College campuses are the next big retail battleground for Target, Amazon and more

The checkout lane at the mini-Target store in Dinkytown is lined with the holy trifecta of many college diets: mac & cheese, Ramen noodles and peanut butter.

As students return to the University of Minnesota campus for the fall semester, the store is packed with boxes of futons, carts of dorm blankets and a whole section at the front dedicated to Gophers gear. Upbeat tunes — from Beyoncé to old-school R.E.M. — blare on the speakers overhead creating a party atmosphere, though many of the students streaming in are oblivious to it because of their headphones. Most head straight back to the small grocery department, one of the only places near campus to buy produce, dairy and meat.

The store, about a sixth the size of a typical Target, opened two years ago and was the Minneapolis-based retailer's first experiment with 20,000-square-foot stores that can more easily fit into dense urban areas. It is also located on what has become ground zero for one of the next big battlegrounds for retailers: college campuses.

For decades, universities were notorious for their dearth of nearby retail options other than the college bookstore and perhaps a convenience store. Retailers were often more interested in expanding to suburban neighborhoods where families have more disposable income. And campuses have added challenges such as that they often empty out during the summer.

But with the suburbs already saturated with stores, retailers are increasingly courting college students as they look for new sources of growth. The rise of online shopping and smaller-format stores is also helping to fuel the budding campus retail wars.

Amazon, which started offering college students discounted Prime memberships several years ago, is rapidly multiplying its number of college pickup centers. Wal-Mart has experimented with a handful of tiny stores right on campus. And following that initial test store in Dinkytown, Target now has five small stores near colleges with plans to open at least eight more in the coming year — and many more beyond that.

"Brands are realizing the economy is slowing a little bit and this is an opportunity to drive sales," said Jason Bakker, chief operating officer of Bloomington-based Campus Media Group, which helps companies market to college students. "Freshmen are showing up on campus regardless of how the economy is doing."

There's real money to be had from college students, he added. According to a National Retail Federation survey, families are expected to spend $48.5 billion in back-to-college spending this fall alone. While a lot of companies focus on trying to capture that splurge at the start of the school year, Bakker said there are plenty of other opportunities throughout the year.

"A lot of brands show up the first week, do some marketing and leave," he said. "It's like, 'Why?' "

Richfield-based Best Buy has a student page on its website where it promotes special deals and coupons for items like computers, small refrigerators and coffeemakers. It has also been running back-to-college TV ads featuring comedian and actor Adam DeVine.

For more than 15 years, Target has hosted after-hours shopping events in the wee hours of the night, busing hordes of college students to their stores with DJs, cheerleaders and mascots providing entertainment. This fall, it expects more than 200,000 students to participate in events at 86 schools.

But beyond that, Target saw an opportunity to continue to engage with college students throughout the year.

"A lot of college campuses have underdeveloped retail, so the students as well as the people who live around campus don't have a lot of options to shop for a quick trip," said Mark Schindele, Target's senior vice president of properties. "They have to get in a car and drive somewhere."

But many students, of course, don't have cars. So of the 32 smaller store formats Target will have opened by the end of this year, eight are near college campuses, including the University of California-Berkeley, Boston University, Penn State and the University of Chicago.

Of the 15 announced so far for next year, five are campus-focused stores. Schindele wouldn't say how many more such stores Target is planning, but he said there will more.

After reporting a quarterly sales decline last week, Target Chief Executive Brian Cornell told analysts that these smaller stores in urban and dense suburban areas bring in much higher sales per square foot than its bigger stores.

"We are accelerating our pipeline of locations we can open in future years, and we expect flex-format stores to be a key driver of future growth," he said.

Target is initially focusing on campuses with enrollments of 20,000 or more, but it will consider smaller schools, too, said Schindele.

These stores offer more of Target's lower-priced private-label lines and smaller sizes of toilet paper and other essentials since students are often getting there by foot or on bike. It also has a prominent area near the entrance where students can retrieve online orders on a much wider selection of products not stocked in the store.

Amazon opened its first campus location last year at Purdue University, providing a central place on campus where students can pick up and return Amazon orders. Since then, it has opened a dozen more around the U.S. and has plans for at least four more this year, including one just announced for the University of Illinois at Chicago.

"College mailroom hours aren't necessarily convenient to students' schedules," said Jon Alexander, general manager of Amazon Campus. "And mailrooms are getting clogged up [with online shipping packages] so it also helps with that."

As an added perk, those pickup locations also enable student Prime members to get free same-day and next-day pickup. For more than five years, Amazon has tried to win over college students by offering them a free six-month trial of its Prime program, which gives members free two-day shipping and access to its streaming content. After that, students can remain in the program for $49 a year, instead of the $99 a year it charges regular customers. Alexander wouldn't divulge how many student Prime memberships it has, but he said the program has been popular.

"Ultimately, we want to make the program affordable for college students while they're in school," he said. "If we do a good job with that, we believe they'll continue to be Prime members when they graduate."

That is the hope of many retailers wooing college students — that they develop an affinity for these brands at an impressionable time in their lives and will remain longtime loyal shoppers of those companies.

But tapping into the college market isn't easy. Five Wal-Mart on Campus stores that range in size from 3,000 to 5,000 square feet have opened since 2011 at the University of Arkansas in Fayetteville, University of Missouri, Arizona State and Virginia Commonwealth University. But one of them, at Georgia Tech, has already closed. Wal-Mart spokesman John Forrest Ailes did not say much about why, but he said the retailer doesn't have any immediate plans to open more.

"We're learning a lot," he said. "We're seeing that a number of customers are wanting all of the services of a supercenter. Many of our students are choosing to shop there."

He added that some supercenters are right next to campus anyway, such as a store that recently opened across the street from the University of Tennessee.

"At a lot of college towns, the Wal-Mart supercenter is the heartbeat of the town," he added. "That's where they go for tailgating and where they go to get their prescriptions, groceries and to get futons and mini-fridges."

Back in Dinkytown, the small Target store has been busy all week with students coming back to campus.

"It's like a good and a bad thing because it's so convenient," said Paige Hill, a junior at the University of Minnesota who lives in the apartments above the store.
She ends up popping in several times a week, sometimes spending more money than planned. But if she doesn't need an item right away, she first checks prices on Amazon, for which she has a Prime student membership, to see if she can get it there cheaper.

Tony Lee, a senior from South Korea, lives just down the street. He comes in at least once a week for groceries and doesn't really shop anywhere else.

"One of the reasons I wanted to live [in that apartment building] was to be closer to Target," he said.

After all, he doesn't have a car. So this way he doesn't have too far to go when lugging back big bundles of bottled water.

Kavita Kumar • 612-673-4113