Surprising products Target is dumping
Target has kicked off a massive makeup sale - and while it's good news for budget-savvy beauty lovers, it's also a worrying warning of the ailing discount department store's future.
A photo of the significant markdowns was recently shared on social media, revealing a wall of cosmetics with bright yellow sale stickers.
"All makeup at Target is $5 or $10 as they're not stocking it anymore," the accompanying caption reads, with the Facebook post sparking a frenzy of excitement among shoppers.
However, while Target has not confirmed it is removing the makeup category altogether, it's a grim sign the struggling chain was planning to dump a slew of products as it desperately attempts to reverse its fortunes and remain competitive.
In a note to investors released on May 22, Target's parent company Wesfarmers revealed that up to 75 large format Target stores and Target Country stores could soon be permanently shut, while up to 92 large format Target stores and Target Country stores could be converted into Kmart branches.
Wesfarmers, which owns both Target and Kmart, confirmed the drastic restructure would take place within 12 months, although most action would occur in 2021.
It also revealed $780 million of writedowns on its Kmart Group and industrial and safety branch, and a number of plans designed to "accelerate the growth of Kmart" and "address the unsustainable financial performance of Target".
It was later confirmed that 53 stores across all states and territories except the Northern Territory will close while a further 53 would become Kmarts, leaving customers reeling.
MAKEUP FIRE SALE
Queensland University of Technology retail expert Gary Mortimer told news.com.au the massive sale was an "interesting move" hot on the heels of the news of those dramatic closures.
He said it indicated the company could be looking to dump a number of unprofitable categories too.
"Clearly by having branded products like Revlon and Maybelline, you tend to put yourself into direct competition not just with Myer but also with pharmacies like Priceline and other cosmetic retailers," Dr Mortimer said.
"There's no margin in that type of product either because of the sustained, competitive environment cosmetics and fragrance operates in."
He said the move was similar to strategies employed by Guy Russo, who previously served as the chief executive of Wesfarmers' department stores division and has been credited with the transformation of the once-ailing Kmart chain.
"This seems to be almost a Guy Russo-Kmart strategy of removing brands and replacing it with private label products or removing the category completely if it doesn't generate profit," he said.
"Ultimately it is a smart move to get out of those categories that don't drive sales and only incur costs.
"We've seen discount department stores do this over the past five or six years - Kmart got rid of music and CDs, TV sets and its sight and sound department because it was clearly being beaten by category killers like JB Hi-Fi, and expanded categories it could dominate in like home furnishing, toys, kitchenware and general apparel."
Dr Mortimer said evidence of that tried and tested strategy could be seen in Kmart stores today, which had a "very small range" of cosmetics and toiletries like bath bombs, face masks and exfoliators, the majority of which where Kmart's own private label.
"It's great as it brings in lots of profit, so it may be the case that Target is getting rid of brands but will replenish the area with a whole new range of Target makeup."
MORE ON THE CHOPPING BLOCK
Moving forward, Dr Mortimer said it was likely Target would also take the axe to other underperforming categories - meaning stores that so survive could soon look very different than the Target we are used to.
"I was in my local Target store recently and the whole sight and sound department had almost closed down - the televisions were turned off and all the mobile phones had gone missing, but it used to have a really good range of PlayStation and Xbox games, which have slowly disappeared as EB Games dominated the market," he said.
"What Target managers are doing is looking at those categories they can't win in - Harvey Norman and JB Hi-Fi own the electronics space and Myer, Priceline and other pharmacy groups own the cosmetic space, and if you're not competitive in the market, you're better off focusing on what you can do well in."
ONE GLARING PROBLEM
However, there was a serious risk involved.
"It would seem Target is starting to look more like Kmart, which is exactly the problem," Dr Mortimer said.
That's because Kmart had been widely credited with cannibalising Target and ensuring its downfall, as their offering was nearly identical, forcing them to become direct competitors.
He said as recently as last year, Wesfarmers boss Rob Scott had indicated Target was going to be repositioned away from Kmart with e new focus on the middle market, although that no longer seemed to be the plan.
"If they were going to do that, they would definitely continue with a range of mid-tier, good quality brands like Sony PlayStations, Revlon and Shimano products, but they don't appear to be doing that," he said.
"Instead, they seem to be replicating the Guy Russo Kmart strategy of no-name, cheap and cheerful."
News.com.au contacted Target for comment.
Originally published as Surprising products Target is dumping