Target continues to build on its familiar private label strategy that brought the Minnesota-based company 30 billion dollars in annual sales, but it is now moving away from its competitors by offering its products at other retailers.
The supermarket chain announcement Monday plans to expand its Cat & Jack children’s clothing line to Hudson’s Bay Company’s 85 Canadian department stores, adding outerwear and shoes to the brand’s 1,400 items, most of which cost less than $15. Since the partnership launched in Marchthe brand has been incredibly popular in Canada, Target reported, leading to a 15% increase in basket sizes at Hudson’s Bay.
Target has no plans to replicate its own brand expansion in the United States, but its Cat & Jack expansion is the latest in the company’s tactics to win over consumers during a crisis. reduces discretionary spending. In February, the company launched a new economical brand “worthy of a good deal” of home items for less than $10. This is after 2023 saw a 1.7% increase decrease of sales at $105.8 billion.
Target has failed to make the same progress as its rival Walmartwhere sales are constantly growing, even if their strategies have converged. Last week, Walmart launched a store brand grocery lineand in March, Target launched its paid rewards program Target circle 360parrot Amazon Premier and Walmart+.
It’s no surprise that retailers are expanding their private labels. About 60% of shoppers say they buy private brands at least somewhat frequently, according to a September 2023 study. Civic Science Report. And according to market research firm Circana, private label sales increased by 6% in 2023 to reach $217 billion. But while retailers are taking inspiration from each other and consumers to stock their shelves with own-brand items, Target is taking a less conventional route, experts say.
Challenge conventions
Braden Douglas, founder and CEO of marketing agency Crew Marketing Partners, said Fortune that Target’s play to expand its private brands beyond its own stores is not a popular bet.
“It’s not very common because most other retailers don’t want to help another competitor increase revenue,” he said.
The tough economic climate means large retailers are more likely to take strategic risks to attract consumers. For Target, the move makes sense, Douglas explained: Target has a strong supply chain that allows it to be nimble and grow, but it is limited by its own geography that is almost exclusively in the United States. United. made his debut in Canada in 2013, purchasing the leases of more than 200 Zellers, a bankrupt retail chain, in Hudson’s Bay. Due to Target’s rapid expansion, the company is not expected to be profitable until 2021, and the company pulled the plug on all its Canadian channels less than two years later. Expanding Hudson’s Bay offerings could offer Target an overhaul of its rocky experience in the North.
“There’s still a lot of demand in this area,” Douglas said. “I like that they (will) dip their toe in the water again.”
Calculated risk
Although Target’s private label strategy is rare, that doesn’t mean it’s unprecedented, argued Katrijn Gielens, a marketing professor at the University of North Carolina at Chapel Hill’s Kenan-Flagler School of Business. . Even Target offers private label products from competitors, including No7, the skincare line from the Boots drugstore chain. Gielens has seen similar moves from national grocery chains that have successfully implemented health-conscious private labels into smaller, regional stores.
Gielens agrees with Douglas that competitors won’t frequently offer their own-brand products in each other’s stores. But she added that expanding private brands into new geographies or to appeal to specific demographics is a low-cost way to get exposure, because purchasing and distributing private brands on a larger scale often presents challenges. savings advantages.
“You need a certain reputation; you have to have some expertise and knowledge,” she said. “It’s not easy to achieve.”
The practice of expanding private labels beyond their original retailer became more common between 2008 and 2012, and the trend tends to emerge during times of economic malaise, Gielens said. Not only do private labels offer an effective sales strategy during a recession, but interest in these brands generally continues in the years that follow. From 2008 to 2022, retailers’ private brands earned approximately $35 billion, Forbes reportedusing data from Nielsen and Information Resources, Inc.
Like inflation stay stubborn and consumer confidence even lower that before the pandemic, Gielens expects to see companies take actions similar to those of Target, even riskier, to take advantage of the favor of private labels.
“That’s when people are more open to exploring and also considering things that are slightly lower priced,” she said. “This is the right window of opportunity.”
