Why is Target once again selling Amazon devices?
Four years after Target booted Amazon-branded e-readers and tablets from its shelves, the devices are back. Eight experts share their takes on the about-face.
Target and Amazon just can’t quit each other. Four years after Target unceremoniously yanked Amazon’s Kindle e-readers and tablets from its store shelves, the two companies have kissed and made up: As of last week, an expanded array of Amazon-branded devices including e-readers, tablets and streaming media players are back on sale on Target.com, and will return to 1,800 Target stores nationwide in October.
Target was the first brick-and-mortar retailer to feature Amazon devices back in 2010—in fact, the Kindle was Target’s best-selling tablet on Black Friday that year. But some analysts criticized Target’s decision to carry Amazon products and effectively usher Trojan horses into its stores. In 2012, Target terminated the partnership, although other chains like Best Buy and Bed Bath & Beyond continued to sell the devices.
Amazon hasn’t missed a beat since the Target deal ended. Earlier this month the online retail giant reported record-shattering quarterly earnings, singling out its Fire TV device as “the #1 best-selling streaming media player in the U.S.” And following July’s annual Prime Day deals and discounts event, dubbed the biggest single shopping day in company history, Amazon touted a 2.5x increase in Amazon Fire TV sales compared to the first Prime Day a year ago, along with sales of hundreds of thousands of Kindle e-readers.
Amazon’s Fire tablet now accounts for 4% worldwide tablet market share, up from 0.3% percent in the second quarter of 2015—a staggering 1208.9% year-over-year increase—according to research firm IDC.
“Credit goes to Amazon as its performance [in the second] quarter has been reflective of the aptly named Fire tablets,” IDC said in its most recent Worldwide Quarterly Tablet Tracker report, published earlier this month. “The low price combined with the company's online presence has once again afforded Amazon a spot in the top 5 vendor list. Given the growing popularity of Amazon's Prime Day sale, it would not be surprising if Amazon performs similarly in the next quarter.”
For Target, this all means that if you can’t beat ‘em, then (re)join ‘em. “Target continually evaluates our assortment to deliver quality products at a great value,” the company said in a statement explaining its decision to put Amazon-branded devices back on its shelves. “We know our guests love the many aspects of shopping at Target, and believe they will appreciate the convenience and savings of finding these items in our stores and on Target.com.”
Research firm Kantar argues that Target had little choice in the matter. “At this point, it’s too late to hold back the tide,” Kantar Retail analyst Amy Koo told the Minneapolis Star-Tribune. “When they discontinued them, it was ‘Oh my goodness, we need to pay attention to this competitor that is eating our lunch.’ Now it’s about the ease at which shoppers can switch, so there is no actual benefit in them not carrying it.” Target and Amazon are also complementary partners, Kantar has found, with both companies serving a younger, wealthier customer base than common rival Wal-Mart.
In the wake of the news that Target and Amazon have mended fences, discussion forum RetailWire asked its BrainTrust panel of retail experts the following questions:
- What is your reaction to Target reauthorizing Amazon’s devices for sale in its stores and on its website?
- Is this a bigger win for Amazon or Target?
- Do you expect other retailers not currently selling Amazon devices to follow Target’s lead?
Here are eight of the most provocative and insightful comments from that discussion. Comments have been edited by Retail Dive for content and length.
1. It will drive customers to Target stores
Ross Ely, President and CEO, ProLogic Retail Services: Target is making a good move by offering Amazon products in its stores. Amazon devices will drive traffic into the stores and encourage sales of other products. Shoppers are savvy and know that virtually all products carried by Target are also available on Amazon. As long as Target is price-competitive and provides an excellent in-store shopping experience, Target will get its fair share of sales in its stores and on its e-commerce site.
2. It will tether customers to Amazon
Ken Cassar, Vice President, Principal Analyst, Slice Intelligence: Target is making a mistake. Amazon’s devices aren’t like other [consumer electronics] devices that merely seek to entertain. They are about locking consumers into Amazon’s ecosystem. Target would be better off focusing its efforts on helping Apple and Google sell their own Alexa-like devices.
3. Target is taking a calculated risk
Ryan Mathews, Founder and CEO, Black Monk Consulting: Nice to see reality finally being acknowledged. Amazon is popular and if Target customers want its products then Target has to take the calculated risk and sell them. The biggest winners in all this are Target shoppers who now get access to another of their favorite brands. Amazon wins because it proves their market strength and Target wins because it gets to stop losing sales and upsetting customers. As to whether other retailers will follow, only if they are smart.
4. Target is making a mistake
Tom Redd, Global Vice President, Strategic Communications, SAP Global Retail Business Unit: Not sure. I never would. They are selling a tablet that guides shoppers away from Target. If I were a retailer I would never let them in my stores. No matter the margin. Let my shoppers go to Amazon and get them, but they would come to my store to do the things Amazon cannot figure out—and never will.
5. Both sides win
Herb Sorensen, Scientific Advisor Kantar Retail; Adjunct Ehrenberg-Bass; Shopper Scientist LLC: The bottom line of retail for the past 100 years is all about efficiency. What’s going on here is about the fundamental driving force of economics, which created the need for retail in the first place: Everyone does what they are best at, and then trades with others for what they are best at. Target just may be at the cutting edge of this, with both Amazon and CVS.
For both Target and Amazon it is all about improving their own businesses, just as it was for Target and CVS. The evidence so far—based on their Seattle store—is that Amazon is making no serious efforts to get into the type of brick-and-mortar retailing Target is in. And I doubt that Target will ever be able to manage the “single item” retail that Amazon is super at.
These types of “partnerships” may play a larger role in the evolution toward the convergence of online, mobile and brick-and-mortar retail. So far there is no serious operational competitor with Amazon, with their infinite long tail (The Everything Store). Their item management expertise simply represents a massive disjoint with ALL brick-and-mortar retailers, who are built on pallet management.
6. Pure play is not child’s play
Doug Garnett, Founder & CEO, Atomic Direct: It is becoming clear that Amazon is not the threat to brick and mortar that Amazon has always claimed. My guess is that Target now sees this and sees an opportunity to make some good money selling those devices.
We should also look at the flip side: It’s more evidence that Amazon is desperate to get away from the shackles of pure play online. There’s far more profit to be made in stores than online. (Especially since their latest numbers show nice profit—but yet again none of it appears to be from their business that competes with retail.)
7. Size matters
Brittain Ladd, Cross-Border Logistics and Bimodal Supply Chain Management: Target should do much more than just sell Amazon products; Target should leverage Amazon’s vast fulfillment and transportation capabilities in order to reduce the costs and complexity of their supply chain. Let me get straight to the point: Target, Walmart, Macy’s, Gap, etc., etc., are learning the hard way that it is extremely challenging to compete with Amazon. Therefore, executives should shift their thinking from “What is our Amazon strategy” to “How can we leverage Amazon to reduce our cost and complexity and achieve a competitive advantage?”
The biggest risk facing retailers is their inability to compete with Amazon due to Amazon’s size and massive product selection. Since Amazon will continue to grow in size and selection, retailers would be wise make Amazon part of their strategy vs. trying to compete head-to-head with Amazon.
8. The danger has passed
Carol Spieckerman, President, Spieckerman Retail: Now that Amazon Prime is in its prime (near-ubiquitous), the risk of shoppers fleeing Target and heading to Amazon through the devices is lower. In other words, as the Prime membership base matures, Target can view Amazon’s offerings from a brand and product advantage perspective rather than through a competitive lens.
Target is well-known for its proprietary branding bent yet it is quite difficult to pursue this strategy in consumer electronics. By partnering with Amazon, Target gains a powerful brand (one that isn’t being emphasized at Wal-Mart), and a growing selection of innovative hardware that it can pick and choose from. The time is right as the risk is reduced.
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