Target (TGT) – Get the report from Target Corporation is stepping up its head-to-head competition with beauty retailers, claiming this week that it has added 40 new beauty brands, including “clean” or plant-based items.
The move comes six months after Target partnered with Ulta (ULTA) – Get the report from Ulta Beauty Inc on in-store outlets in select Target locations in a highly publicized deal.
But that partnership hasn’t stopped the chain from developing its own line of Ulta-like beauty products and possibly gaining insight into what it sells for their competitor, as the workers of those Ulta pop-ups are Target employees who use the Target technology for making calls and monitoring sales trends.
Objective aims at more diversified customers
Diversity also appears to be one of the next moves in the Target playbook.
The company came under sharp criticism in 2019 for a viral photo showing a Target store with anti-theft devices on cosmetics aimed at people of color or color.
Target reached out to the Twitter user who posted the photo asking for more information, but didn’t ask for a formal apology at the time. A spokesperson for Target confirmed to TheStreet that the anti-theft devices were misused in a store, but were quickly removed and are not in line with Target’s theft practices.
Now, however, Target has added 20 beauty brands owned by blacks or black bottoms in an effort to increase the number of cosmetics or skincare products that appeal to consumers, similar to competitors Sephora and Ulta.
As of 2020, Target claimed to have increased its black-owned and founded assortment by 65% and previously said it would spend $ 2 billion on black-owned businesses by 2025 and increase the number of brands of property of blacks.
The beauty pageant heats up
Competition is heating up among retailers selling skin care and cosmetic products. Sephora now has a partnership with Kohl’s, which is also found in malls, while Target has chosen Ulta.
Target has been increasing its offerings of cosmetics and skin care products for several years as consumers gravitate towards products that include fewer chemicals and are plant-based instead.
Sephora has plans to open more independent stores in 2020 until the global pandemic ends their plans. For 2021, the company told Retail Dive that it plans to open 60 to 70 individual stores.
“The question is, how many of Kohl’s shoppers who didn’t have access to beauty inside Kohl’s walked four doors to the Ulta store in the same center, parked in the same parking lot?” Wissink said.
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“How many Target customers have shopped in that Ulta store? So some of the analytics work is still ongoing and we still don’t know what the impact will be.”
Can Target take on Ulta?
Analysts said Target sought partnership with Ulta because its stores already offer hundreds of products.
“Target didn’t make the deal with Ulta out of desperation, their beauty business is actually pretty strong, it’s still strong enough,” said Steph Wissink, CEO of Jefferies, according to an article in Retail Dive. “The goal was establishing itself as a truly desirable place to shop for mass beauty.”
In the past, Ulta often searched for outlets where other businesses had a Target, TJ Maxx or Kohl’s due to the additional shoppers who could go looking for products and the lack of cosmetics in those stores, Wissink said.
But shoppers have largely switched to purchasing cosmetics and hair care products from retailers in malls and are spending less time in malls. Retailers have noticed the change.
Can more brands win this war?
While a clear winner may take years to emerge, most brands involved in this type of expansion will benefit immediately due to increased exposure to more buyers and the potential for more sales.
“Well, the winners are the brands because the brands now have just gotten all this incremental distribution – and they can sit back and watch the battle,” Lauren Bitar, head of insights at RetailNext, told Retail Dive.
Target has also expanded the cosmetics and skincare department in its stores and has also revamped its design to reflect the look and feel of competitors, such as Sephora and Ulta. But that may not be enough to attract loyal buyers to the brand.
“They won’t have their full assortment in those spaces, their footprints are smaller than their full store,” said Larissa Jensen, vice president and beauty industry consultant at NPD Group.
“The other thing is that Ulta has hairdressers in their stores. Obviously you won’t necessarily find it in Target. So the full experience of the store versus the store within the store, I think, is quite different.”
Competition by numbers
For now, Target looks set to have the deepest war chest for a beauty battle, with a market cap of $ 102.55 billion at close of trading on Monday.
That number includes the entire inventory and assets, however, and isn’t broken down into the retailer’s beauty offerings.
Subsequently, Ulta Beauty has a market cap of $ 19.79 billion, which LVMH, which owns Sephora, has a market cap of $ 410 billion. This includes luxury brands like Moët, Hennessy, and Louis Vuitton, giving them an insight into how luxury shoppers shop.