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Hi Alexander, The hreflang link in the header is probably the best way to do it. As to if it is impacting you, it depends on how much duplicate content there is to some degree. If you have set up both sites in GWT with separate sitemaps you can keep an eye on how well both sites are being indexed, a lot of unindexed pages on one or the other might indicate a problem. Best practice would be to put in the hreflag as you mention if in doubt.

One of us is having a senior moment. You wrote: "If this was my site we would get rid of the product pages and display all of the color choices on one page." You sent a link to a product page. I was expecting a link to a psychedelic category page saturated with pictures, colors, content and "buy now" buttons with no links to products. The Target bread crumbs show a hierarchy and presentation as proposed by Allen. I get it. And agree. With both of you.

Thanks for your insight! we're trying to get all of our pages rank A, according to Moz's on-page analyis, optimised for different keywords.