Aussies have been left reeling from the announcement that Target has been folded into Kmart and one retail expert has said one major thing is about to change.
Aussies have been left reeling from the announcement that Target has been folded into Kmart – but it’s ultimately good news for customers as everything is expected to get cheaper.
On Monday, Wesfarmers, which owns both businesses, said they were merging them into a dual-brand retail giant.
This is expected to create a singular $10 billion booming business.
Wesfarmers warned there would be a “handful of redundancies”, and added that Kmart chief executive John Gualtieri will run the stores day-to-day while Target managing director Richard Pearson will move into a new role within Wesfarmers.
Queensland University of Technology leading retail expert Dr Gary Mortimer said this will make products more affordable and lead to a greater range in a major win for consumers.
He also added that everything would largely stay the same at existing Kmart and Target stores, with the main difference being there would be less double-ups of products.
“Customers won’t notice, the brands will still be operated as two separate brands,” Dr Mortimer told news.com.au.
“You’ll still have your favourite Kmart store, the Target store will remain mostly the same.
“The biggest change customers should expect, lower prices over the next 12 to 24 months.”
“As you bring the Target and Kmart leadership and operations together, you start to remove those duplications (of product),” Dr Mortimer continued.
“Once you remove duplications you get better efficiency, lower costs, and that leads to lower prices.
“The key message is that shoppers won’t notice in any difference in brand, it’s good news. “They will see better prices and a better range of offers.”
In the past, customers would find the same $12 toaster at both Target and Kmart, but this would no longer happen, according to the expert.
Kmart and Target used to “muddy” the waters between the brands, but now there will be a very distinct difference.
“Very clearly, if you want every day low prices, you’ll head to Kmart,” Dr Mortimer said.
“If you want a better quality, better value offer, you’ll go into a Target store.”
Target has been flailing in recent years, with Dr Mortimer noting that ditching the Target brand all together “was probably an option on the table”.
In 2021, Wesfarmers announced that 75 Target stores would permanently close. A further 44 Target stores were rebranded to Kmart or ‘KHub’.
“The stronger brand will cannibalise the weaker brand,” he predicted.
Kmart Group managing director Ian Bailey told media on Monday there would only be a “handful of redundancies”, mostly in technology and merchandise, with all changes in the back end of the business.
“We will end up with more jobs in the business a year from now,” he said.
“Kmart and Target are both strong businesses. I don’t see us doing this from a position of weakness. It’s quite the opposite. I’d say we’re strong, but I think there’s an opportunity to really capitalise on this time and find ways to continue to deliver better value for customers.
“What we found was that running two businesses it was very, very difficult to get the tech into Target, and to get those benefits. This is really why we decided to push the two businesses into one.”
Kmart raked in an astonishing $475 million in profits for the six months to December 31, 2022, helping Wesfarmers post a whopping profit of $1.39bn.There were 19 Target stores converted to Kmart stores during this time, with initial trading results “exceeding expectations”.
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