Dive Brief:

• Gene Munster, managing partner at venture capital firm Loup Ventures and a former Piper Jaffray analyst, and his team sparked a heated discussion this week after predicting, among other things, that Amazon could buy Target in 2018, according to a company blog post.

• Target is the ideal offline partner for Amazon for two major reasons, the firm said: shared demographics and a manageable but comprehensive store count (with roughly 1,830 stores). Target’s focus on moms in particular "is central to Amazon’s approach to win wallet share," according to Loup’s note.

• Buying up more brick-and-mortar stores wouldn't be unfathomable for the e-commerce giant. Amazon's recent acquisition of 470 Whole Foods stores, along with testing of the Amazon Go retail concept, is evidence the company sees the future of retail as a combination of mostly online and some offline, Loup said.  

Dive Insight:

The likeliness of such a deal occurring depends on who you ask. Amazon and Target share customers to a great extent, considering Amazon’s Prime membership overlaps with Target’s higher income, better educated core customer, according to marketing consultancy Magid. But Amazon would need to dig deep to determine whether Target's operations are worth the expense, according to 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."

It’s certainly doable, according to GlobalData Retail Managing Director Neil Saunders. "Target is in an interesting position as it is recovering nicely and has a solid proposition, yet remains undervalued," he said in an email to Retail Dive. "This may make it of interest to Amazon and would support the company's drive into physical retail."

An ideal takeover target for Amazon is a retailer with strong physical retail but not necessarily strong e-commerce, Fosina also said. Such a retailer "can put solid infrastructure and operational efficiency along with brand to improve overall value to the customer and profitability to the bottom line," he said.

It could be a win for Target, too, and it could arm Target and Amazon against a surging Walmart. "A deal with Amazon allows the combined company to consolidating their operating expenses and build a new working model that provides much better bottom line," Fosina said. "Amazon is No. 1, Walmart is No. 2 and Target is the distant No. 3. Acquiring Target gets Amazon in both the first and third position, accelerating advances on Walmart but, more importantly, it puts Amazon into the brick and mortar business, which would give them double advantage on Walmart — both direct and retail."

But not everyone can see it. "The idea of Amazon buying Target just seems so fantastic to me that I doubt it’s true," Lee Peterson, executive vice president of brand, strategy and design at global retail design firm WD Partners, told Retail Dive in an email. "Sounds like a good PR stunt more than anything. Besides, Target is no Whole Foods in terms of size and when it comes to the old activist investor burning platform. If anything, a merger or even a partnership (lockers?) might make more sense given their size, but even that seems pretty far fetched."

Since Amazon’s summer acquisition of Whole Foods last year, speculation about its next possible move has been rampant. Last year, Jeff Glueck, CEO of location intelligence company Foursquare, maintained that the company had the data to suggest that Amazon may be interested in home improvement retailer Lowe’s, eyewear startup Warby Parker or department store Nordstrom. 

Target's performance of late could make it a pricey bauble, Peterson said. "Target is doing pretty well on their own at the moment, which would make the price untenable, defying the immutable Wall Street law of ‘buy low, sell high,’ he said. "To me, someone like Kohl’s would be a more likely bet: free standing units, good number of stores in the right demographic areas, and with stores that aren’t 120,000+ square feet."

Kohl’s has already tied up its fortunes with Amazon to some extent. Amazon now has space carved out in 10 Kohl's stores in the Los Angeles and Chicago areas, dedicated to the "Amazon Smart Home Experience," plus an area for Kohl’s to take returns.