Target Looks to Battle Pricing Apps

Target Corp. is exploring pricing changes to counter the practice of “showrooming,” or using mobile pricing apps to check out and scan the price of products in stores only to purchase them at a less expensive price online.

“What we aren’t willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands,” according to a letter signed by Chairman, President and CEO Gregg Steinhafel and Executive Vice President of Merchandising Kathee Tesija and sent to some of its vendors regarding the changes.

The letter was first disclosed by Citi Investment Research’s Deborah Weinswig, followed by a report in The Wall Street Journal. Target confirmed to the Associated Press that the letter was sent but declined to confirm any details.

In the letter, Target reportedly asks vendors to help it create more exclusive items to create a greater point of differentiation and reduce product-on-product price competition that has become easier for shoppers to uncover through computers and smartphones.

According to the Journal, where exclusive products aren’t possible, suppliers are being asked to help it match rivals’ prices. In her report, Ms. Weinswig wrote that she thinks Target is “exercising leverage over its vendors to achieve the same pricing that smaller, online-only retailers receive. This strategy would help Target compete with retailers like Amazon on like-for-like products.”

Finally, Target indicated to its vendors that it is exploring the possibility of creating a membership or subscription-based online pricing, which Ms. Weinswig believes might be similar to Amazon’s “Subscribe and Save” program. The program gives regular buyers of certain products, such as diapers or coffee, special discounts.

The move comes as online sales jumped 15 percent this holiday season, more than three times the 4.1 percent rate seen for retail overall.

The Journal quotes a few analysts believing Target’s reported moves likely won’t reverse the “showrooming” trend. They said online retailers have significantly lower labor costs, don’t collect taxes in most states, and can use other revenue generators — such as cloud data storage and fees it charges others to sell on its website — to subsidize the lower margins it gets in retail.

“The traditional retailers are still doing business the old way while Amazon has reinvented the model,” Sucharita Mulpuru, retail analyst at Forrester Research, told the Journal. “Wal-Mart and Target are willing to sell a few things at a loss. Amazon’s whole business is a loss leader.”

BrainTrust

Discussion Questions

Discussion questions: Do you think Target’s purported tactics to offset the “showrooming” trend will be effective? How should retailers respond to the advantages online sellers are gaining through mobility? How should vendors respond?

Poll

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Doug Stephens
Doug Stephens
12 years ago

It’s a Band-Aid on a bullet wound.

There’s only one way for retailers to respond. Either sell unique things or create such an unparalleled, value-added experience that all comparisons go out the window. Do something so marvelous that consumers put their smart phone back in their pocket and forget about “show-rooming” you. Be remarkable!

Make no mistake — there is no easy fix for this and no letter to the vendors is going to make it go away. It only tells them how scared you are.

Dick Seesel
Dick Seesel
12 years ago

Target is admitting — through its letter to vendors — that it has a pricing problem. It should have taken steps a long time ago to develop more exclusive merchandise that would be more difficult to price-compare. But at this point the smartphone genie is hard to put back into the bottle.

Target has a couple of options: First, make sure that its prices are competitive in the first place. (After all, consumers can price-compare its website vs. other e-commerce sites without setting foot in the store.) And, second, push its vendors harder (as it seems to be doing) to differentiate its merchandise.

Fundamentally, this story underlines the built-in conflict in Target’s brand promise, especially as the store becomes more focused on competing in food and commodities.

Bob Phibbs
Bob Phibbs
12 years ago

Correction: Amazon has not reinvented the retail model — they are hijacking customers other retailers paid lots of money to attract to their four walls.

The point that Amazon’s whole business is a loss leader begs the question how long they can hold on with the “we’ll make it up somewhere” philosophy which RW touched on last year.

I wrote about the Target letter today, positing that vendors should be looking at different SKUs for different retailers — the one-size-fits-all isn’t necessary with modern manufacturing capabilities.

David Livingston
David Livingston
12 years ago

Target forgets they have an advantage of being able to showroom the products. Customers who want the product immediately can buy it from Target. I’ve often found that using Target’s REDcard and getting 5% off makes them very price competitive with the online retailers. I am actually annoyed when manufacturers make special products, like computers, for a retailer changing model numbers slightly and making minor changes to the specs like memory capacity.

Target might be upset with online competitors using its stores as showrooms, but the online competitors are also forced to lower their prices to compete with Target’s REDcard discount and ability to provide the product immediately. What am I missing? If I want the product at the online price, a little whining with the customer service manager usually gets the job done.

Fabien Tiburce
Fabien Tiburce
12 years ago

I think this is fantastic! The practice of “showrooming” is unfair and unsustainable (since web-only vendors would in fact do less business if their prized showrooms went away entirely). On the one hand, you have retailers who invest in stores to showcase products and answer customers’ questions. On the other, you have web-only stores who capitalize on showrooms, don’t invest in the products or the customers, and reap the benefits. Why do so many retail consultants say, “Get used to it”? Should you get used to being walked all over by your competition? Don’t get used to it. Show your customers you are willing to fight for their business. Fight it; give it back. Put your best foot forward and don’t let a competitor take advantage of you. Amazon is not being fair and kind to you, why should you be? This is not a time to be defensive or complacent, for your sake and for the sake of your customers (who, again, would lose the showrooms if you disappear).

Roger Saunders
Roger Saunders
12 years ago

Target has the purchasing power to seek specialty packaging, sizes, and features that selected vendors will be willing to develop. This will provide those selected vendors with a load-in sales/marketing edge over the short term.

A more effective approach for the right retailer might be to embrace the increasing use of mobile devices, and literally set up examples of making use of them within their store. Then, while the consumer is at their side/on their site, demonstrate the benefits of making their purchase with them. Trusted retailer, convenience, value (perhaps pricing), location (the shopper is there), service.

Retailers cannot run and hide from this phenomenon. Some consumers are going to “kill for a quarter,” but retailers have to remain aligned with these ultimate decision-makers.

Steve Montgomery
Steve Montgomery
12 years ago

Part of the determination of the success of Target’s attempt will be determined on how one defines effective. There is no question that having unique merchandise or models blunt the ability of someone to make exact comparisons (just look at what Sam’s has done in this area). Does that mean they won’t buy a similar but not exactly same item at a lower price online? Sometimes yes and sometimes no, depending on the uniqueness of item or its features that Target is able to bring to market.

Adrian Weidmann
Adrian Weidmann
12 years ago

The efficacy of this approach will be short-lived at best. Retailers should be exploring methods and practices that provide more value for the money, not simply less money. Retailers have leveraged vendors through various financial ‘support’ by way of vehicles such as ‘market development funds’, COOP funds, placement fees, etc., for years. Many large retailers simply tell the vendors what it will cost them to display their items in the store. Now that the world is ‘becoming digital’ the consumers and vendors are finding each other without the ‘middle man’. Retailers need to face this reality and design and activate solutions that make them more relevant to their shoppers. Being a big box with shelves that have stuff on them simply isn’t going to be sustainable in our digital world. Target can flex its distribution muscle and it will certainly work for a short period of time, but shoppers and brands will find each other in the digital ether!

Paula Rosenblum
Paula Rosenblum
12 years ago

The following is one of the funniest things I’ve read in a long time: “What we aren’t willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands….”

And what exactly is Target going to do about it? As my partner Nikki likes to say “Will you cover your stores in tin foil so that no one can get a cell signal?”

An “exclusive product” will still have similar characteristics to others that are sold online. Just like the electronics market. A gazillion SKUs, but once you understand the specs, you can make different choices. And mobile apps are getting smart enough to figure that out.

I’m frankly surprised Target’s execs have reacted this way. The company has a great brand and didn’t need to call attention to itself in this way. It’s telling the reader that maybe the brand is NOT all that unique.

I think the company has had a seriously bad 8 months (starting with it’s unfortunate web site troubles). This did not help.

Matt Schmitt
Matt Schmitt
12 years ago

It is in vendors’ best interests to find ways to help, whether through unique products or packaging.

The ease with which mobile shopping apps can do pricing and online ordering (i.e. bar code scanning) presents a low barrier to the showrooming practice. Maybe unique product codes and labeling could offset some of the behavior by making it a bit more work to skirt the retailer on some purchases. But likely the solutions will be more complex, requiring shopper loyalty programs with real incentives to buy locally or to at least skew more of the online purchases to the retailers’ e-commerce programs instead of to an Amazon.

In any of these approaches, I think Target is right in that they need their manufacturing brand partners to be just that — partners with a will to keep the retailer healthy and thriving.

Ryan Mathews
Ryan Mathews
12 years ago

Showrooming is hard to beat. A friend of mine owns a bookstore and tried to counter Amazon’s efforts by a straight appeal to customer decency. It sort of worked — but only for some shoppers.

Ian Percy
Ian Percy
12 years ago

I’m confused…again. Is Target angry at the online websites because they send in one of their own to scan prices or are they angry at the end-consumer because they go in, check out the product, scan prices and then go order online? Exactly whose bad is it?

One thing for sure, it doesn’t pay to get angry at the customer. Instead apply the ultimate competitive strategy: Exploit the weakness in your competitor’s greatest strength.

If I have it right: 1) the customer travels to the store; 2) they hunt around to find something they want; 3) they use a mobile app to compare prices — not just with one online store but among online stores; 4) they decide to order the same thing through their phone; 5) they pay a lower price and likely shipping and handling; 6) they go home to wait for the product for a week or more; 7) they hope that what comes in is as ordered; 8) they’ve taken a risk with their credit information; 9) if they don’t like the product they have to re-package it and 10) they have to travel to the post office and probably pay to send it back.

Anyone know what people actually “save” (full net) on a typical online purchase? To me this is like watching guys line up for an hour at the gas station, with their car running, to save 20 cents a gallon. Sometimes people just don’t think!

If Target can’t compete with this scenario, they’re really in a lot of trouble. If it were me, I’d put up signs showing what online stores are charging, what shipping and handling is, where it ships from and how long they have to wait before they can enjoy the product. In other words, use that energy rather than resist it. That leads me to the second ultimate competitive strategy: Paint your problems in bright colors.

Gene Detroyer
Gene Detroyer
12 years ago

To the question of how long can Amazon “hold on”? With a gross profit margin of almost 25% and annual inventory turns in excess of 10 times, they can “hold on” a long time. Target, with turns of less than 5 times per year, better be making a whole lot more margin to “hold on.”

Now to the issue of the day:

Once upon a time there was a company called Napster. It shook the foundations of the music industry. The music companies together sued Napster and put them out of business. While the music companies were toasting their success of saving the business as they knew it, Steve Jobs understood how people behave and where the future was going…the result was iTunes. In the end, the music companies saved nothing.

Target’s best strategy would be to start thinking like a showroom and not fight the inevitable.

Ed Dunn
Ed Dunn
12 years ago

For a big box like Target, one way to defeat “showrooming” is create an “showrooming” app yourself for your customers to use.

For smaller stores like appliance and electronics, remove the UPC code from play — that is the glue that enables showroom. Replace with your own barcode/QR code system.

Camille P. Schuster, Ph.D.
Camille P. Schuster, Ph.D.
12 years ago

This has been happening for a long time. The fact that Target did not think it was a big problem until now means that they have not understood their consumers. The reason it finally reached their attention is that Internet sales and the ability to check prices electronically is more widely used. Having products in stock for immediate purchase, creating a shopping experience that is worth the extra price, creating a meaningful reason for loyalty, or selling exclusive items are ways to beat price competition. Target is not the only store having to face and address this issue.

W. Frank Dell II, CMC
W. Frank Dell II, CMC
12 years ago

It has been said that Best Buy is the show room for Amazon. This issue is not going away and will only grow. The online retailer has the advantage of lower delivery costs and greater margin and lower retail price. Two approaches have merit. The best way to compete with Walmart is to not carry the items they stock. This approach only goes so far, but vendors using two different UPCs for the same item would make it more difficult.

The mattress industry has solved this issue. Each retailer has their own item number and cover for the same product. It is difficult for consumer to compare those products between retailers.

Bill Emerson
Bill Emerson
12 years ago

Target can rattle sabers at the vendors all they like, but to little effect. The technology is giving more power to the customer and, no surprise, the customer is using it. In effect, the customer is telling retailers that they need to have something unique — product, experience, price — to be successful in the new model. Having a ubiquitous product in a convenient location is no longer a viable strategy.

Max Goldberg
Max Goldberg
12 years ago

It’s interesting that most of Target’s tactics involve getting something from manufacturers. Are consumers really using Target to save money on diapers or cereal? Where does Target have responsibility to live up to its tagline of expecting more and paying less? Perhaps a better in-stock policy and knowledgeable sales associates would make consumers more willing to pay a little.

Lee Peterson
Lee Peterson
12 years ago

Like the record companies and Napster, you may be able to stop a consumer-driven idea for a while, but the concept of show-rooming will eventually evolve into something you can’t stop — as Napster evolved into 99 cent downloads.

At the end of the day, the best tactic is to join ’em, because you really can’t beat ’em. Maybe Target’s ‘special subscriptions’ will do that, but it sounds more like a “we’ll beat any price, any time” strategy might work better.

This is just the tip of the iceberg, of course, and retailers across the board need to develop strategies that address the effects of technology on their business model sooner than later — or, as Les Wexner once said, “I’m afraid to stop and smell the roses … I could get hit by a truck.”

Robert DiPietro
Robert DiPietro
12 years ago

Two thoughts come to mind:

1) Is Target really a showroom? When I think showroom, white goods and TVs come to mind. Are consumers really going to showroom shop on soft goods, home goods, and groceries? Use the REDcard and most pricing comes in line.

2) If you go down the derivative route and have vendors produce unique products, who owns the inventory risk? The vendors can’t reroute the supply if demand at Target softens.

Ted Hurlbut
Ted Hurlbut
12 years ago

Showrooming looks like THE major challenge that bricks ‘n’ mortar retailers are going to face over the next few years. They are caught, because technology is now on the side of consumers, and online retailing has a fundamental economic advantage that’s not going away. They can sell for less (to quote a local car dealership in the greater Boston area) because their costs are less. That’s not going to change.

I agree with Doug that Target’s first steps are like a Band-Aid on a bullet wound. I don’t see them having much effect. We’re talking about highly identifiable, commoditized products. Like all other commodities, the game is all about price. For these types of products, no amount of “exclusivity” or “experience” is going to offset anything more than very minor price differences.

The genie’s out of the bottle. I don’t think any of us know what the answer is at this point, or how this is going to play out. But give Target credit for starting to explore potential responses. Other retailers are sure to follow up with their responses pretty soon as well.

Bill James
Bill James
12 years ago

Target is an immense brand showroom for many products made here and abroad. They can compete effectively for the mobile shopper mindshare IF they drive innovation into their stores via creative merchandising, unique product offerings (stores-within-stores concept for select global brands) and by ensuring that what they are merchandising is actually on the shelf or even in the store. The out-of-stocks problem they and all retailers are plagued with is shocking at times. If it’s not in your store, and I can get it with 3 clicks on my iPad, delivered into my home in 48 hours, guess who gets my business? Outside of a few critical items available at the commodity level (paper products, health and beauty, and food) I can usually wait for what I need to arrive via UPS. Throttling your vendors to play your game so only you win is not a strategy; rather collaborating with your vendors to offer superior quality products at competitive prices, is.

Jerome Schindler
Jerome Schindler
12 years ago

It might be effective in getting their vendors to compensate them for being a “showroom.” I can see some justification even under Robinson-Patman for a vendor selling at a lower price to brick & mortar stores than it does to internet retailers to compensate them for that “service.” Our politicians need to address the sales tax inequity as well. It is no longer chump change, and probably favors the 1% who are more likely Amazon customers. This would not be a new tax — just assuring collection of an old tax.

Gordon Arnold
Gordon Arnold
12 years ago

Here is another example of executives keenly aware of the problems not just inherited with technology, but also amplified through under-utilization. Companies that wish to continue using stores as a primary sales platform should use online pricing only as a means to compete. If Amazon customers must wait and suffer the consequences of lower availability causing late or no arrival for low low pricing, so to can yours. Did I forget to mention shipping charges and where they apply? Returns, lost shipments and exchanges are real issues that cause thousands of internet customers to forever abandon this platform.

In the battle for business, first know and become proficient with your strengths. Never engage the competition with your weaknesses. Then, before you engage a competitor, understand their problems and attack the market with a better solution to the problems you find. Maintaining store-bought price and service is a must and how you explain these musts to legitimate customers (versus the chronic complainer) is important, and needs to be constantly measured.

jack flanagan
jack flanagan
12 years ago

Target needs to look at its own value proposition and business model rather than complain about other options for potential customers.

Data point of one as it may be, it is telling. Many hundreds of purchases later from Amazon, I’ve never had anything less than an outstanding customer experience, including many that are not ‘price driven'(recommendations, returns, reviews, assortment, etc.).

I interacted once with Target’s online presence. Didn’t like the item (which arrived in a brightly-logoed Target shipping package. Took $30 item (still in Target packaging) into a Target we happened to be driving by for a refund. Customer service and store manager say “No can do” as we didn’t have the receipt with us. OK, our bad (I guess).

Next time I’m online I print out the receipt, take it with the item and Target-logoed packing into a nearby Target. This time I’m told they couldn’t do it because the item was ‘sold’ by — wait for it — Amazon (who was, at the time, Target’s fulfillment agent).

In both stores, the item was sitting on the shelf. It was clearly in their ‘brick & mortar’ assortment.

Calls to Minneapolis brought no joy. The item now hangs proudly among my customer service Hall of Shame exhibits.

Brian Kelly
Brian Kelly
12 years ago

Technology disintermediates stores from its customers. 40 years ago, category killers focused on product. 25 years ago, lifestyle centers focused on location. Today, Amazon et al. is focused on price. However it happens, relevant options are increased for consumers. Consumer centric merchants will adapt and move forward. The others? We know: “Retail ain’t for sissies.”

Doug Fleener
Doug Fleener
12 years ago

What goes around comes around. For years consumers went to the independent specialty stores to get expert advice before going to buy at the big box stores.

The power is now in the consumers hand…literally. If you take away the sales tax issue, Target could be price competitive. Or at least close enough that the consumer will pay the difference for a better experience and getting the product immediately.

But when there is a 5% to 9% savings off the top they don’t have a chance. We have to address the unfair sales tax advantage Amazon and others have. As a consumer I like not paying sales tax, but it’s unfair to the companies like Target who invest in our communities and hire our neighbors.

Carol Spieckerman
Carol Spieckerman
12 years ago

Target’s fundamental assumption, that vendors control retail pricing (or promotions), makes this stop gap tactic flawed from the get-go. Pushing responsibility down to vendors may feel like a solution but the realities are too complex and, without clear standards, enforcement will be arbitrary and confrontational.

Why not go the way of Walmart’s price match guarantee and let the still-small percentage of showroomers manage the exceptions that matter to them? Attempting to adjust an entire pricing model based on this growing-but-still-negligible dynamic makes no sense.

Last time I looked, Target was the one, not just encouraging, but pushing, like-for-like comparisons between its private brands such as Up & Up and national brands on the shelf — right down to adding specific “compare to” language on its packaging just in case the value didn’t register through proximity.

Why the lurch from bold to meek?

Jack Kurek
Jack Kurek
12 years ago

The majority of people going into a Target store are “in the moment” wanting to fulfill their need or want now. The appeal of the brick and mortar store will always be the immediate satisfaction of walking out the door and taking their new possession home to either use or show. Products need to be well displayed, easy to find, priced reasonably close to the competition (immediacy has value) and most importantly — in stock and available.

Tony Orlando
Tony Orlando
12 years ago

I am glad that the supermarket business is not sensitive to the big problems Target and Best Buy are facing, as nobody checks the UPC for t-bone steak when they’re shopping in my store. This is not going away, unless the tax is put in place for all purchases, and I don’t see that happening right away.

Technology is changing the face of how we do business, and no consultant out there can magically change what is happening right now. Yes … we need to focus on the customer service, and signature items, and really good prices, BUT the younger generation of shoppers shop differently than I do. It is like a game for them, as they can price app 50 items in 5 minutes with their phones, and sit around at Starbucks with their other buddies talking about all the great deals they got doing this.

I can’t predict the future, but it is going to always be tough to stay ahead of the techies to stay in business.

Carlos Arámbula
Carlos Arámbula
12 years ago

It’s an interesting approach, but it appears convoluted and an easy system to beat.

Essentially the retailer will be asking a manufacturer to affect their economies of scale by producing goods with slightly different features for the brick & mortar locations vs. online stores. In turn, this will lead to more complicated inventory control and logistical issues for the manufacturer. All the aforementioned so the consumer can get a coffee maker with an extra widget only available at Target?

It doesn’t make sense. A bargain shopper consumer will stick to the online version of the product sans-extra widget.

Why not offer service plans or warranties only available through the store? The retailer needs to address the value of the product, the extra margin, and any service plan that accompanies the product as a benefit over online purchases.

We also have to look at the 15% increase of online sales within the context of the current economic situation. Consumers altered their purchase behavior in an effort to save money or simply the allusion of saving money … or perhaps they felt they could shop at home and not run the risk of getting pepper-sprayed by a fellow bargain hunter.

Kent Bryant
Kent Bryant
12 years ago

I don’t think the vendors can do much for all of us who have brick & mortar stores other than offer branded items, but the store can add value by offering easy returns and taking care of defective items at the store. The one thing that would help both stores and the states they are in is to fix the sales tax or use tax collection. The tax fix would need to be easy for the stores to set up.

Matthew Keylock
Matthew Keylock
12 years ago

There is definitely an interesting re-balancing going on in retail thanks to digital devices and the online channel.

As well as the cloud opportunities, Amazon has a lot of further potential as a media and a data/insight company too and plenty of headroom to continue to drive its strong positioning in the retail space.

Eliott Olson
Eliott Olson
12 years ago

Some e-commerce will be slowed by higher pricing from the imposition of state sales tax, higher shipping costs and a high percentage of returns.

Over the years upper end department stores abandoned categories where they could not compete with category killers. Old Macy’s acquired companies used to carry electronics (Floor TVs etc), white goods, furniture, sporting goods, stamps and coins, and books. Dayton’s (Targets founder) also started B. Dalton Bookstores. Target has already downsized sporting goods and automotive. Other categories are also shrinking as Target expands its food offering. Categories will continue to shift.

Target cannot compete with truly unique or specialty products against an Amazon with its long tail. All it can do is disguise the product so it can’t be identified in the price police lineup.

Craig Sundstrom
Craig Sundstrom
12 years ago

This article — and the ensuing discussion — is remarkable for several things:

– “(Target is) exercising leverage over its vendors to achieve the same pricing that smaller, online-only retailers receive.” Are we to believe that Target — one of the largest retailers in the country — believes it is actually being charged HIGHER prices than smaller competitors?!

– “Amazon has reinvented the model…(their) whole business is a loss leader.” A full decade (and several related financial disasters) after the dot-bomb fiasco(es) and we still have analysts who will not only say outrageous things, but will be quoted by (presumably) respectable news outlets for saying them;

– David hasn’t (yet) quipped that this isn’t a problem for Walmart because few of their customers are wealthy/intelligent enough to own smartphones;

Ultimately I think this battle — to the extent that there ever was one — is over. As Ian and Tony both note, for many of the smaller non-durables (soap, $3 towels, etc.) that Target sells, showrooming is a non-issue; for the larger items, they will have to match online prices (or nearly so) … it’s that simple.

Matt Hahn
Matt Hahn
12 years ago

Exclusives are a great way to differentiate, but for most of what Target offers, truly unique items will be rare. Competing on price won’t mean that Target needs to be equal to or lower than Amazon. Target’s biggest advantage over online is its physical space. They’ve already got their product into your hands and you can take it home right now so if they can be reasonably close on price they can win the battle. If you’re looking at everyday items and Target is within a few percent, the shopper will likely take advantage of the instant gratification. The larger ticket items, where a few percent could mean a couple hundred dollars, will be where Amazon is more appealing although a few loss leaders on Target’s side can tip the scales. Building in loyalty programs (like the Target card and a premium service club) can keep the local shopper attached to Target. I still believe people like shopping in a physical space when they can and as long as they feel they’re getting fair prices and value.

Target thrives despite tough price competition with Walmart because of its value proposition. Consumers know and understand the difference between the two big boxes and are willing to pay a little more at Target. The company needs to do the same versus Amazon. Target can’t afford to get into price wars with Amazon, nor can it keep up with its selection, but it needs to get creative and leverage its inherent advantages to remain competitive.

Ed Rosenbaum
Ed Rosenbaum
12 years ago

This will be a daunting task for Target to be able to accomplish. I doubt a letter to a vendor is going to make a significant difference either. Target will have to roll up its sleeves and get down to some productive planning and execution. This can’t be left in a boardroom or it will always be business as usual tomorrow morning.

John Karolefski
John Karolefski
12 years ago

Technology is taking us where no retailer has gone before. What to do? Either make the in-store experience absolutely fabulous so that consumers want to be there and return, or work with vendors to develop and sell totally unique products that consumers must have.

Ronnie Perchik
Ronnie Perchik
12 years ago

Whatever the product is that a retailer sells, it can most likely be found somewhere online at a cheaper price point. Create a ‘unique’ product, someone will pick it up, and start selling it online for cheaper. And I don’t think that will ever change. It really just speaks to the power of the internet.

Creating a wholly unique in-store experience, or in-store only offers and rewards programs, is key. And I agree, I don’t think it’s necessarily fair that ‘showrooming’ takes place.

But this pushes retailers to recognize that they need to think out of the box, and find real reasons to drive consumers into the store. What can people get in the store, that they just can’t get online, to make them purchase?

Part of the process is working with the right vendor to ensure creative ideation, and efficient execution.

Bill Bittner
Bill Bittner
12 years ago

Sorry I missed this yesterday, but if anyone bothers to catch up on the discussion, I offer my thoughts.

First of all this quote from the Forester researcher is the stupidest thing I have heard: “Wal-Mart and Target are willing to sell a few things at a loss. Amazon’s whole business is a loss leader.” If that were true, Amazon would have run out of capital years ago. Having said that it has become difficult to define Amazon as “just a retailer.” They are into so many other things such as Cloud Computing, hardware manufacturing, and brokering for both content producers and other consumer outlets. Maybe everything they sell could be subsidized from their other businesses.

I think the idea of product differentiation makes a lot of sense for all the players in this new world. When you really think about it, if stores become irrelevant, it is going to affect a lot of businesses from package designers to transportation companies, fixture and display manufacturers, commercial real estate, and so on. This is without even mentioning the direct impact on all the people currently employed at store level.

The last chance a product manufacturer has to “make the sale” is at the shelf edge. Product manufacturers offer special labels, product sizes, and consumer packs for the club stores. There is no reason why this can’t work for brick and mortar in general. With the coming of serialization (RFID) manufacturers will have better control over their distribution channels and be able to prevent leakage across channels. This will allow them to offer special discounts to the brick and mortar stores specifically because they provide a “showroom service” for their products. This can be done even if package differentiation is not possible.