After becoming the most vocal retailer against showrooming, Target recently dropped Amazon’s wildly popular Kindle eReaders and the Kindle Fire tablet, citing “conflict of interest” as the motivation behind its decision. While many in the industry were quick to point to Target’s growing relationship with Apple in explaining the bold move, I believe that the clearance of the Kindle line was a declaration that the retailer is not going to support it biggest competitor anymore.
Amazon and Target have had a long cooperative relationship. Amazon previously ran Target’s website, filling the site’s orders and providing customer support, and Target was the first chain to sell the Kindle line in the retail channel. However, Amazon.com is well on its way to becoming a go-to shopping destination for many American households, giving Target little reason to fund its competitor’s growth.
Background
As noted above, Target was the first chain to shelve Amazon’s Kindle eReaders when the e-commerce giant expanded the distribution of its Kindle devices to brick and mortar stores in April 2010. The chain was also among the first retailers to carry the Kindle Fire in November 2011. Amazon’s eReader placements at Target helped the company expose its devices to a new group of consumers many of whom may not shop online, prefer the immediacy of buying a big ticket item in person, or want an opportunity to test a product before buying.
When Target partnered with Amazon to sell Kindle devices at its retail stores, Target was likely hoping to increase in-store traffic and sales by carrying the popular devices. As much as Target is now trying to beat showrooming, the chain acted as a showroom for Amazon’s Kindle devices. Anyone who wanted to test a device in store before purchasing it, walked into Target, tested a Kindle, and could have easily ordered it from Amazon! This is true for all other retailers such as Best Buy who sell Kindle devices at their brick and mortar locations and are likely funding what could be their own future replacement.
Why Now?
Claims that Target decided to drop the Kindle line due to pressures from Apple are likely shortsighted as Target and Apple have been working together for a long time. Target has been selling Apple’s iPad line since its introduction in April 2010, and the two companies reached an agreement to open mini-Apple stores just recently, suggesting that Apple had a very small role to play in Target’s decision to cut its ties with Amazon. Additionally, Apple’s mini-stores are not unique to Target as chains like Best Buy and Sam’s Club, who continue to sell models from the Kindle line, feature Apple shops within their retail locations. It cannot be forgotten that Apple has also decimated Target and other retailers’ music sales, but these retailers continue to sell Apple products in-store, suggesting that the war between Target and Amazon is personal!
Amazon Promotes Showrooming
As mentioned above, by carrying Kindle devices, chains like Target acted as a showroom for Amazon’s products and even products from other brands that happen to sell at Target and can be purchased at Amazon.com. With the increasing proliferation of smartphones and tablets, it is now much easier for shoppers to do online research and find competitive prices for products, thus risking retailers’ role as a purchase destination versus a product evaluation and testing site.
Adding fuel to the showrooming fire, in December 2011 Amazon offered discounts to users who checked in-store prices using Amazon’s Price Check mobile app, but ultimately purchased the product from Amazon.com. This sent a major message to Target and other retailers that even though they were partners as far as the Kindle is concerned, Amazon’s long term strategy is to grow at the expense of its retail “partners.” Few could argue that Amazon’s bold move of directly attacking retailers brought the end of Amazon and Target’s relationship.
Target Launches a War Against Amazon
Target finally has had enough! Within a month of Amazon’s price check promotion, Target sent a letter to its vendors in January 2012 asking them to create special products that would shield it from price comparisons from online resellers. It is hard for users to compare exclusives against products available online and those placed at other stores, unless you have access to gap intelligence’s data! By May 2012, Target also became the first retailer to drop the Kindle line from both its retail and ecommerce store fronts.
With these events it is clear that Target is finally taking a stand against Amazon and its increasing dominance as a one stop shopping location. While all other chains continue to work with their greatest threat, Target has decided that it will not act as its competitor’s retail partner, promote showrooming, and partially fund its competitor’s growth. It remains to be seen if other retailers will show the resolve that Target has demonstrated or remain a mute spectator and leave without a fight. And even if they do, will deciding not to sell the Kindle brand sufficiently slow Amazon’s growth? After all, if Kindle devices are only available at Amazon.com, shoppers will have no choice, but to make their purchase online.
