Could Amazon Benefit from Breakup with Target.com?

TechFlash reports: Could there be a silver lining for Amazon in its impending breakup with Target? Target on Friday said it will take control of its own ecommerce operations in 2011, ending a 10-year relationship with Amazon. For Amazon, Target's move marked another major loss for its ecommerce platform business. But Amazon might also benefit if Target stumbles, according to one analyst.

JP Morgan analyst Imran Khan writes in a research note that "Target hiccups could boost Amazon":

Rolling out a platform to fulfill the sales of a top-20 eCommerce site is likely to hit a few bumps in the road—and Amazon’s market share could see benefits if Target.com has any difficulties providing a top-notch customer service experience, in our view. Additionally, we believe Amazon may see a slightly reduced need for warehouse investment.

Khan says that Target represents less than one percent of Amazon's annual operating profit—and says the overall impact of Target's decision to take web development in-house "will be slight" for Amazon.

Amazon forged many of these ecommerce partnerships in the dot-com era when brick-and-mortar retailers were eager to establish a presence on the web but didn't have the technology expertise or resources to do it. But as online sales have grown, some of Amazon's big ecommerce customers have chosen to take the reins themselves.

For Target, there may also be an element of competition at work. Amazon has expanded from selling books to selling all kinds of merchandise online, which is encroaching on Target's turf.

ZDNet's Larry Dignan writes that Target's split with Amazon could be good news for another ecommerce provider, GSI Commerce, which began working with Toys "R" Us after the toymaker's acrimonious parting with Amazon.

Writes Dignan:

Add it up and it wouldn’t be all that surprising if Target cuts some kind of deal with GSI Commerce. GSI provides back-end e-commerce services for Toys R Us, Dick’s Sporting Goods, Nautica, Zales, the NFL and other big-name retailers. In a nutshell, GSI provides the same services Amazon does without the direct competition with customers.

Amazon at last report was still doing ecommerce support for U.K.-based chain Marks & Spencer, Lacoste, bebe, and Sears Canada. But it's also been looking at providing more web tools for middle-market retailers as part of its Vitamin C project.