Two of Australia’s biggest retailers – Kmart and Target – will be merged into one dual-branded discount giant to deliver “better value for customers” as the cost of living bites.

The back ends of both Wesfarmers retailers will be streamlined into one, creating a mega $10 billion business.

But shoppers won’t notice any difference at the front end as the two stores will remain separate brands.

Kmart will continue to be price-driven and Target will keep focussing on affordable clothes and soft home furnishings.

The news was first reported in the Australian Financial Review on Monday, with Kmart Group managing director Ian Bailey revealing the change was just an “internal reorganisation”.

“With customers now demanding value more than ever, this new operating model will unlock a new level of scale and productivity across both brands, so we can deliver even greater value to our customers in the future,” Mr Bailey said.

“For store networks and 50,000 store team members – it’s business as usual – as we continue to focus on providing the best value products to the thousands of customers in Australia and New Zealand who choose to shop at Kmart or Target every day.”

Kmart operates 324 stores throughout Australia and New Zealand and  employs about 38,000 people.

Target has 128 outlets and about 10,000 workers.

Kmart CEO John Gualtieri will run the combined Kmart and Target stores day-to-day, the AFR reports.

Mr Bailey said there would be only a “handful of redundancies”, mostly in technology and merchandise. But he said “we will end up with more jobs in the business a year from now”.

“Kmart and Target are both strong businesses. I don’t see us doing this from a position of weakness. It’s quite the opposite. I’d say we’re strong, but I think there’s an opportunity to really capitalise on this time and find ways to continue to deliver better value for customers.

“What we found was that running two businesses it was very, very difficult to get the tech into Target, and to get those benefits. This is really why we decided to push the two businesses into one.”

“This change enables us to push the same technology into Target because we will get to a point when we will have one technology stack,” he said.

“We will run one set of processes. It also means then we have a $10 billion business, which further fragments the cost.

“You can see how all of this plays into our productivity improvement.”

In 2020, Wesfarmers closed dozens of Target stores and some others were converted to the Kmart brand.

Kmart was established in 1969, opening its first shop in Burwood, Victoria. Target began as a drapery outlet in 1926 in Geelong, Victoria.