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Why Target’s web snafus with Lilly Pulitzer are good news

April 20, 2015, 4:15 PM UTC

There’s little doubt that Target (TGT) would have preferred it if the online launch on Sunday of its hugely popular limited-edition, limited-time Lilly Pulitzer collection had gone more smoothly.

After all, it’s never good to disappoint customers, especially when they’ve stayed up all night to shop online, hoping to snag clothes in the Palm Beach-inspired luxury brand’s 250-item collection for a fraction of the usual price, only to find a website that couldn’t handle the traffic. Nor is it fun to be excoriated loudly and widely on social media for those failings.

But the fact of the matter is that the runaway success of the Pulitzer collection shows one major thing: that the discount retailer still rules the roost when it comes to creating buzz with its designer collaborations.

The craze the Pulitzer line generated will bolster Target’s image as a place to buy top-notch clothes and home goods at a time when competition from other retailers — from Macy’s (M) to Williams-Sonoma (WSM) to even Wal-Mart Stores (WMT) — is getting more intense.

Designer collaborations like the Pulitzer line are important to Target, not because they add much to its $73 billion-a-year in sales — they barely make a dent in it — but because they are essential for the discount, mass merchandiser to be able to maintain its “cheap/chic” cachet, and thereby attract affluent and middle-customers along with lower-income shoppers, and give them a reason to go visit Target instead of Walmart for everyday stuff. In essence, those collections are what make Target Tar-zhay.

It had been a while since Target scored such a massive hit with a designer collaboration, the last one arguably being the 2011 tie-up with Italian luxury fashion brand Missoni (that also led to big web problems for Target.) Partnerships with TOMS and Altuzarra last year attracted attention, but did not yield mass hysteria, while the Neiman Marcus joint collection in 2012 was an unmitigated flop.

In contrast, the Pulitzer line was so popular that many sold-out items have quickly surfaced on eBay (EBAY) at multiples of the price Target was charging. And last week’s preview events for Pulitzer in New York’s Bryant Park were reminiscent of publicity events from yesteryear, such as Target’s 2005 Vertical Fashion Show in which models scaled a building in Rockefeller Center in that it captured the attention of the media and fashion industry and became a pop culture phenomenon.
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This success must be reassuring at a time when other retailers such as Kohl’s , Gap (GPS) and many others are borrowing from Target’s designer collaboration playbook. Target has now done 150 of these, and the Pulitzer debacle/runaway success shows it is still the best at them.

What’s more, any spillover fashion halo from this episode will help Target, under the leadership of CEO Brian Cornell, make its in-house bread-and-butter apparel brands, such as C9, more compelling to customers, a top priority for the company.

“Bottom line, we believe the buzz is more likely positive than negative to revitalize Target’s fashionable, signature category brand image,” Cowen & Co analyst Oliver Chen wrote in a research note.

Target shares were lately moving higher Monday, suggesting investors agree with Chen’s assessment.
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