Target and Amazon

Friday, November 29th, 2013

I’m not surprised that 62% of Target’s shoppers also visit Amazon, but I am surprised that more Target shoppers visit Wal-Mart. I thought there was an invisible cultural line between Target and Wal-Mart. If you shop at Target, you don’t shop at Wal-Mart — unless you’re that one weird Target shopper who also needs ammo.

Anyway, Target is trying to learn some of Amazon’s tricks:

Target’s Internet sales are puny—less than 2% of its $73 billion in total sales last year. By comparison, Amazon’s North America sales rose 30% last year to $35 billion, most of it in categories of goods that Target also sells. Meanwhile, traffic to Target’s stores, as evidenced by its overall transaction count, has fallen for three straight quarters.


In an effort to catch up, Target this year is spending about as much of its $2.3 billion U.S. capital budget on improving its technology, developing mobile apps and modernizing its supply chain as it is on opening and remodeling stores. Next year, the company will spend more on those investments than on stores, an acknowledgment that future growth will increasingly depend on digital sales.


Adding food helped Target get more everyday trips and better match what Wal-Mart stores offered, and the Red Card, which offers discounts, now accounts for more than 20% of purchases and is growing ahead of expectations. The Canada push had a rocky start with fewer repeat shoppers than expected, and Target now expects profits will take longer to come.

“It was a very aggressive agenda, and it has stretched us and tested us,” Mr. Steinhafel said.

Like other retailers that have confronted the Amazon threat, Target sees its physical stores as an asset that the strictly online retailer doesn’t have. For instance, Target is trying to boost sales of baby equipment by adding employees to aid customers, something Target has tested in Chicago and is rolling out to more markets. The company is also putting in so-called beauty concierges to push cosmetics, and it is expanding these to 300 stores by year’s end.

Both moves appear to be aimed at boosting sales for two profitable categories that have migrated to the web, Kantar Retail’s Leon Nicholas said.

Some of Target’s responses fall short of Amazon, which could make it hard to stem the loss of customers. Its subscription service only covers baby supplies, far fewer than Amazon’s Subscribe & Save, which also offers deeper discounts based on how many items are in a scheduled order. Target does plan to expand its subscriptions to offer limited selections of coffee, personal care products, paper towels and toilet paper by the end of the year.

Target also is letting its customers retrieve online orders at any one of its 1,800 U.S. stores starting this holiday season, much like Amazon’s package pickup program at lockers in 7-Eleven convenience stores. But having in-store pickups is something other brick-and-mortar retailers have been doing for years and some, like Wal-Mart and Home Depot Inc., have carved out space in their stores. Target has dedicated space for pickups in only a handful of locations.

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