(c) 2009 
Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.Target Corp., beset by declining sales in stores and online, said it plans to build its own retail Web site in time for the 2011 holiday season and will then end its relationship with e-commerce powerhouse Amazon.com Inc.
Since 2001, Target has outsourced nearly all of its online operations to Amazon. The Seattle e-commerce giant provides software to run the existing Target.com Web site and also hosts the sale of Target goods directly through Amazon.com. In addition, Amazon runs the call center and most of the warehouse operations for Target as well as shipping the products to customers and handling customer service.
Target won't renew its contract with Amazon when it expires in 2011 so that Target has the flexibility to add new capabilities and functions to its own Web site, said Target spokeswoman Kelly Basgen. The retailer also expects to realize financial benefits, she added. The company hasn't said whether it will continue to sell its goods through the Amazon.com site.
Amazon still runs Web sites for companies including Marks & Spencer PLC and Timex brand watches. The company declined to say what percentage of its third-party sales come from Target.
"We remain focused on delivering on-going success" to our large sellers, said Amazon spokesman Drew Herdener.
Minneapolis-based Target is the fourth most popular online retailer in U.S., after Amazon, Apple Inc. and Wal-Mart Stores Inc, according to comScore Inc., a marketing research firm.
But Target is the only retailer among the top five whose June traffic declined compared with a year earlier, though the drop was modest.
While traditional stores have been battered by the recession, online retail sales have held up relatively well and remained flat in this year's first quarter compared with a year earlier, according to comScore. Amazon, the largest Web-only retailer, increased its revenue 18% in the first quarter and 14% in the second quarter.
Target hasn't been nearly as aggressive as some competitors at efforts to blend online and offline stores. Wal-Mart and other retailers offer a service that allows shoppers to order products online and pick up them up in the stores without incurring shipping fees.
Amazon, which began as a book retailer, has slowly expanded the range of products it offers and now has become a first destination for many online shoppers.
Target is the latest in a string of retailers -- including Borders Group Inc. -- to part ways with Amazon. The company and Toys "R" Us began a bitter divorce in 2004 over whether Amazon was unfairly competing with the toy retailer on its own site; earlier this year Amazon agreed to pay Toys "R" Us $51 million under a settlement agreement.
"As e-commerce becomes a larger part of these retailers' business, they want to have more control over it," said Scot Wingo, president of Channel Advisor Corp., which helps retailers sell online.
Credit: By Ann Zimmerman and Geoffrey A. Fowler
My Research
