Target Takes Aim at Amazon Price Matching
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“You don’t tug on Superman’s cape…” – Jim Croce, Don’t Mess Around With Jim
I know. I’ve used that quote in a previous post. My apologies for lack of creativity and originality, something all of you depend on from me. But it fits here, painfully appropriate, and I use it because I care. I love my local Target (NYSE: TGT), which is perched across a side street from Wal-Mart (NYSE: WMT). It’s especially fun when I’m feeling more obnoxious than usual, and I roll into the store with my pressed Dockers and red polo shirt.
When I read that Target had boldly ventured down the same successful path as Best Buy (NYSE: BBY), throwing margins and caution to the wind, matching competitors’ low, low prices, even the mighty Amazon (NASDAQ: AMZN), my first thought was: “uh oh.” But then after I cleared my cluttered mind, read more about it, listened to a few talking heads on the TV, it made perfect sense.
If any of the two dozen of you reading this has ever had the unpleasant experience of returning an item at Target, you would most certainly agree with my fleeting moment of clarity. I shop at Target an overwhelmingly unhealthy amount, not counting my cantankerous moments posing as a stock boy. There have been three (I still have the receipts) occasions where I have unsuccessfully attempted to return an item purchased there. I possess things I have no use for, even if I were to have a garage sale. I would rather do that than go through the arduous task of dealing with someone who honed his or her customer service skills at the Don Rickles School of Charm. Now don’t get me wrong, it’s almost as bad at Wal-Mart, standing in a line that dwarfs those at most amusement parks. Both experiences are worthy of challenging levels in video games.
But the beauty in the marketing move by the big red dot comes with the entire Target “experience,” especially as they move more and more into groceries. I can’t count how many times I’ve darted into the store for a few items, only to finally emerge $150 lighter and the proud owner of six picture frames. Now multiply that with thinking about this mythical “price matching” I keep hearing about so much.
I truly love the move, and the reason it will possibly work for Target and be yet another epic fail for Best Buy, is the overall incredible selection of merchandise. I don’t know about the nine of you still reading, but I can count on both hands the number of high-end electronics on the shelves at Target. And the obstacles consumers will have to go through to realize the benefit are daunting, even by Target standards. Item must be in stock, purchased within seven days, third-party Amazon Marketplace sellers’ items are not eligible, must be of legal drinking age and a registered voter.
For any of the numerous analytical pessimists, I encourage you to give it a shot, I’ll be there to congratulate you as you saunter from the store, bag of popcorn in hand, proud owner of a few more picture frames. And Target shareholders get paid for their patience as they learn of the results of this marketing madness, with a decent dividend yield of 2.3% ($1.44 per share annually), in line with the yield Wal-Mart currently pays ($1.59 per share, yearly).
I don’t think this decision from Target will have a negative impact (as several others seem to think), and it shouldn’t be considered in the same retail realm as Best Buy’s price-matching, last-minute, desperation heave. Any further pull back in Target’s share price, currently over $5 off recent 52-week highs (September), should be considered a possible opportunity for a long investment.
kmet312 has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!