P&G Gets Caught in Rivalry Between Amazon and Target

By Markets Fool.com

It is probably no surprise thatAmazon.com has made its share of enemies among traditional retailers. Not only has the e-tailer threatened the brick-and-mortar players by dominating the online space, but it has also at times used underhanded tactics to gain an advantage. In 2011, the company encouraged shoppers to use big-box stores as a "showroom," offering a 5% discount for doing a price check at retail store to see if Amazon offered the product for a lower price. Best Buy, perhaps the biggest victim of the ploy, fought back by putting unique bar codes on items so they couldn't be scanned and compared.

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Target has also had an extended falling out with Amazon. In what was probably a misguided tie-up to begin with, Amazon operated Target's website for 10 years until 2011, when Target took back control of its e-commerce platform. The initial results were shaky, but the retailer has improved every year, and now derives the same percentage of sales from e-commerce as doesWal-Mart.

The flames were fanned in 2012 when Target dropped all Amazon products from its shelves, including Kindle e-readers and Fire tablets. Management was vague about the reason for the move, but retaliation for showrooming and a partnership with Apple seemed to be the only possible explanations.

Just last week, Target lowered its minimum online order for free shipping to $25, undercutting Amazon's $35 limit, but the big-box chain's most intriguing move involves a deal Amazon made with Procter & Gamble.

Hell hath no fury like a retailer scorned
In an effort to save P&G and Amazon warehousing and shipment costs, P&G began allowing Amazon to operate within its warehouses to ship items, such as diapers and toiletries, directly to consumers. The move was not received well by other retailers. Target, in particular, retaliated against the Pampers maker in 2013 after learning about the partnership by moving its products to less prominent spaces in its stores. It also removed the "category captain" status from some P&G brands, meaning it instead worked directly with other suppliers to boost sales of their products, which included ideas like promotions on combined purchases of products.

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Though it may seem like an overreaction for Target to go to such lengths to punish Procter & Gamble, relationships between suppliers and retailers are sensitive, and each party is likely to respond to any perceived favoritism with another partner. Target has employed such a strategy previously, refusing to sell a Beyonce CD after it was released exclusively in theApple'siTunes store a week before it hit retail locations.

Winners: Amazon & P&G; Loser: Target
By last February, the spat had cooled off and P&G products had returned to endcap positions on Target aisles, but the Amazon-P&G alliance is still running strong. According to data from L2, P&G ranks on the first page of results in Amazon for over 40% of its individual products, and close to a third of its products are among the top 50 in their category in the number of reviews per listing on Amazon.

Target was also forced to pull Clio brand teeth-cleaning whitestrips from its shelves after a court found the product infringed on P&G's patent for Crest Whitestrips.

There may be a silver lining for Target, however, as the CEO who led the retaliation strategy, Gregg Steinhafel, was ousted last year following a series of challenges, including a data breach that revealed as many as 70 million shopper credit card numbers and a failed expansion into Canada that cost the company over $5 billion. New CEO Brian Cornell has quickly stepped up Target's e-commerce platform and spruced up stores; the early results have been positive, with Target beating analyst estimates over the holiday quarter.

With Cornell at the helm, the retailer might finally be learning that it has to compete with Amazon at its own game, not simply punish suppliers that are trying to boost their own e-commerce sales.

The article P&G Gets Caught in Rivalry Between Amazon and Target originally appeared on Fool.com.

Jeremy Bowman owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, and Procter & Gamble. The Motley Fool owns shares of Amazon.com and Apple. 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.