What does Target’s new in-store food brand mean for retail?
Tuesday, August 27, 2019
Experts say that retailers should be looking at the writing on the wall and go lean. It’s said that only the biggest guns like Costco and Walmart have the resources to weather the Amazon storm.
So, Target's announcement that it is launching a new grocery brand, Good & Gather, came as a surprise. Confident projections that it will also be a multibillion-dollar brand by the end of 2020 raised eyebrows as well.
After years of representing private-label brands on their shelves, Target's new brand will be a boost to its food business. Good & Gather is based on a better-for-you groceries model and includes over 2,000 items ranging from fresh salad mixes, organic snacks and frozen meals.
Target is known for its loyal customer base and says that one of its biggest strengths is that it is a one-stop-shop for their guests. A recent survey from the company revealed that 75% of Target in-store shoppers add at least one food item to their baskets.
The new grocery brand will help provide more options for the shopper. While this seems like a logical progression what already occurs, analysts disagree that Target offered much in the way of groceries.
Target has often been criticized for its lackluster offering in fresh food and groceries as well as its higher prices compared to other similar stores. The loyal Target customer is more prone to step in for apparel, makeup and houseware, and some national snack brands than any fresh food at the Bullseye.
Clearly, grocery is the one spot that Target needed to fix, so it's better late than never. Products from the new line Good & Gather will have everything from organic pizza crusts, hazelnut and peanut butter spreads, milk and eggs, frozen veggies, pastas, and salad mixes.
The Good & Gather launch follows Target's like-minded experiments in other sectors. The company is now focused on creating more store-owned brands and now proudly proclaims 25 new owned-and-exclusive brands. These include Project 62 for furniture and kitchenware, A New Day for women's clothes, and Hearth & Hand with Magnolia for home goods, among others.
So far, the experiments have paid off, and Target closed FY18 with $75.36 billion in sales compared to $71.88 billion in 2017.
While Target hasn't done well in food historically, the new shift comes at the right time.
Changes in customer demographics are contributing factors, and brands like Walmart haven seen phenomenal results with their private brands like Great Value. However, experts say that Target should stay true to its philosophy of offering great products at great prices instead of taking on giants like Walmart.
Target's experiment is an excellent example for other retailers to follow. Millennials do not have the same compulsion for brand loyalty as their parents did.
On the other hand, there are national brands that have reigned for ages but have fallen back on account of limited innovations. For example, how many big-brand cereals do you think have reworked their ingredients despite heavy and long-term criticisms from food experts on how harmful some of them are?
Well-read and hyperalert modern parents will no longer stand for that. They would prefer to opt for the store brand that listens to them instead of paying more for a name brand.
For retailers worldwide, this is an important lesson to keep in mind if they want sustainable business growth.
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