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Tariffs Help Target Set Its Bullseye on the Small Supplier

Anonymous October 24, 2019

Target took the easy, and cowardly, route in last week’s “Business Partner Update” penned by Mark Tritton, EVP & Chief Merchandising Officer (see below). There is so much to unpack in that short three-paragraph missive to its supplier base that we really need to deconstruct it in bits and pieces. It actually has the making of a short movie.

Big splashy start: “Business Partner Update.” Those three words, while each meeting their distinct definitions, don’t quite add up to the sum that one might expect when getting an update from a partner.

It is about business — both the supplier’s and Target’s business, consumers, and the commerce they transact.

It is being delivered to Target’s partners, as the supplier base is a key partner in Target’s ability to attract and retain its massive consumer following (and subsequent profits).

It is an update as it is a distinct change from Target’s position back in June when the retailer had previously warned that tariffs would hurt American consumers. Target’s letter to US Trade Representative Robert Lighthizer (also penned by Mr. Tritton) read, “Simply put, additional tariffs on these products will require new families to spend more or make tradeoffs about which products they’re able to purchase for their families.” To be clear, the update here is that Target expects their suppliers to bear the entirety of this burden — there will be no spending more or making tradeoffs for Target consumers on his watch.

Okay, definitionally correct on “Business Partner Update.” Well done, Mr Tritton (who, by the way, just recently resigned from Target last week to take over as CEO of Bed Bath & Beyond). The stage is now set for the drama (or is it comedy, or maybe tragedy?).

The first paragraph is a snoozer and somewhat uneventful — a nice “volatility and uncertainty in the marketplace”, “impacted goods” and, wait for it, “millions of American families who shop at Target every day.” Some back story and character definition. Pass the popcorn, please.

The second paragraph is where it gets going. Mr. Tritton regales us with Target’s strategy on how to minimize the impact of tariffs on families’ pocketbooks. That strategy? Cooperation, hard work, and partnership. Translated to straight talk it means Target says no to any price increases from suppliers and the kicker is that Target “appreciate(s) the work we’ve done together.” Like any husband that has dared spoken about the delivery of a child to a wife as the “work we’ve done together.” Done. Together. Pure comedy — Michael-Scott-Dunder-Mifflin type comedy right here. Hero identification complete, but some tension is introduced.

Copywriting chops: check.

Before we move to the final paragraph, I felt compelled to point out that Target used the word “partnership” in their strategy. That would appear to be an odd word choice as a solid definition of partnership is “where the participants in an enterprise agree to share the associated risks and rewards proportionately.” Proportionate risk sharing? Not so much.

The final paragraph is where Mr. Tritton makes an unprecedented plot pivot and moves from comedy to fantasy/tragedy. He embraces some other worldly view of what suppliers deal with when working with Target. It is a view devoid of gravity and the basic laws of the time-space continuum.

Wait, hold on, Mark Tritton is a retail expert. Target, Nordstrom, Nike — he has seen it all. Supply chains, pricing, importing — he has seen and run the gamut. He knows how small-business suppliers negotiate constantly with every single supplier of theirs (shipping, warehousing, payroll processing), hold pricing for years, take price reductions at every Target line review on the promise of some riches at the end of the rainbow. He knows that margins are tight and always getting tighter from ever-increasing costs. He knows the pace of healthcare insurance increases and the struggle to find a plan for his employees that provides real care. He knows all that; he must.

However, for Mr. Tritton it is an intellectual exercise that is discussed over cocktails at a Super Bowl party, while rubbing elbows at an Oscar’s gala or while spouting business platitudes at some leadership forum. Truth be told, his vantage point for these issues is from some distant apex of a very well capitalized firm with droves of people managing supply chains and exerting the type of pressure on suppliers that can turn charcoal briquettes into diamonds. Mr. Tritton’s fantasy/tragedy is that he has likely been far removed from managing the triumvirate of every small supplier — cash, inventory, and ordering (in this case, from China). The tragedy is that 15, 20, 30 percent tariffs eat into the profit and life blood of small businesses that would crawl over glass to work with Target. Small suppliers don’t have the luxury of alternative supply chains, they don’t have enough margin in their cost structure to casually absorb this trade war, and they may not last long enough to make it to next year’s payroll. Some of those millions of American families who shop at Target every day may not be employed next year. That is the final scene. Small suppliers, families, and consumers find that the Target bullseye was trained squarely on them behind the cowardice and bluster of a corporate titan who runs his “guest-centric plan” up the Target flagpole and mandates that everyone (that supplies Target) salute.

Stakeholder Capitalism
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