co-existing with Walmart, but they're also good at trying to figure out what they can do that the competition can't really do well," said Barclays analyst Robert Drbul.
The two-level CityTarget in Chicago is roughly eight times as large as Walmart Express stores in the city and will sell everything from food to 60-inch televisions.
CityTarget is also part of a test of special areas for selling Apple Inc devices. Each CityTarget has wifi, letting shoppers test iPads and browse for items not in the store.
Target has eliminated some goods that would not appeal to urban dwellers, such as lawn fertilizer and large furniture. In scaled back sections such as baby goods and electronics, shoppers can scan codes with their mobile devices to see Target's full selection and order online.
Later this year, another Los Angeles store and one in San Francisco will open, followed by a third Los Angeles location and a CityTarget in Portland, Oregon, in 2013. Target has not said yet where it may open other CityTargets.
"We're in talks with pretty much every major city," said Schindele.
Expanding and enticing shoppers to spend more are critical for Target. While its sales growth outpaces that of Walmart, recent measures such as June sales at existing stores came in below analysts' expectations.
On Tuesday, Citi Investment Research analyst Deborah Weinswig cut her rating on Target to "neutral" following a disappointing U.S. Commerce Department report on U.S. retail sales.
"If they can get this right that will be very interesting to watch," said Drbul. (Editing by Steve Orlofsky)
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