Target pulls Kindles from its stores in a spat with Amazon

Posted on May 18, 2012 by aviyer2010

An article in the New York Times (May 3,2012) describes a decision by Target to stop selling Amazon’s Kindles in its stores. The article describes worries by Target that “showrooming” – a practice of scanning items in the store to get online discounts (like the Price Check app by Amazon that offered 5% off up to $5 for scanned item and prices from stores) hurts the retailer. But Kindles continue to be sold at other retailers, and the app can be run on any smartphone. Does this decision hurt Target or Amazon, given the relatively small number of units sold by Target ? How can physical stores combat the power of e-tailers, given their inherently larger cost to own and display local inventory ? Target’s letter to vendors recommends that they consider assortments and inventories offered to physical retailers, is it in the self interest of vendors to differentiate between Amazon and Target ?

About aviyer2010

Professor

View all posts by aviyer2010 →

This entry was posted in Ecommerce, Operations Management, Supply Chain Issues and tagged competition, Consumers, Cost, Ecommerce, Margins, Retail, Service, Suppliers, Supply Chain. Bookmark the permalink.

4 Responses to Target pulls Kindles from its stores in a spat with Amazon

Ravindran says:

August 20, 2013 at 1:51 am

Target’s withdrawal of selling Kindle tablets in its stores definitely seems to be a strategic move to combat the ‘show rooming’ effect. Target in no way could have curbed this effect because customers would obviously end up buying the tablet from Amazon stores given the competitive price it could offer on its own product. Withdrawing Kindle sales, Target would hamper the sales of Amazon especially during the holiday season where many customers visited the Target stores to feel the Kindle products before buying it from Amazon.com on discounted prices. Given the recent advent of the tablet technology it may be logic that the consumers first what to have a physical feel of these devices before they make the buying decision. With a rich store network of over 1700 stores Target definitely helped boost the sales of Kindle products through ‘show rooming’. In short, Target served as a profit-making vehicle for its competitor, Amazon and the organization now seems to have realized this phenomenon.

This tug of war between retailers and e-tailers has been around for some time now and retailers have been trying multiple options to offset the severity of losing consumers to e-commerce sites. One of the important things which the brick & mortar stores can do to retain their industry share is to improve consumer buying experience. For instance, if retailers can convert a store visit from just a cold footfall to buy grocery to an exciting trip then they could definitely offer a unique value proposition as compared to e-tailers and can retain consumers. Like, some retail companies in India offer kids playing area in the stores to make grocery buying more of a family outing event. Also, product differentiation can help the retailers to have an edge on the e-tailers. Target’s letter to its vendors could also be in an interest to enhance the its store assortment range and hence improve its sales.

Reply
Anubhav Nigam says:

August 20, 2013 at 2:20 am

The Price check app may prove an online disruptive technology as people may use the facility of physical store to check the product functioning but they may buy it from Online retailers such as Amazon.

The Price check technology’s strength is that it made easier for people to compare price on the spot (POS). Now the Physical retailers have to offer some more value proposition to customer to lure the customer.

The major attractions of physical stores are on the spot buying ( POS ) and immediate access to the product.

Physical stores have to come up with an excellent value proposition of after buying/ sales benefits to break the clout of the Price check app.Physical stores may use some technology which can inform the buyer of a particular product to buy a complementary product on the spot or at later stage at discounted prices to increase their sales.

From vendor’s point of view , I feel that it is not good to differentiate between Amazon’s and physical stores’ products . the differentiation such as offering more assortment to Amazon will tilt the market power in hands of Amazon and then Amazon may use its market power to influence vendors at later stage.

Reply
Ashish Agrawal says:

August 27, 2013 at 2:10 am

Target’s decision of withdrawal from selling Kindle tablet may have seems to be a strategic move for a short term, but in long term, Target will face the serious repercussion because of this move.
Yes, it is true that online retail in one of the fastest growing sales channels and they are outperforming most of the brick and mortar stores. But Target being the country’s second largest discount chain has the edge of maximum reach to the customer than other stores. So if a customer comes to buy or to get to know about Kindle in the store, there are highly chances that he may ends up buying different other products as the store displays huge variety of product, but if the same customer doesn’t find the product that he is looking for, he will move to some other stores and with him all the probable sales will be gone.
With the advent in the technology apps such as Price check is just a start, so withdrawal of selling product is not a solution. To win the war of attracting customers, target should work on to figure out different value proposition to the customer than the online store.

Reply
erhao teng says:

September 5, 2013 at 3:04 pm

This case talked about that Target withdrawal from selling kindle tablet on the store. It has positive and negative aspect for the company. First, it is a fact that customer came to the store the check the stuff then go to buy it from online, which is doing job as a “showing-room”. It is helping target’s competitor in invisible way, and also losing its own customers. After target withdraw the kindle, obviously it will decrease the sales of kindle on amazon.com. However, it will also decrease the attractiveness of the store that less people would like to come to buy. In other point, the article mentioned that the store should improve the buying experience. It is a way to persuade customer to shop in the store. For example, target may have some kindle’s accessories and make it into a “combo”, then price it as a deal. I believe that customer would prefer more on this kindle packet.

Reply