Is Target Trying To Become Amazon For Cooks?
Target (NYSE:TGT) is quietly getting into the E-Commerce infrastructure business. The $68 billion chain announced last Thursday (March 14) that it is buying online cookery sites CHEFS Catalog and Cooking.com, both of which sell kitchenware and utensils. But Cooking.com also provides the backend for several high-profile celebrity cooking websites -- and Target apparently intends to keep its hands off that business as long as it keeps growing.
Keep in mind that it's barely a year and a half since Target could barely keep its own newly built E-Commerce site running, after a decade of having its E-Commerce operations run by Amazon (NASDAQ:AMZN). That's fresh in the minds of Target E-Commerce execs, so if there's any chain that can see an advantage to becoming a mini-Amazon for cooking websites, it's Target.
The deal by Target is odd in several ways. One is that Target will essentially leave the two kitchenware E-tailers alone—they'll retain their brands and even go into a wholly owned subsidiary all their own, instead of being digested into the $68-billion chain. Another is that Target's minimal announcement of the acquisitions didn't even mention the most interesting parts, including connections with celebrity chefs and a significant non-retail business.
Is Target trying to bury this news? Probably. And possibly with good reason: If you're trying to become the Amazon (NASDAQ:AMZN) of cooking websites, you don't want to make too much noise early on.
The deal itself, which Target announced on March 14 and plans to finalize by mid-April, will give Target the two E-Commerce websites along with a brick-and-mortar outlet store operated by CHEFS in Colorado Springs, Colo. The new subsidiary will be run by current CHEFS CEO Tim Littleton, while Cooking.com CEO Tracy Randall will become a Target consultant. Both those sites will continue to sell kitchen merchandise.
But Cooking.com isn't just an E-tailer. It also provides the back-end E-Commerce platform for more than a dozen branded online cookery stores bearing the names of Rachael Ray, Emeril Lagasse, Paula Deen, Pillsbury, Betty Crocker and the Food Network. That's a lot of high-profile names for Target to ignore.
But, of course, Target isn't ignoring those big names. Target already has products from those celebrities in its stores. What it gets from this deal is, in effect, the chance to collect rent from their E-Commerce sites—and the opportunity to collect even more rent from any other cooking-oriented websites it can sell on using Cooking.com's platform (and the built-in endorsement of celebrity cooking sites that already use the platform).
For Target's E-Commerce execs, the "Powered by Cooking.com" logo on those celebrity-chef sites must feel very reminiscent of the decade Target spent with Amazon's logo plastered on its online operations. The chain ended that deal with Amazon less than two years ago, and what followed was a series of spectacular stumbles as Target launched its own site until it finally found its footing.
Now Target has put itself in the Amazon position—owning the platform, collecting the rent, even having the history to remind its cookware tenants that building their own E-Commerce systems is hard, dangerous and probably more expensive than it's worth.
It's a clever strategy. And the best part for Target is that it doesn't have to find arcane omnichannel synergies, much less actually corner the cooking market, to make this work. It's selling a service to other retailers—and it makes money as long as it can keep collecting a piece of the action.