PL Buyer Cover Story: On Target?
By Jill Rivkin
Through special arrangement, we offer this excerpt from PLBuyer’s recent cover article for discussion on RetailWire. Click to view the entire article,
On Target?
Though it’s already so recognizable that it’s headlining a line of couture items in a chic Los Angeles boutique, the big red bull’s eye still isn’t quite enough brand recognition for Target. The nation’s No. 2 discount chain is splashing famous designers – alongside the bull’s eye – on television and in print ads to build its cheap-chic image and set it apart from its well-known Bentonville, Ark., competitor.
Simultaneously, Target is tackling the grocery business by expanding food sections in many of its stores and further developing a store brand program featuring everything from basic commodity items to high-end chocolates. Additional grocery space, freezers and coolers are being squeezed into standard Target stores, while SuperTarget outlets are now home to expanded produce, bakery and deli sections featuring a host of exclusive items. Taking a cue from some of the nation’s leading grocery chains, Target introduced its own line of high-end meats under the Sutton & Dodge brand name and continues to grow its upscale Archer Farms line to include unique, differentiating items running the gamut from Elder-Flower Pear Bottled Spring Water to Italian sodas, and one of the broadest assortment of store brand spices out there. Target’s national-brand-equivalent items under the Market Pantry brand are given visible homes in displays and endcaps, and the retailer’s distinctive Choxie chocolates boast retro colors and eye-catching packaging, as well as national television spots.
But the question remains: How can a Target differentiate itself, create a strong brand image, compete on price and be everything to all of its consumers at once? Some say Target doesn’t know the answer quite yet, some say it’s on its way and others banter about whether or not Target knows the right strategy at all.
“One of the things they’re doing well is creating an image – it’s a differentiation strategy,” said Dan Raftery, president of Raftery Resource Network. “They are positioning to have higher quality, better design and pushing the connection between design and quality, which can be a little bit squishy because they have to continue to deliver the goods as far as quality, otherwise it won’t work.”
Target’s approach to home goods and apparel takes what other mass merchandisers have done with celebrity endorsements and raised it to a higher level. By teaming up with apparel and home goods designers, Target has created a lineup of exclusive brands that goes beyond private label to a true store brand philosophy.
Don Delzell, a partner at Retail Advantage, said Target has succeeded in exclusive brands, but still has room for improvement.
“I’d like to see Target build fewer brands and carry them across more departments…Borrowing equity – licensing a name – across an assortment of such names creates challenges in presenting a unified overall brand image. Department stores ran into this, and still do… What does Target mean? If there are too many brands, the overall corporate brand positioning becomes diluted and hard to understand.”
On the food side of the business, the Archer Farms premium line features a wide variety of gourmet groceries, appetizers and European-style baked goods. Breads, juices, kettle chips, imported olive oil, hand-harvested coffee, unique snacks and frozen appetizers encompass this brand, well-merchandised throughout the stores’ center store shelves and freezers.
“Target’s big focus is on design, and so they’re positioning their private label to be upscale vs. their main competition, Wal-Mart,” said Mr. Raftery. “They’re trying to distance themselves, but it’s pretty complicated because private label is not just one brand in a store anymore. The strategies differ by category or department – apparel has to have a different cache than private label food.”
Over the past year, Target focused on significantly increasing the amount of space allocated to grocery, with hopes of drawing in more customers and exposing them to other departments in its stores.
“I think it’s a standard ‘we have the footsteps, let’s sell them something else’ retail ploy,” said Mr. Delzell. “How does carrying commodity food categories conform to the differentiated image in the marketplace? Can Target really differentiate in food from others? It’s an attempt to capture more visits. On the other hand, having food doesn’t hurt Target. It keeps it squarely in the same business as Wal-Mart.”
Discussion Questions: Can Target differentiate itself, create a strong brand image, compete on price and be everything to all of its consumers at once?
If no, what can it do?
I think that where they have yet to build a brand is in food, but they are taking steps in that direction.
Over the past 6 months, Target has really been focusing on building the Archer Farms brand. It is being carried in more categories and in more depth in each of them. Their big opportunity, as someone alluded to, is spreading this across to other departments. They need star names in food the way they used Michael Graves and Thomas O’Brien in the housewares and decor categories and what they’re doing with other designers in cosmetics.
They need an Emeril Lagasse or Rachael Ray to move the private label food lines forward with consumers and use the brand recognition they build in food to related categories.
“Fashionable, chic, trendy, innovative. Target shoppers believe they will find products fitting this description at reasonable prices.” Yes, that is the expectation that Target’s marketing has created. Target is truly unique in that people who have never been to the store love to talk about how great it is solely on the basis of their ads in New York Times magazine and the major television networks. Target is continually challenged to deliver that same brand image in its stores and in its merchandise. That is being done in some areas but is very difficult and seemingly falling short in others. The bar is very high and it remains to be seen if they can continue to get over it.
What can Target do?
If Target is going to move forward with planned obsolescence programs (Go International), it had better ensure that they are executed on time and in entirety. When chunks of a 90-day program are missing 30 days in (pieces that are shown as complete looks on target.com), you’ve got a problem.
If Target really is going to win the middle and snag those mid-range department store shoppers that everyone is clamoring for, they’ll need to work harder on steam, fluff and fold in apparel. They over-promised a bit on the Merona career suiting (will rival Banana at half the price, they said) and again, floor execution is a big part of that.
I’m a big believer that these days, retailers CAN be many things to many people; however, Target seems to be distracted by upscale to the point of ignoring basics/staples across multiple categories. How many times have I picked up a cute/functional/groovy impulse item that wasn’t on my list only to ditch when the basic item that drove the trip was no where to be found?
Not to go totally neg…Target’s private label offerings, particularly in the frozen category, remind me of trips I’ve made to Sainsbury’s in the UK – just terrific. Their tie-in with Andrea Immer in wine was a beautiful upscale move, and their active wear presentation continues to be more coherent than Wal-Mart’s.
Target remains focused. They design and market for a profit, with differentiation a key part of the Target merchandising philosophy that they preach to their suppliers. Target knows their “upscale at heart” shopper, wants all of their shopper’s dollars that they can collect and has a focused, store wide approach towards going after them.
Wal-Mart has publicly stated it wants to go after the Target consumer who shops Wal-Mart and Target, but shops Wal-Mart just for their commodity items. This and Wal-Mart’s Store of the Community has prompted numerous articles trying to answer the question; “Wal-Mart and Target: Who is Chasing Who?”
Recently, Wal-Mart seems to be going after all customers and all the dollars. With their Retail Link data system they are as knowledgeable about their individual store customer profile as any retailer on the street and each store is becoming more unique in assortment. It is Wal-Mart who has the hardest job and biggest downside of potentially confusing the customer. New upscale terra cotta floors, wooden apparel fixtures, designer private label and 20+ page spreads in Vogue could start their customers down the track of, “Has Wal-Mart raised their prices?” Depending on who you read, they either are the low price leader or the perceived low price leader. Either way they win. This is one edge Wal-Mart with recent 1% to 2% comp store increases cannot afford to give up.
One of the interesting byproducts of both the gas-price squeeze and the fragmentation of media audiences has been the growth of private label. There is no reason to expect this to stop. As it becomes more and more difficult (and costly) to build a brand image, the cost and retail advantage to private label can only become more significant.
Target is right on target with their effort to establish a retail brand image. A lot of discussions have focused on in-store promotion. Private label has a distinct advantage over national brands when it comes to this important outlet. There is also the cost advantage that allows the retailer to negotiate unique manufacturing costs based on minor product variations that make the private label item unique.
I think Target’s approach to “upscale differentiation” with premium house brands has shown significant following by Target shoppers in many non foods departments, so it’s logical that they continue this approach into Food products.
Target also watches trends outside of the US, and it is hard to knock the success of Loblaw’s in Canada, as well as a host of upscale European retailers using this strategy. Success breed imitation and expansion, and Target is following their own non foods successful model and that used by other successful European and Canadian leading retailers
My “watch out” for them would be to center on continuous supply as they build Target brands, and to be certain they have multiple sources of product to go to, if their key supplier has a disruption in service. They can not deflect consumer anxiety on any product recalls to the supplier, as the brands are Target brands. Consumers only need one good reason to move on, and a food recall at Target would be reason enough….
For Target to take Own Brand to the next level they should hire or create a big time chef who only uses their Own Brand to make great dishes. Someone who endorses the upscale of their Own Brand products. Target should build their brand the CPG way.
Rachel Rae or Emeril would be good place to start. How about a new chef named Archibald Farmington?
Hang on, here. I don’t think Target is at the point of trying to be all things to all people. Rivkin says: “How can a Target differentiate itself, create a strong brand image, compete on price and be everything to all of its consumers at once?” I’m not sure what this tone-setting statement is saying — is it criticizing Target for trying to do all these things? This statement appears to be talking about differentiation, brand, and meeting targeted customers’ expectations — forgive me, but isn’t that what successful businesses of all kinds do? That isn’t dilution, it is the basic business formula — isn’t it?
Yes, Don, Target can certainly make improvements. We are asking Target to focus even more on meeting its customers’ expectations and on building stronger brand image. I know of no organization that can’t stand to improve on these. At the same time, I think it is important to recognize that at least according to our data, Target is more differentiated and is meeting more expectations than most other retailers. Let’s see how Target can get stronger, yes, but let’s keep perspective.
Fashionable, chic, trendy, innovative. Target shoppers believe they will find products fitting this description at reasonable prices. One brand name doesn’t need to be used throughout the store. Consumers believe that items in each department are unique, different, and trendy. They don’t expect one brand to do that in all departments. Creating different brand names in different departments is fine as long as the items are unique, trendy, and fashionable. Ensuring that Target’s products are innovative, at the beginning of new trends, and offered at reasonable prices, and appeal to Target consumers is tricky but, so far, Target has been successful. Will they continue to change and be current or innovative for changing consumers is the question to be answered.
Everything in retailing starts and ends with the target consumer. Target’s target consumer is different than Wal-Mart’s. With that said, there is no reason Target can not advance its Private Label program and project a competitive price image. The difference it is in the packaging and product quality.
Nobody can be all things to all people and those that try deserve what happens to them. Target would be better off offering a limited line of “upscaled” food products and a select set of nonfood items which would reinforce its broader image. Unless they’re careful, with Target moving downmarket and Wal-Mart moving upscale we might end up with two clones of Kmart.
Amplifying Race’s comments: Target is very careful about their assortments. If a category hasn’t got a profitable margin, they have the guts to drop it. As time goes on, this rule will be expanded: if Target hasn’t got a competitive edge in a category, they’ll drop it. Great retailers edit their assortments well, so they can’t appeal to everyone. J.C. Penney’s assortment approach is similar: if there’s no profit, that category is history.