Are vendors and stores headed for a fight over Amazon?
Hanesbrands, the parent of Hanes, Champion, Playtex and a number of other apparel labels, has been aggressively reallocating resources over the last several years to capitalize on retail sales moving from stores to online, but last week acknowledged it’s not been fast enough.
Sales in the fourth quarter missed expectations even though the company saw 28 percent growth in domestic online revenue across channels. On a conference call with analysts, Gerald Evans, CEO, said, “The current scale of our online business was not enough to offset the pressures in U.S. brick-and-mortar.”
Online revenue for Hanesbrands across all channels grew to 11 percent of its domestic sales in the quarter versus eight percent for the full year. Amazon.com became its fifth largest customer in 2016 with sales growing at a “strong double-digit rate.”
Going forward, Hanesbrands will “continue to aggressively follow the consumer.” Assortment will be broadened across online channels and digital will increase to over half of Hanesbrands’ total media spend in 2017.
At the same time Handesbrands will plan more conservatively for its brick & mortar channel activity. Said Mr. Evans, “The shift online is not only pressuring store traffic, but it’s also reshaping traditional shopping patterns as store visits are becoming more concentrated around key promotion events. Therefore, we’re going to be more targeted with our promotions and we’re planning for tighter inventory management at retail.”
Vendors aggressively pursuing online sales may not please retail partners, particularly those with sizeable brick & mortar presences and particularly when much of their efforts are concentrated on serving Amazon.com.
Shares of Autozone, Advance Auto Parts, O’Reilly Automotive and Genuine Parts all fell on January 22 after a New York Post report indicated a number of the largest auto parts suppliers reached deals to distribute through Amazon. Amazon is reportedly paying more to the suppliers while under-pricing the retailers.
“If Amazon is committed … they are definitely going to pick up some share,” Northcoast Research analyst Nick Mitchell told Reuters.
- HanesBrands Reports Fourth-Quarter 2016 Financial Results – Hanesbrands
- Hanesbrands Q4 2016 Results – Earnings Call Transcript – Seeking Alpha
- Amazon’s next frontier to conquer? Auto parts – New York Post
- U.S. auto parts sellers skid after report on Amazon’s entry – Reuters
DISCUSSION QUESTIONS: How should vendors manage online growth opportunities when efforts rankle their traditional brick & mortar partners? What options do retailers with sizeable brick & mortar presences have in these situations?