Why Target Is Investing In Mattress Startup Casper
Reports suggest that Target (NYSE:TGT) is investing $75 million in bedding startup Casper in order to help boost its e-commerce presence. This investment comes after Target announced a partnership with Casper, making its products available on Target.com but could not make an outright acquisition of the mattress startup. E-commerce is a key focus area for Target. In Q1 2017, the company’s digital sales grew by 22% year on year and accounted for nearly 5% of its total sales. As Wal-Mart accelerates its online initiatives to compete with Amazon, Target needs to increase its focus on e-commerce to stay competitive. Further, the company is looking to augment the “cool” brands available on its platform. Investment in a “future focused digital brand” can help the company attract customers to its e-commerce website, and innovative products can provide a competitive edge to Target.
Building A Competitive Edge Through Innovative Products
Target is lagging behind its competitors while Wal-Mart and Amazon are working on several innovations to attract millennials who are looking for shopping convenience and value. However, the company appears to be working on an integrated retail strategy to attract and retain customers. Recent reports suggested that Target is no longer pursuing “Goldfish” – its secretive e commerce startup (Read Is Target Changing Its Strategy By Cutting Down Innovation Initiatives?). It now appears that the company is looking to build a competitive edge via innovative products, which will be sold online to attract customers. Casper has been named one of Fast Company’s most innovative companies in the world in 2017 and is an extremely popular brand among millennials. The company is growing steadily and gaining market share from other players. By selling Casper on its digital platform, Target can attract its strong fan base to its platform, driving revenues for the company. It is likely that Target will acquire or invest in other digital brands to improve the products on its platform and compete effectively against Wal-Mart and Amazon.
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Target is looking at ways to drive revenues in a competitive retail environment. We believe the investment in Casper is a sign that the company is ready to buy or invest in strong digital brands which are popular with millennials to augment its product offerings and attract this section of customers to its platform. This strategy can become a long term sales driver for the company.
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