When Brian Cornell took over as Target CEO in 2014 (TGT) – Get Target Company Reportthe retail giant has lost a bit of its “Tar-Zhay” magic — the inexplicable connection between the brand and its customers.
During the 2013 holiday season, the chain suffered a massive data breach that exposed the credit and debit card information of millions of customers.
That was a big deal at the time, even though consumers have mostly been dismissive of such breaches these days. But that’s not Target’s only problem: The company is in danger of becoming just another place to shop.
Cornell understood the problem and started fixing the brand. This includes two main components: refurbishing many of the stores to better reflect how customers use them, and building a range of private labels.
Target has always had private labels, but the new CEO led a program to differentiate them that not only worked, but moved the brand forward.
Target ditched many of its designer clothing lines to focus on creating its own high-quality yet affordable alternatives. In areas such as homewares and kitchenware, it has forged celebrity partnerships to drive customers to stores.
The chain has also used shelf space to build its own and operated food and beauty brands, as well as swimwear, athleisure and many apparel lines.
In short, Target uses its stores as a way to showcase its brand, making it a core part of its products.
Amazon (AMZN) – Get Amazon.com Inc. Report Tried to do the same thing, but it mostly failed for a fairly obvious reason.
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Amazon shrinks its private labels
Amazon wants to build its own private label because they cut out the middlemen. The online giant also has endless data on what’s sold on its platform, so it should be able to create product lines that resonate with customers. But mostly it fails to do so.
People buy a lot of Amazon’s basic products, which in part exposes Amazon’s broader problems. It is relatively easy to buy without looking at the charging cable or backpack. You know what you’re getting, and the Amazon name implies a certain level of quality.
However, the company has struggled to gain traction with its many owned and operated clothing lines. This may be because people rarely buy clothes based only on pictures. In most cases, consumers want to try on garments, or at least hold them in their hands.
Like Amazon, Target has multiple lines of swimwear, underwear and activewear. Before anyone buys them, they can at least pick up things and take a closer look. This allows them to judge the fit, quality and whether they actually like the items.
Amazon couldn’t do that on the site, which explains why most of its private labels failed, and the company decided to scale back its investments in the space.
Kohl’s can solve Amazon’s problems
Once again, Target does a great job with private labels because it can show them off in stores. Amazon doesn’t have a store to display most of its owned and operated product line.But it does have a partner – Kohl’s (KSS) – Get Kohl’s Corporation Report – Urgently need to update its merchandise.
Amazon could certainly buy Kohl’s. The two companies already have a partnership: The brick-and-mortar retailer already charges returns for the online giant, and its brick-and-mortar stores will help with Amazon’s logistics in addition to giving it a place to display merchandise. Beyond that, however, the two retailers could reach a deal to provide Amazon shelf space for their private-label clothing lines.
Doing so will help Kohl’s refresh its product offering and offer it a brand that other retailers don’t have. This could lead to increased sales, and for Amazon, some in-person shoppers will place their orders online (because once you see/wear something, you don’t need the store anymore).
The deal makes sense, and it helps both brands. Target has proven that this business model works, but it requires stores. Kohl’s can provide Amazon with a puzzle that it doesn’t.