Target going in-house for e-commerce

Posted 10 August 2009 19:22pm by Patricio Robles with 2 comments

Target,the second-largest discount retailer in the United States, hasannounced 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.

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