Target teams up with Disney on interactive in-store shops

Target has had plenty of deals with other brands, but has not established mini-shops within its stores as have Best Buy and other retailers.

However, the Minneapolis-based retailer has found a prominent partner to set up a permanent store-within-a-store concept: Disney.

Leaders of the two companies announced Sunday afternoon at the D23 Expo, a big Disney fan event in California, that Target will carve out Disney-branded shops in 25 of its stores, including Maple Grove, in October. Forty more will follow in the coming year.

As part of the deal, Target also will roll out an enhanced Disney experience on its website with an increased product assortment.

Target CEO Brian Cornell told reporters on a conference call that the two companies began working on this idea about a year ago and have codeveloped and designed the look and feel of the in-store shops. He noted, too, that Target has modeled some parts of its culture after Disney, borrowing its custom of calling customers "guests" nearly 30 years ago.

"Fast forward to today, and by any measure, Disney is among our largest and more admired relationships," he said. "Disney has unmatched entertainment, media and merchandising that touches families like no other company, and we love bringing their stories and characters to our guests."

Target has increasingly been leaning into its own private-label brands as part of a multipronged strategy that has been paying off with robust sales in the past couple years. Last week, for example, it unveiled a new flagship grocery brand called Good & Gather that will replace Archer Farms and Simply Balanced, and will be its largest store brand.

But at the same time, as Target's business has improved and outperformed many others — particularly department stores that have been struggling with declining mall traffic — prominent brands have begun seeking out Target as an attractive space to sell their products.

Target recently began selling Levi's "Red Tab" label jeans in about 50 stores and on Target.com. The jeans maker, which hasn't traditionally sold its core products in big-box stores, sought out Target as a partner after seeing dropping sales at one of its longtime partners, Sears, which declared bankruptcy last year and has been closing hundreds of stores.

Disney has more than 200 stores in the U.S., most of which are in malls. Bob Chapek — chairman of Disney parks, experiences and products — said the ways consumers shop are changing, and its fans have been saying they want "more Disney wherever and whenever they want."

"It's not that malls are bad, but this does give us an opportunity to go ahead and expand our footprint well beyond those malls," he told reporters.

He added that Target was an ideal partner because the data suggests there's a 90% overlap between Disney's high-affinity fans and Target shoppers.

Disney also lost a prominent place to sell its licensed merchandise with the shuttering of Toys 'R' Us stores last year. Target has been one of the beneficiaries of those store closings, with its toy sales spiking since.

For the past several years, Disney has had branded mini-shops inside of J.C. Penney stores. Those have been quite successful, Chapek said, proving that this idea works. But, he added, the shops inside Target will be "distinct" from those in Penneys stores, with more experiential components and more prominent branding.

The companies declined to break out current sales of Disney merchandise at Target or to reveal sales projections for this partnership.

Target's Disney shops will be about 750 square feet, situated near the kids' and toy departments, and will feature about 450 products spanning clothing, games, toys and accessories, including about 100 items previously only available at Disney's retail locations. They will feature merchandise from Disney, Pixar, Marvel and "Star Wars" movies.

The shops will be operated by Target and will have interactive displays and music, photo opportunities and a seating area where families can watch Disney movie clips.

As part of the partnership, Target will also open a new store on Disney property next to the western entrance of the Walt Disney World Resort in Orlando. The store, to be located at the Flamingo Crossings Town Center, is slated to open in 2021.

While Target often works with outside brands on limited-time design partnerships, such as its recent collaborations with Vineyard Vines and Victoria Beckham, the Disney shops will be permanent. As it has remodeled stores to keep them fresh, Target has created dedicated shops for Hearth & Hand, its exclusive home decor brand with HGTV stars Chip and Joanna Gaines.

"Target's traditional perspective has been promoting and marketing its own brands and using outside partnerships to give a little bit of spice to them, but not letting them dominate," said Carol Spieckerman, a retail consultant. "But this looks like a big investment for both companies that they're looking to see through for the long haul."

A downside is that the Disney brand is already fairly ubiquitous and can be found in many stores.

"So I think the key word is 'unique' in making sure they're going to have a unique experience at Target, not just in products but in experiences," she said.

Having in-store shops for prominent brands has become increasingly common as big-box stores and department stores have looked to deepen their partnerships with vendors and differentiate themselves from Amazon. Richfield-based Best Buy has done this extensively in the past several years, setting up dedicated spaces in its stores to highlight brands such as Apple, Samsung and Sony.

It remains to be seen whether Target will do more along these lines. Target's Cornell said the retailer thinks it is important to have the right combination of owned brands and national brands.

"Based on the performance of our business, we've gotten interest from a number of different vendors," he said. "We're very selective as we think about our partnerships going forward."

The collaboration with Disney, he added, is a "premier partnership that we're very excited to bring to light."

Kavita Kumar • 612-673-4113