It certainly looks like a target.
The walls are daubed with pops of red, there’s a spot on logo above the entrance, and you can buy men’s and women’s fashion, homewares, and toys.
Heck, it’s even called Target. But that’s not the target. At least not Target as Aussies know it.
It’s American Target style. In the heart of New York.
Target US – unrelated despite the similarities – is a powerhouse with stores in all 50 states that last year made just over US$100 billion (A$145 billion) in revenue with profits of US$11.6 billion (A$16.6 billion). Some attributed it to the senior executive’s “fuck you” attitude toward investors looking for a dime.
Down Under, Wesfarmers-owned Target is in the doldrums, closing stores and trying to find its footing in the struggling retail sector,
“It’s too late for Target Australia,” said one retail commentator, of the retailer as a direct competitor to Big W, owned by Kmart and Woolworths.
Target Australia insisted there was still life in the old brand. He points to the chain’s downsizing and pivot to a “digitally-led retailer” with a focus on “mother as primary customer” gearing up for a brighter future.
But there’s no doubt that Aussie Target has had a torrid time.
How Target Australia and Target US Differ
So how can two seemingly so similar stores, even though they are in different parts of the world, behave so differently?
First, they are not identical. Target’s American stores sport large supermarkets, something you absolutely don’t see in Australian Targets. Indeed, it’s one of the biggest selling points for customers as they pass clothing and household items on their way to fruits and vegetables.
Stateside Target also has more brands – like Olay and Levi’s – that Australian stores lack.
One of the most notable changes is that Target stores in America look less like Target Australia and more like Kmart Australia.
While Kmart stores in the US – which are now stretched thin – look like some of the saddest Australian targets.
The success of Target US is of course dependent on price and range. But also stay relevant and inviting.
He spent billions to inflate his network of stores. The company said it wanted to give customers some of its “signature ‘Tarzhay’ magic” (it was Target US, not Target Australia, that coined this genius play on its name).
He added that he wanted his ‘guests’ to feel ‘welcomed and inspired’ in the stores yet familiar.
An example of this is one of its newest stores, just off Times Square in Manhattan. Befitting its brightly lit environment, the store’s signage is neon.
While some Target stores in Australia can seem dimly lit, clinical – almost dark in some corners – this store is warm and bright, but not overwhelming.
In some places, like the beauty aisles, the shelves are lower and further apart, so you can linger.
Pops of color catch the eye here and there. The modes are cheap as chips but don’t feel dull and lackluster.
In a single trip you can buy bread and milk, t-shirts, a yoga mat, cushions, eyeliner – you can even pick up your prescription medication.
Of course, there’s click and collect; in department stores there are “drive up” areas similar to petrol stations where you can get your goods ordered online
The Times Square store is also an example of how Target US is experimenting with different formats. This store is small – 25% the size of a regular Target – and caters directly to city dwellers who need to haul their wares home on the subway and not crammed into an SUV.
Targeting US $9.3 billion bet
Mark Cohen, director of retail studies at Columbia University Business School in New York and former CEO of Sears Canada, said Target US’ achievements were due to courageous decisions by its current CEO, Brian Cornell. .
“When he joined the group in 2014 he said ‘the stores are worn and dated and I’m going to spend US$6.5bn (AUD$9.33bn) in capital expenditure’.
“Well, Wall Street went crazy and (Mr. Cornell) basically said, politely, ‘fuck you’, my board is behind me and we have to do this,” he told news.com.au.
“And that positioned them beautifully for what turned out to be a bargain.”
Although even Target US faced headwinds with lower earnings in the first quarter of 2022 due to what the company called “unexpectedly high” operating costs. And a move to Canada, where the band was unfamiliar, was a disaster.
“Too late for Target Australia”
Gary Mortimer, professor of marketing at the University of Queensland, said Target US appealed to a budget-conscious consumer who didn’t want to feel budget-conscious.
“US Target is similar to Walmart in its low-cost image, but Target caters to a younger, image-conscious consumer by stocking more fashionable ‘exclusive’ furniture, clothing and designer lines than Walmart,” he said.
“They leverage ‘masstige’ – ‘prestige for the masses’. It’s a strategy that aims to be influential, trendy, stylish, while remaining affordable.
The most successful retailer in Australia, Prof Mortimer said, was, yes, Kmart.
“It is too late for Target Australia. Wesfarmers made the right decision to reduce the store base, remove duplication and push their remaining Target stores into the middle market,” Prof Mortimer said.
“The Australian market is too small to support three large discount stores.”
Targeting Australia’s New Plan
Wesfarmers owns both Target and Kmart and has merged them into a single Kmart group that does not completely separate its accounts. As such, it’s hard to gauge how well – or not – Target Australia is doing.
In the full year to June 2021, Kmart and Target together made a profit of $739 million, but that excludes Target-related restructuring and impairment costs.
And there are plenty of them with half of Target’s 300-store fleet in 2020 now closed or converted to Kmart or the smaller “KHub” format.
Target sales were down 3.7% from 2020, but comparable sales growth — which excludes stores closed during shutdowns — was up 13.3%.
Wesfarmers said sales had been “significantly impacted” by store closures but also by Covid-19 restrictions which affected the entire retail sector.
In a few weeks, Wesfarmers will detail Target’s performance for the past fiscal year. This will reveal if the mark turns a corner or is stuck in neutral.
The company was reluctant to talk ahead of those results.
But a figure from its 2021 balance sheet is essential. Last year, 26.9% of Target’s sales were online. And that indicates where Target’s future likely lies.
In a strategy presentation in June, Target Australia managing director Richard Pearson outlined the vision for the venerable brand.
The key is to be a “smaller, simpler business” with “future growth…. digitally driven,” he said.
Target was an “iconic, high-profile brand,” the document says. The focus was now on clothing and home decor with “mom as the primary customer.”
In February, Target launched its first advertising campaign in seven years. Based on the slogan ‘That’s Target’, the aim is to instill in the Australian shopper that the brand is the birthplace of ‘affordable quality’.
Target Australia hopes to recapture some of that Tarzhay buzz from the brand’s heyday.
He won’t want to end up like Kmart USA. It has not evolved over time; its stores have become obsolete; its pricing is less attractive and its point of difference less clear.
Now there are only three stores left and they will probably be gone by Christmas.
It’s a nightmarish vision of the future that Target Australia will want to avoid.