How Target Built 10 Billion Dollar Private Brands
Target’s All in Motion private label clothing brand
One of the oldest tricks in a retailer’s playbook is to have a portfolio of great private label brands. Back in the early 2000s Target was known for its cheap chic clothing but by the time the recession hit in 2008 and 2009 Target had lost its way. Once the economy started to recover after the great recession Target’s customers felt it had lost its cheap chic edge. Once popular private label brands such as Merona and Mossimo began to look dated. Target’s private label brands also often lacked a sense of brand identity with brands having too many items across divergent themes. By 2017 Brian Cornell, Target’s CEO announced an ambitious turnaround plan for Target and one of his key initiatives was to introduce new private label brands.
Repositioning a brand is difficult. Your customers tend to hold onto what a brand once was and currently is. Think about Gap. It has tried unsuccessfully a number of times to convince shoppers that it is cool again. So instead of updating Merona and Mossimo Target decided to discontinue those brands. On the surface this may seem like an easy move but it’s not. Those brands despite no longer being as lucrative as they once were, were still generating a material amount of revenue. This is what often keeps a company from moving on to something better. It does not want to give up what it has now in case its new direction does not work out.
When Target decided to renew its focus on private label brands it took an aggressive approach. Over the past few years Target has introduced over 30 new private brands. Cat & Jack, a private label kids clothing line quickly became a hit generating $2 billion in sales for Target within only one year after launch. At least three additional Target brands have passed the $2 billion mark: Good & Gather, a food and beverage line; Up & Up, a personal care and household essentials brand; and home decor brand Threshold. Target now has private label brands across a number of categories including clothing, grocery, beauty and home.
In 2020 Target launched another billion dollar brand called All in Motion a line of activewear and accessories which has already passed the $1 billion sales mark despite its short tenure. Merchandise within the All in Motion line is made from sustainable materials and has an inclusive size range, XXS-4X for women and S-5X for men signalling that Target is listening to and responding to consumer needs. “Since the launch, the design team’s been busy, reading every single guest review (more than 15,000) and using that info. to continue to improve and expand the brand,” Target stated in a blog post.
As Fortune wrote in 2021: “Target now has an astonishing 10 billion-dollar brands it built itself on its roster, something only a few other companies like Procter & Gamble can boast.” Target’s winning private label value proposition also includes its pricing strategy. Target, known as the “chick chic” retailer, has maintained its reputation by giving its customers premium style at affordable prices. Target’s All in Motion line is approximately 75% of the price of competitor brands. This low price strategy is a winning one in an economy where millions of Americans are struggling to make ends meet.
To build these brands, in addition to a deep commitment to listening and responding to customer feedback Target also invests in visual merchandising so that its brands look just as good as national brands. Target is also known for its exclusive collaborations like the one it has with Chip and Joanna Gaines for its Hearth & Hand line.
Having a strong portfolio of private label brands gives shoppers a reason to shop at Target over Walmart or Macy’s. "In a world where everything is increasingly commoditized, each…[private brand] helps differentiate Target and build preference for our overall brand," says Target CEO Brian Cornell. It is also a strategy that flows right to the bottom line with private label branded products having much better margins than national brands. For national brands, the margins are around 1% of sales for packaged food and for equivalent private label products the margins are around 25% to 30%.
Target’s private label strategy has generated significant financial returns with Target reporting that last year its 48 private label brands generated $30 billion in sales and the sales of its private label brands grew at a faster rate than overall sales growth.
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