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Jeff Chiu / AP
Customers shop at a Target Store in Colma, Calif.
In an effort to prevent consumers from taking a look at merchandise in-store, but using smartphone apps to shop for cheaper prices online, low-end retail chain Target is scaling up its business model by asking vendors to create Target-exclusive products.
The problem, experts say, is that there isn’t much Target and other big-box retailers can do to quash competition from online giants like Amazon.com and Overstock.com. The practice of so-called "showrooming," when shoppers hit the brick-and-mortar venues to determine whether they like an item, but then buy it for cheaper on Amazon.com, is here to stay, these experts note.
“The bottom line is that the more commoditized the product is, the more people are going to look for the cheapest price,” said Morningstar analyst Michael Keara. “If there’s a significant price difference [among retailers] and you’re using it on a regular basis, you’re going to go to Amazon.”
Consumers turned to online shopping in droves this year, spending a whopping $37.2 billion during November and December of 2011 alone, representing a 15 percent increase in spending over the same time period in 2010, according to digital research company comScore.
And while many retailers, from J.Crew to Barnes & Noble, offered free shipping and steep discounts on merchandise in the days leading up to Christmas, smaller brick-and-mortar retailers cried foul when Amazon.com rolled out its Price Check App last December.
Amazon offered customers an additional 5 percent discount on products they purchased using the app, which would essentially strangle brick-and-mortar stores by encouraging shoppers to seek products there, but buy them online.
Indeed, Target sent an “urgent” letter to vendors last week, asking them to “create special products that would set it apart from competitors,” according to The Wall Street Journal. Citigroup’s Deborah Weinswig told the Associated Press that Target’s letter insisted that it would not “let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands.”
Target would not comment on the letter, but did say that the company “has long prided itself on having truly collaborative vendor partnerships and we continually work with our vendors to remain competitive in the ever-evolving retail environment,” according to an e-mailed statement from Target spokesperson Molly Snyder.
Other big-box retailers -- such as Wal-Mart, Best Buy and Sears -- did not immediately respond to requests for comment. Amazon did not respond to a call for comment.
Target also recently announced that it would partner with a number of boutique chains -- such as The Candy Store and Cos Bar -- to carry specially designed Target wares, and it has long teamed up with high-end designers to create special budget lines for its stores to increase demand.
Analysts say that other big-box retailers will likely try to follow Target’s example of creating exclusive products and shopper loyalty programs, such as Target’s RedCard, which offers cardholders free shipping for online purchases and a 5 percent discount on select products.
“The trend toward more exclusives has been growing anyway, and showrooming is just another accelerant,” wrote Sean McGowan, a senior analyst at Needham & Company, in an e-mail message.
And whether Target likes it or not, when it comes to higher-end products and national brands, consumers aren’t loyal. The advent of online shopping just exacerbates that.
“This company is under extreme pressure to keep their margins down,” said Morningstar's Keara. “They really need you to come into the store and buy things that are a little higher margin.”
But that’s where Amazon goes in for the kill, because today’s cash-strapped consumer just wants a lower price.
“I think we’re slowly, gradually coming to this realization that consumers aren’t going to spend what they did in the last 10 to 15 years,” he said.
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We had a small gift and home decor business in the Lake Tahoe area of California. We certainly underestimated the effects of online retailing. It would get really irritating when you would have customers "Phishing" for the names of companies so that they could go and find the item online." Fortunately, we had many good years before the economy completely soured and online buying became the new norm. You really do not want a bricks and mortar small business anymore....it's a recipe for failure.
Actually, you need a mixed model. Many companies won't let purely online retailers sell their merchandise, so having a small store allows you to represent great brands; however, the online business allows retailers to expand their base and and increase their sales.
Check out http://anglershabitat.com out of little Caldwell, Idaho. They only do 1/4 of their business in their store; the rest of their business is online through eBay, their online webstore and a dozen other ecommerce sites.
And the advantage of a mixed model approach is that you can provide better service than pure online companies, giving more value and a reason for people to shop with you.
One way brick and mortar stores can compete is by providing an up to date website that allows you to note what items are in stock and where. I use Milo.com often to see if items are in stock near my house. A couple of weeks ago I wanted a humidifier because I was sick and I wanted one immediately to alleviate my sore throat. I went on Milo and found that one of my local Best Buy had it. I went and picked it up.
Online shopping is great, but offline stores have the advantage in that there is no waiting. For example say my tv remote breaks and I want to get a new universal remote. I look online and see a fancy one that I really like. I could order it online and wait a couple of days for it to get here, but I want it NOW. I should be able to go to Target's website and see if they have it so I can go and just pick it up.
Walmart and Best Buy both have those types of websites. Target's website is horrible and they lump the online only items with the in-store items and don't give you a way to separate them. Kohl's, Sears and JCPenney's website is even worse. I don't think these companies realize what a helpful feature that is.
Target has long teamed up WITH Amazon for selling items online. The problem is that Target has some of the HIGHEST shipping charges and SLOWEST ship times of any retailer with a presence online.
Many people (myself included) who have health issues need to shop online because they can't physically get out to stores on a regular basis. I prefer to go to Target over Wal-Mart when it comes to in-person visits ... but for online shopping Amazon trumps them BOTH with the Amazon Prime offerings (which Target doesn't participate in). Why spend literally $15 - 20 for shipping in A WEEK buying online from Target when I can get the same thing from Amazon with ZERO shipping charges for TWO-DAY shipping? Next-day with Amazon Prime is $3.99 per item.
Target dumped Amazon some time ago.
Target severed its relationship with Amazon late in 2011 and is trying to go it alone. Many analysts blasted the timing--just before the peak holiday season. During that time, Target began managing its own website (Amazon had done it for them in the past) and they encountered serious problems in doing so. Target's CEO has a long successful history with the company but has made several questionable moves since assuming the position in May 2008. Like all retailers, Target has had its ups and downs. They've always managed to bounce back strongly in the past. It will be interesting to see what happens with this and other recent business moves.
Showrooming was one of the major reasons the store i used to work for shut all the area locations down and left the market. about 50% of the people going into the home entertainment section were just there to look at tv's or home theater systems before purchasing them online. i know this is a fact because after getting done answering a customers questions about the product they would leave saying stuff like " im just gonna buy it on amazon, its $xxx dollars cheaper.
i doubt that having exclusive models in the stores will help stop this, as customers these days have no loyalty to anyone other than themselves and just want the lowest price possible.
Who is going to buy a model exclusive to the store? Before I purchase anything, be it a new television or be it a new pack of socks, I want to read reviews of what other consumers think. If it is a model that is exclusive to the store then there aren't going to be any reviews.
Either compete on price and service or get out of the business. Yes, people will pay 5% more than Amazon for good service. No, they won't pay 20% more.
*sigh*
How many battles (and jobs) have to be lost before people get it that you CAN'T fight the Internet? The gas, time, and hassle of the store is nothing compared to the comfort of your own home and the almost Christmas like feeling of opening a box to receive the item you ordered.
Clearly people (including myself) don't want to do ALL of their shopping on the internet. People do have a need to see, touch, and feel certain types of products in person. There can be vast, profound differences when doing so.
Personally, if the price is within 5-10%, I will buy the product at a local brick and mortar if I'm already there. I believe that they provided me that price difference in terms of the value of me being able to walk in and see the item in person. Many people don't think this way though.
It's our new reality, whether we like it or not. We wanted a new entertainment system. Our nephew told us exactly what to order on line, no shipping, no tax. It all arrived in a couple of days in perfect condition. He came over and installed everything, got it running and trained my husband and I how to use all the components. Not likely we could ever afford the wonderful system we have without internet prices and his expert help.
Like cops?
Like teachers?
Like free public roads?
Well, that "no sales tax" is part of why cops, teachers, and firemen around the country are being laid off. In CA, you are still required to pay the sales tax when you file your state tax return. Maybe one day, that law will be enforced.
Amazon = end of local businesses that aren't restaurants or salons.
Most other states pay for teachers and cops though property tax and roads mostly via gas tax. Because CA rigged their property tax to place a very low cap on it they are much more dependent than other states on sales tax.
The government is about to put a stop to the sales tax loophole. Online venders are going to be requred to collect and pay applicable state sales taxes. Expect this to happen in short order. State revnue streams have taken a beating since 2006 and with the impact it has on providing vital services the federal commerce agencies must regulate the collection and payment of state revenues through online vending.
The answer is to *eliminate* the sales tax and move to property and income tax alone, not to try to force internet retailers into some tax scheme that their customer's don't want to be a part of.
I will freely admit to buying things like TV's online, mostly because it gets shipped to my house for free, rather than me having to pay $50 or whatever to get the store to truck it over, all while the sales clerk is giving me terrible advice and constantly trying to upsell me into other products. However, for smaller items... I recently bought 2 pairs of specialty shoes in a store, running me $200. I probably could've saved about $50 buying them off of Amazon, but the sales lady was so amazingly helpful, bending over backwards to help us and give advice and help us trying them on etc all without ever trying to get us to buy one red cent more of merchandise than what I asked for, that I felt good about giving extra money to the store and bought them there without a blink. I enjoy the fact that I helped pay her paycheck, as she deserves twice what they pay her. The take-away? In regards to "show-rooming," when I feel like a store is giving me poor service compared to an internet website where I can't even ask questions, then I will go online. If I get better service in the store, I will simply buy it while I'm standing there.
Target deserves what it gets. They were the last to price match other brick a morter stores so before online became a problem, they were losing sales to other brick and mortor stores. They wouldn't even pricematch their own online prices and wondered why folks went somewhere else.
Target, Walmart etc put the small mom and pop shops out of business, now mom and pop have servers and guess what. My heart bleeds...
Is your mom hot?
Just level the damn playing field and make Amazon pay sales tax.... watch how fast people go back to Target.... When I buy something on Amazon it's already 6% cheaper because of the sales tax... and there is absolutely no reason Amazon should not pay sales tax...
Yes there is a reason why some companies don't pay sales tax .. they don't have a brick and mortar store in that state ... that's the law .. its always been that way .. This is just an attempt at a money grab by greedy states looking for another income source.
How about Delaware ... they don't even have a sales tax ...
Are you trying to talk the government into an online sales tax?
Hurry up, short bus is here.
Actually the law is relatively recent based on the Supreme Court decision on "nexus"... you might want to look that one up (that's your bricks and mortar)... but remember that one was way before the internet became big time. So as Amazon continues to sell tons of stuff on line and pays no sales taxes... and local stores close up such as Target... you can all move to the 12 states that have Amazon automated warehouses paying people $10.00 per hour to ship stuff out... and lose jobs within your own state.... and also the revenue that goes to your state. For all you uneducated please remember that the sales tax idea is born of the GOP as a "consumption tax"... you don't consume.. you don't pay.... states have use taxes (when's the last time any of you ever paid that one... for buying something out of state and bringing it into the state... yes.... and there should be an online sales tax.... for whatever the local sales tax is.....
Kevin, level the playing field? Really? Create a tax just to protect an unprofitable business model. Taxes are not supposed to be tools to be used by lobbyists and private companies to punitively punish other innovative businesses. You are supposed to pay sales tax on your online purchases to your own state tax commission when you purchase something online out of state. If you dont pay it, then you are breaking the law. Do most people know this, no, they dont. Do most states enforce this? No, they dont. Some states have sales tax, and some dont. In states, the sales tax is different in one county from the next. In those counties, different cities have different sales tax rates. As an eBay Powerseller, I can tell you that it would burden (destroy) smaller sellers to have to collect sales tax from everyone that buys something from my store on eBay. The proper role of Government is not to tax businesses to "level the playing field".
Those that say online companies should collect sales tax need to get themselves a tax id and just try it themselves. Just because a sales tax is say 7% does not mean you can just collect 7% and be done with it. This is actually a state sales tax and a bunch of local ones that you must know all the sub codes for. It is crazy since sometime the lines cut though people property so you would get a different code if you deliver to the back door rather than the front. If they insist on this then then stores like target should also have to deal with this. They should have to collect based on where the customer lives rather than where their store is.
Hey, Terry, it is not about protecting an "unsuccessful business model." It is about collecting the revenue due to the state where the purchaser resides. Most states rely heavily on consumption taxes to fund their state/local governments. Allowing online retailers to skirt these taxes is artificially deflating those revenue streams. Bottom line, online retailers must be required to collect and pay applicable local jurisdiction taxes. Period. Absence of sales taxes shuld not be used to support an otherwise unsuccessful business model. The collection and payment of taxes is fundamental to the soundess and success of local governments and econonmies.
The way to level the playing field is to eliminate all sales tax (like Oregon, Montana, Alaska, and other states). Government can survive on property and income tax alone.
If you want to tip the playing field in favor of the local retailer than give them a tax credit based on total sales. For every $100 in sales have the government reward them with $2-$3 in credits.
Pulling internet retailers into an antiquated sales-tax scheme is like trying to ban the sun to protect candle makers.
[as customers these days have no loyalty to anyone other than themselves and just want the lowest price possible.]
Well, DUH! The majority of stuff for sale probably all comes from the same sweatshop in China. Why pay 15% more for cookie cutter Chinese crap when you can get the same thing on Amazon for 1) less munch, 2) tax free & 3) free 2-day shipping?
When retailers step up an produce quality, unique and long lasting items, loyalty will return.
We just had a Target store open in our town last fall. Never been in one before, so figured I would check it out. I would take a good estimation that 90% of everything I looked at said "Made in China" very plainly on the tag, even home furnishings that were made to look as American as apple pie.
After five minutes walked out empty handed and will probably never go back. Give me American made!!
Joe, what is made in the US?
Cannondale bikes? Attack helicopters? Laser guided missiles?
People really don't buy things made in the US because the price of labor is higher so therefore the price is higher. They would rather have a lower quality and a lower price. And just because it's made in the US doesn't mean it's quality, either, as we've lost our manufacturing skillset.
I give it until 2020. That's about when the Chinese cost of labor will be prohibitive and cause manufacturers to return to the states in earnest, according to economists.
With Amazon it isn't just the free sales tax .. its the shipping to your door ... it's the ease of finding what you want and not having to drive all over creation to find it .. it's the comfort of shopping from your home and easy price comparison ... Walmart sells a lot of stuff online .. I would rather shop online than walk a 1/4 mile to the back of the store and another 1/4 miles picking out products before waiting in a long checkout line and hauling my purchase to my car that I had to park 1/4 mile away . So heck yes online shopping is better ... online you don't have to put up with some old lady in the 10 items or less lane with 43 items who's wanting to write a check on top of that ... and oh wait .. she has some coupons for that cat food somewhere in her pocket book ...
Would be funny to see amazon beat the beast (walmart). Problem these stores have is something that companies like Lowes an Home depot already have, experts (not all). Ever try to buy an electronic device at one of these stores? im sure grandpa who is a retired state employee with a hip problem is going to tell me all the info I need about an Ipad vs Galaxy tab, do these fools even know what 1080p is? where are the experts? oh i forgot they are making real money somewhere else.
I'm an older retired guy and I just got my first smart-phone before Christmas, 7 weeks ago. I also downloaded the Amazon.com app for my new iPhone and also an app for scanning bar codes. I gotta be honest that I am one of the people who now goes to the bookstore, hardware store, and electronics store and look at the products, scan the bar code, check the online prices, then only buy at the bricks and mortar store if their prices are very close to the online prices; but the online prices are almost always much cheaper. So far, in just a few weeks, I've almost paid for the new unlocked $600 iPhone with savings from buying stuff online. Just one book order from Amazon saved me $50 and those savings add up fast. The savings might slow down now that the Christmas season is over, but it's how I shop now. Not bad for an older retired guy who is technically challenged. Oh yea, I bought the unlocked iPhone online too, directly from Apple.
Well, what the anti-union, anti-decent-wage, TeaPublicans haven't realized is that when you move jobs overseas and put a lot more Americans on unemployment or squeeze them until they haven't enough money for anything but bare necessities, they are going to economize every way they can find to save money.
And those who might have money to spend aren't going to spend it to buy gas to drive to a store where they get rude and crappy service, limited selection and poor quality. And they are NOT going to have loyalty to a brand if it's not American-made because one Asian-sounding company name is interchangeable with any other.
Manufacturing jobs are being moved overseas to places where the employees are required to live in dormitories so they are available to be awakened at a moment's notice and worked in 12-hour shifts; and the impoverished people over there don't complain because they need their subsistence-level wages to survive. Companies then use their ability to utilize this near-slave labor to scold American workers, union or not, for expecting a better wage, better job safety and better benefits than drones in second-and third-world countries take.
There was a day when American corporations paid good wages, which meant their workers had enough disposable income to buy cars, houses, televisions, radios, clothes, vacations, jewelry - good quality items that were made here, so when the workers bought them the purchase fed back into the AMERICAN economy and sustained workers in other American companies that then had the money to buy goods from other American companies.
The essential principle is illustrated in the old lessons of wise management of working farm animals in the day before motorized plowing. Whether a farmer used horses or oxen or mules to pull their plow, the wise ones knew that you had to properly feed and care for that animal in order to get keep them strong and healthy contributors to their necessary farm work. A farmer who reduced their working animals' feed could get away with it for a while, but over time it extracted a toll on the quality of the animals' performance in the field, the vigor and length of time the animal could work without collapse. And if you increase the amount of work you expect from the animal without balancing that with better quality and amounts of feed, they will run down faster, too. Human workers, like 19th-century working farm animals, are an investment and the wise employer takes the long view of sustaining them well FOR HIS OWN BENEFIT.
The principle still holds true for employees of today, but for too many corporations the long view has been forgotten about or lost in the blind lust for the immediate gratification of maximum profit, regardless of the long-term damage. For decades they've paid workers less, even if only by not keeping wages up with inflation, yet they've expected workers with less disposable income to continue to purchase discretionary goods at the same pace as before. They complain that American workers care less about quality and more about price, when it was the corporations that forced the worker to prioritize price by marginalizing their purchasing power, leaving them fewer jobs and lower wages for the jobs still in existence. Then, in reaction to the demand for lower priced goods, companies started making products in places they could cut the wages and more American jobs were lost and the cycle continues to today.
The corporations started this fall of dominoes because they put their individual company's profits ahead of the long-term wellbeing of our country's economy. Maybe they didn't appreciate how inter-related all this was, maybe they didn't consider the long-term 'what ifs', and maybe they didn't care and figured it was a problem that someone else a generation or so down the line would have to deal with.
Today, the corporations' propaganda is spun to turn the truth inside out and blame the American worker for unwillingness to reduce our wages, working conditions, benefits, safety protections and standard of living - all things that truly made America great, made America proud and made America the envy of the world throughout the 1950s, '60s and '70s. It was about the time of the Reagan presidency, the period of "greed is good", that things clearly started to turn. And the fact of the matter is that a cycle of continually demanding more work while paying stagnant or lower wages causing even those still employed to have less and less to use to buy things is not sustainable because there is a point where quality cannot lowered and workers cannot survive on the wages the companies are willing to pay. The fact that our corporations are recording record profits while unemployment is unsustainable and wages have been stagnant or diminished over decades will not long be tolerated.
You want brand loyalty - EARN IT! Show American workers respect, pay them decent wages that will sustain or improve their standard of living! Demand American-made products to force companies to revive our manufacturing greatness. I'm one of millions of people who would pay a little more if I knew my purchase was helping feed a fellow American's family and provide them with money to buy the product my company makes. And recognize that online purchasing isn't going to go away, even if I have to pay sales tax; because I'd have to pay the sales tax in the store, too, and have to pay for the gas to get to the store and factor in the value of my time and exertion in getting the item home and carried in (especially if a larger item which I couldn't transport easily in my car or lift on my own).
We've got to convince the corporate leadership, the politicians, the academics and everyone else that the only way to stop our spiral down to the level of the third world is to take care of ALL American workers at least as well as we do our pets!
That era in America is over; that was from 1901 to 1999.
The new era from 2000 to 2099 belongs to Asia and India.
The good-old-days in America are over, permanently. Too bad for us; I think I'll plant me a garden so I have something to eat next year!!!
I wish Target would provide dedicated online access to their own online catalog in their bricks and mortar stores. Some things are only in stores, some things only online. I was shopping for a baby shower where the mother was registered at Target. It was hard to select items when I had to make a trip to the store AND look in their online catalog.
Believe me working as a stocker/checker for Target is heaven compared to the 'mordern' sweat-shop conditions at Amazon's box-stuffing warehouses. Amazon pays a little more, but the constant harassment of time-audits and write-ups hardly makes it worth it. Let's hope all retailing doesn't go this way. Chinese working conditions need to stay in China.
Brick and mortar stores are archaic, they are only delaying the inevitable by not converting to an online/warehouse format over the retail format. The mathematics of it all just don't make sense for retailers, in the long run Target, Best Buy, etc. are all going to go the way of CompUSA, Circuit City, and Borders. No amount of managing can save them from an uncompetitive business model.
This looks like a return to the old days when Sears, Montgomery Ward, K Mart and other large department stores had merchandise private labeled.
I think its simple. Target won't even match thier own online price. BestBuy, and Walmart will meet or beat prices of other brick and mortar retail stores online listed prices, including thier own. Target will not budge...period. They don't care that its 10-50 dollars cheaper if you buy it online from them...I think if they were willing to match thier online price in store that they would find less loss of consumer spending in thier store to Amazon. Amazon will match any other competitors price out there. You want to compete. Offer the same incentive Target...
Target "prides" itself on value. The most important part of value is $$$$. Get it. How's it feel, Target? Too big to fail? Hmmm?
I used to buy a lot of computer parts from walmart...graphic cards,sound cards etc the prices where good and I went there all the time to see what new items they had..but low and behold walmart all the sudden quit selling these items there PC department is a sham they don't carry nothing anymore except low end computers ,laptops etc printers etc..just the cheap of the cheap so now I was forced to buy online and I really liked being able to get my parts when I needed them instead of waiting on the mail and I was willing to sacrifice a few more dollars for the privilege but..the powers that be looked the other way and lost out on my business..and now they all complain about online shoppers..come on be real..they shot their-self in the foot a long time ago on that issue..they have to realize that in today's economy they have to make less just like the rest of have to do...or offer better easier to get items that you usually have to wait for online...
Not sure where you live, the nice part about living in an urban area is that you have access to stores like Fry's Electronics or MicroCenter if you want quality computers and/or parts. These companies are also (usually - depending on the sales person you get!) good about matching online or advertised prices for both competitors and their own websites. Their websites also allow for a product search by store to locate what you need, and either have it held until you arrive or transferred to your closest location for pickup with an approximate date/time so you don't waste a trip.
The nice part about these specialty stores is that they actually *do* have experts working the floor.
Due to such a bad economy a lot of us obtained jobs for online retailers to be "troll shopping" on specific brands. We go into retail stores of interests, find the products to research the mfg offerings of contents, obtain pricing information and move on to the next items. This information is vital to online retailers hence the lack of overhead to house a product online. In some cases if the mfg. only wants to sell in brick n mortar, it was warehoused in an obscure location representing as such. We don't see and end to the online retailers due to lack of overhead costs most brick n mortar stores face. You save gasoline by shopping online, time and effort and have ease of access. Product display and information online has gotten much better over the years. The only way to curb online competition is legislation but do we want yet another law in business set to squash or hamper free trade? Target just needs to get on board and get with the program. Amazon has lots of warehouses in strategic locations around the nation. Unless you go up on their rent they're probably rich enough now to build their own. Technology has advanced a nation of shoppers that want ease of use, saves tons of money and hassle. We seek out products that give us the greatest bang for our buck. Inclusive, there are up and coming retailers online that compete with Amazon on a regular basis. We have seen many times it is cheaper to purchase from the new retailers instead of Amazon. We as Americans strapped for cash will always do one of two things. Shop for cheapest best quality or do without it.
Target lost my respect years ago! Overpriced products, poor quality, and deplorable customer service!!
I would pay more for American made products, if I could find them. I would love to shop for quality, real quality, not flashy features and useless bells and whistles.
I also do not mind paying sales tax. Our taxes are what supports our social infrastructure and our environment.
The objective, in my opinion, is not to buy vast quantities of cheap crap, rather to spend towards lasting quality. Americans are drowning in cheap crap that they did not have sense enough NOT to buy! That is how they waste their income and build up devastating debt. Many people who are considered to be poor, and those with heavy debt burdens got that way all by themselves. I, and many of the friends in my life, have low incomes, but are not poor. We do not lead poor lives.
If China, and others, are selling us cheap crap, it is only because we so readily consume it!
And, when I DO want to buy something, it is usually something that I cannot go to the store and buy. I do shop online. But, I would not mind paying sales tax on what I buy online. I find that all the stores carry the same dammed stuff--ugh!