Target's Challenge in Ending Amazon Contract: It Knows Bricks Better than Clicks


I've written several times about retailers' challenges in creating an effective clicks-and-bricks strategy, one in which customers enjoy similarly happy experiences shopping in physical stores and on e-commerce sites. Among the challenges: creating a similar look and feel and blurring the lines between experiences with features such as the ability to order stuff online and pick it up at a store.


In many analysts' minds, Target has lagged behind competitors like Wal-Mart in integrating its site and store experience. Not too surprising, considering that for the last eight years Target has outsourced Target.com sales and order support to Web behemoth Amazon. Target said as much in its statement:


Amazon has been an important strategic partner since we re-launched Target.com in 2001, and the strength of Amazon's technology and fulfillment services has been a contributing factor in Target.com's success. However, to deliver a customized multi-channel experience for Target's guests, we believe it is in Target's best interest going forward to assume full control over the design and management of Target's e-commerce technology platform, fulfillment and guest services operations.


Few are better than Amazon at e-commerce and order fulfillment. Working with Amazon may have been a mixed blessing, however. Target now must start practically from the ground up, and chances are it hasn't built much internal Web expertise. (Why would it, with a partner like Amazon?)


Assuming control of Target.com from Amazon will be a formidable challenge, writes ZDNet blogger Larry Dignan. The difficulty is compounded by the fact that the switch is set to occur by the 2011 holiday shopping season, just two years away. In fact, Amazon itself could benefit from any Target missteps.


Dignan wonders whether Target will enter into some kind of an outsourcing arrangement with GSI Commerce, which provides the same kind of invisible-to-the-customer yet essential back-office services as Amazon does for clients including Toys R Us, Dick's Sporting Goods and the NFL. Unlike Amazon, it does so without directly competing with its customers. Using such an approach "could help manage some of the IT risk Target will face," Dignan says.