Can Google Save Target?

Ailing retailers like Target (NYSE: TGT  ) might have an unlikely ally and possible savior in their uphill battle against Amazon.com: Google (NASDAQ: GOOGL  )   (NASDAQ: GOOG  ) .

Many analysts have noted that Target seems to be losing some of its valuable middle class customers to Amazon.com. Time described a diaper delivery service that Target rolled out last October as an effort to help the discounter woo mothers of infants away from Amazon.com. Target's efforts to enter the online ordering and same-day delivery race have certainly lagged behind such experiments as Amazon Prime Fresh, Wal-Mart's Walmart to Go and Kroger's Home Shop. Both Home Shop and Walmart to Go allow customers to order items pulled from stores for same-day delivery.

Shopping Express to the rescue
But now Google has unveiled a new service that could enable retailers like Target to quickly enter the same-day delivery wars. Google Shopping Express combines an online shopping portal similar to Amazon.com with a same-day delivery service.

Here's how Google Shopping Express works: A customer places an order online. Once the order is processed, employees at a store pull the order. The order is picked up by the Google Shopping Express driver, who takes it to the customer. The process is similar to what is used by Kroger Home Shop. The cost for the Express could be $4.99 per order.

Target is one of the retailers participating in a beta test of Shopping Express in Manhattan, Los Angeles, and San Francisco, Slate reported . Other retailers in the test include Walgreen and Costco Wholesale. Google is trying to hook customers on Shopping Express by offering six months of free service.

Same-day delivery might not save Target
Target certainly has to do something; financial data indicate that its trailing revenue fell by $1.2 billion in just three months. Target reported trailing revenue of $73.8 billion in October and trailing revenue of $72.6 billion on Jan. 31.

That something might not be online retail because the real root of Target's problems seems to be its catastrophic failure in Canada. The Wall Street Journal reported that Target's 124 Canadian stores -- its first outside the United States -- are on track to lose $2 billion. The Canadian Press reported  that Target has lost $941 million in Canada.

News reports indicate that Target's Canada rollout was plagued by such blunders as empty shelves, lack of inventory, and improperly trained employees. There is even some speculation that Target will have to pull out of Canada completely.

Does Target understand technology?
The Canada catastrophe and the well-publicized data breach indicate that Target seems to have lost some of its edge in customer service. The retailer seems incapable of dealing with changing realities and basic retail tasks such as logistics. Obviously, a company that cannot keep its own shelves stocked is going to have a hard time coping with the logistics associated with online retail.

That means same-day delivery options, such as Google Shopping Express, could become a boon for Target. The data breach and reports that Target employees in Canada were trained on the wrong systems indicate that Target has a poor understanding of modern retail technology.

A company that cannot understand such simple concepts as compatibility, the need for proper data security, and logistics is going to have a hard time with the complex systems needed for same-day delivery. Google Shopping Express could help Target here because Google and not Target will be in charge of the technology and handle the logistics of delivery. All Target will need to supply is the products.

Yet Shopping Express could hurt Target. If Target cannot supply the products the customer wants, Google will simply move on to another store, such as Walgreen or Costco. It could also give customers yet another reason to avoid Target.

Foolish takeaway
Target is no longer on the cutting edge of retail. If it wants to remain in the big leagues, Target will need to make some drastic changes.

Google Shopping Express could be a real game changer. One of the biggest changes it could bring is to help brick-and-mortar retailers like Target compete with Amazon.com.

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  • Report this Comment On May 16, 2014, at 12:01 PM, andrewboon2739 wrote:

    Interesting article. Innovation and new strategies will help retailers manage their products and ensure they stay competitive by improving their shipping and delivery systems to meet the changing and ever growing consumer demand. I work for McGladrey and there's a very informative whitepaper on our website that readers of this article will be interested in. @ Count, manage and move: Warehouse inventory control strategies http://bit.ly/1kgYXWo

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