By Tricia McKinnon
One of the oldest tricks in a retailer’s playbook is to have a portfolio of great private label brands. Back in the early 2000s Target was known for its cheap chic clothing but by the time the recession hit in 2008 and 2009 Target had lost its way.Once the economy started to recover after the great recession Target’s customers felt it had lost its cheap chic edge.Once popular private label brands such as Merona and Mossimo began to lookdated.Target’s private label brands also often lacked a sense of brand identity with brands havingtoo many items across divergent themes.By 2017Brian Cornell, Target’s CEOannounced an ambitious turnaround plan for Target and one of his key initiatives was to introduce new private label brands.
Repositioning a brand is difficult. Your customers tend to hold onto what a brand once was and currently is. Think about Gap. It has tried unsuccessfully a number of times to convince shoppers that it is cool again. So instead of updatingMerona and MossimoTarget decided to discontinue those brands. On the surface this may seem like an easy move but it’s not. Those brands despite no longer being as lucrative as they once were, were still generating a material amount of revenue.This is what often keeps a company from moving on to something better. It does not want to give up what it has now in case its new direction does not work out.
When Target decided to renew its focus on private label brands it took an aggressive approach. Over the past few years Target has introduced over 30 new private brands.Cat & Jack, a privatelabel kids clothing line quickly became a hit generating $2 billion in salesfor Targetwithin only one year after launch.At least three additional Target brandshave passed the $2 billion mark: Good & Gather, a food and beverage line; Up & Up, a personal care and household essentials brand; and home decor brand Threshold. Target now has private label brands across a number of categories including clothing, grocery, beauty and home.
In 2020 Target launched another billion dollar brand called All in Motiona line of activewear and accessories which has already passed the $1 billion sales mark despite its short tenure.Merchandise within the All in Motion line is made from sustainable materials and has an inclusive size range,XXS-4X for women and S-5X for men signalling that Target is listening to and responding to consumer needs. “Since the launch, the design team’s been busy, readingevery singleguest review (more than 15,000) and using that info. to continue to improve and expand the brand,” Target stated in ablog post.
As Fortunewrote in 2021: “Target now has an astonishing 10 billion-dollar brands it built itself on its roster, something only a few other companies likeProcter & Gamblecan boast.” Target’s winning private label value proposition also includes its pricing strategy. Target, known as the “chick chic” retailer, has maintained its reputation by giving its customers premium style at affordable prices. Target’s All in Motion line is approximately 75% of the price of competitor brands. Thislow price strategy is a winning onein an economy where millions of Americans are struggling to make ends meet.
To build these brands, in addition to a deep commitment to listening and responding to customer feedback Target also invests in visual merchandising so that its brands look just as good as national brands. Target is also known for its exclusive collaborations like the one it has with Chip and Joanna Gaines for its Hearth & Hand line.
Having a strong portfolio of private label brands gives shoppers a reason to shop at Target over Walmart or Macy’s."In a world where everything is increasingly commoditized, each…[private brand] helps differentiate Target and build preference for our overall brand,"saysTarget CEO Brian Cornell.It is also a strategy that flows right to the bottom line with private label branded products having much better margins than national brands. For national brands, the margins are around1%of sales for packaged food and for equivalent private label products the margins are around 25% to 30%.
Target’s private label strategy has generated significant financial returns with Target reporting that last year its 48 private label brands generated $30 billion in sales and the sales of its private label brands grew at a faster rate than overall sales growth.
