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[20 comments]

Why is Target Launching Brands Online Instead of In Stores?

January 22, 2013

Target is known for launching exclusive, typically limited-edition brands that get the chain plenty of press for drawing crowds to its stores. But last week the company chose a different tactic out of its playbook by announcing it was launching six new brands available only on Target.com.

The new brands include:

  • Boho Boutigue - Whimsical bedding, table linens, curtains and more;
  • Labworks - Contemporary line of missy, plus and petite sizes;
  • MudHut - Eclectic collection of bedding and textiles inspired by cultures from around the world;
  • Room 365 - Bedding designed to "infuse homes with a sense of freshness" all the year round;
  • TOO by Blu Dot - Collection of modern furniture and housewares;
  • Zutano Blue - European designer's lineup of clothing, bedding and décor.

"We're excited about these new brands and how they're helping us further differentiate Target.com from other online retailers," Theresa Schmidt, a divisional merchandise manager at Target, told the company's A Bullseye View website. "We know our guests are increasingly connected and are shopping online more, so we wanted to offer guests something new, unique and unexpected."

FINANCIALS:     [NYSE:TGT] [ ]

Discussion Questions:

What do you think Target is looking to accomplish with the launch of six new brands sold only online? What lessons are in this for other retailers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is it that the online-only brands being launched by Target will eventually be stocked in most if not all its stores?

Comments:

While the six new brands will draw traffic, buzz and (hopefully) sales to the website, I wouldn't assume that they are slated for e-commerce forever. It's worth noting that five of the six brands are "home goods" in an area where Target has lost some cachet. (It's also worth noting that Bed Bath & Beyond's acquisition of World Market points toward a "multicultural" approach to this business.)

It would not surprise me to see the test results of these brand introductions end up with at least one or two expansions to bricks & mortar, after Target evaluates the risks and rewards.

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Dick Seesel, Principal, Retailing In Focus LLC

Target is looking to draw attention to its online business with edgier products that might not appeal to all shoppers. Offering these products exclusively online allows Target to keep a smaller inventory and gage public reaction. Should the new lines catch on, Target can roll them out to its brick and mortar stores.

On one hand, I understand the strategy and goals. On the other, Target seems to be saying that if you want its new products, you should go online and not visit a Target store. The latter seems to be self defeating.

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Max Goldberg, President, Max Goldberg & Associates

Clearly, launching a product or brand online is less expensive and less risky than in physical stores, even if it's done in stores regionally. It's also much easier and quieter to drop a brand that's only online if it doesn't work.

My guess is that Target is testing the waters to see which brands get traction and which sell enough to make it to retail shelves. In this instance, consider the Internet a farm league to prep a brand for the big leagues. Other retailers can do the same. In fact, Piperlime is an example of Gap Inc. proving the brand online before opening a physical location.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

This one is simple. Target is moving with the consumer market and, in the process, developing a low-cost way to introduce, test and inventory new products.

Kudos!

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Ryan Mathews, Founder, ceo, Black Monk Consulting

By introducing online, Target lowers its risk. Less inventory, no store resets, no new lines to educate its staff on, etc. If they sell, then the risk of introducing them to the stores is lessened. Sounds like a good strategy to follow.

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Steve Montgomery, President, b2b Solutions, LLC

Niche brands or products may appeal to a smaller group of consumers who do not make up a large portion of shoppers at any one store, so an online collection could be an effective way of meeting their needs. These products will have to be ones that consumers are willing to purchase without having to see or touch the product first. It is an interesting idea for targeting specific markets.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

I don't really love the move. Once again this appears to be an online group not fully integrated with an in-store group. When you incentivize a group to drive sales in their channel and only their channel, it takes away from the overall opportunity to drive growth for the entire brand/company. Consumers don't want to be confused about where they can buy your amazing unique items; they just want to buy them. In-store, online or on their phone or tablet, they should have easy access to everything you have to offer.

How incredibly disappointed a consumer is going to be when they drive to a Target store because they heard about MudHut or another new brand and arrive to find nothing. Obviously you can't carry the same assortment in store as online (physical space), but use terminals in-store to allow consumers to buy all brands carried by "TARGET" regardless of channel. Ship to home or store let the consumer decide.

Retailers should spend less time driving (forcing) consumers to the channels they think are best and focus on letting the consumer shop the way they want to shop.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

Target has a successful history of teaming up with various designers for short-term ranges. Making these new short-term ranges available online-only is certainly a great way to promote and spread awareness of their online retail shop. This will certainly decrease the showrooming of consumers due to the fact that the items will be available online only. Other retailers should pay attention to the results of this campaign and think about launching new items/ranges with online availability only.

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Zel Bianco, President, founder and CEO, Interactive Edge

I have no false notion that these lines will only be seen online. Why would Target want to diminish in-store traffic? So much for in-store impulse buying, if that is the case.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

This is a test, and only a test. I'll bet a nickel that two of these brands are in stores within a year, two stay online only, and two are gone. Or, something along those lines.

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Al McClain, CEO, Founder, RetailWire.com

Target appears to be reaching out to their core group—younger shoppers on trend, who may be the first to consider these items. Great way to identify interest, and move to bricks and mortar as things develop.

Trying to keep the offering fresh is difficult in fast fashion and home decor—this is a way to evaluate purchase interest nationally across a broad range of shoppers. New product line intros are costly; selecting the right/relevant products is difficult.

Having a new product area/boutique is still a complex endeavor, especially for mass merchandisers. This approach may work well for some as channels integrate more closely.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

It's a lot easier to launch online than to launch in-store. It is also a way to test and see what is popular. Doesn't guarantee what will be popular in a brick and mortar store, but it can still give you valid information about the viability of a product or brand. Online can give data that shows demographic information, such as what part of the country (or world) is buying the product, what products the customer has bought in past (based on the customer profile in the database) and more. This info will help determine which stores are most likely to be successful with the new brand.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Double kudos!

I will quote Ryan Mathews, above. It could not be said more perfectly.

"This one is simple. Target is moving with the consumer market and, in the process, developing a low-cost way to introduce, test and inventory new products."

My emphasis: Target is moving with the consumer market....

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Gene Detroyer, Professor, Independent

Why online?

  • easy way to test new product
  • no cost to cut them into any store POG
  • quick test and iteration cycle.

Target gets to test things quicker before committing to store rollout and has much better customer exposure.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

This is a two point strategy. First is Amazon. The "Steinhaufel Letter" precipitated a number of SKUs unique to Target as a way for manufacturers to respond legally to the pricing challenge. Second is showrooming in general. Not an issue here.

And btw, these are not brands as stated in the discussion. They are categories into which many more brands can flow. Oh, did I mention margins will likely be pretty nice?

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Dan Raftery, President, Raftery Resource Network Inc.

Target is expanding its brick and mortar boundaries online and in the process gathering data that will help them customize inventory and other store level operational functions.

We often talk about the importance of retail locations catering to their demographic audience. This is one step beyond geography. Target has recognized that a segment of their consumer base is willing to join them online. Operationally it's cleaner and will enhance the consumer's perception of the brand.

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Carlos Arámbula, Managing Partner, MarcasUSA LLC

Target sees the light at the end of the tunnel: we're all going online more and more often, so why not move to it now?

Also, despite the great ads and brilliant online expression, let's face it, their in-store experience is still a big-box beat down.

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Lee Peterson, EVP Creative Services, WD Partners

I think it was for publicity, and to draw comments from savvy bloggers who write for sites that are also only online...and it worked!

'notcom'

As others have already mentioned, it is a lower cost and lower risk way to test new products that dovetail with consumer trends. Depending how the product does online, the retailer can then decide whether to offer it in-store as well. It is also a good way for Target (and other retailers) to offer channel-specific promotions that cater to the customer profile for that channel.

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Alexander Rink, CEO, 360pi

Target is trying to diversify its inventory between delivery channels. While many are applauding the move as a cost-effective way to test new products online before introducing them in-store, I tend to agree with John Boccuzzi, Jr.'s comment: The best approach is to "let consumers shop the way they want to shop."

Consumers want to be able to buy what they want, when they want it, and however they choose to buy it (i.e. via every channel). If they are standing in a Target location only to find they can't walk out with a desired "available-online-only" product, this is an undesirable shopping experience.

Christopher Krywulak, President and CEO, iQmetrix

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