Source: Amazon.com
Retailers and brands become best of frenemies with Amazon
The list of retailers and consumer brands setting up their own storefronts on Amazon.com continues to grow. This is true, as a Reuters report points out, even as these companies remain wary of the e-tail giant’s access to sales data and whether that may inform Amazon’s initiatives to develop competitive private labels or other steps damaging to their businesses.
The news service highlights the experience of Chico’s FAS on Amazon. In January, Chico’s announced it would shutter 250 of its namesake banner’s locations as well as its Soma and White House Black Market stores. At the same time, Chico’s has been growing its business on Amazon to the point that it now has 2,300 items for sale.
Chico’s announced last May that it was beginning to sell a selection of its brand clothing and accessories on Amazon, including its Zenergy athleisure, no-iron shirts and So Slimming pants. Reuters reports that Chico’s current selection on Amazon is six-times what it started with last year. Amazon continues to handle fulfillment while Chico’s maintains control of the marketing, pricing and promotions of its products on the site.
Nike is among the highest profile brands that have begun working with Amazon in an effort to grow consumer direct sales. Like others, the global sportswear brand, however, is not putting all its eggs in Amazon’s basket. Nike is continuing to develop its own site to sell directly to consumers while engaging with other digital platforms, as well.
Amazon is not alone in focusing on building its third-party marketplace. Target recently launched Target+, a curated assortment of products from other brands and third-party sellers that complement its online selection. Walmart has also sought to broaden its digital reach with consumers through strategic acquisitions (Jet.com, Bonobos, Eloquii, ModCloth, Moosejaw, etc.), partnerships with retailers, including Advance Auto Parts and Lord & Taylor, and continued recruitment of third parties to sell on the walmart.com marketplace.
- Selling with the enemy: Why rival retailers embrace Amazon.com – Reuters
- Chico’s decides to join Amazon since it can’t beat it – RetailWire
- What will a Nike/Amazon deal mean for the brand and other retailers? – RetailWire
- Best Buy and Amazon expand their coopetition – RetailWire
- Party City to run pilot with Amazon, ‘the world’s largest and most trafficked mall’ – RetailWire
- Will a curated marketplace strategy be an online game changer for Target? – RetailWire
- Walmart adding plus-size women’s brand to its digital portfolio – RetailWire
- Walmart and Advance Auto Parts join forces online – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Are retailers and brands getting over their reluctance to sell on competitive marketplaces such as Amazon, Target and Walmart and, if so, why? What will this mean for the retailing industry over the next decade?
Poll
BrainTrust
Liz Adamson
VP of Advertising | Buy Box Experts
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
Amazon is a distribution channel, and increasingly retailers/brands are viewing it as such. For some retailers/brands, I believe there will always be a certain amount of trepidation with partnering with Amazon and the other major players. Over the long run, the increasing reliance on Amazon and others will likely create more homogeneity in the market as more and more of the things people want are available in the same places. At the same time, it will create real opportunities for the retailers/brands that choose to go their own way to stand out, Lululemon is a good example.
There’s the adage, “If you can’t beat them join them.” Even though the internet is far from new, we are still dealing with uncharted waters in many areas when it comes to clearly understanding what is going to work online or in-store. So I think more retailers realize they need to explore all options and see what works for them. There has been a reluctance to trust Amazon and for a good reason, because they are the powerhouse with tremendous control but at the same time many retailers have found success partnering with them. I would expect other online-retailer partnerships like Target to emerge in this new era of how to market goods and learning more about how consumers respond. Many feel that in the future there will be no stores. I doubt that very much, but I do see the continuing opportunities for the online shopping experience and in-store shopping experience to become more aligned and the consumer using either as they wish with when and how they want to. So retailers selling products on Amazon or other e-commerce sites is just another step toward getting all of us there.
Let’s face it: Amazon is the “new mall,” at the same time that it drives a huge amount of its own retail business. It is becoming a storefront for one chain after another — like Chico’s — as they find their physical footprint to be unsustainable in dozens of weak regional malls around the country.
The upside for chains like Chico’s is that they have a bigger e-commerce audience than they can cultivate on their own — but at the cost of giving up some control to Amazon and facing more direct online competition.
Retailers and consumer brands opening storefronts on Amazon is a simple recognition of where most customers start most online shopping. Amazon is where the customer is hanging out. That is certainly worth a short-term test with a lot of learning yet to happen to determine long-term viability. Then it’s a question of how to manage the assortments offered on Amazon to best protect the data that Amazon then has access to. If a brand skews its Amazon assortments to more basic, longer shelf life items, then Amazon won’t learn what fashion is selling. The brand then also risks the customer quickly tiring of not being offered a treasure hunt experience, at least on Amazon. I still think it’s worth trying. Explore and experiment. Learn. Retail is being reinvented. Participate in the evolution.
One of my top retail trajectories is “ubiquity is the new exclusivity” – that is, brands (including retailers) can no longer afford to limit their options or enter into agreements that curtail reach. Being many places is the only way to stay top-of-mind and online marketplaces are the logical large-scale move. Through marketplaces, retailers can monetize the digital platforms they’ve invested in so heavily and/or can pop their owned brands on others’ marketplaces with relative impunity. However, if this marketplace madness continues, brands (again, retailers included) will risk over-exposure and retailers will stand for nothing as third-party marketplaces morph into opportunistic online bazaars. Some brand marketers are beginning to create brands specifically for marketplace distribution. That seems like a wise way to play the game for now.
The growth and reach of Amazon can’t be ignored. Roughly half of U.S households are Prime members who spend more money and shop more frequently on Amazon than non-Prime members. To continue to grow their business brands need to go where their customers are. And right now customers are embracing free two-day shipping and other perks that come with shopping on Amazon.
Fellow panelist Mark Ryski pointed out that brands are increasingly viewing Amazon as a distribution channel. I’d take that one step further and say that brands are viewing Amazon as both a distribution and marketing channel that actually drives results in other channels too.
Here’s why:
Do they have a choice? For many of them Amazon is the largest retail platform available. How could they not at least try to create some commercial rapprochement with Amazon? As to the future, I guess it depends on whether or not Amazon finds it is more profitable to act as a platform, or digital mall; a retailer; or a hybrid, raking off profits from both options. I’m putting my money on Door Number Three.
I’ve participated in a lot of discussions with brands around their offerings on Amazon. Quite often, they expand on Amazon for political reasons — not because it’s smart strategically.
It works this way: The VP sales needs “good news” to tell. So when retail sales are “only” a 2 percent to 5 percent increases, they love touting a 15 percent increase on Amazon. Except, they also never add in that the 15 percent is of a very tiny number. And that misleads many of the brands on Amazon into committing there.
Each brand needs to ask very hard questions about Amazon in order to avoid getting carried into a bad decision from hype and erroneous perceptions. Maybe it’s a great idea. Maybe not. But clarity in knowing the real opportunity there is most critical — and I don’t see companies with clarity about Amazon very often. Interestingly, those who do get clear also usually get skeptical.
As long as Amazon is not a retailer’s ONLY online channel it seems foolish not to have a presence – especially if one can maintain control of marketing and pricing.
This is the wave of the future, PERIOD! Will anyone ever catch up with Amazon? Will anyone ever catch up with Walmart? Will Amazon and Walmart go head to head with bricks-clicks convergence? (Convergence doesn’t mean pasting them on each other!) Will clicks ever move intelligently INSIDE bricks, or will techies continue to see pathetic hand-helds, or even kiosks, as their entry there?
This whole show has been moving forward for at least 20 years, and it seems like minds are stuck in the mud. Think the future, not the present and immediate past. Looking FAR into the past can provide helpful perspective on the future.
Since 50 percent of online product searches begin on Amazon.com, it is hard for retailers to ignore the potential missed opportunities of not offering their products on Amazon. While many have held out for many years, we are seeing many big brands buckle and they are now listing their product with the “frenemy” – Amazon. Some of these retailers are offering a subset of their product line on Amazon and keeping some of the more premium or sought after models/styles for their branded website.
Well, since almost 1/2 of all consumers go to Amazon’s site for product searches FIRST, I’d say that brands are forced to join or die. You are definitely facing the risk of giving all of your customer and product data to them, but given that your competition is most likely also on their marketplace, it’s the price you have to pay.
Nike’s strategy for DTC is the best IMO: excellent direct ecom and apps, marketplace presence with AMZN and Jet, terrific stores and a fantastic social media presence. To me, they’re looking at the writing on the wall and eliminating the middle man, slowly but surely. Their strategy is the way of the future and something for other specialty retailers and manufacturers to emulate.
Amazon is a marketplace and represents another centralized selling channel for both brands and retailers. With that said, Amazon offers the scale and reach that both legacy retailers and emerging brands could leverage as another channel to connect, interact and engage with digital first consumers.
By entering into the Amazon ecosystem. Retailers and brands will now have a fighting chance for the consumer’s dollars, especially as Amazon has virtually become the starting point of any retail search request. Just as retailers struggled with setting up their ecommerce businesses, partnering with Amazon will take a crawl, walk, run approach. It’s key for any retailer’s or brand’s vitality to have a presence there, but by all means, they need to have their own unique digital selling channels, as well as a customer experience obsessed physical store.