Tuesday, April 24, 2012

The Shops at Target

As we all know, mass merchandisers and department stores face stiff competition these days.  Online retailers continue to disrupt the brick-and-mortar retailers.  Moreover, many of these firms face intense price competition with their rivals, and they sell many items at steep discounts.  For years, Target has fought to differentiate itself, to do more than just sell the same goods others do.  They have tried to avoid direct price competition on some items, by selling exclusive designs and premium private label products not found at other retailers.  Now, they have launched Shops at Target - an interesting innovation in the mass merchandiser industry.  According to the company,

Through this ongoing program, Target will partner directly with the shop owners of specialty stores and boutiques to co-create affordable, limited-edition collections for its guests.  The first flight of The Shops at Target features five exclusive collections from five U.S. specialty stores: The Candy Store, Cos Bar, Polka Dog Bakery, Privet House and The Webster.

The innovation here is that Target is NOT partnering with well-known designers in these situations.  They are partnering with small, independent specialty shops.   In so doing, they avoid the competition to sign up those well-known designers, while also offering something even more unique and off-beat.   After all, other retailers have raced to sign up designers for exclusive collections, imitating Target's strategy.  As that has happened, the expense associated with this "arms race" has become quite high.  This strategy tries to find a way to move beyond that arms race.

 The limited-edition nature of the collections seems intended to drive traffic too - "Come now to see what's here, because it won't be here for long."   As we know, increasing frequency of trips is crucial for retailers.  When a shopper comes more often, they tend to buy other items perhaps not on their list.  In the end, the question will be:  Will shoppers pay premium prices for these products, and will Target be able to avoid deep discounting associated with slower-moving items in these collections? 

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