Target's New Strategy May Be On-Target
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Investors and shoppers alike do not know what to make of Target (NYSE: TGT).
It recently diversified into groceries and pharmacies to better compete with the world's biggest retailer, Wal-Mart. Yet Target also offers high-quality designer goods at discount prices.
Because of its strategy, the company's competitors run the gamut from department stores to electronics stores like Best Buy to online retailers such as Amazon to Walmart.
Target critics point to its sales in December, which rose a disappointing 1.6%, as just the latest example of Target's failed strategy. It seems to these critics as if the company is going through an identity crisis, trying to figure out what sort of retailer it wants to be.
On the one hand, Target wants to be a one-stop shop like Wal-Mart where customers can pretty much buy anything. On the other hand, the company wants to be a retailer known for offering style not available anywhere else.
Some in the industry feel Target cannot be both and that it diluted its brand with its recent move into fresh food and pharmacies. After all, the company has spent much of the past few years building its image as a trendy, design-focused brand.
But it looks like Target is adding everyday items such as fresh food merely as a way to expand its base of customers. It really isn't deviating much from its long-term strategy of offering quality brands at a good price.
The company's focus on this way of getting shoppers through its doors goes back a number of years. Its sales of designer products began with architect Michael Graves and his home accessories in 1999 and since then Target has worked with a number of partners.
Its most recent announcement of its “design for all” slogan and various partnerships seems to fit right with its long-term strategy.
Target reported that five small boutiques would spearhead its launch of stores-within-stores in May. The five boutique partners -- Privet House, The Webster, Cos Bar, Polka Dog Bakery and The Candy Store -- currently operate no more than a handful of stores each.
Target's plan is to give each of them room in all of the company's 1,700+ stores to sell limited edition merchandise, but only for six weeks. These boutiques will then be replaced by other small boutiques. It's all part of Target's plan for 2012 to “delight and surprise them [its customers] with new things.”
Target's other announcement should give it a boost too...it will open 25 mini Apple stores within selected Target stores in an effort to boost its lagging electronic sales.
These new initiatives should help Target attract a key demographic -- younger shoppers, who seem to gravitate toward specialty stores and boutiques.
Yes, Target is going through a period of turmoil. It is still without a chief marketing officer and recently fired its lead advertising agency.
But critics should give the new strategy a chance to work. After all, the old strategy didn't work well. Look at Target's stock price of the past five years -- lots of up and down with the stock nearly 20% lower than it was five years ago.
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