Target is stocking its shelves full of brands born on the internet in hopes of appealing to younger shoppers who don't want the same Old Spice deodorant or Schick razor their parents use.
The big-box retailer's latest deal is with Flamingo, a women's body care brand launched late last year by men's shaving start-up Harry's, which is already being sold in Target stores. Starting Monday, Flamingo's razors and shaving gel for women will be in all of Target's 1,800 locations across the U.S., marking the brand's bricks-and-mortar debut.
For Target, selling goods from brands like Flamingo is helping the company increasingly become known as a "cool" place to shop. And for brands like Flamingo — which uses sleek packaging to promote women shouldn't be embarrassed to shave their underarms — the deal offers huge exposure and reach to consumers en masse that would be hard to achieve alone.
"We know Target is such a core part of [our core customer's] weekly shopping experience," Allie Melnick, general manager of Flamingo, told CNBC. She said the brand completed survey work before it determined this would be a "natural collaboration." In many big-box stores, the heavily trafficked aisles that sell razors and other body care for women "haven't been touched" by old-school brands in a really long time, presenting an opportunity for Flamingo to move into retail, Melnick added.
Target has inked a handful of similar deals with so-called digitally native brands including Casper for mattresses, Native for deodorant, Harry's for men's shaving essentials, Quip for electronic toothbrushes and Bark for dog toys. The approach is somewhat different than that of one of Target's biggest competitors, Walmart, which has gone the way of outright buying some of these digitally native brands, like Bonobos and Moosejaw. (Walmart did start selling Harry's razors in its stores last year, after Target.)
Another retailer going the same route as Target is Nordstrom. The department store chain has lined up a series of brands in recent months including sneaker maker Allbirds, luggage retailer Away and Casper to sell in its stores, often for a limited period of time. The news has helped generate buzz and pull shoppers in who want to test out those products offline. Unlike Flamingo and Harry's, though, Allbirds, Away and Casper already have their own stores and are growing that network today.
Tie-ups between traditional retailers and these up-and-comers make sense for a number of reasons, including the fact that the collaboration can help young brands decide if they should open their own standalone stores as a next step, according to Jake Mendel, of Silicon Valley Bank's Early Stage Practice in New York. Many of these brands born on the internet bring with them cult-like followings — huge Instagram audiences — that legacy retailers like Target and Walmart can potentially piggyback on, Mendel added.
"Big retailers are acutely aware that direct-to-consumer brands are building close and authentic relationships with their customers, which seems to be driving a willingness to be more flexible on terms than they have historically," he said.
It's also worth noting a lot of these tie-ups thus far have been in the consumer-packaged-goods space — for things like razors, toothbrushes and deodorant.
"If you're selling a product with a low absolute dollar margin, even if your gross margins are insane, you still need to move a lot of volume to build a large scale business," Mendel said. "With [the large majority] of consumer sales still happening through retail channels, these partnerships are a great way to reach large volumes very quickly."