The slow decline of Target demonstrates some important lessons for businesses with multiple brands — and one of them was staring Wesfarmers right in the face.
Managing more than one brand in the same category has its benefits: the potential to leverage economies of scale in your supply chain; the ability to absorb category insights relevant to multiple brands; the ability to become an expert in that category.
But it also presents challenges. Sadly for Target, Wesfarmers’ announcement that it will be shutting, or rebranding to Kmart, more than 160 Target stores nationally shows that it failed to overcome those challenges.
There are some fundamental brand-portfolio management principles that Wesfarmers’ 2019 annual report identified as being issues that Target needed to address, but these concerns were not dealt with in time for Target to keep up with the market.
Here’s what we can take away from its mistakes.
Know your target audience
Perhaps one of the most bewildering mistakes Target made was abandoning what had been a successful strategy to attract style-savvy women in their 20s and 30s by partnering with high-profile designers, including Stella McCartney, Collette Dinnigan, Jean Paul Gaultier, and brand ambassador Gok Wan.
These customers, who follow fashion trends but cannot afford the multiple-thousand-dollar price tags usually attached to such designer clothing, flocked to Target whenever a new collection was unveiled. Target had a clear proposition to that audience — shop with us if you want exclusive designer products without the cost.
Target’s abandonment of this strategy possibly forced those fashion-forward young women (some of whom might also be budget-conscious mums) right into the arms of its sister brand, Kmart. Or into the changing rooms of trend-focused international players such as H&M and Uniqlo.
Even if you play in as broad a category as Target does, you still can’t be ‘for everyone’. Especially now, given how fragmented the marketing landscape is, it makes it impossible to reach any potential customer in a meaningful way. Segmenting your audience down to the mindset level is critical to successfully manage multiple brands in the one category.
Differentiate between brands
Target was struggling to directly compete against Kmart. But it wasn’t always that way; just a few years ago, it was Kmart on the chopping block.
So what changed the fates of these two sister stores?
Kmart implemented a vast makeover and created a clear point of difference to all other discount department stores. It introduced a simplified, mostly private-label range of products, along with vibrant, relatable messaging which said to customers: It is acceptable (heck, even desirable) to be thrifty, and you can still create the style you want.
Kmart has successfully honed its proposition. Target left its behind.
It’s not enough to slap two different logos on your brands and leave it up to your customers to position you. Having a very clear, thought-out position in your category — for each brand — will help guide your customers’ perception of you. And importantly, brand positions distinct from one another.
Don’t give customers a reason to shop elsewhere
One of the main shifts for Target in recent years was the move to majority of generic brands. Just like Kmart. This, coupled with an everyday low-price strategy that forced shoppers to compare it directly to other discount department stores, completely watered down any equity it had built during its high-fashion heyday.
Target gave customers a reason to shop elsewhere. If it was going to offer the same products, with the same level of quality, yet employ a pricing strategy that was still slightly premium, why would customers shop there?
If you have a distribution model that allows for efficiencies across your portfolio, leverage it, absolutely. But you must ensure that the customer-facing parts of each business don’t leave you open for unwanted comparisons or price-shopping. And don’t take your customers for fools.
Together, Target and Kmart could have tightly stitched up a nice big piece of the pie, as back-to-back, Australian-owned discount department retailers against the new international entrants. That would have been a celebrated example of brand portfolio management.
Instead, we have the dramatic decline of an Australian staple retailer, which could not have been more poorly timed.
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