Target: A Day Late And a Dollar Short With New Dealworthy House Brand
Target today announced a new house brand for $1-$10 items called "dealworthy" . This new offering achieves the trifecta of nonsense.
1 - Doesn't address the root problem of cost to serve combined with assortment.
For the past two years, Target has been trying to recover its inventory footing when it had the wrong assortment, and not enough of it. Sure, it's cheaper to ship from stores, but your assortment is so low it doesn't matter.
Temu has centralized inventory in China and a broad constantly refreshing assortment subsidized by the government and if you believe the reports, slave labor, poor wage practices etc. Dollar Stores have many cheap stores, sparsely staffed by lower wage employees.
Still, cost to serve is not mentioned.
2 - Cheapens the overall brand
Target has been long known for upscale value. In the launch of this brand, it is trying to indicate that you get quality, but don't sacrifice low price. This kind of thinking is nonsensical and the consumer knows otherwise.
Anyone who buys something for a $1 knows that if it doesn't work out, you toss it. Not only is just this not a very sustainable policy, it doesn't raise the profile of your brand even if you "stand behind it". What exactly are you standing for and why?
3 - The new return policies are ridiculous
In a world where returns can kill your bottom line and many brands are just saying "keep it", Target has announced a year-long return policy on these new $1 dealworthy items. You can't even blink at these items from a reverse logistics point of view without spending at least $20-$40.
In short, it's hard to see this as anything other than a permanent "doorbuster" type play. However, in it, Target has made the ultimate Faustian bargain. Here's a bit of my soul, and you give me back a bit of traffic. At least for a time.
As Andy Jassy said on the Amazon earnings calls, cost to serve must be addressed in a serious way to offer lower ASP items. With this copycat move, Target has signaled that its "lifer" management team is fresh out of ideas.
Perhaps it's time for new blood at Target. The Cornell/Mulligan playbook has run its course, and it's been a great run. This new "Tar-Mu" is not going to save them.
