Their products are sometimes better in quality and usually closer aligned to current fashion trends. It depends on the product, but there are definitely some things that I think are worth paying more for at Target compared to Kmart.
Yes. I don't personally, but know Kmart at least is cheap for clothing basics, especially for kids. It also has cheap homeware and small appliances. Not everyone can afford to buy expensive brands.
Edit: should also point out, they pretty much have clearance stuff on sale weekly, so people probably go to see what they can get for cheap.
Perhaps people that buy lots of chocolate and confectionery? That's the biggest theoretical demographic I can think of (my only other thought are people that buy new clothes and underwear rather than using a washing machine, but I don't think that would be many).
I suspect your frame of reference for this might be from somewhere other than Australia. Neither one has groceries in Australia, other than a small selection of snacks.
That said, almost every shopping centre where you get one of the big supermarkets, you'll also get at least a Kmart or Target.
As an American reading the headline I was like how the hell is K Mart merging with anything besides a bankruptcy but I get how they might have had more recent success elsewhere