The back-to-school shopping season might be winding down, but the demand for kids clothes is still going strong.
This is especially true at Target, where the company’s Cat & Jack brand has been one of the standout success stories of the retailer’s owned-brand merchandising strategy.
Within just two years of its launch in 2016, Cat & Jack sales boomed to more than $2 billion, and the brand now brings in more than $3 billion annually for Target.
Beyond the $4 T-shirts and $8 jeans and dresses, one thing that some parents have come to love about the brand is Target’s one-year satisfaction guarantee — an unusually generous policy in retail, especially as some retailers start to charge for returns.
Some have even posted videos on TikTok in which they return hundreds of dollars of well-worn apparel for cash and store credit.
Here’s Target’s policy and the strategy behind it.
What is the return policy for Target’s owned brands such as Cat & Jack?
Target
Target has more than 45 private-label offerings, all backed by the same guarantee: “If you’re not satisfied with any Target Owned Brand item, return it within one year with a receipt for an exchange or a refund.”
Some of the company’s more well-known brands are All in Motion athleticwear, Made By Design kitchen and dining supplies, Mondo Llama arts and crafts, Cloud Island baby gear, and Room Essentials.
“Target’s return policy is extremely generous and is designed to build confidence in its own brand product and create a strong customer-service ethos,” Neil Saunders, GlobalData’s managing director for retail, told Business Insider. “This is especially important in kidswear, where parents spend a small fortune and garments are put through their paces by often very active children.”
He added: “There are always worries about quality and how long products will last, so Target’s policy takes that concern out of the equation and gives parents peace of mind.”
Christina Hennington, Target’s chief growth officer, often highlights the Cat & Jack brand and the return policy on the company’s quarterly earnings calls, and a Target spokesperson previously told Business Insider the return policy reflected the company’s confidence in the value of its private-label offerings.
“One of the reasons why Target has these very lenient return policies has to do with customer retention,” Hitha Herzog, H Squared Research’s chief retail analyst, told BI. “They don’t want to lose market share or have any sort of customer attrition when it comes to their private-label brands.”
Returns are possible without proof of purchase, but a customer must show a form of identification, and each individual may only return $100 worth of items without a receipt in a 365-day period.
Items purchased with a Target Circle membership are automatically logged, so paper receipts aren’t required.
The same digital tools Target provides to make it easier for customers to track their purchases also help the company offer individually tailored promotions, increase shopper loyalty, and drive sales, according to Target investor presentations.
Does this policy cost Target money?
Courtesy of the author
In a way, the return policy helps Target make sales, as it incentivizes shoppers to buy its in-house brands. The total value of Cat & Jack returns is almost certainly a small percentage of the $3 billion in total yearly revenue generated by the brand.
Target is also a data juggernaut, and the cost of returns is accounted for in the price of an item, Herzog said: “Even if there is a bunch of returns coming back at 250 days, with the notation that the customer was not satisfied with the product, that store already has it priced in.”
In-store returns also naturally bring shoppers into the store, and the company says an increase in foot traffic over the past 12 consecutive quarters is driving the majority of sales growth.
In other words, a parent returning a Cat & Jack outfit is highly likely to buy a new one — or Mondo Llama art supplies or Good & Gather groceries or more.
Will Target change this policy?
Associated Press
Target keeps a close eye on consumer trends, and if it notices trouble brewing in the returns department, it could take steps to limit its policy. Some workers and customers have also said their locations are taking a stricter stance, especially when it comes to Cat & Jack products.
“Certainly, some people may abuse the returns policy, but Target has probably calculated that this is a very small proportion of revenue, so it doesn’t matter too much,” Saunders said. “That said, if too many people take unreasonable advantage, they may start clamping down.”
The notion of “satisfaction” can be an ethical gray area, even if it’s completely legal for a customer to say they’re unhappy with a purchase 360 days later, Herzog said.
“These are people admitting on social media that they were actually quite satisfied, but they are just finding a loophole and this return policy,” Herzog said. “If the return policy allows you to do that, I guess you can. But ethically, should you? I wouldn’t.”
Still, as far as Target is concerned, the official policy remains unchanged as the company says it remains focused on making it easier for shoppers to buy its products with confidence — especially from its private-label portfolio.
If you are a Target worker who wants to share your perspective, please contact Dominick Reuter via email or Signal at 646-768-4750. Responses will be kept confidential, and Insider strongly recommends you use a personal email and a nonwork device when reaching out.
