Commerce Weekly: Target doesn't want to be the showroom for online retailers

Target wants help fighting "scan and scram." Strong iTunes growth was tucked inside Apple's big earnings.

Here are a few things going on in the world of online commerce this week.

Target wants to fight “scan and scram”

TargetRemember all that talk before the holidays about the blissful union between brick-and-mortar retailers and mobile users? Retailers seemed to have accepted that many of their customers shop with smartphones in hand — and retailers even appeared to be embracing it.
A Deloitte consultant who follows these things, Kasey Lobaugh, told Internet Retailer that retailers:

… need to invest in providing customer connectivity in the store, including in-store Wi-Fi, … building functionality that best serves the customer at the ‘point of need’ and thinking about the capabilities that align with the customer’s location and context, as the customer may be in the store with a smartphone in hand or in a variety of other locations and scenarios.

Indeed, Macy’s, Sears, and Nordstrom boasted about their in-store free Wi-Fi. Personally, I realized this meant I no longer had to chase after the Home Depot staff whose “Ask Me” shirts always seem to be disappearing just around the far end of the aisle. I could now ask my iPhone.

But a report in The Wall Street Journal this week about Target fighting back against “showrooming” has everyone wondering if all that goodwill is gone with the swept-up tinsel and empty See’s Candies boxes. The Journal reported that Target wrote a letter to suppliers asking for their help avoiding the fate of becoming physical showrooms for online retailers. They’re asking vendors to make unique products that can be sold only at Target, so there’s no option to find them cheaper online. “What we aren’t willing to do,” the Journal quoted the letter as saying, “is 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.”

The letter certainly points out the missing logic in the equation: upbeat stories about free Wi-Fi in stores all seemed to suggest that those smartphone-enabled shoppers would be checking in at the retailers’ own online site for reviews and availability. Who would have guessed that these ungrateful shoppers would stoop so low as to compare prices at other sites? Is all harmony lost? Will our favorite stores try to block our signals or ask their suppliers to come up with unique brick-and-mortar-only SKUs to confuse Red Laser?

There are still some voices calling for reconciliation. Will Reese on offers seven ways retailers can combat “scan and scram”, including beefing up a store’s own mobile presence and being clear to customers about the value the store provides. No one could accuse Target of failing to invest in its online and mobile stores, but I suppose one could make the argument that a little more investment in the customer service aspect of Target’s staff could help turn the tide. After all, as Reese describes in his story, Apple Stores aren’t afraid of customers with smartphones, possibly because they know the people working those stores — and in particular, their expertise — are one of the company’s biggest retail assets.

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iTunes also had a monster year

The huge numbers in Apple’s latest earnings report caught all the attention, but if you dig in, you’ll also find some pretty impressive stats for iTunes. Apple’s online content store sold about $6 billion worth of music, movies, TV shows, and apps in 2011, up 55% from $4.2 billion in 2010. Billboard reported that iTunes moved nearly $1.7 billion of content in the holiday quarter of 2011. It’s interesting to compare that with Amazon’s $43 billion in sales last year and then realize that Apple didn’t need to ship any physical products to hit its iTunes number.

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  • Agree with Target. What Amazon & other online-only vendors encourage is the modern-day equivalent of a street vendor hawking its wares in front of a store that has to pay rent, taxes, fees, etc.

  • Yelkereb

    To be fair, Apple also uses techniques like minimum advertised price (MAP) and tight controls over third party resellers to minimize the differences in price. Offering a great customer experience is relevant but part of the success is also derived from the way Apple controls it’s products sales experience at non-Apple retail stores as well.

  • Interesting analysis on what is an increasingly disruptive problem.

    Back in 1999, my colleagues at Accenture Technology Labs developed a prototype called Pocket BargainFinder – a relatively crude but working system composed of a mobile phone and barcode scanner both wired to a circuit board – that we used to provoke discussions with various Accenture clients in the retail sector. The discussions were very engaging, but I don’t think the threat was taken very seriously at the time. It will be interesting to see how offline stores cope with what is now a pervasive challenge.

    BTW, I think comparing Target to an Apple store is unfair. Discounted prices are part of Target’s core values, and its motto is “expect more, pay less”. The Apple Store – as part of the Apple brand – follows more of an “expect more, pay more” strategy. I have yet to see an Apple product discounted anywhere, so it’s not as though anyone shopping in an Apple store can buy something cheaper online.

  • NZN

    Its called “resourcing” to use a term from mass market retail employees at Target/WalMart/ToysRUs/etc…

    Retail employees have been doing it to manufacturers for years.

    Their request is falling on deaf ears.

    Low cost single source (China) cpg retailers are up against a new model. Customers are moving in the direction of VRM (vendor relationship management), and wise local US manufacturers are competing with mass market business practices in kind.

    When you apply a business model that hires green 25 year old buyers and put them on 18 month category cycles with the motive to knock off loyal innovators of product by resourcing their innovations in China… your crumbling cookies are your own concern.