May 4, 2012

Why Target is worried about associating with Amazon


The above graph shows a possible effect of Amazon’s “Price Check” app: It charts the share price of Best Buy, which in March announced it was closing 50 of its 1,100 stores amid a revenue shortfall. As Bloomberg Businessweek, which created the graph, points outs: the company’s stock tumble began just days after Amazon debuted the app, which encourages “obnoxiously savvy smartphone users” to walk into retail outlets—like Target, Wal-Mart, and Home Depot—and “scan a particular item’s barcode …and immediately know who has the best deal on the Web.” When Amazon launched “price check”  it offered 5% off (up to $5) on three purchases made using the app.

When news of this broke in November 2011, many, including MobyLives (here and here), criticized the effect it might have on indie retail outlets and especially bookstores, which now sell many non-book items. But with news that Target is angry about Amazon’s efforts to poach its business by helping customers use brick-and-mortar stores as “showrooms,” it appears the biggest casualty may be big box stores like Target. As we reported yesterday, Target is striking back against Amazon by dropping its Kindle ereaders from its website and its 1,800 stores.

Target’s own share prices has been relatively stable … but perhaps the company’s small strike against Amazon is meant to reassure investors that it won’t end up like Best Buy.

(View a larger version of the above graph on the Bloomberg Businessweek site)


Kelly Burdick is the executive editor of Melville House.