Listed conglomerate Wesfarmers is merging its store networks Target and Kmart into a singular $10 billion business in a bid to boost returns and bring better value to customers.

Ian Bailey will continue to oversee the enlarged Kmart group, while Target MD Richard Pearson is assigned to a new role within Wesfarmers’ health unit.

Kmart CEO John Gualtieri will run the day-to-day operation of the combined Kmart and Target stores. Kmart’s Brad Blyth is still in charge of leading technology as CIO, including Target’s migration to one set of systems as part of this change.

The changes only occur on the business’s back end, with Target and Kmart remaining separate consumer-facing brands and store staff unaffected, Bailey was quoted by the Australian Financial Review (AFR) as saying.

Kmart will continue to be price-driven and Target largely centred on affordable apparel and soft home furnishings, he added.

“I don’t see us doing this from a position of weakness. It’s quite the opposite.”

“What we found was that running two businesses it was very, very difficult to get the tech into Target, and to get those benefits.”

Amid the rising cost of living, Kmart has put through 1000 price drops over the past two weeks.

The group has been leveraging technology such as merchandise planning tools and using a self-navigating inventory scanning robot to improve sales and offset many of the cost increases coming through the business.

“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,” Bailey told the AFR.

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

He believed there is an opportunity for the business to capitalise on this merger and continue to deliver better value for customers.