Last week, without a lot of clashing of swords or explanation, Target announced that it would phase out sales of Amazon’s Kindle in May. The announcement was interpreted as an indication of Target’s frustration with Amazon over what is called “showrooming “, or more pointedly, “the Amazon effect “. Basically, it’s that online retailers are pulling sales away from their landed competition by making it easy for consumers to compare prices while they are on the sales floor. No one entity has been more blatant about this than Amazon, when it introduced it’s its iPhone Price Check app last December, which not only made it possible to price compare, but then upped the ante by offering a 5% discount if consumers purchased the item from Amazon.

Initially, Amazon’s announcement was for a limited time and for only selected categories (electronics, toys, sports, and entertainment). But while book sales might be a very small category for Target (thus the lack of concern over also selling the Barnes & Noble Nook), those categories are significant to Target, especially during the 4^th Quarter holiday season. Amazon’s shot across Target’s bow was apparently enough to have gone beyond the limits of “coopetition “.

This isn’t the first indication that the Minneapolis retailer wanted some distance between itself and Amazon. Last August, Target re-hosted its e-commerce website, discontinuing its longstanding relationship with Amazon’s web services offering. Perhaps Target decided to make that strategic move after watching what was happening to book retailer Borders, which ceased its hosting agreement with Amazon in 2008. In retrospect, that deal seems wrong-headed; by the end of 2010 Amazon’s North American media sales were approaching $7B while Borders total sales had plummeted from a high of almost $3.5B in 2007 on into bankruptcy and liquidation in 2011. At the time, Borders president Mike Edwards explained the company’s demise thus: “the rapidly changing book industry, e-reader revolution and turbulent economy, have brought us to where we are now. ” But one might argue that the real reason that company failed was because #1 it did not see the future, and #2 actually did business with another bookseller who did. Oops!

Target, being an astute observer of emerging retail trends, made their decisions accordingly.

So… ?

Just as retailers underestimated Walmart’s supply chain prowess in the early 1980’s, many retailers may still underestimate the threat of disintermediation, which is made possible in today’s world by the digitization of information. As I commented on in an April 12 Retail Paradox Weekly piece (Sephora And “The Amazon Effect “), “goods and services that can be easily digitized are prime targets for disintermediation, most notably books, music, and photos. … But not every product can be digitized, and so a second criterion for what makes a product a good target for disintermediation is the extent to which information about the product can be separated from the product itself. “

We all know now in hindsight that books, music, video, and photos were the first victims of the new distribution capabilities brought about by digitization. But that’s not where it will end, surely. Although other categories pose a tougher challenge, “showrooming ” makes it possible for consumers to inspect the products in the carbon-based world before buying them in the digital one.

All of this somehow reminds me of a conversation we had around the executive table in the late ‘80’s when Walmart made a significant move into our #1 market (California). At that time, we were the 800 pound gorilla of chain drug stores in the West. As we discussed Walmart’s entry into the state, one of our most senior execs said, “there’s plenty of business to go around. ” At the time, I thought that was nuts, not because of the size of the business in California, but because of the nature of the threat- Walmart had a mastery of the supply chain that we could only dream of. That’s when the supply chain masters ruled the retail world.

Well, when it comes to retailing in the digital omni-channel selling world, that’s Amazon. At least that is apparently how Target sees it.