There's a huge change coming for Target as its major Kmart brand is rolled out into a sister department store

Two of Australia's biggest retailers appear to be merging.

Department store chain Kmart's popular Anko homeware range has been spotted on the shelves of Target by an eagle-eyed shopper. The sister department stores are both subsidiaries of Wesfarmers.

The video uploaded to TikTok, captioned “the collaboration we don't need”, showed the Melbourne store's shelves full of Kmart products such as mugs, cups and water bottles.

Kmart Group revealed on Monday that the pilot project has been introduced to combat the Australian population rising pressure on the cost of living.

“I think the search for value is something that consumers will continue to try as they try to figure out how to maintain their lifestyle,” said Kmart Group managing director Ian Bailey.

'We received great feedback from customers and had very encouraging sales. So I think we have a lot of reasons to be optimistic.”

The change is intended to provide more value to everyday items that are not brand specific, but Target's core business of apparel and home goods will remain unchanged.

“If you think about hangers or plastic tubs, they'll be under the Anko brand, but it's not a product where you're really brand conscious in the same way you can be with clothing,” Bailey shared. The Western Australia.

Kmart Group revealed on Monday that the pilot project has been introduced to combat rising cost of living pressures in Australia

Customer feedback is crucial and adjustments can be made, he added.

“We don't expect to see a precipice where consumer confidence will drop markedly on any given day, but … nor do we expect there to be a sudden rebound in customer expectations and sentiment.”

However, many shoppers have already taken to social media to express their disappointment.

One wrote: 'I don't think I'll be shopping at Target anymore.'

“I was so disappointed,” said another. 'I hate the quality of Kmart.'

A third said: 'Nooooo, we don't want this.'

In 2019, Kmart rebranded its private label from '&Co' to Anko, an acronym for 'a new kind'.

It's a major profit center for the conglomerate, with Kmart's annual report showing sales rose from $9.1 billion to $10.6 billion last year.

Last year Wesfarmers revealed plans to merge Kmart and Target.

The merger came about because running the two companies separately made it difficult to improve the use of technology in Target.

Mr Bailey, who has led the turnaround in Kmart's fortunes in recent years, said merging the two branches into one $10 billion entity will lead to significant cost savings and productivity improvements.

In 2020, 167 Target stores were permanently closed or converted to Kmarts after the chain suffered a $67 million drop in sales.

Target staff were offered jobs at Kmart or other Wesfarmers companies including Bunnings and Officeworks.

The closures and conversions reportedly cost the company between $120 million and $170 million.

Another $140 million was used for one-time store conversion and inventory clearance costs.