Target creates its cheapest in-store brand as consumers are squeezed

By Jordan Valinsky, CNN

New York (CNN) — Target is taking aim at budget-conscious customers with a new inexpensive brand with prices for everyday basics that start at less than $1, underscoring the way inflation has squeezed Americans and hit Target’s sales in recent quarters.

A new in-house value brand called “Dealworthy” is rolling out this month to shelves at Target stores nationwide and online with 400 items, ranging from phone chargers to disposable plates and even underwear, taking aim at competitors like dollar stores and Amazon Basics.

Prices are “among the lowest” customers will see at Target, with some products, like electronics, half the price of other brands sold at the store, the retailer said in a press release. Most of the items cost less than $10, with the cheapest coming in under $1.

The company believes it can attract new customers by giving them a cheaper alternative with the credibility of a brand that’s actually owned by Target, instead of a third party, Rick Gomez, a Target vice president, said in a press release.

Launching Dealworthy is a “recognition that Target needs a strong value tier in its offering to better compete with Walmart and dollar stores,” Neil Saunders, retail analyst and managing director at GlobalData Retail, told CNN.

“Low prices have become much more important to Target shoppers and, over the past year, more of them have been switching to other retailers who have stronger opening price points,” Saunders said. “Target wants to retain this spend and is hoping that Dealworthy will be the vehicle to help them do this.”

But even as Target attempts to find success with customers getting squeezed by an ever-rising cost of living, less expensive competitors like Dollar General are running into issues of their own. That company replaced its CEO less than six months ago, even as it faces external forces like cuts in SNAP payments that affect its core customer base.

The entrance of Dealworthy means a shakeup of two other Target budget-focused brands that it produces: Smartly and Up&Up. The former, which largely focused on household essentials like soap and trash bags, will be discontinued and replaced by Dealworthy items.

“Smartly was supposed to be Target’s low-price brand, but the assortment was weak and the positioning was odd, so it never really commanded the attention of shoppers,” Saunders said.

Up&Up, another affordably priced Target brand, is getting a redesign and will be priced slightly higher than Dealworthy. Those products, which span 2,000 items from toothbrushes to now dog grooming supplies, have been upgraded to meet “higher quality standards” and cost less than $15, Target recently announced.

Target’s 45 private labels are popular with customers, generating more than $30 billion in annual sales and giving the chain a key differentiator against rivals.

However, its overall sales have tumbled two quarters in a row as customers limited discretionary purchases like furniture, electronics and some clothing. Its quarterly sales fell for the first time in six years last summer as consumers pulled back on discretionary goods and fierce right-wing backlash to Target’s Pride Month collection took a toll on the brand.

Target (TGT) is expected to report its next earnings in March.

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