Up next for Target: Apple, more designer brands

@CNNMoney January 13, 2012: 7:00 PM ET

NEW YORK (CNNMoney) -- Hoping to offset a disappointing holiday season, Target is relying on some tried and true designer partnerships to bring more of its core customers through the doors and testing the waters with cult favorite Apple, in an effort to attract new ones.

First up will be Jason Wu for Target, a limited collection of dresses, handbags and scarves by the young designer made famous by Michelle Obama -- he designed the gown she wore to the inauguration -- that will roll out Feb. 5. Then in May, the retailer will launch "The Shops at Target," a series of design partnerships with small boutique businesses, that will offer several more limited-edition collections.

But perhaps the most anticipated alliance is the trial sale of Apple's (AAPL, Fortune 500) iPhones, iPads and other products in Target stores. The rollout will initially occur in 25 stores, according to spokeswoman Dustee Jenkins, who refrained from providing additional details like when the products would be available.

Target (TGT, Fortune 500) has always been a "women-friendly store," said Britt Beemer, retail analyst and chairman of America's Research Group. That has helped boost sales of clothing and beauty products, but has significantly hindered sales of big-ticket items like electronics.

By adding Apple products to its offerings, the analyst believes it could help the retailer attract more male customers and give it a much-needed shot in the arm in the electronics category.

"Designer clothes won't fix [Target's] problems," Beemer said, but "[teaming up with Apple] is a smart strategy from the viewpoint of getting a new customer in the store."

The move couldn't come at a better time. Low margins coupled with slowing same-store sales have hurt the retailer, particularly over the key holiday shopping season.

"Target has had to discount more this year than they have in the past to get people back in the store," Beemer explained. "A top they might have sold a year ago for $10, this year they will sell for $8."

After the retail giant's holiday sales fell well short of analyst's expectations, the company lowered its earnings guidance for the fourth quarter, citing soft sales of electronics, music, movies and books.

Missoni for Target fetches big bucks on eBay, Craigslist

Target has been successful with its popular collaborations in the past, so much so that other big-box stores like Kohl's (KSS, Fortune 500) and JC Penney (JCP, Fortune 500) adapted their model. But Target's last designer collection, with Italian fashion house Missoni, was a publicity coup that became a logistical nightmare.

Spiking demand for the limited-edition clothing and house wares collection crashed the company's web site. Online orders were delayed and some orders were later cancelled, leaving many shoppers unsatisfied.

"That was an unprecedented event" said Stacia Andersen, Target's senior vice president of merchandising. To ensure the company is equipped to handle the spikes in demand that generally follow the launch of a limited-edition collection going forward, "our teams have been working around the clock," she said.

Going forward, the company has said it will pursue more collaborations and limited-edition collections -- moves aimed at bringing in more of its core female customers.

But Hunter Orr, director of research Alpha Street Research, says he remains wary. "They have had to do a lot of cost cutting -- decreasing their margins to compete with Wal-Mart (WMT, Fortune 500)," he said. "A collection is not enough to make a difference."

"These type of alliances are not selling huge volumes [of merchandise] but they will definitely drive traffic to the store," added Hana Ben-Shabat, partner in the retail practice at A.T. Kearney, a management consulting firm. But "sooner rather than later this tactic will run out," she said. "You have to come up with new strategies to keep up that level of excitement." To top of page

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