When Amazon announced its “vendor flex” program last October, I wrote about the strategic change this heralded. Vendor Flex is when Amazon puts a mini warehouse in a section of a vendor’s warehouse. As I wrote last year, the big issue was how brick and mortar retailers would react to P&G opening its doors to the ultimate “category” killer. So, there it was in the Wall Street Journal: “P&G’s Pact With Amazon Angers Target“.
Target went ballistic and downgraded its relationship with P&G to the benefit of Unilever. Procter lost the critical position of “category captain” in many categories (huge implications in the daily shelf wars) and there is no doubt that Unilever picked up significant ground. The article ends with things are patched up, but I don’t buy that all is back to happiness.
Most likely Target received some sort of “most favored nation” status which said that INCLUDING free shipping, Amazon will be sold at prices that are no better than those offered to Target and Target will receive a couple of early/exclusive new product launches that historically went to Wal-Mart. Target is most likely thinking about all of its vendors and their relations with young Amazon vs the dowager princess…
The reality is that the writing is on the wall. Amazon will be eating Target’s core customer, faster than hackers can steal Target customers’ credit data, for the simple reason that their costs are lower and they will pass it through to the customer to create a better value proposition. The consumer is smart and retail is simpler than it seems!