Marketing 4th Edition by Dhruv Grewal,Michael Levy

Exercise 5

TARGET AND ITS NEW GENERATION OF PARTNERSHIPS
The country's second-largest retailer, Minneapolis-based Target has been an innovator in structuring retail partnerships that offer customers something special: fashionforward housewares and apparel at prices they can afford. In addition to its Target.com website, the company operates nearly 1,800 stores in 49 states, along with 37 distribution centers nationally and a separate headquartered location in India. Apparel and accessories account for approximately 20 percent of Target's annual sales.
Similar to its more standardized rivals Walmart and Kmart, Target offers the vast breadth of a full-line discount store, featuring everything from cosmetics to baby clothes, housewares to electronics. But Target also has uniquely positioned itself through a series of exclusive partnerships with top designers, such as Michael Graves and Isaac Mizrahi, who have collaborated with the retailer to offer limited-edition, distinctive products. Although other retailers also have developed relationships with designers to create exclusive brands-such as Kohl's Simply Vera line from designer Vera Wang, which accounted for 50 percent of its apparel sales in 2010-these competitors have struggled to maintain their lower prices.
Thus, though it is not alone in partnering with designers, Target appears to be the best practitioner of this strategy. The company launched its first retail partnership in 1999 with renowned architect Michael Graves, whose teakettles and toasters were hailed for having brought the word "design" back to the housewares category. Since then, the company has worked with more than 80 design partners who have generally welcomed the chance to reach a mass market with their exclusive labels.
Most of the partnerships have been limited to a specific time, which also has built a sense of urgency and exclusivity around the offers. Target's 2011 holiday offerings featured a number of designer labels: Harajuku Mini kids' clothing from designer Gwen Stefani; hats from Albertuse Swanepoel; and a jewelry line featuring designs by Dana Kellin. Whether time-limited or longer term, such partnerships have consistently offered high-profile labels at moderate prices, helping the retailer boost its bottom line.
Target's collaboration with Missoni made the biggest splash though. The fashion world was stunned when the Italian fashion house agreed to create a collection for Target. The big American retail store is the diametric opposite of the high-end shops that have typically carried Missoni's expensive knitwear and apparel. Target's announcement through Facebook, other social media sites, and a Manhattan pop-up shop for fashion editors, celebrities, and other Missoni clientele helped stoke public excitement.
Of course, such excitement can cause problems as well. Target's website crashed just moments after the Missoni launch, as customers clicked in droves to buy up the designer duds. Although the site remained up when Jason Wu (the designer of Michelle Obama's famous 2008 inaugural gown) released his line, many stores reported nearly immediate stockouts. Customers in a Miami store watched in shock and dismay as one couple swooped in and purchased the entire selection that was on the retail floor.
Now Target has created a new model for retail partnership as a way to offer its shoppers something different. Through a store-inside-a-store initiative that it has dubbed The Shops at Target, the retailer is partnering directly with small specialty shops and boutiques to offer their limited-edition merchandise, from dog biscuits to vintage furniture, at prices ranging from $1.99 to $159.99.
The store-within-a-store, with dedicated space branded by the designer, has already proven a successful strategy elsewhere. Macy's has Ralph Lauren boutiques; Bloomingdale's has Chanel boutiques. JCPenney, a close Target competitor, also hosts Sephora boutiques, MNG by Mango, and other designer brands.
The Shops at Target collaboration is being rolled out as a series of six-week partnerships. For its first round, launched in May 2012, the retailer chose five independently owned specialty shops-The Candy Store; the Cos Bar cosmetic shop; Polka Dog Bakery; the Privet House home accessories shop; and The Webster, a high-end Miami clothing store-all getting their first crack at a national market through Target's nearly 1,800 locations, not to mention its website. Target plans to repeat the program subsequently with new sets of boutiques, but the initial group alone will add nearly 400 new and exclusive products to Target's online and store inventories.
In a separate but parallel development, Target has also announced that Apple will open 25 small retail shops at Target locations around the country. This isn't a first for Apple; it already has some mini-stores at Best Buy locations. So what's the special appeal Target already sells both iPads and iPods, but the expanded instore venture can introduce Apple products to new groups of customers, including those who might not be looking for electronics. Full-blown shops for Apple products, with their own décor and personality, should encourage Target shoppers to test out the products. Furthermore, of the vast number of people who enter Target stores every day, many of them will stumble on an Apple shop and be unable to resist playing around with the appealing, fun products. Whether they buy on that shopping trip or on another visit back to Target, Apple thus is likely to expand its sales.
Target shoppers thus have come to expect a steady stream of exclusive new designer brands, along with the constant possibility of finding something unique, even unpredictable, in the next aisle over. Now the big merchandiser is hoping to keep that excitement going with its new specialty-shop partnerships. But just as it was introducing that new retail model, Target was also forced to announce disappointing sales figures and declining profits. The question going forward will be whether Target-the store loyal customers have dubbed "Tarzhay" for its supply of "cheap chic"-can keep its steady customers coming back, while attracting more shoppers with new rounds of boutique surprises.
Using the factors for choosing retail partners outlined in the chapter, do you believe that Eva's line of green cosmetics should attempt to get placement in Target