Target (NYSE: TGT) wants to own more of the brands that populate its shelves. And even in this era of expanding e-commerce, actually having shelves is a real advantage for the retailer on that score.
The discount retailer has long partnered with fairly well-known names to gain attention for its private label brands and exclusive lines, including Chip and Joana Gaines, Chrissy Teigen, and Vineyard Vines. This time around, though, it's betting that shoppers will take a flyer on a new line simply because of the values it represents.
Target has tried to make Everspring's packaging attractive. Image source: Target.
What is Target doing?
The retail chain's latest private label is Everspring -- a 70-item line of household essentials like laundry detergent, paper towels, hand and face wipes, and cleaners.
Target describes Everspring as "a down-to-earth solution that is up to Earth's standards." Products in the line are made with plant-based or otherwise renewable materials, as well as with post-consumer recycled paper.
"Guests can feel confident they're purchasing essentials for their home that include ingredients and components they want and have the efficacy they need to get daily routines done," said Target Senior Vice President Christina Hennington.
The line, which is already on sale in stores and at Target.com, also complies with Target Clean, the new product standard the company debuted in March. The Target Clean icon on a product means that it has been "formulated without specific chemicals ... such as phthalates, propyl-paraben, and butyl-paraben and sodium laureth sulfates."
Private labels give Target more control over its supply chain, and by essentially cutting out the middle man, allow it to sell at lower prices if it chooses to. In the case of Everspring, Hennington said items in the line retail for about 20% less than other comparable products.
More importantly, if consumers decide they like an Everspring offering, they can't buy it anywhere else. That should keep customers from taking still more of their retail activity to Amazon (NASDAQ: AMZN), which has had less success with its own private labels.
It's not like the e-commerce giant hasn't been trying: It has created more than 400 private label brands -- but few have been successful. In fact, a recent research report from Market Pulse showed that Amazon gets 81% of its private label revenues from just 10 brands, and 57.8% of those come from its AmazonBasics line, which is more like an old-school house brand than a private label. Overall, Amazon's exclusive private labels account for less than 1% of its total sales.
The difference may well be that it's hard to attract attention to brands consumers have never seen before without brick-and-mortar stores. People who are browsing the shelves and racks at Target not only see the new items, they can also handle them, and in some ways get a sense of their quality.
Amazon's private label products may come up on prominently in search results on the site, but the inability of shoppers to physically touch them prior to purchase appears to be seriously hindering their sales growth.
Target does not have that particular weakness, so it should have a leg up in persuading its shoppers to give Everspring a try.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.