Worried that smartphone-wielding shoppers are using its stores as showrooms to view products before buying them for less money on other retailer's web sites, Target has sent out an urgent request to its merchandise suppliers for help in selling products at lower prices without cutting into its profit margins.
Target Corp. sees how the Internet is revolutionizing retailing and recognizes that it needs help. Worried that smartphone-wielding shoppers are using its stores as showrooms to view products before buying them for less money online, the country's second-largest retail chain has sent out an urgent request for help from its merchandise suppliers.
"We understand and appreciate consumers' desire to find the best price, and we are absolutely committed to delivering the differentiated, high-quality merchandise Target is known for at low prices," Target president and CEO Gregg Steinhafel and executive vice president of merchandising Kathee Tesija wrote in a letter to the retailer's primary suppliers. "What we aren't willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices."
Steinhafel and Tesija asked suppliers to renegotiate their agreements with the retailer to let it lower prices and compete more effectively without hurting its profit margins, and to provide Target with products not available from its online competitors. Their letter to suppliers was quoted in a research note by Citigroup Global Markets Inc., an investment advisory firm. A Target spokeswoman declined to elaborate beyond saying "we continually work with our vendors to remain competitive in the ever-evolving retail environment."
Target has reasons to believe smartphone owners are checking out products in stores and then buying from other retailers online. 58% of smartphone owners took that path in buying electronics, 41% shoes, 39% apparel, 23% appliances, 22% sporting gear and 19% home and garden products, according to a survey last fall by consumer electronics shopping and review site Retrevo.com.
Some retailers with store operations, meanwhile, are trying to turn the showroom concept to their advantage. In November, Wal-Mart Stores Inc.'s e-retail arm opened two temporary Walmart.com stores in malls in Southern California to act as showrooms. The Walmart.com stores let consumers touch and test products, then directed them to kiosks to purchase from Walmart.com. Consumers could not buy the displayed products in the store.
And the retail revolution continues.