Target sends sharp message to P&G over Amazon deal

Discussion
Feb 27, 2014

It’s not unusual for retailers and consumer brand suppliers to have disagreements. What’s unusual is when news of these temporary rifts becomes public knowledge. Back in 2009, for example, there were reports that Costco took the extreme step of delisting Coca-Cola beverages over a pricing dispute.

Now comes a Wall Street Journal report that Target is taking issue with Procter & Gamble’s agreement to allow Amazon.com to set up shop inside its warehouses to speed online orders to customers. P&G made a similar offer to Target and other retailers, but some turned it down because e-commerce remains a relatively small part of their overall business.

According to the Journal, Target has made other companies category captains in place of P&G and reduced display support for the consumer product giant’s brands.

Target and Amazon have a history. Prior to the 2011 holiday season, Amazon ran website operations for Target.com. The transition did not go as smoothly as planned. In 2012, Target made the decision to no longer sell Amazon’s Kindle e-readers and tablets in its stores.

What do you think of Target’s reaction to Procter & Gamble’s agreement with Amazon.com? What do you expect it will do to the trade relationship between Target and P&G? Are these types of dispute more or less common today than in years past?

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34 Comments on "Target sends sharp message to P&G over Amazon deal"


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Bill Davis
Guest
8 years 8 months ago

From my perspective, Target needs to start thinking more creatively around omnichannel retailing.

Amazon helped get them into the eCommerce arena and once Target figured out that Amazon was leveraging their role to strengthen their market position, they shouldn’t have been surprised by that. And if P&G did make the same or similar offer to Target as with Amazon, then Target only has itself to blame for not capitalizing on this or suggesting an alternative.

Target was late in figuring out the Amazon threat. They should stop being “angry” and focus on competing as they know Amazon’s tactics just about better than any other retailer.

Peter J. Charness
Guest
8 years 8 months ago
It’s always a slippery slope for a manufacturer to take steps that can be construed as competing with their customers. It’s “okay” for a manufacturer to have an outlet store as a clearance vehicle. It’s fairly okay for the manufacturer to open a few flagship stores as “brand statements” as long as they employ no special pricing or promotions to entice customers away from the retailers (think Nike store, or Apple Store). Any retailer can set up an arrangement with a willing supplier to support rapid replenishment by keeping consignment product in the retailer’s warehouse – a smart move to insure no/low stock-outs by store. Basically this is what P&G is doing with their retail customer Amazon. So P&G is not competing directly for the customer business with Target, they are just enabling one of their retail customers to be more efficient in meeting customer demand. Technically it’s a legit move by P&G as a vendor-supported inventory logistics technique. However it makes a competitor more efficient. I’m not sure how Target calls this unfair. I… Read more »
Tom Redd
Guest
8 years 8 months ago

Retail is like WAR. Fight for a limited resource or for domination. In the old, old days of retail, it was worse. This is a simple turf war. In the old days it was worse. Cash register salesman of old used to smash up storekeepers places if they did not buy a new cash register from them.

Today, retail is a polite fight and the weapons are technology and relationship based – or a mix of both. With P&G and Target, the relationship is the choice of battle tools and may the side that is most for the sake of the shopper win.

Watching my flank side…Tom….

Lee Peterson
Guest
8 years 8 months ago

Right on Target! When I first heard about the Amazon/P&G relationship, I couldn’t help but think that if I were Walmart or Target or Kroger, I’d go NUTS! Wait, you have my #1 competitor IN YOUR WAREHOUSE??? That’s wrong! Sure is a statement though, as to whom P&G is betting on.

It will be interesting to see how all this plays out as Amazon makes one smart move (successfully!) after another and boxes out physical retailers. Sooner or later, as in this case, they’re going to wake up and the bricks are going to hit the fan!

Paula Rosenblum
Guest
8 years 8 months ago
What interests me most about this story isn’t the past or the future, it’s Target’s reaction to this and other threats recently and today. I can’t remember if it was 2012 or 2013 when Target wrote a letter to its suppliers demanding that they help the company combat showrooming. More recently, when it released its 2013 Q4 sales and earnings, even though the company hit its targets (sorry…can’t help the pun) it still blamed its data breach for weak second half of December sales. Do you think it might’ve had more to do with “shooting the wad” over Black Friday weekend? And speaking of the data breach, it remains unclear why the company did not immediately notify consumers. Maybe there was some agreement with law enforcement, but it still was strange. In other words, a company that originated cheap chic and helped redefine what was cool, seems to be getting a bit…troubled. I’m very surprised. Target stores used to be a really great place to shop, and even the fashion editor from the Palm Beach… Read more »
Gib Bassett
Guest
8 years 8 months ago
CPG sales channel complexity is increasing so it’s really important to try to figure out if new channels like Amazon will compete with traditional retail partners or be incremental. The reality is probably somewhere in between, but factors like pricing, packaging size/format and delivery timeliness plus others are probably the key determinants of what this means to Target. I’ve seen Deloitte research into this from the supplier/manu side, and P&G is probably the exception to their research which suggested CPG execs were making half-hearted attempts at sales through direct or third party pure play online channels like Amazon (for fear of losing key retail partners, shelf space and obviously sales). Their research also suggested there is a fairly sizable segment of “indifferent consumers” who don’t particular care for or have interest in the in-store shopping experience. It is these consumers who represent possible incremental sales opportunities via online sales channels. When you can keep shipping prices low and delivery times quick, and price is competitive if not lower, there’s a real incremental sales opportunity. So… Read more »
Max Goldberg
Guest
8 years 8 months ago

If Amazon offered the same arrangement to Target, and Target turned it down, than Target has nothing to complain about. Target and P&G need each other. This spat will blow over.

Retailers are looking for any edge with consumers. They expect brands to help them gain that edge, and for the most part brands are willing to help.

Target has had problems with e-commerce since they broke away from Amazon. Rather than punish Amazon, who runs circles around Target in cyberspace, Target should learn from Amazon and improve its online efforts.

Adrian Weidmann
Guest
8 years 8 months ago

P&G remains the largest advertiser, merchandiser and promotions on the block and Target couldn’t make a collaboration that should be a win for consumers, Target and P&G?! Why? Because Target’s e-commerce “remains a small part of their business.” This is the proverbial ostrich burying its head in the sand. Does Target believe it is immune to the online world? Target is a great retailer and should embrace logistics and opportunity to learn and react to shoppers! I’d back P&G in this exchange long before siding with Target.

Oh, and by the way, that other Minneapolis based retailer? The Star Tribune reported this morning that Best Buy was letting go of 2,000 folks because of “less than expected holiday sales.” If it wasn’t for a number of major brands supporting and using Best Buy as their retail showroom and channel, Best Buy would cease to exist. Wake up.

Ron Margulis
Guest
8 years 8 months ago
I clearly remember the battles between Wakefern and P&G when I was growing up, as they were frequently a topic of conversation at our dinner table. Because my dad was a Wakefern retailer, my impression was always that P&G was trying to screw us over with their heavy-handed tactics. Put in this merchandise set or don’t get roto dollars. Carry the full line of paper products or we won’t support your other promotions. Etc. It wasn’t until I was a journalist that I came to understand there are two sides to the story and that P&G had logical reasons for doing what it was doing. This enlightenment came mostly through a series of conversations I had with Ralph Drayer, who was then head of supply chain for P&G. Ralph explained to me the efficiency and sales lift P&G was trying to drive through Wakefern (and other retailers) with their marketing approach. While he never convinced me Wakefern was in the wrong with its pushback, he did make me understand they weren’t as clearly in the… Read more »
Richard J. George, Ph.D.
Guest
8 years 8 months ago

This reaction is similar to Target’s banning of the Beyonce album for releasing via iTunes. Incidentally, so did Amazon. While the logic in the Beyonce case is that Amazon and Target want to show that they’re willing to shoot themselves in the foot to do minor damage to Beyonce in order to dissuade other artists from signing even time-limited exclusives with Apple, the same will not hold true for the major CPG manufacturers.

I see no advantage for Target. First, the company is leaving money on the table. Second, P&G loyalists will tend to migrate to retailers that feature and promote P&G products.

Unfortunately, these conflicts will increase until the traditional retailers realize that retail is now technology. Instead of these trade wars, traditional retailers need to provide consumers with real omnichannel opportunities.

Ed Dunn
Guest
8 years 8 months ago

The reality is, there are young hot shots working at consumer product brands looking to disrupt the supply chain to win some points and get a mention in the industry publications. And they are willing to sell Amazon and direct to consumer without looking at the overall impact.

Retailers like Target have to be aggressive to protect their current position but at the same time, the community needs to be educated that they lose local jobs when they decide to buy consumer products from an out-of-state warehouse versus the big-box store that employs local people and gives donations to local schools and causes.

Tony Orlando
Guest
8 years 8 months ago

Target can cry in their beer all they want as we, the independents, have been getting hosed for years. The biggest of the biggest is P&G, and they want to marry up with the big movers. It doesn’t matter what the past is, because at one time, supermarkets were the place to get all of your P&G supplies. Not any more, and now Target is upset, and there isn’t one thing they can do about it.

Amazon has the attention of P&G, and will move forward with pushing tons of their product, as the competition loses ground.

This is just another evolution of retail and we as retailers need to focus on working with companies who need our business.

Ed Rosenbaum
Guest
8 years 8 months ago

Target vs. Amazon. Target vs. P&G. What is the common denominator here? One gets their feathers ruffled for something they started and takes it out on the other. Maybe the focus should be the data breach…who’s going to be the big loser here? Hmmm….

Gene Detroyer
Guest
8 years 8 months ago

What do I think of Target’s reaction to Procter & Gamble’s agreement with Amazon.com? How about stupid, naive, close-minded, trying to save the past and ignoring the future…shall I go on?

It amazes me that this type of thinking remains so prevalent in the retail management mindset. In ten years, brick and mortar stores as we know them will be rare.

I am teaching a capstone course on Leadership and Corporate Sustainability (meaning survival, not environmental). Business history provides a multitude of examples of great companies that refused to see the future. If there is one category that presents the best examples is retail (read: Sears, Woolworth, Kmart, etc…).

Carol Spieckerman
Guest
Carol Spieckerman
8 years 8 months ago

Target’s myopic brand-centricity is out of step with new retail realities, in this case, the acceleration of platform partnerships. Target, a retailer that has taken like-for-like, private brand/national brand packaging and shelf comparisons to new heights (and is now backing them up in circulars)? Why the war on brand partners, particularly at a time when it has baskets of bigger fish to fry (Canada, the breach wake, plunging profits…)? It’s time to tone down the tantrums.

J. Peter Deeb
Guest
8 years 8 months ago

This is a war between 2 giants who may win a battle but lose a war! Both should be finding ways to maximize their consumer interface instead of trying to take them away. The consumers will ultimately decide where and how they buy their favorite brands and all entities should be working to have maximum assortment and convenience for those purchase occasions in their facilities.

PJ Walker
Guest
8 years 8 months ago

It’s time for Target and other traditional retailers to wake up and embrace digital. Accept the fact that eCommerce is here to stay and if you, as a retailer, continue to refuse to realign your organization to operate in an omnichannel fashion, then prepare to lose wallet share – period.

Daniel Silverman
Guest
8 years 8 months ago

There is a long standing business practice for manufacturers to customize solutions to retailers to improve retailers’ bottom lines. Walmart: PDQs and pallets. Club: club packs. Target: end-cap blocks. Drug/Grocery fixturing and displays. And on and on. Why is this any different? Target would no more benefit from setting up shop in a P&G warehouse than Amazon would benefit from taking in displays or pallets. The fact that amazon and P&G are partnering should come as a surprise to no one. So to be upset about it is a bit petty. Target would be better served to focus its energy on fixing its eComm strategy, rather than penalizing those who have one.

Ken Karnes
Guest
Ken Karnes
8 years 8 months ago

Target has been a “not invented here” company for some time now (and this spat has germinated from that attitude) and you’d think they would have outgrown it for the sake of customers and their business.

Eliott Olson
Guest
Eliott Olson
8 years 8 months ago

If P&G is giving consideration to Amazon that they are not offering to anyone else, that would seem to be a violation of the Robinson-Patman Act.

In general, the Act prohibits sales that discriminate in price on the sale of goods. Price means net price and includes all compensation paid. The seller may not throw in additional goods or services.

It is interesting that in the ’90s when the American Bookseller’s Association sued the book publishers, Amazon flew under the radar.

Robert Heiblim
Guest
Robert Heiblim
8 years 8 months ago

Target’s reaction is not surprising, but it is also not helpful. Target and others need to realize that this kind of execution that Amazon is aiming at is the new “table stake” in the market. While it is also natural to complain about what may be viewed as a competitive and unfair advantage, this is not just about Amazon or P&G. Rather, this kind of move is empowered by consumer expectation. While Amazon may be moving that meter, they are not alone.

Omnichannel is not easy, but mobile consumers expect rapid and accurate service across any and all buying and service channels. In the end, I expect Target to ask for help to match the service level. If they or other retailers do not then their value proposition to consumers will be under assault. When you play in general merchandise you need to meet the general expectations, which keep on rising.

Li McClelland
Guest
Li McClelland
8 years 8 months ago

My initial reaction is that Target has some much bigger fish to fry — I mean regaining their customers’ trust and dollars after the ugly credit card breach.

Possible unavailability at Target of brands or certain products customers want because the parent companies are having a tiff seems like a pretty silly move to me.

Kim Souza
Guest
Kim Souza
8 years 8 months ago

Target is looking more like a victim of its own inferiority complex. In this dog-eat-dog competitive world of retail, only the strong, and more importantly the innovative, will likely survive. Many experts believe the lines will continue to blur between supplier and retailer — get used to it.