Target is making a bigger bet on baby

In deciding to grow Cloud Island, Tritton explained, “We like to see what customers buy with what… what they come back with frequency on. As they buy x, they buy y.” He said many moms and dads come to Target to buy clothes or groceries, and they leave with a pack of wipes or baby formula. Target is then able to leverage those insights on shopper behavior to decide how its wants to invest back into its own private labels.

Still, some customers will always want a national diapers brand, like Pampers, and Target will continue to offer them that, Tritton explained. “We think there is a place for special brands, premium brands. … We know we are not going to dominate” the baby category, he said.

Getting into the private-label diaper business, though, Target will arguably have a leg up over consumer goods behemoth Procter & Gamble, which said last year said it would be hiking the price of Pampers diapers and other household goods as its profits were being squeezed.

Diapers alone make up a $44 billion category globally, or $6 billion in the U.S., according to UBS. The investment bank said Pampers is still the dominant brand name in the diaper category, ahead of Kimberly-Clark (which owns Huggies) and other private labels. Meanwhile, UBS estimates price increase from P&G and Kimberly-Clark will show up on shelves in the first quarter of this year.

Families looking for a better bargain could start to pivot to other, cheaper options.

Target said the price for Cloud Island wipes will range from $2.99 for 80 to $16.99 for 800. (An 800-count box of sensitive Pampers wipes retails for $21.99 on Buybuybaby.com.) Cloud Island diapers will range from $7.99 for a “jumbo” pack of newborn diapers to $21.99 for a “super” pack of diapers in size seven. (A jumbo pack of Pampers diapers for newborns retails for $8.99 on Target.com.)

When it reported holiday sales earlier this month, Target called out the baby category as one of its strongest performing in November and December. Target also has its own baby registry business, and the company told CNBC sign-ups grew by a double-digit percentage in 2018.

Speaking at the National Retail Federation’s Big Show earlier this week in New York, CEO Brian Cornell explained how Target’s private-label business “started to sputter” a few years ago because the company wasn’t investing in the right ways. Merchandising was off, he said.

But now, the company is seen as getting back to its “cheap chic” roots with trendy brands selling everything from home goods to apparel for teens. It’s one of Target’s weapons, arguably, against other retailers like Walmart and Kohl’s. Some of Target’s in-house brands including apparel brands Cat & Jack and A New Day have already surpassed $1 billion in sales.

And despite some fear that consumers might start tightening their wallets in 2019 because of economic uncertainty and an ongoing government shutdown, Cornell said, “Consumer confidence is still quite high. … It’s still a healthy retail environment.”

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