Upscale retailer Neiman Marcus will collaborate with Target to produce a collection of holiday merchandise from top designers.
Come this December, Target's cheap chic will go considerably upscale through a venture with one of America's top luxury department store chains. The two companies will jointly sell a limited edition assortment of exclusive clothing, home goods, and even electronics accessories created by 24 high-profile designers, including Marc Jacobs and Oscar de la Renta. Prices range from $7.99 to $499.99, with most items selling for less than $60.
"We've set the stage for a redefining moment in retail," Target CEO Gregg Steinhafel said in a statement. "This collaboration is unlike anything Target has ever done before, and we're confident our guests will be thrilled with this extraordinary collection."
But the real star of this show isn't necessarily the designers. It's Neiman, whose reputation for upscale retailing will push Target higher up the food chain as competitors increasingly seek to challenge Target's grip on affordable luxury, analysts say.
"Retailers are brands" in themselves, said Carol Spieckerman, president of Newmarketbuilders, a retail consulting firm. As J.C. Penney, led by former Target executive Ron Johnson, prepares to offer higher-end designer brands, Target is saying "'we are going to go even higher by affiliating with Neiman Marcus."
In a broader sense, the partnership reflects the rapidly changing nature of retailing, said Robin Lewis, CEO of the Robin Report, a newsletter that tracks the retail industry. Mindful of the crowded market and the growing power of the Internet, brick-and-mortar retailers have been searching for new ways to distribute their goods, he said.
For example, big-box retailers like Target, Best Buy and Wal-Mart have been experimenting with smaller formats. Next week, Target will open its first CityTarget stores designed for dense urban centers in cities such as Seattle, Chicago and San Francisco.
Retailers also have turned their stores into mini-malls. Earlier this year, Target launched the Shops at Target, which features products from a revolving cast of five boutique shops across the country. J.C. Penney also will soon feature different shops within its stores. But Target and Neiman Marcus' collaboration is unique, both in its concept and ambition, Lewis said.
At first glance, Neiman and Target would seem like an odd match. The former sells fur coats and jewelry that cost thousands of dollars, while the latter sells $20 blouses along with pet food, deodorant and toilet paper.
But officials from both retailers say their customers frequently shop at each other's stores. Ginger Reeder, a Neiman spokeswoman, said the company admired Target's long history of design partnerships, which meshes well with Neiman's upscale fashion reputation.
"This can't be pulled off with a Neiman Marcus and Wal-Mart," Lewis of the Robin Report said.
Luxury and discount customers are also not necessarily separate groups. High-end consumers who normally shop at brand-name luxury stores devote an average 6.5 percent of their overall spending to bargain retailers like discounters, according to a recent study by the Robin Report.
"High/low [shopping] is no longer a fad," said Target spokesman Joshua Thomas.
For Neiman, the partnership offers the retailer a chance to reach a broader audience, Reeder said. Target boasts 1,764 stores in the United States compared with Neiman's 42 locations. Target also had extensive experience in manufacturing and sourcing, she said.
"We could not execute [such a holiday collection] with 42 stores," Reeder said.
For Target, the partnership offers a chance to answer some past missteps.
Analysts have long clamored for Target to launch a major design partnership for the key holiday shopping season, which can make up to 20 percent of a retailer's annual sales. In November and December 2011, Target generated less than 2 percent growth in sales in stores open for at least a year, well below Wall Street expectations.
When Target presented its Shops at Target concept, some analysts questioned why the company scattered the products throughout the store instead of grouping them together. The Target/Neiman Marcus collection will be located in one prominent area of the store.
When Target debuted products from Missoni last fall, the website crashed and stores quickly ran out of merchandise. Since then, the company said it has invested significant resources to improving its website. Target also will limit how many items shoppers can buy at its stores. Normally, the retailer left those decisions to store managers.
Target "will be ready this time," Lewis said.
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