Store brands provide a unique means for retailers to signal their identity and strategy. Target’s most recent initiative in this realm highlights its desire to appeal to all shoppers, by ensuring that its pricing strategy is comprehensive.
The new Smartly line of products will feature household necessities, packaged simply and often in single-serving portions, at prices that average about 70 percent less than comparable national brands. By listing most of the items at less than $2, Target is aiming to appeal to budget-conscious consumers who care little about brands.
The move stems from a notable shift in Target’s strategy though. In the past, it rarely tried to compete on price; even its
existing private label, Up & Up, cost about the same as national brands. But in recent years, hemmed in by competition from Walmart and Amazon, as well as price pressures resulting from the growth of discounters such as Aldi and Dollar General, Target changed its tune. The CEO officially announced that the retailer would minimize its emphasis on profits so that it could charge lower prices across the board. Smartly is a key added component of that strategic effort.
It joins several other private-label brands in other product categories, such as Target’s Heyday electronics, that also are priced below the national brand average level. With these exclusive lines, Target hopes to maintain its appeal for shoppers who visit its stores precisely for the unique offerings, not just for the prices. That is, it wants to appeal to brand-focused shoppers who want the latest limited edition line available only at Target, but it also wants to get brand-agnostic consumers needing the lowest price through its doors or onto its website.
A key demographic in these efforts is millennials, who generally are price conscious and might need a single roll of toilet paper for their first apartments. These shoppers also tend to care little about branding, so the Smartly packaging wastes little effort with fancy displays and instead simply describes the product’s primary function (e.g., “Paper Towels—Cleans Up Your Messes”).
Yet the expansion of its offerings—Target currently has added or announced plans to include more than 20 separate store brands across various product categories—may be a challenge for store operations. Target will be faced with a choice and must determine whether to grant limited shelf space to popular national brands, its familiar Up & Up private label, or the exciting new (and price-oriented) store brands. Target’s strategy at this point is a plan to remove the worst performing items from each line.
Another option though is to move more customers online. For this related effort, Target is hyping its Restock program, which allows online shoppers to fill a box with a range of products and have it shipped to them, for a single, flat fee. If they also maintain a Target Redcard credit account, they can have the essentials shipped to them the next day, while earning even greater discounts on their purchases. Thus if Target can get all these elements of its strategy to work cohesively, it might hit the mark for a wide range of shoppers, ensuring their satisfaction and loyalty over time.

Discussion Questions:
1. What type of store is Target, and with what types of stores is the new Smartly line designed to compete? Which specific stores?
2. What type of growth strategy is Target employing in introducing its new Smartly line?
3. What are the advantages and disadvantages of adding the new Smartly line to its existing product offering?
4. How will Target make room for Smartly products in its stores?

 

 

Source: Khadeeja Safdar, The Wall Street Journal, October 6, 2018; see also George Anderson, “Will a New Private Label Keep Target’s Customers out of Aldi and Dollar General?” Retail Wire, October 8, 2018