Target’s Tactics Called Heavy Handed
By George Anderson
Suppliers to Target say the retailer, which has traditionally been known for partnering with manufacturers, is now using reverse auctions and strong arm negotiating tactics to do business, reports AdAge.com.
Suppliers, who refused to be identified fearing a backlash from the Minneapolis-based chain, say the retailer has become more like Wal-Mart in its business dealings while Lee Scott and company have become more like Target.
“Target was once easier to work with than Wal-Mart. They were more into developing a business plan. You did it with them. Wal-Mart was more into dictating what they wanted,” said a VP-sales for a major consumer products company. “That’s changing now and Wal-Mart is more approachable than Target.”
Others said Target’s distribution system does not allow for their companies to reduce costs in such a way that price concessions can be justified.
For example, the unnamed VP-sales said that he can combine an order on a truck with other suppliers if none has enough for a full load. The Target system would require each of the individual suppliers to ship product separately.
Others have expressed concern that Target’s increased reliance on reverse auctions means that price is the prime criteria in the chain’s purchasing decisions, when other factors, such as a brand’s equity with consumers, is removed from the equation.
Target, reports AdAge.com, maintains reverse auctions put “vendors on equal footing so that the vendors who deserve the business get the business.”
A chief marketing officer for a well-known consumer brand said there is reason for concern based on Target’s current direction. The company, he said, “has a proven ability to make good house brands they speak to a higher, more attractive demographic. If they come out with great-looking stuff, customers are loyal to shopping in their stores, not to shopping for certain brands. If you are a premium brand, why would you not be scared by that?”
Moderator’s Comment: If true, do you see the change in how Target deals with its suppliers as a positive or negative for its business as it continues
to grow? How do you see reverse auctions impacting retailer/supplier relationships and the products that find there way to store shelves and racks? –
George Anderson – Moderator