Target's not-so-secret weapon for the past 40 years? Its private labels

Target started its slow phasing out of its private label Archer Farms in 2019 and created a new grocery brand called Good & Gather.

Yet the Minneapolis retailer still fields questions and complaints from customers about the longtime line's disappearance. That's how loyal Target brand enthusiasts are.

"I look forward to going and looking to see what I find at Target and telling people I got it from Target," said Maddy Kellum, 25, of Rush City. "When it comes to clothes, home decor, shoes, accessories, makeup, I'm at Target for that kind of thing and usually their brands."

Many consider Target's owned-brand strategy as the gold standard in retail. Other retailers' customers don't fuss or even notice a private label dissolution, often viewing it as a lower quality, discount option to higher-end national brands. But many of Target's private products have dedicated followings, with customers posting on numerous Pinterest boards, Instagrams and TikToks about #TargetMustHaves.

The huge retailer has grown a customer base of Targét lovers throughout the past 40 years, partly thanks to its ability to innovate and install its own brands focusing on everything from food to fashion.

Private or owned brands have become even more critical as consumers dealing with high inflation look for less expensive and longer-lasting items they still consider cool.

Target's brands, which make up a third of its merchandise, generated more than $30 billion in sales last year and grew faster than its overall sales.

Retail consultants and analysts say Target has an opportunity to snag even more market share this year, even as its growth has slowed from pandemic highs. Target spent much of 2022 trying to reset its inventory, offering big markdowns to rid itself of excess products.

"Often what retailers do with private label[s] is ... about profitability," said Wendy Liebmann, chief executive of New York City-based shopper insights and retail strategy firm WSL Strategic Retail. "It's about affordable price points for their shoppers, but it is also about, 'How can I make much more margin on this?'"

With inflation persisting, retailers like Target will likely push their private brands even more this year, said Greg Melich, an analyst for investment banking advisory firm Evercore. But Target also needs to avoid missteps, like copying another brand's idea too closely or replacing a beloved brand too fast.

"There's a lot of risk that gets introduced every time you try to reformulate something," said former Target VP Chris Walton, co-founder of the local OmniTalk blog and podcast. "So they'll have to be really smart about that going forward. They've shown in their history that they can do it very well."

Liebmann agreed. "At Target, it's always felt like it's had a different flavor, that it was about building brands that would differentiate them," she said.

Betting big on its brands

Target launched its first owned brand in 1984, a color-coordinated clothing line for men, women and children called Honors.

Target now has more than 45 owned brands spanning all product categories, with 10 new or extended assortments coming this year.

Kellum recently snagged sandals from Target's A New Day label that were less than half the price of a high-end, luxury shoe.

"I can't spend a couple hundred dollars on a pair of shoes," Kellum said. "But I will spend $30 on a trend."

Maria Hall, 38, of Andover, works as a personal shopper and style coach and uses some of Target's apparel brands to style her clients.

"It's really great for some of those really trendy pieces where you like to feel updated," Hall said, "but you don't want to really break the bank."

Target doubled down on private brand development in 2017 under leadership from CEO Brian Cornell and former Nordstrom executive Mark Tritton, who served as Target's chief merchandising officer at the time.

Target's thinking evolved in favor of a more elevated approach, said Toopan Bagchi, an independent retail consultant who used to work as a vice president at Target.

Since 2019, Target has added 17 private brands. Several brands, like Good & Gather and All in Motion active wear, came out not long before the pandemic swept the U.S. in early 2020. More customers then turned to Target for essentials like food and cleaning products as well as discretionary purchases, from home decor to comfy clothing.

"Target took a big risk a few years ago when it began scrapping well-known, high-volume [licensed] brands and creating entirely new ones in their place," said Carol Spieckerman, head of retail consultancy Spieckerman Retail, referring to Target's phase-out of beloved clothing brands Mossimo, Merona and Cherokee. "Target's bet appears to be paying off."

Good & Gather, Target's largest owned brand, generated more than $3 billion in sales last year. About 60% of Good & Gather sells for less than $5.

Fighting 'an outdated notion'

Target prides itself on how it gathers feedback from customers and crafts concepts using design teams at its Minneapolis headquarters. Even during the pandemic, developers created sweets brand Favorite Day after experimenting in their home kitchens.

Besides the viral seasonal flavors of whipped cream — peach jelly bean was big around Easter on TikTok — Target also explored frozen global foods like dumplings and ramen as well as meal bags with recipes using Good & Gather products, such as shepherd's pie.

"There's an outdated notion of, 'owned brands are just kind of replicas of national brands,'" Target Chief Food and Beverage Officer Rick Gomez said. "That's really not the case. We are creating new offerings. ... We are bringing innovations from a health and wellness perspective, a packaging perspective, going into new categories and new forms."

Sometimes, all it takes is a little reinvention. One example is how Target designers reworked traditional gingerbread house kits into mini edible Target stores for Christmas and bunny houses for Easter.

Chief Merchandising Officer Jill Sando said that's all part of the plan.

"It's not just about the price," she said, "It's about the style and the quality."

Yet there is room for improvement, especially in women's apparel, said Liza Amlani, founder of the Canada-based Retail Strategy Group.

"When you actually go on the shop floor, there's just too much," Amlani said. "It's not specific enough to capture the customer for repeat purchases."

Target also has faced accusations that its private brands are too similar to other products.

In fall 2019, Texas designer Adrian Layne sued the retailer, alleging baby clothes Target sold with the words "I love you" written numerous times were too similar to designs she sold under her Cat & Dogma brand. Last December, a jury awarded Layne $1 million in damages. Target has motions pending challenging the decision.

"There's a difference between inspiration and infringement," said Layne's attorney, James Freeman of Sanders Law Group.

The company disagrees with the ruling.

"We pride ourselves on the originality of our designs," Target said in a statement, "and never seek to infringe on those of others."

Target private brand launches

1984: Honors — a color-coordinated clothing line for men, women and children — launched with newspaper ads, including one in the Star Tribune.

1995: Archer Farms, Target's first grocery brand, rolled out in the new SuperTarget stores with food staples like bread, milk and pasta.

1999: Makeup artist Sonia Kashuk partnered with Target for a makeup collection which later expanded to fragrance, skincare and nail polish. Target bought the line in 2015, making it the retailer's first owned brand for beauty tools and accessories.

2001: Market Pantry, with its red packaging, introduced as a budget-friendly pantry resource.

2003: Room Essentials, the brand for stylish and cheap furniture pieces.

2012: Threshold home decor made its debut.

2016: Cat & Jack kids and baby apparel and Pillowfort kids decor brands.

2017: A New Day women's apparel brand as well as Art Class, designed to be a bridge between kids and young adults, launched.

2019: Good & Gather replaced food brands Archer Farms and Simply Balanced.

2020: Activewear brand All in Motion hit the aisles.

2021: The Mondo Llama crafting brand born during the pandemic.

2022: Brightroom makes home organization brighter.