Target last week made news with a joint letter from their Merchandising Chief and Chief Executive to their vendors.
According to the WSJ, “Target is reaching out to vendors to help craft a more competitive pricing strategy as it seeks to battle rivals and the lower-priced online market."
In that letter, the retailer says it is not going to let online-only retailers use its stores "as a showroom" for their products. The result is an undercutting of Target's prices "without making investments, as we do, to proudly display your [the vendors’] brands," the letter states. The executives say they will be "challenging" the vendors "to work with us to develop an assortment that will allow Target to be competitive and profitable across all channels."
This sends a bold message to online retailers and to the vendors Target has helped make successful. It is an opening salvo against the foregone conclusion that everyone is switching to buying everything either through smartphone apps or online. And against Amazon hijacking their customers.
Target’s partners are bound to accept the request, and Target won't be the only one putting it out there. It could be as simple as vendors making minor changes in their products so the Target product wouldn't have any exact match - the model number/bar code simply won’t exist anywhere except on the Target item. Therefore when customers find items at Target, they can’t swipe them with their smartphones to find them cheaper online. This is a step beyond private label - the reason to create these products is not to be necessarily a cheaper alternative to the brand. It is designed to be exclusive.
It would make it easy for Target to say, if you can find a lower price on the exact same item, we’ll match it because the exact same item won’t exist except at Target.
According to the National Retail Federation 95% of all retail operations are single store units.
Smaller merchants need to be able to mimic Target and say you won’t be able to find this product online either.
Look, 92% of merchandise is still purchased in bricks and mortar stores according to CNBC.
Smaller operators need to claim the kind of power Target has in order to thwart the online retailers who are looking to make bricks and mortar stores into showrooms for online products. But as single operators they don't have much clout.
How to do it?
Most bricks and mortar retailers belong to at least one trade organization or buying group. They should band together and request this from their vendors so that their SKUS don’t match the online-only sites.
Ideally vendors have to be willing to create products that are slightly different and aimed for sales in either big box stores, smaller retailers or online retailers - but not for all. I'm sure many will be skeptical this could work.
But if bricks and mortar retailers can use their buying power to increase personalization through their instore channel, then they can leverage the advantage they truly need against the showrooming of Main Street.
What do you think? Could this work? Please comment below:
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