Target Fights Showrooming With Price-Matching Scheme

This article was first published on 11 January 2013.

There’s no doubt that traditional bricks and mortar retailers are struggling to devise a strategic response to the ever-increasing threats posed by the rise of e-commerce.

It appears from this article that Target is hoping it can turn its showrooms into a source of strategic advantage with the mindset being that a sale at internet prices and margins is better than no sale at all.

I see two issues with this that are likely to be problems for virtually every retailer in Target’s position:

1. The cost structures of online retailers are generally lower than those of bricks and mortar retailers.  My guess is that there’s a price for most goods at which an internet retailer can still make money but for which a bricks and mortar retailer would be making a loss.  While there are some subtleties in relation to cost structure that might allow the bricks and mortar retailer to compete in the short term, it’s not a position that’s sustainable or viable in the long-term.
2. The showroom is only an advantage as long as it provides some benefit to the customer that can’t be experienced online.  There are a number of developments very clost to commercialisation in areas such as tactile touch screens, gesture interactionand virtual reality that will undermine the benefits that currently exist of going to a showroom.  These new technologies will make it possible for a customer to do things like understand what a product “feels” like, try on new clothes for sizing, and see how the product might look or feel in situ all virtually and from the convenience of their living room.

The disruption to retail is far from over!