Amazon.com will acquire Target Corp. in 2018, predicts Gene Munster, a respected technology-market analyst and co-founder of Loup Ventures.
“Target is the ideal offline partner for Amazon for two reasons, shared demographic and manageable but comprehensive store count,” Munster said in issuing his prediction on Jan. 1. “Amazon’s [$13.7 billion 2017] acquisition of Whole Foods 470 stores along with testing of the Amazon Go retail concept is evidence that Amazon sees the future of retail as a combination of mostly online and some offline.”
Munster notes that the acquisition would boost Amazon’s brick-and-mortar store count from 470 to some 2300, a huge jump although still well behind Walmart’s imposing global presence of 11,695.
“Getting the timing on this is difficult,” Munster says, “but seeing the value of the combination is easy. Amazon believe’s [sic] the future of retail is a mix of mostly online and some offline.”
“Looking at the top 18 U.S. retailers (including grocery), Walmart has about 23% share and an Amazon/Target combination would have about 13% share,” Munster said, adding that if Amazon were to pay a 15% premium to the current TGT trading level, that would imply a take-out valuation of $41 billion, “about 8% of the value of Amazon’s current $564 billion market cap.”
According to an analysis at Retail Dive, while Amazon and Target do share customers to a large extent, that doesn’t mean Target would be worth the price. The analysis quotes Jim Fosina, CEO of Fosina Marketing Group.
"Amazon would need to understand what the current Target customer provides in terms of incremental shopping visits and whether they can gain in terms of the number of products in the Target shopping cart vs. the Amazon visit," Fosina said in an email to Retail Dive. "Are the Target customers more frequent shoppers with larger carts than the same shoppers when they shop with Amazon? The size of cart and transaction plus the frequency of shopping visit and margin on aggregate number of products per visit is really the determining factor."
Other analysts have speculated about Amazon’s potential acquisition targets. Candidates include Lululemon, Abercrombie & Fitch, Advance Auto Parts and even possibly a small to midsized bank.
Target shares rose 3.7 percent the day after Munster’s statement.
A video of Technonomy CEO James Kirkpatrick’s take on the idea (“It’s not crazy”) can be viewed here: