Target Creates New Less-than-a-Dollar Brand: “dealworthy” counters Temu & Shein

Targets New Private-Label Brand “dealworhty”: Key Insights

• New Brand Launch: With its new under-a-dollar brand "dealworthy", Target is responding to competition from Amazon and Walmart by offering one of the lowest prices on the market and attracting budget-conscious shoppers.

• Low Online Sales Growth: With eCommerce sales growing at just 1% CAGR over 4 years, Target is trying to improve online profits along with same-day delivery and click-on-collect.

• Tight Competition in the U.S.: In addition to competition from Walmart and Amazon, Chinese retailers like Temu and Shein outperform Target in revenue and website traffic.

Target just created a new private label brand to offer items starting at less than a dollar. About 400 new items are expected to be in stores by early 2025, with the first products already available. The new low-priced brand, called "dealworthy," will include everyday essentials such as underwear, socks, toothbrushes, and dish soap, as well as electronic supplies such as phone cases, power cords, home and kitchen items and beauty products.

The move is Target's response to direct competition from Walmart and Amazon, which also own low-cost brands for groceries and household items, while shoppers increasingly turn to cheaper private label brands to save money.

Target Reacts to Low Price Competition

Cheap privat brands fill a gap in the market, as most dollar stores have had to raise their prices due to the inflation of the US$. DollarTree was the last remaining to stick to prices under $1 but had to raise its prices to $1.25 in 2021.

"Consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt, and reduced savings rates, have left them with less discretionary income, forcing them to make trade-offs in their family budgets," said Target CEO Brian Cornell. Target’s goal is to offer the lowest priced items in every category. So far with its own brands make more than US$30 billion in annual sales from its own labels.

With the new low budget brand, Target also aims to improve its online sales, which are just slightly making progress in recent years. From US$19.8 billion in 2021, eCommerce sales improved to US$20.2 billion two years later, an annual improvement of 1% per year. As a result, ECDB predicts that the online net sales will continue to improve at the same rate to US$20.3 billion in 2024.

Threat of Chinese Competition

Not only competitors in the names of Amazon and Walmart are a reason for Target's low prices. Chinese online stores like Shein and Temu with their low-price strategy are a threat for Target. Since the beginning of 2023, Temu has overtaken Target in terms of unique visitors in the US. While Temu improved its visitors by 1,675% after increasing its unique visitors from 5.1 million to 90.5 million in 10 months, Target's users decreased by 5% from 63.2 million to 59.8 million during the same period.

Meanwhile, competitors Walmart and Amazon have also improved their unique visitors count. Amazon's number grew from 217.6 million to 221.8 million, and Walmart could account for 128.4 million in July 2023 after accounting for 112.3 million in September 2022.

Reasons for this could be a better marketing of brands like Amazon and Temu on the online business, as this is their main focus and identity. However, Targets competitor Walmart with its many stores in the U.S. shows that it can still attract more users to its website.

Target’s New Under One Dollar Brand:
Closing Remarks

Target shows its approach to change with its new under-one-dollar brand as a reaction to the whole market left by the competition and market development. Still, this move won't make their online sales rise dramatically nor might it be enough to fight especially the rising Chinese competition from Temu. Target still focuses on fast delivery. Paired with new cheap and essential products, the retailer could target new potential customers with this combination.

Sources: Reuters, Insider Intelligence, Business Insider