Target’s Final Move to Survive
What are the implications of the restructure of Target for Australian retail and what do Target need to do to survive and ideally thrive following this huge downsizing in store network and cost structure?
With no discernible brand position different to Kmart, or Big W, the Target brand has finally succumbed to the pressure of the market with COVID-19 the accelerator to its fate. While the headlines may have you believe the brand is closing down completely, the truth is they are still going to have 115 stores open after the planned closure of up to 75 stores and conversion of approximately 90 to Kmart branded stores.
So what are the implications of this to the Australian retail market?
DDS
BIG W are cheering. For years we’ve been indicating the 3 Discount Department Store brands in AUS were too much. Historically at least one of them is always suffering and performing poorly. Now, there looks like there may finally be a duopoly, it will be interesting to see if and how Big W can make the most of this opportunity. The Big W brand itself has suffered similarly to Target in recent times. I hope that they take this news as a real wake-up call and get serious about their transformation in order to survive and compete with both Kmart and the smaller but hopefully better placed Target.
Regional Retail
All Target Country stores are closing. This is huge for regional Australia. The plan includes converting 52 Target country stores to Kmart and closing the remaining 50 Target Country stores. This will greatly impact employment for 50 of our regional towns. These towns are already suffering greatly for so many reasons (bushfires, droughts, floods, pandemic etc). And, reduces the accessibility of affordable products in these areas which given their constraints is quite important. The economic impact of this for regional Australia alone will be felt for a long time.
Fast Fashion
There has been a notable change in the Kmart womenswear category in the past few months. I imagine this has everything to do with the latest announcements (or it’s an incredibly lucky fluke). The range is better, colours on point, and it actually feels good to walk into a Kmart store through this section for a change. Target’s womenswear on the other hand sits more in the mainstream, and is less trend focused. It conjures images of affordable office attire and basics, despite its recent introduction of sub brands like Bettina Liano (a denim based brand) and Preview (a more upmarket office wear line that has a strange similarity to the Review brand – I’m unsure if this is intentional), it seems these brands were not marketed to the right audience or anyone? Have you ever seen a Target post on social media by anyone other than Target? I haven’t. Kmart on the other hand are Instagram giants, with all sorts of influencers happy to drop the K brand on their feeds.
Target is a good place to shop for womenswear that you need not want… whereas Kmart have turned the corner into the land of want in this space. This places Kmart to do really well here and it will be interesting to see the direction Target takes in its final attempts at relevance in the market.
Baby & Children’s fashion
Kidswear has been the staple and strongest performing category for Target in the customers eyes. Read thru the twitter responses to this news, or ask any mum – she’ll tell you what brand she buys for her kids to wear to daycare – aka able to cope with Armageddon! CottonOn kids is cool but not quality enough to last through the daycare test, Kmart’s kids range is limited and even worse quality (read the twitter comments on Wesfarmers’ announcement for more on this). If Target are smart, and focus on this category, as well as lift their online game to make the purchasing journey pleasant and simple they may do well.
Wesfarmers has provided an update on the review of Target, including changes to the Target and Kmart store networks. The Group also provided an update on significant items expected in the 2020 full-year results.
Read full announcement here: https://bit.ly/2LLrKH5
The target baby and kids clothes will be a big loss for parents. They were Target's best products.
What should Target do next?
With a reduced cost base (80 less head office staff + less stores) how will the remaining Target brand reinvent itself for survival? Here’s my wish list for them, I’m hopeful they have these strategies well placed – if not, call me.
Brand Purpose
What’s the reason for Targets existence? A big question but one all successful brands can answer clearly. The answer should determine what they do next across all aspects of the business such as which categories to focus on, their service model and brand identity. Without a true brand purpose everyone in the business can get behind, there will be no Target in 3 years time.
Product Strategy
Following from setting their brand strategy a rationalisation needs to take place on which categories they continue to play in. Home has been won clearly by Kmart. Toys, while important, has again serious competition from Kmart. Given their reason for the reduction in stores is due to the cannibalisation of the market from their own brand Kmart, it would make sense to divide the market up and let Kmart continue to kick goals in these areas, letting Target focus on the one area they do well (read above).
Store Footprint
One of all brick and mortar retailers largest costs is rent. It seems inevitable that the remaining stores will likely need to reduce their floorspace in order to help turn profits. Similar to Myers recent strategy of reducing store footprints, it makes sense to do this and get their sales per square meter up. Looking at Wesfarmers’ announcement the below quote seems to imply this is part of the plan:
“ Ongoing negotiations with landlords to support the transition to a sustainable store network”
Omni-channel (aka CX)
So this term gets thrown about a lot. A lot, a lot. But its already outdated, the customer has moved on. In fact they were never interested in your channels or your customer data, just the experience. Customers are already living in the multi/omni channel world, they just don’t talk about channels, ever. We’re, searching online for price and product, being influenced by friends, family and strangers on social media, and have really high demands on convenience – as in how easy it is to shop your brand, how long does it take to click through your website, can I link through from social media, how fast can you deliver, do you have my preferred payment option, do I have to scan it myself in store, are your emails relevant and useful or annoying? etc.
So it’s all down to customer experience (CX) in the end. If the customer is happy they will want more and tell their friends about you, if not, they’ll go to Kmart instead.
In light of all of this, the prospects of Target’s survival are slim, but it can be done. It will require a robust and brave customer focused strategy. Something which has unfortunately been lacking in the Australian department store landscape for a very long time.