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Target sends sharp message to P&G over Amazon deal

February 27, 2014

It's not unusual for retailers and consumer brand suppliers to have disagreements. What's unusual is when news of these temporary rifts becomes public knowledge. Back in 2009, for example, there were reports that Costco took the extreme step of delisting Coca-Cola beverages over a pricing dispute.

Now comes a Wall Street Journal report that Target is taking issue with Procter & Gamble's agreement to allow Amazon.com to set up shop inside its warehouses to speed online orders to customers. P&G made a similar offer to Target and other retailers, but some turned it down because e-commerce remains a relatively small part of their overall business.

According to the Journal, Target has made other companies category captains in place of P&G and reduced display support for the consumer product giant's brands.

Target and Amazon have a history. Prior to the 2011 holiday season, Amazon ran website operations for Target.com. The transition did not go as smoothly as planned. In 2012, Target made the decision to no longer sell Amazon's Kindle e-readers and tablets in its stores.

Discussion Questions:

What do you think of Target's reaction to Procter & Gamble's agreement with Amazon.com? What do you expect it will do to the trade relationship between Target and P&G? Are these types of dispute more or less common today than in years past?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Are retailer/CPG manufacturer disputes more or less common today than in years past?


From my perspective, Target needs to start thinking more creatively around omnichannel retailing.

Amazon helped get them into the eCommerce arena and once Target figured out that Amazon was leveraging their role to strengthen their market position, they shouldn't have been surprised by that. And if P&G did make the same or similar offer to Target as with Amazon, then Target only has itself to blame for not capitalizing on this or suggesting an alternative.

Target was late in figuring out the Amazon threat. They should stop being "angry" and focus on competing as they know Amazon's tactics just about better than any other retailer.

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Bill Davis, Director, MB&G Consulting


It's always a slippery slope for a manufacturer to take steps that can be construed as competing with their customers. It's "okay" for a manufacturer to have an outlet store as a clearance vehicle. It's fairly okay for the manufacturer to open a few flagship stores as "brand statements" as long as they employ no special pricing or promotions to entice customers away from the retailers (think Nike store, or Apple Store).

Any retailer can set up an arrangement with a willing supplier to support rapid replenishment by keeping consignment product in the retailer's warehouse - a smart move to insure no/low stock-outs by store. Basically this is what P&G is doing with their retail customer Amazon. So P&G is not competing directly for the customer business with Target, they are just enabling one of their retail customers to be more efficient in meeting customer demand.

Technically it's a legit move by P&G as a vendor-supported inventory logistics technique. However it makes a competitor more efficient. I'm not sure how Target calls this unfair. I bet they've already set up plenty of VMI programs with P&G (and others) to make the supply chain to customer more efficient for their brick and mortar model.

Long note, but I think Target is overreacting and should focus on making their own supply chain and logistics more competitive.

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Peter J. Charness, SVP America, Global CMO, TXT Group

Retail is like WAR. Fight for a limited resource or for domination. In the old, old days of retail, it was worse. This is a simple turf war. In the old days it was worse. Cash register salesman of old used to smash up storekeepers places if they did not buy a new cash register from them.

Today, retail is a polite fight and the weapons are technology and relationship based - or a mix of both. With P&G and Target, the relationship is the choice of battle tools and may the side that is most for the sake of the shopper win.

Watching my flank side...Tom....

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Tom Redd, Global Vice President, Strategic Communications, SAP Global Retail Business Unit

Right on Target! When I first heard about the Amazon/P&G relationship, I couldn't help but think that if I were Walmart or Target or Kroger, I'd go NUTS! Wait, you have my #1 competitor IN YOUR WAREHOUSE??? That's wrong! Sure is a statement though, as to whom P&G is betting on.

It will be interesting to see how all this plays out as Amazon makes one smart move (successfully!) after another and boxes out physical retailers. Sooner or later, as in this case, they're going to wake up and the bricks are going to hit the fan!

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Lee Peterson, EVP Brand, Strategy & Design, WD Partners

What interests me most about this story isn't the past or the future, it's Target's reaction to this and other threats recently and today.

I can't remember if it was 2012 or 2013 when Target wrote a letter to its suppliers demanding that they help the company combat showrooming. More recently, when it released its 2013 Q4 sales and earnings, even though the company hit its targets (sorry...can't help the pun) it still blamed its data breach for weak second half of December sales. Do you think it might've had more to do with "shooting the wad" over Black Friday weekend?

And speaking of the data breach, it remains unclear why the company did not immediately notify consumers. Maybe there was some agreement with law enforcement, but it still was strange.

In other words, a company that originated cheap chic and helped redefine what was cool, seems to be getting a bit...troubled.

I'm very surprised. Target stores used to be a really great place to shop, and even the fashion editor from the Palm Beach Post was singing its praises just a few short years ago. No one differentiates on Tide. They just don't.

This is not how you combat competitive threats. You continue differentiating, and make the shopping experience more inviting. If Target thinks its going to win based on the commodities P&G sells, it's missing the mark.

I keep thinking about my partner Nikki Baird's blog, where she said she could envision a future where she buys most of her staples online, because Amazon is dependably NOT out of stock, and buys fresh and heavy products at stores. That future can only be altered if we give consumers a reason to shop in stores. That's where our focus should be.

Sorry for the rant...but pushing on vendors is not the way to win customers' hearts.

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Paula Rosenblum, Managing Partner, RSR Research

CPG sales channel complexity is increasing so it's really important to try to figure out if new channels like Amazon will compete with traditional retail partners or be incremental. The reality is probably somewhere in between, but factors like pricing, packaging size/format and delivery timeliness plus others are probably the key determinants of what this means to Target.

I've seen Deloitte research into this from the supplier/manu side, and P&G is probably the exception to their research which suggested CPG execs were making half-hearted attempts at sales through direct or third party pure play online channels like Amazon (for fear of losing key retail partners, shelf space and obviously sales).

Their research also suggested there is a fairly sizable segment of "indifferent consumers" who don't particular care for or have interest in the in-store shopping experience. It is these consumers who represent possible incremental sales opportunities via online sales channels. When you can keep shipping prices low and delivery times quick, and price is competitive if not lower, there's a real incremental sales opportunity.

So in the end, Target's online channel is probably grousing over this versus their brick/mortar operations. Amazon is more a competitor to Target online. P&G probably views it that way too, and expects over time Target online to embrace its products just like many retailers, both online and brick/mortar. The more interesting question is arguably how the landscape reacts when CPG manus make strong attempts at direct sales themselves and how that impacts online sales partners.

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Gib Bassett, Retail and Consumer Goods Industry Principal, Oracle

If Amazon offered the same arrangement to Target, and Target turned it down, than Target has nothing to complain about. Target and P&G need each other. This spat will blow over.

Retailers are looking for any edge with consumers. They expect brands to help them gain that edge, and for the most part brands are willing to help.

Target has had problems with e-commerce since they broke away from Amazon. Rather than punish Amazon, who runs circles around Target in cyberspace, Target should learn from Amazon and improve its online efforts.

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Max Goldberg, President, Max Goldberg & Associates

P&G remains the largest advertiser, merchandiser and promotions on the block and Target couldn't make a collaboration that should be a win for consumers, Target and P&G?! Why? Because Target's e-commerce "remains a small part of their business." This is the proverbial ostrich burying its head in the sand. Does Target believe it is immune to the online world? Target is a great retailer and should embrace logistics and opportunity to learn and react to shoppers! I'd back P&G in this exchange long before siding with Target.

Oh, and by the way, that other Minneapolis based retailer? The Star Tribune reported this morning that Best Buy was letting go of 2,000 folks because of "less than expected holiday sales." If it wasn't for a number of major brands supporting and using Best Buy as their retail showroom and channel, Best Buy would cease to exist. Wake up.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

I clearly remember the battles between Wakefern and P&G when I was growing up, as they were frequently a topic of conversation at our dinner table. Because my dad was a Wakefern retailer, my impression was always that P&G was trying to screw us over with their heavy-handed tactics. Put in this merchandise set or don't get roto dollars. Carry the full line of paper products or we won't support your other promotions. Etc.

It wasn't until I was a journalist that I came to understand there are two sides to the story and that P&G had logical reasons for doing what it was doing. This enlightenment came mostly through a series of conversations I had with Ralph Drayer, who was then head of supply chain for P&G. Ralph explained to me the efficiency and sales lift P&G was trying to drive through Wakefern (and other retailers) with their marketing approach. While he never convinced me Wakefern was in the wrong with its pushback, he did make me understand they weren't as clearly in the right as I had thought.

All this is a long way to say that while P&G's relationship with Amazon may be frightening to Target, they need to build their own relationship with P&G so both continue to benefit from it. Easier written than done, I know, but the basic truth is that P&G wants all of its retail partners to sell more.

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Ron Margulis, Managing Director, RAM Communications

This reaction is similar to Target's banning of the Beyonce album for releasing via iTunes. Incidentally, so did Amazon. While the logic in the Beyonce case is that Amazon and Target want to show that they're willing to shoot themselves in the foot to do minor damage to Beyonce in order to dissuade other artists from signing even time-limited exclusives with Apple, the same will not hold true for the major CPG manufacturers.

I see no advantage for Target. First, the company is leaving money on the table. Second, P&G loyalists will tend to migrate to retailers that feature and promote P&G products.

Unfortunately, these conflicts will increase until the traditional retailers realize that retail is now technology. Instead of these trade wars, traditional retailers need to provide consumers with real omnichannel opportunities.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

The reality is, there are young hot shots working at consumer product brands looking to disrupt the supply chain to win some points and get a mention in the industry publications. And they are willing to sell Amazon and direct to consumer without looking at the overall impact.

Retailers like Target have to be aggressive to protect their current position but at the same time, the community needs to be educated that they lose local jobs when they decide to buy consumer products from an out-of-state warehouse versus the big-box store that employs local people and gives donations to local schools and causes.

Ed Dunn, Founder, (Stealth Operation)

Target can cry in their beer all they want as we, the independents, have been getting hosed for years. The biggest of the biggest is P&G, and they want to marry up with the big movers. It doesn't matter what the past is, because at one time, supermarkets were the place to get all of your P&G supplies. Not any more, and now Target is upset, and there isn't one thing they can do about it.

Amazon has the attention of P&G, and will move forward with pushing tons of their product, as the competition loses ground.

This is just another evolution of retail and we as retailers need to focus on working with companies who need our business.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Target vs. Amazon. Target vs. P&G. What is the common denominator here? One gets their feathers ruffled for something they started and takes it out on the other. Maybe the focus should be the data breach...who's going to be the big loser here? Hmmm....

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

What do I think of Target's reaction to Procter & Gamble's agreement with Amazon.com? How about stupid, naive, close-minded, trying to save the past and ignoring the future...shall I go on?

It amazes me that this type of thinking remains so prevalent in the retail management mindset. In ten years, brick and mortar stores as we know them will be rare.

I am teaching a capstone course on Leadership and Corporate Sustainability (meaning survival, not environmental). Business history provides a multitude of examples of great companies that refused to see the future. If there is one category that presents the best examples is retail (read: Sears, Woolworth, Kmart, etc...).

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Gene Detroyer, Professor, Independent

Target's myopic brand-centricity is out of step with new retail realities, in this case, the acceleration of platform partnerships. Target, a retailer that has taken like-for-like, private brand/national brand packaging and shelf comparisons to new heights (and is now backing them up in circulars)? Why the war on brand partners, particularly at a time when it has baskets of bigger fish to fry (Canada, the breach wake, plunging profits...)? It's time to tone down the tantrums.

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Carol Spieckerman, President, Spieckerman Retail

This is a war between 2 giants who may win a battle but lose a war! Both should be finding ways to maximize their consumer interface instead of trying to take them away. The consumers will ultimately decide where and how they buy their favorite brands and all entities should be working to have maximum assortment and convenience for those purchase occasions in their facilities.

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J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

It's time for Target and other traditional retailers to wake up and embrace digital. Accept the fact that eCommerce is here to stay and if you, as a retailer, continue to refuse to realign your organization to operate in an omnichannel fashion, then prepare to lose wallet share - period.


There is a long standing business practice for manufacturers to customize solutions to retailers to improve retailers' bottom lines. Walmart: PDQs and pallets. Club: club packs. Target: end-cap blocks. Drug/Grocery fixturing and displays. And on and on. Why is this any different? Target would no more benefit from setting up shop in a P&G warehouse than Amazon would benefit from taking in displays or pallets. The fact that amazon and P&G are partnering should come as a surprise to no one. So to be upset about it is a bit petty. Target would be better served to focus its energy on fixing its eComm strategy, rather than penalizing those who have one.

Daniel Silverman, Global Head of Business Consulting Services, Clavis Insight

Target has been a "not invented here" company for some time now (and this spat has germinated from that attitude) and you'd think they would have outgrown it for the sake of customers and their business.


If P&G is giving consideration to Amazon that they are not offering to anyone else, that would seem to be a violation of the Robinson-Patman Act.

In general, the Act prohibits sales that discriminate in price on the sale of goods. Price means net price and includes all compensation paid. The seller may not throw in additional goods or services.

It is interesting that in the '90s when the American Bookseller's Association sued the book publishers, Amazon flew under the radar.


Target's reaction is not surprising, but it is also not helpful. Target and others need to realize that this kind of execution that Amazon is aiming at is the new "table stake" in the market. While it is also natural to complain about what may be viewed as a competitive and unfair advantage, this is not just about Amazon or P&G. Rather, this kind of move is empowered by consumer expectation. While Amazon may be moving that meter, they are not alone.

Omnichannel is not easy, but mobile consumers expect rapid and accurate service across any and all buying and service channels. In the end, I expect Target to ask for help to match the service level. If they or other retailers do not then their value proposition to consumers will be under assault. When you play in general merchandise you need to meet the general expectations, which keep on rising.

Robert Heiblim, Principal, RH Associates

My initial reaction is that Target has some much bigger fish to fry -- I mean regaining their customers' trust and dollars after the ugly credit card breach.

Possible unavailability at Target of brands or certain products customers want because the parent companies are having a tiff seems like a pretty silly move to me.


Target is looking more like a victim of its own inferiority complex. In this dog-eat-dog competitive world of retail, only the strong, and more importantly the innovative, will likely survive. Many experts believe the lines will continue to blur between supplier and retailer -- get used to it.

Kim Souza, Editor, Talk Business @ Politics

I am not sure theirs was the most constructive response for the long term. P&G clearly saw a way to improve their business and made it available to a variety of retailers, and from what it seems, Target chose not to pursue this avenue. I understand that Amazon is probably one of the top 3 - if not the top - threat for Target in many categories, however, it sounds like Target could have accessed the same program.

In terms of how it would affect their relationship, it will depend on what Target decides to do. Target and P&G are clearly both major players, and I would think they would gain more from finding ways to ensure continued collaboration.

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Alexander Rink, CEO, 360pi

This is like one of those grainy 1950 movies where two dinosaurs are fighting. Suppliers lost power to retailers. Retailers have now lost power to shoppers, who are migrating to whoever meets their needs, and it is pretty obvious that e-commerce meets their needs.

They will get over it. But I bet P&G will still have Amazon in their warehouse. Whatever faults P&G may have (insert your own list here), they consistently bet on the future and ride the waves of real change - which is something Target has not learned to do nearly as well. Playing King Canute and demanding that the tide roll the other way is pointless.


Target is reacting to P&G's agreement with Amazon because it is another challenge to Target's sales at a time things are kind of bleak.

As for P&G's and Target's trade relations, this is just a lover's spat. They both need each other and they will bed together again. But Target needs to tone down it tantrums and compete with Amazon's aggressiveness.

These sorts of matters come and go in the Disneyland tactics of retailers and suppliers. They are designed to make the marketing scene a wee bit more exciting as this discussion proves.

Gene Hoffman, President/CEO, Corporate Strategies International

So, Target's solution to fighting its competition is to make it more inconvenient in their store for their customers to purchase the disputed products? Guess I'll now be getting my Tide elsewhere.


That sound you hear is the pendulum swinging back in the manufacturer's favor

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Joel Rubinson, President, Rubinson Partners, Inc.

We've seen "Minnesota nice," now we're seeing "Minnesota stupid." I hate to break it to them, but customers - or "guests" as Target annoyingly refers to them - go there to buy products that other companies make...minimize those products, and you'll minimize your sales.


I briefly covered this issue generally in a recent CatMan webinar on the Retail Multiverse. You can download the PDF here if you like. The basic idea is to create a multidimensional spread sheet with retailers, brands and shoppers constituting the 3 most important dimensions. Then, each intersecting cell describes the relation of those three parties.

It has been widely recognized, I believe, that retailers were reasonably passive toward the brands until after WW2 when both businesses really exploded. The large increase in brands, and the recognition that the shoppers "belonged" to the retailers, led to a continuing shift in power from the brands to the retailers. However, the drive to thin margins, explicitly, by many retailers, led to my exaggerated observation that, "The retailers have all the power, but the brands have all the money!"

But the times they are a changing, and retailers are LOSING their proprietary grip on shoppers in the stores. This is bringing a day of reckoning to their sometimes arrogant and domineering relation to the brands. Whether Amazon ultimately displaces Walmart, or not, at the top of the retail chain, retailers fail to recognize the wave of "creative destruction" (Schumpeter,) that we are well launched into. The Retail Multiverse is being shaken to its foundations! ;-)

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Herb Sorensen, Ph.D., Scientific Advisor Kantar Retail; Adjunct Ehrenberg-Bass, Shopper Scientist LLC

If Target turned down P&G's offer, than they have been open and transparent about their intentions. All brand marketers (and retailers) are going to be looking for creative initiatives to bring their goods and services to consumers in varied ways, so all partners need to at least be aware of what they agreeing or disagreeing to being involved in. Next move is Target's, really.

Donna Brockway, President, FutureRetail

Can you name ANYTHING Target has done well in the last three years? Target has a hugely inflated sense of their importance. P&G, on the other hand, knows who they are and where they are going. Target spurning P&G is akin to biting the hand that feeds you. P&G does more advertising than its 2 nearest competitors combined. AND Target has never provided any decent pricing on anything in the consumer products arena. I am sure others in the retail trade will encourage Target's developing attitude as it is surely pushing Target's customers to them.

Ed Dennis, Sales, Dennis Enterprises

A public cat fight seems like a waste of resources all around. At best it wastes time and resources that could be better used elsewhere, and at worst it makes Target appear shortsighted with respect to omnichannel -- as many of the commenters in this forum have already pointed out.

Since P&G offered this same opportunity to Target and other retailers, anyone who didn't take up P&G on the offer has only themselves to blame. It doesn't look like Amazon is getting favored treatment -- it's just that they're the ones taking up P&G on this strategically valuable opportunity.

In consulting with retailers over the past 15 years or so, I've seen so many companies miss significant opportunities because the fear of making a mistake also prevents them from making a brilliant innovation.

Trying lots of ideas is the best way to find a really good idea -- because only a small fraction of all your ideas turn out to be the really good ones. What that means is that you end up trying plenty of stinkers on the way to finding a great innovation.

I believe this is exactly why Amazon (and smaller, nimble, innovative startups) continue to best the traditional retailers. These fast-moving innovators are willing to take risks, try out "crazy" ideas, stumble, get up, and try it again until they nail it. This is where companies like Square have been able to transform POS and payments in a few short years while much better capitalized, much better equipped companies -- who should have been the ones to reinvent those industries -- have plodded along while Square swooped in and ate their lunch.

I'm not sure if these types of disputes are more common than they used to be, but I believe we'll see plenty more as brands race to meet consumer demand for retail transformation.

We can wish things wouldn't change, or we can accept that things are changing and get on board. Change is tough, but it sure beats irrelevance.

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Lance Thornswood, Sr Director, Omnichannel, JCPenney

Where to start? There are so many wonderful points that already have been made. Target management has become very reactive -- firing off knee jerk responses to threats (real or perceived) that typically make the retailer look like a whiny child.

P&G historically been a good partner to Target, helping it redesign aisles to boost not only P&G sales but the category as a whole. As the returns from PFresh conversions wane, Target needs to apply some of its merchandising mastery from the GM side of the business to consumables to create interest and drive much needed traffic. Having a strong trade relationship with a company like P&G, which prides itself on its consumer understanding, would be a valuable input.

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Kelly Tackett, Retail Analyst, Independent

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