Multichannel
Target Seeks a Better Deal, Taking Aim at Online Retail
- 25th January
- Campbell Phillips 154
Target blames online retailers, as well as mobile devices, for lagging sales. The solution? Demand a better price from suppliers.
In the US, retail giant Target Corp. is angling to renegotiate their agreements with suppliers in order to remain competitive against online-only retailers. The retail chain sent a letter to some vendors stating Target’s concern that its stores are becoming showrooms for Internet retailers who can sell the same products more cheaply.
“We understand and appreciate consumers’ desire to find the best price, and we are absolutely committed to delivering the differentiated, high-quality merchandise Target is known for at low prices,” wrote President and CEO Gregg Steinhafel and Vice-president of Merchandising, Kathee Tesija in the letter.
“What we aren’t willing to do is let online-only retailers use our bricks-and-mortar stores as a showroom for their products and undercut our prices.”
Target has also indicated the possibility of introducing membership- or subscription-based shopping models to further compete with online stores that have similar programs.
The increasing use of technology by consumers is cited as one of the reasons Target was asking for pricing and product improvements, stating that customers “want complete transparency on price, and are using technology to find the best deals regardless of retailers or channel.”
These concerns are justified. As smartphone and tablet sales continue to grow, more and more people turn to the Internet to ensure they are getting the best deal. Apps like Amazon’s Price Check make it even easier for users to quickly compare prices online.
Target’s plea to renegotiate with its suppliers is a case of passing the buck. If Target’s vendors can’t absorb the loss, they will have to ask for reduced prices from manufacturers in turn. In the end, everyone loses.
On the other hand, if Target did introduce novel purchasing schemes and continued to innovate in other ways, customers would continue to spend on products in-store.
Do you think Target is taking the easy way out?
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If Target have still got the buying power, they should be able to protect their position with many suppliers. But if they leave it too late and an online retailer gains the upper hand in the buying power stakes then it’s all over. Target will have to move quickly and decisively. On the other hand some retail imagination and creativity might be a more effective way of prising open the wallets of the shoppers who’ve bothered to enter their stores.