Target (TGT) is known for selling housewares by forward-thinking designers like Philippe Starck. What's less known is the Minneapolis retailer's secret weapon for finding such talent. Along with in-house trend-watchers, Target works with Culture & Commerce, a small New York design agency, to scout for innovative designers with potential mass-market appeal.
The firm is the reason Los Angeles designer Sami Hayek's $20 bedspreads are stars of Target's back-to-school campaign. "They give me access to companies that I would have to take a lot of time to even get an appointment with," says Hayek.
Michele Caniato, a consultant on high-performance materials for companies such as Nokia (NOK) and Whirlpool (WHR), founded Culture & Commerce with entrepreneur George M. Beylerian in 2000. They applied the concept of Hollywood talent management to product design. "We're a matchmaker and guardian angel," says Caniato, adding that the firm has negotiated $65 million in designer contracts to date.
Before introducing designers to companies like Target or other clients such as Microsoft (MSFT), Morgans Hotel Group (MHGC), and Puma, Caniato analyzes their mass-market potential and spends up to nine months coaching them on how to work with large corporations. He also negotiates financial and legal details of a deal and acts as a liaison between the two parties, managing scheduling, budgeting, and contracts.
In return, the designers, who retain final say on the look of their products, pay 25% to 30% commissions under 4-to-10-year contracts with the agency. And they get to focus on coming up with unique products. "Before, I wasn't designing a lot," says Hayek. "After, I began designing again."
Target's relationship with Culture & Commerce dates from 2001, when Caniato introduced Starck to the retail giant. It was the agency's first deal—and a risky move for Starck, then known for luxury goods sold at upscale boutiques such as New York's Moss. Caniato convinced him that designing a line for Target, created with more hands-on involvement than a typical licensing deal might allow, would increase his visibility without diminishing his high-end reputation.
Focus on Value
Starck provided a high-profile test case for Target's design-centric strategy. The company, which does not break out sales figures, has pursued this "open innovation" approach to design partnerships ever since.
Target's overall sales growth has hovered around zero for the past three quarters, but Chief Executive Gregg W. Steinhafel has said that the company will continue with such collaborations, which have shifted from big design-world names toward breaking new talent, such as Hayek. This fits Target's renewed emphasis on low prices rather than on hip chic. "What Target has begun to do, albeit later than we would have liked, is to focus more on value and on price," says JPMorgan Chase (JPM) retail analyst Charles Grom.
Roger Martin, dean of the Joseph L. Rotman School of Management at the University of Toronto, who lectures on design as a corporate strategy, says Culture & Commerce's approach is smart. The arrangement helps product designers, who otherwise tend to rely on their own promotional Web sites or licensing services to drum up new business. And it helps businesses source fresh talent. "The design world is fragmented, so it can be hard for companies to know who's out there," Martin says.
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