Target recently sent a letter to vendors asking them for help in battling rivals and the lower-priced online market. This letter has made its rounds through the news and social media circles, with plenty of discussion and opinion about whether it will do any good. It sounds like Target is steering towards a product assortment from vendors that is exclusive to target so that the ability for consumers to compare the same product across different retailers is reduced.
My first reaction is that Target is shifting the burden onto its suppliers, forcing them to help it stem sales loses. This is not a bad strategy, I suppose, if I were Target. If suppliers want to sell products to Target shoppers, they must give Target exclusive products and packaging. The downside to the supplier is that they will have to add SKU’s, thereby increasing the investment required to hold inventory for these additional SKU’s.
Channel conflicts have always been an issue and will become more accute, especially between offline and online retailers The Internet, coupled with the increasing use of smartphones, makes it easy and just plain common sense to see who gives you the best value for your money. Since I work with small CPG suppliers and manufacturers, I tend to look at how things like this will affect this group and their ability to sell in retail. I believe that products that have wide distribution are most prone to channel conflicts and retailer angst. Small CPG companies typically do not achieve such wide distribution due to the investment required to manage inventory and sales to many different retailers, so they probably have less to worry about. That said, a relatively cost-effective way to eliminate conflicts between offline and online is to sell a higher quantity pack – like bundling 2 cartons of your product together. Consumers are use to paying more for a product online to justify the shipping or to reach the minimum order to get free shipping.