What: Retail Dive reviews Target’s private label business’ reasons for success.

Why it is important: Private labels are a powerful method to generate incremental sales by capitalizing on the retailer’s name. It will also be a strong differentiator in the future, meaning that the days of private labels as ‘cheap’ options with low prices might be gone, in favour of strong, desirable brands at the right price and quality.

Target introduced its range of private labels back in 1995, in food first, and then expanded into home, healthcare, apparel and electronics. As of today, Target manages 48 private labels, and 10 of them are worth a billion dollars. The strategy pursued is all about upgrading quality and brand perception, and this is a path now followed by other US retailers. Walmart, for instance, teams up with fashion designers to introduce desirability in its lines. Macy’s is trying to target millennials (we reported it here). Bed Bath & Beyond is also entering in the kitchenware business (we reported it here).

However, analysts point out that private label business is closely linked to the retailer’s brand equity. Target’s approach was favoured by its proximity with its customers (through its 2,000 stores in the US), helping them to touch & feel quite easily its products. The retailer also benefits from a “cheap-chic” perception others might not have. This strategy is pretty like what French urban supermarket chain Monoprix is doing.

Target shaped private labels into powerhouse brands. Now others want to do the same.