Pitted against each other in an increasingly competitive market, Kmart has emerged triumphant over its sister business, outperforming it in sales and basking in the success of a popular social media and online marketing campaign.
Ninety-two of the 167 Target sites earmarked for change will be converted to Kmart stores.
National Retail Association CEO Dominique Lamb said Target’s decision to pursue a different strategy with a higher price point than Kmart, and move away from successful collaborations with designers such as Stella McCartney, was a move that cost them considerable market share.
Stores to close as shoppers move online<img src="http://www.ladyclick.
Social distancing, store closures and working from home have seen online sales surge, with some retailers operating ‘dark stores’ to fulfil customer orders, and wondering whether to reopen all their bricks and mortar stores.
“I think Target’s online store has been more predominant than Kmart’s, but I’d say the individuals shopping probably just had a preference in the end for the Kmart brand and the price point was right — Kmart was a little cheaper.
“Kmart did a really great job of engaging with their demographic, they used the people who were shopping with them as their best promoters, then they started to replicate quite high-end products like the teddy jacket.
With increasingly negative consumer confidence and stalled wages growth in Australia, IBIS World senior industry analyst Daisy Feller agreed Kmart’s lower prices were far more appealing for the majority of shoppers.
“Target has been underperforming Kmart over the past five years.
Kmart has benefited in its position as a discount retailer in times of negative consumer sentiment,” she said.
“Target positioned itself as a middle-market retailer.
“A lot of the negative consumer confidence has just come over the past two years and wages are not growing as fast as we have wanted.
The brand also ‘got a bit vanilla’
Its similarity to Kmart has also been behind Wesfarmers’ decision to keep rationalising Target stores while promoting Kmart.
Retail strategist Brian Walker said every great retail brand has “a story, it has a point of difference and it has a competitive reason to be there”.
“Added to that, it had a high rising cost base and lost the ability to pay its way.
“When you look at Target in the United States, it has a great success story, Kmart in Australia also has a great success story in the rise of chic and cheap. Kmart has a story — it’s getting pretty cool to have something from Kmart.
But all is not lost for Target
With Wesfarmers’ acquisition of Catch Group, which operates an online business model offering branded products on a first-party basis and a third-party online marketplace, Mr Walker said there may be a chance for Target to continue in a virtual retail space.
“If I was being audacious, I would think what was interesting about Wesfamers was that they bought Catch Group. Target has a great brand name where I think it potentially could go into more of a marketplace operation.
<img style="max-width: 760px" src="http://www.ladyclick.
info/wp-content/plugins/OxaRss/images/5f2888565c47141c5276a1df3a336849_12277076-4×3-xlarge.jpg” />Target could make a comeback online, says one analyst.
(ABC News: Hugh Sando)
“I’ve got great empathy for the longstanding employees though I think a lot will redeploy into Kmart. The decision will have an impact straight away on landlords, it’ll have an impact on suppliers.
“I don’t think we’ll see the end of the brand over time.
They’re still a reasonably sized company.”
There could be more retail horror to come
The demise of Target could have disastrous impacts on centres which relied on the department store to generate foot traffic.
“What we need to remember is retailers have had it tough even before COVID-19 and now unemployment is increasing, discretionary spend is decreasing and there’s a cautiousness around consumers who are only spending on certain types of things.
Myer, Kathmandu and Rip Curl stores to close<img src="http://www.
“We’ve had a bit of upheaval, elections, change in governments, and that has left people nervous as to what the state of our economy is.
“Many of these businesses are making very strategic decisions about making brands commercially viable.
“Target has had success online but that middle market has been crowded for some time and consumers only have so many dollars to spend.
“There was always going to be an adjustment,” he said.
“Overall retail spend has dropped by $335 billion, online shopping is growing at 10 per cent and will probably get to 15 per cent but the pie wasn’t growing, so that has got to come out of physical stores.”