Amazon and Target announce 2011 separation – Breaking up is hard to do…

August 7, 2009

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

There’s been lots of excitement today around Target’sannouncement that they will be leaving the Amazon ecommerce platform (they call it Merchants.com internally).  From the statement:

“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, fulfilment and guest services operations,” Steve Eastman, president of Target.com.

The articles go on to say that by Holiday 2011, Target plans to roll out the new system.
What does this mean?  First let’s look at how big Target.com is and then let’s dig into the Target/Amazon relationship specifics to understand more.
How big is Target online?
I pulled out my handy, always-at-my-side/or-under-my-pillow Internet Retailer 500 guide. IR500 has for 2008 the following data points:
  • Target.com’s IR500 rank: 20
  • 2008 online sales: $1,209,208,320 (We’ll call it $1.2b for short)
  • 52m/m visitors
Compete.com has Target at a top 28 of all websites rank with 30m unique visitors and 54m total visitors.  So all that data lines up.
How do Target.com/Amazon work together today?
Amazon and Target.com have a complex multi-facited relationship that includes:
  1. Amazon’s ecommerce technology powers target.com
  2. Amazon/Target appear to both work on the internet marketing
    1.  Specifically, Target has its own internet marketing team, but tends to have to make requests from Amazon to get much done.
  3. Amazon handles fulfilment for Target.com
  4. Amazon handles customer-service for Target.com
  5. Target.com sells on Amazon (Merchants@/3P type business)
Here’s a screen shot of what number 5 looks like if you haven’t seen it before – note the logo at the very bottom (click to enlarge)
Paul_frank_slippers

What does this mean?

Given the data and details on how they work together, it’s not clear how much of that $1.2b in GMV comes through the target.com front door and how much comes through the Amazon 3P.  If we assume that maybe it’s 25% then you have a 900m/300m kind of split.
Thus if Target.com leaves Amazon, but Amazon.com retains the Target product, that really lessons the blow and doesn’t hurt the Amazon selection.  That’s going to be the key point to watch over the next two years.  As usual, we’ll keep you posted.
Also, does anyone find it interesting, or just a coincidence, that this separation is coming right on the heels (har har) of the Zappos announcement?
SeekingAlpha Disclosure: I am long Google and Amazon