May 3, 2012

In a dramatic move, Target takes a costly stand against Amazon and “showrooming”

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The New York Times headline says it all: “Target, Unhappy With Being an Amazon Showroom, Will Stop Selling Kindles.” The story beneath that headline, by Stephanie Clifford and Julie Bosman, reports that Target — with 1800 stores, “one of the bigger carriers of Kindles in the offline world” — was “signaling its growing irritation with its rival Amazon.”

According to Clifford and Bosman,

Like other big retailers, Target has been trying to figure out how to stop Amazon shoppers from visiting Target stores to check out products, and then buy them online from Amazon. It is a practice encouraged by Amazon; over the Christmas holiday, for example, the company offered a promotion on its Price Check app that gave shoppers 5 percent off any item scanned at a store.

Now that retailers like Target are aware of this so-called showrooming, carrying Amazon’s Kindle is a little “like Starbucks selling Dunkin’ Donuts gift certificates,” said Michael Norris, a senior analyst for Simba Information.

Target isn’t wasting any time in the effort, either. A report by Bryan Bishop on The Verge — which broke the story — says that “While several brick-and-mortar stores we contacted still had the devices in stock, a quick search through Target’s online store reveals that Amazon’s e-readers have already vanished, and the Kindle-branded online store comes up entirely empty.”

The Times reports that Target had warned Amazon back in January that it “wouldn’t sit back.” In a letter to Amazon and other vendors, the company said, “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.”

Target has been selling Kindles since 2010, when Amazon sought to counter Barnes & Noble‘s advantage in having its own brick-and-mortar outlets to showcase its Nooks, although Amazon is still believed to sell far more Kindles from its website. (The Times reports that “Amazon sold about a million Kindles a week over the holidays,” although it fails to note that the only source of this information is Amazon itself; although a publicly-traded company, Amazon has consistently refused to document actual sales figures for Kindles.) Staples, Best Buy and Wal-Mart also sell the Kindle.

Not everyone believes this was entirely about showrooming. One analyst tells the Times the move is “probably just a mild annoyance for Amazon unless other retailers follow suit.” A Wall Street Journal report observes that ”The decision is a bit curious given the Kindle has been a big seller for Target.” It speculates that there must be some other reason: “The move does come as Target plans to expand its offerings from Apple Inc.”

But the internal memo quoted by the Times, and the overall logic of the move despite the very real and very large loss of income, make it seem like a refreshingly simple stand for fair and healthy business practices — the kind of thing that seems to draw fire or ridicule (or Department of Justice lawsuits) in today’s world.

And make no mistake this is more than a “mild annoyance” to Amazon. No company that just announced a 35% drop in earnings can simply wave off the loss of 1800 retailers. Meanwhile opponents can take some satisfaction in the interesting suggestion made by the Times reporters that anger at Amazon’s price check app hasn’t dissipated, and six months later may still be motivating a wide range of retailers to fight back.

Which makes the notion that others may indeed follow suit not so far-fetched at all, but an equally simple, elegant and possible development.

 

Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives

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