Target, the second-largest discount retailer in the United States, has announced that it will bring its e-commerce website, Target.com, in-house in time for the 2011 holiday season.
Since 2001, Target.com has been run in partnership with Amazon.com. The e-commerce giant's platform powers the Target.com website and Amazon.com handles much of the call center and fulfillment operations.
But a lot has changed since 2001. E-commerce has matured significantly and in this case, Target wisely realized how important the multi-channel experience is to its customers and decided that bringing its e-commerce operations in-house was the best way to deliver the desired experience.
According to Steve Eastman, president of Target.com, "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".
With almost 7% of Target's non-GAAP profit coming from e-commerce, it's no surprise that Target wants to take control of its e-commerce platform, and as Sam Black of the Minneapolis/St. Paul Business Journal notes, "Target's decision mirrors a similar bring it in-house strategy that Target initiated last year when it decided to distribute its own food and groceries rather than rely" on a third party partner. Such moves make sense, especially in these tough economic times.
For Amazon.com, the loss of Target won't really hurt the bottom line as Target.com accounted for a small fraction of its total revenues. But one has to wonder how many of Amazon.com's other customers, which include Marks & Spencer and Timex, are at risk of leaving too. Target isn't the only customer to leave; Borders and Toys R Us are amongst those who have moved on, and not all have left on good terms. That's not exactly a surprise; Amazon.com could be looked at as a competitor by many of its retail customers.
If there's any take-away from this, it's that more and more traditional retailers are getting smarter and more comfortable with the internet -- enough so to bring their e-commerce operations in-house. While Amazon.com is still going to be a dominant force in online retail, pure-play pioneers don't have a monopoly when it comes to platforms and supply chains.
Photo credit: IntangibleArts via Flickr.
Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.
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8:28PM on 10th August 2009
Amazon has all the data. They can strike partnerships, observe profitability of a certain line, then decide whether they want to go into that business for themselves. No big surprise partners leave with a sour taste.
10:02PM on 10th August 2009
Given the developments in Enterprise Open Source Software (and perhaps as importantly cheap content delivery and scalable hosting) since 2001, Target could build a robust, scalable multi-channel solution to the warehouse door entirely out of proven EOSS software for a fraction of what I'd imagine they would otherwise be paying Amazon over the next few years (assuming their contract is tied to 2001 economics, when ecommerce platform providers thought they were providing something profound and customers were willing to pay for the same).