Photographer: Mark Kauzlarich/Bloomberg
Retail analysts may think it’s Prime time for a takeover, but are Target shoppers prepared for the changes Amazon would impose on their beloved Tar-zhay?
A potential name change alone (Ama-zhay?) is just the beginning of how an Amazon acquisition could change what millions of shoppers expect in their ritual Target shopping experiences. Could the combined company maintain the Tar-Zhay pizzazz?
Loyal Target shoppers need not worry, for now. A recent headline-grabbing report predicting Amazon would take over Target has been dismissed by many. Still, it has forced us to wonder: What would a combined Amazon-Target brand look like?
For shoppers, it may not result in a better experience, particularly in store. Here are six questions shoppers should ask.
1. Could prices change?
Very likely, and not always for the better. Price comparisons of select Target products against those at Amazon-owned Whole Foods Market show Target charges less in certain categories. When it comes to Target’s fashion, beauty and housewares, many of which involve private labels, it’s just not clear how Amazon would handle price until it had a chance to examine vendor and manufacturing contracts and cost structures. If the cost of carrying these items eats more into the margin than Amazon is willing to withstand, it could raise prices, reduce promotions or simply limit terms of distribution. The future of Target’s free Cartwheel app, which offers discounts in the aisle, would also likely come into play.
2. What would happen to Target’s brand selection, including private label?
Both Target and Amazon are building their private-label portfolios, and some of the brands would likely not survive a merger. Target plans to launch 12 brands over the next year or so. Amazon owns more than 30 private labels, including all of Whole Foods’ 365 Everyday Value line. If any Target brand fails to meet Amazon’s standards for performance, even if it appeals to a loyal niche market, it could be shelved. This extends beyond private labels. Whole Foods is asking suppliers, including local small-business owners, to work with its own retail strategy firm (and help pay for it) to save costs and centralize operations as Amazon strives to reduce prices. As a result, some smaller suppliers said they’ve seen their shelf space shrink in favor of national brands.
3. I get my prescription filled at CVS/Target. Would that be affected?
CVS Health Inc., which operates pharmacies in roughly 1,600 Target stores, may not prescribe to an Amazon partnership. Amazon has been looking into the pharmacy business for some time and has received approvals for wholesale pharmacy licenses in at least 12 states as of October. Some believe these efforts pressured CVS to acquire Aetna Insurance — to stave off Amazon’s entry into pharmaceuticals, according to The Wall Street Journal. With so much on the line, financially and operationally, CVS could balk at selling through Amazon, or regulators may not allow it in states where Amazon does not have a license.
4. If Amazon owns Whole Foods, would it want to sell food at Target?
Target has been struggling to strengthen its grocery legs for a couple of years (it recently agreed to purchase grocery-delivery startup Shipt Inc.). Amazon’s purchase of Whole Foods raises the bar, making Target grocery vulnerable. If Amazon were to acquire Target, it might choose to dismantle its grocery strategy altogether in favor of focusing on Whole Foods. In doing so, it would eliminate an important source of convenience for shoppers, even those who piggyback limited grocery purchases on their trips for apparel and household goods. That being said, there could be a chance Amazon would add Whole Foods products to Target stores (perhaps even under special Whole Foods signage), but that could result in lost Whole Foods sales or cannibalism. And it could eliminate some of the brands and/or products some shoppers favor.
5. How important would I be to Amazon as a Target shopper?
When fewer entities own more of the brands we interact with on a regular basis, it means more homogeneity. There could appear to be a greater number of choices in both what to buy and how to buy it, but the control of those choices rests with fewer companies. This means an individual shopper’s voice may count for less because there are more shoppers influencing a single corporation’s decisions. The shoppers with the most sway may prefer different channels, spend more money per trip or simply wear larger sizes. In short, they could be vastly different from the minority.
6. Would any Target stores close?
Amazon has eschewed a massive brick-and-mortar retail presence for a reason — to avoid bankrolling expensive stores. Investors like this about Amazon. If it were to acquire the roughly 1,800 Target stores, not to mention its 320,000 workers, Amazon’s model would shift to a more cost-intensive traditional retailer. And that would affect the stock price. Even if it didn’t, an Amazon-Target combo would likely undergo government regulatory scrutiny due to concerns regarding market dominance.
Lastly, what of the Target élan? Target shoppers are loyal because they have grown close to its brands, store layouts, vibe and in-store experience. Why invest substantially in so many locations when many of the brands and products Target sells are already available on Amazon via a completely different experience? You could almost hear Target shoppers shouting, “Tou-zhay!”
If customer satisfaction and new revenue streams are its goals, Amazon might be better off targeting a bank.
This article originally appeared in Forbes. Follow me on Facebook and Twitter for more on retail, loyalty and the customer experience.
