Target kisses Kindle goodbye, but could gain sales in the process

Retailers are in business to sell products customers want, except when they’re not, which appears to be the case with the retailer’s decision to stop selling Amazon.com’s hugely popular Kindle devices.

The Kindle was a coup of sorts for Target when it began offering the device in 2010. The e-reader was a hot new item, and the fact that it was available at Target brought the retailer the type of cache it works so hard to cultivate. But then the device outlived its usefulness and a website called “The Verge” this week reported Target would stop carrying the Kindle. The story was widely picked up because, let’s face it, a Target versus Amazon plot line has plenty of intrigue and makes for a good contrast between an old economy, conventional retailer and an e-commerce innovator. The plotline becomes more intriguing when you factor in that Amazon used to operate Target’s e-commerce business and after the two separated Target flubbed the relaunch of its website last fall.

Predictably, the news spawned a lot of commentary about what was the company thinking in the first place when it agreed to carry the Kindle. Especially since Target was offering those who purchased the device a superior way to access Amazon’s assortment and superior website experience.

Good point, except a similar argument could have been made decades ago when Target began selling telephones, a device that enabled customers to order from the Sears or JCPenney catalog. Or more recently, within the past few decades anyway, with the advent of laptop computers and the Internet, every time Target sells a PC it facilitates shoppers’ ability to complete largely tax free transactions on the Internet. The same thing could be said about such Apple products as the iPad or iPhone, which offer a fantastic user experience, access to the iTunes stores and countless other e-commerce opportunities, all of which compete with Target and Target.com.

What made the Kindle different and why Target was wise to dump the device is that it is essentially a loss leader for Amazon in the true spirit of Gillette’s classic razor and blades example, where the razors are essentially free in order to promote consumption of the blades. Kindles aren’t exactly free, but Amazon’s strategy, which Target facilitated, was and is to get the devices into the hands of as many people as possible because the company makes money off the content and products purchased through the device as opposed to the device itself.

It’s also worth noting that Target chairman, president and CEO Greg Steinhafel servs as chairman of the Retail Industry Leaders Association or RILA, a group arguing passionately for legislation know as the Main Street Fairness Act which might as well be called Make Amazon Collect Sales Tax Act.