Will Retailers Up The Game Against Amazon With Consolidation?

Retail is no more constrained to the four walls of its brick-&-mortar existence. Instead, it is rapidly accepting the concepts of an increasingly digitized world as advancing technology and digital transformation are playing key roles in evolving consumer shopping patterns. Consumers now prefer to shop online from the comfort of their homes rather than hopping from one store to another.

Indeed, technology is reshaping retailers’ today and tomorrow. Retailers are fast embracing the omni-channel mantra to provide a seamless shopping experience, whether in stores or online or through smartphones via apps. They are allocating capital toward developing a multi-channel growth strategy, IT infrastructure, fulfillment centers and enterprise-wide inventory management system.

But will technology alone help retailers survive Amazon’s (AMZN – Free Report) growing dominance in the ultra-competitive environment or will they combine forces to bolster their position.

Is Consolidation the Path?

Be it department stores, discount retailers, supermarket chains or grocery players, all are in the race of survival of the fittest. So is consolidation the next path retailers may prefer to tread to thwart Amazon’s omnipresence? Market pundits believe that with a whopping market cap of more than $700 billion, technological prowess and outstanding consumer reach Amazon looks invincible in the near term. But left with no choice retailers may prefer to walk the tightrope hand in hand.

Last Friday (Mar 23), market was abuzz with news of possible merger talks between Target (TGT – Free Report) and Kroger (KR – Free Report) . Per Fast Company report, both the companies are discussing a probable partnership and are taking forward the talks initiated last summer. Shares of both these Zacks Rank #3 (Hold) companies went up during Friday’s pre-marketing trading session.

However, there was no official comment from both the parties on the subject. Instead, later a CNBC report surfaced that denied any merger discussion but suggested Kroger may be in talks to partner with Target’s online grocery platform, Shipt. Nevertheless, analysts believe that if they choose to combine, Kroger could benefit from Target’s e-commerce capabilities and merchandise assortments, while the latter could further strengthen its grocery business.