People like to shop at Target (TGT). The chain has become sort of the new mall (not that most old malls have gone anywhere) where people visit not just because they need something but because they want to see what the store has.
Walmart (WMT) offers stores-within-a-store at its locations, but it has not added the value to its in-store experience that Target's partners have. Only Best Buy (BBY), with its embedded Apple (AAPL), Microsoft (MSFT), and other giant tech brand stores inside its big boxes, has done anything close to what Target has done.
Target has found a near-perfect mix of useful and aspirational. Nearly all its stores have Starbucks (SBUX) locations. That's a treat for customers who can indulge in an affordable luxury and then -- just to suggest one example -- look at items in the chain's Magnolia section and ponder a pricier purchase from the Chip and Joanna Gaines line.
Visit a Target and you'll likely get a Starbucks, and might get "stores" from Magnolia, Disney (DIS), Ulta Beauty (ULTA), and Levi's (LEVI). Not every Target has every partner, but the retail chain has big plans to expand two of these deals.
Target Wants More Levi's
As a chain built on classy but affordable products, Target has leaned into the same with its partnerships. Both Levi's, a classic jeans brand that's well-priced compared with some of today's trendier brands, and Ulta Beauty fit that description.
Now, the retail giant has expanded its relationship with both partners. Target plans to bring Levi's Red Tab, its partnership with the iconic brand, to 300 more stores by the spring, making for 800 stores in total.
“Strategic partnerships like Levi’s continue to drive preference for Target, and guests turn to Target for the very best national brands alongside more than 45 incredible owned brands,” Target CMO said in a news release.
“Since offering our guests Levi’s Red Tab label for the first time more than two years ago, paired with our unmatched owned brand offerings, we’ve established Target as a go-to place for denim."
That might be a bit hyperbolic, but Target has given its customers, at least in select markets, an affordable jeans option for, if not quite a premium brand, certainly not a discount brand.
The chain will also expand its offering from Levi's to include 60-plus new styles, including tops, dresses, and on-trend jeans for women, as well as fleece, tees, and trucker jackets for men. The assortment will vary by store, with the entire collection available online (where you’ll also find extended sizes in many items), according to the company.
Image source: Ulta Beauty
Tar-Jay Doubles Down on Ulta Beauty as Well
Ulta Beauty and Target complement each other very well. Both are mass-market brands that can feel like premium brands. Target fans may make the well-worn "Tar-Jay" jokes, but they fit in this case as both companies seem higher-end than the prices they charge.
Target has been very happy with the deal, with the company noting that it has been a traffic driver. And much as it's doing with Levi's, it's adding 250 more Ulta store-within-a-store locations throughout 2022 to get to a total of 800.
“Since Target and Ulta Beauty partnered, our shop-in-shops have delivered more prestige beauty brands and industry-leading expertise to more guests,” said Target Chief Growth Officer Christina Hennington.
“In stores where we’ve added an Ulta Beauty experience, guests are buying incremental items from the assortment, while continuing to shop the beauty brands they’ve loved at Target for years and adding more to their baskets in complementary categories."
Basically, Target has given its customers more of what they want by bringing in brands that speak to the same audience. That's good for the retailer and for its partners while also giving the chain something Walmart and Amazon clearly don't have.
Target has also created an experience in its stores that drives foot traffic, Customers may visit when they don't need something, perhaps to get a coffee at Starbucks or maybe just to look around.
That's a type of audience that really only malls and warehouse clubs like Costco (COST) and Walmart's Sam's Club can currently boast among big box stores, which should further drive sales.
Target shares are up over 10% in the past 12 months and almost 300% over five years.
