Amazon Buying Target Isn’t as Likely as One Tech Analyst Seems to Think

Gene Munster's bold prediction might end up being just that

Industry analysts don't think Amazon will buy Target this year.
Photo Illustration: Dianna McDougall; Source: Getty Images

Amazon buying Target sounds like something from a dream—and that’s all it could end up being.

Gene Munster, a tech analyst and managing partner at Loup Ventures, made the bold prediction in a blog post yesterday. His reasoning? Amazon needs more brick-and-mortar stores as well as another way to reach moms (and their wallets). If Amazon did acquire Target, it could increase the number of Amazon stores to 2,300, compared with Walmart’s 11,695, Munster explained in the post. It’s not necessarily a huge jump, but any increase is beneficial to Amazon in its never-ending quest to compete with Walmart.

It would seem easy to dismiss Munster’s prediction as far-fetched, but his background as an Apple analyst at Piper Jaffray makes his a voice to take seriously. Munster is after all the same person who predicted Apple would create products like the iPod and move away from computers (though his other predictions about an Apple TV set and car have yet to come true).  However, other industry analysts are a bit more skeptical, thinking Amazon will leave Target alone and pursue other brick-and-mortar ventures.

If Amazon did buy Target, it would increase its retail footprint—but at a cost that isn’t worth it, according to Steve Sarracino, founder and partner of Activant Capital Group, an investment firm that works with commerce companies.

This logically makes sense until you look at the price—$45 billion-$50 billion for 2,300 stores—or about $21 million per store,” Sarracino said. “Granted, Amazon paid about $37 million per store for Whole Foods, but they acquired grocery already. That is the most important repeat purchase a consumer makes.” 

Target doesn’t have a strong enough grocery business to make it more viable than Whole Foods or even to complement it.

“Target is trying to improve their grocery offering to drive the regular visits, and they have struggled in this area and tried a number of technology tools, including same-day delivery and curbside pickup, which ultimately resulted in Target buying Shipt,” Sarracino said.

Munster’s other main point, that “Target’s focus on moms is central to Amazon’s approach to win wallet share,” doesn’t hold much water, according to Bridget Fahrland, senior vice president of strategy at Fluid.

“It is pretty clear Amazon has the mom market already figured out and wins them over with fast delivery, pricing, selection and the countless reviews that moms will scour to make the best decision,” Fahrland said. “They do not need Target’s help with moms.”

While Amazon may not benefit much from buying Target, experts believe there is brick-and-mortar opportunity for the ecommerce giant. Fahrland believes Amazon will find other ways to grow its retail footprint, both offline and online, like continuing to experiment with pop-up shops (as it did this holiday season with Calvin Klein). 

“There won’t be an ‘A’ in the middle of the red bull’s-eye anytime soon,” Fahrland said.