Innovative thinking permeates entire business model

DSN Retailing Today, April 11, 2005 by Laura Heller

Target's innovations are not limited to designer merchandise and marketing; the retailer has also launched initiatives in its seasonal department with Global Bazaar and temporary locations in markets without stores.

Target has long had a presence in New York, without actually opening a store in Manhattan. In the past, the chain has used a town house to showcase home goods, tents to take part in fashion week and even operated a floating store one holiday season so that New Yorkers wouldn't be deprived of cheap holiday chic.

Examples of its marketing savvy include taking its newest star, designer Isaac Mizrahi, on the road to promote his extended apparel, pet and home goods line, and opening a temporary store in Times Square during October's Breast Cancer Awareness month and donating a portion of profits from the product sold to benefit the cause.

But it's the retailer's Global Bazaar merchandising initiative that really stole the show this year, making innovative use of seasonal space that not only further cemented Target's place as a fashion-forward merchant, but also proved it could move higher-price-point merchandise while enhancing its direct-sourcing capabilities and maximizing underutilized floor space between usual seasonal sets.

In short, Global Bazaar was a win-win for Target, boosting January sales and scoring points with consumers and Wall Street alike.

Featuring imported home goods, the department occupied space traditionally taken up with seasonal merchandise running for just six weeks through Feb. 19. Beaded and mirrored pillows, mosaic vases and end tables and painted pottery hail from India. Smoky glass accent pieces, earthenware and wrought iron evoke Latin American decor. Japanese style screens, teapots, dishware, silk orchids and candles sit across the aisle from blue and white ceramics and figurines from China. Endcaps from Mexico and Italy mix glassware with condiments such as salsa from Frontera Grill and imported extra virgin olive oil. Prices range up to $299 for the dining furniture and area rugs set in a canopied vignette sit in the center of the department.

According to Target Stores president, Gregg Steinhafel, lessons learned from this first Global Bazaar initiative will be incorporated throughout the store going forward. "We found that our guests connected with the better-quality, higher-price products that we had, so that's going to give us greater confidence to expand our assortment in our best classifications whether it's in home textiles, home decor or decorative home," he said. "We'll just have a lot more confidence that our guests are ready for us to continue so we'll be incorporating those assortment changes throughout the year."

The program also allows Target to compete more directly and steal market share from home decor chains.

"The impressive offering could potentially take market share from both Cost Plus World Market and Pier One, in our view," wrote JP Morgan analyst Charles Groin in a research note, "given that 'eclectic' furniture pieces have historically been the bread and butter of both home furnishings retailers."

"Global Bazaar has been a natural and successful expression of Target's value-added design strategy," said Deutsche Bank analyst Bill Dreher. "This initiative creates increased near-term competition in the home decor space."

Competition that has historical benefited Target, at other's expense.