Target is coming straight for Dollar General with $2 toiletries

  • Target is launching a new, low-cost private-label brand on October 14. Known as Smartly, the 70-piece collection will offer deals on toiletries and essentials such as hand soap, razors, and household cleaning products.

  • Items cost between $0.59 and $11.99, with most under $2.

  • The new collection allows Target to better compete with dollar stores, especially Dollar General, which is expanding at a rapid rate.

As dollar stores ramp up their expansion in the United States, Target has a new strategy to woo back budget shoppers.

On October 14, it's launching a new private-label collection of low-cost essentials including everything from hand soap and cleaning products to paper plates and razors.

The items cost between $0.59 and $11.99, with most under $2. The line, called Smartly, will be available online and in stores.

"The introduction of Smartly is another example of how we are listening to consumers and bringing them solutions to make their lives easier," Mark Tritton, executive vice president and chief merchandising officer at Target, said in a press release on Monday. "Smartly offers incredible value, looks great and most importantly, gets the job done. It broadens our assortment to give guests even more options to find the product that's right for them, regardless of their budget."

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Target has doubled down on its private-label assortment in the past few years, rolling out more than 20 brands and exclusive partnerships.

These brands are a way to differentiate Target and boost profit margins while still offering customers affordable prices. Plus, they are a big asset in driving traffic to stores, and given that they are cheaper than other well-known brands, customers are likely to buy more. Private label now makes up around one-third of Target's total sales, according to Morningstar.

The Smartly collection is a way for Target to better compete with dollar stores, which are expanding in the US at a rapid rate. Dollar General, one of the largest dollar-store chains in the US, is on a path to dominating this market. In 2017, it opened new locations at a rate of around four stores a day. 900 more stores are slated to open in 2018, at a rate of about three stores a day.

While competitors have been squeezed by growing competition online and from Amazon, the dollar-store sector has flourished, swooping in and offering customers prices that are 20-40% lower than grocery and drug stores.

Sales at US dollar stores grew to $45.3 billion from $30.4 billion between 2010 and 2015. Moody's said it expects this market to grow 8% in 2018, which is about double the growth of what is expected for US retail in general during the same period.

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