Chico’s decides to join Amazon, since it can’t beat it

Discussion
Photo: Chico's FAS
May 01, 2018
George Anderson

Chico’s FAS is the latest large retail chain — joining the ranks of Best Buy, The Children’s Place, Sears and others — to decide that the potential benefits of selling on the Amazon.com marketplace outweigh the risks of trying to go it alone against the e-tailing giant.

Yesterday, the company that operates its namesake brand as well as Soma and White House Black Market, announced that it would begin selling a selection of Chico’s brand clothing and accessories, including its Zenergy athleisure, no-iron shirts and So Slimming pants, on Amazon beginning the middle of this month.

All items sold on the site will be eligible for free shipping, returns and other benefits through Amazon. Chico’s will maintain control of the marketing, pricing and promotions for its products sold on the marketplace.

Shelley Broader, CEO and president of Chico’s FAS, said her company “will be one of the few vertically-integrated specialty retailers with Prime eligibility,” a fact that she says is “a testament to the strength of our iconic brands and their growth potential.”

Chico’s, which operates 1,460 stores in the U.S. and Canada, saw its same-store sales fall 5.2 percent during the fourth quarter.

DISCUSSION QUESTIONS: Do you see the floodgates opening for major brands and retailers to begin selling on Amazon’s marketplace? What are the ramifications for retailers with strong customer bases such as Chico’s?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Retailers are realizing that there are ways to leverage this platform, without completely compromising their traditional brick-and-mortar business."
"There is no better retail customer experience than what Amazon provides and when you can work on more or less your own brand terms..."
"There will be a short-term gain for Chico’s but Amazon will absorb their shoppers. History does repeat itself..."

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24 Comments on "Chico’s decides to join Amazon, since it can’t beat it"


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Mark Ryski
BrainTrust

I’m not sure the floodgates will open, but clearly this is a trend. As has been discussed in previous discussions, Amazon is a powerful product discovery platform and retailers across virtually every category are realizing that there are ways to leverage this platform, without completely compromising their traditional brick-and-mortar business.

Tom Dougherty
BrainTrust

If the floodgates do not open soon expect everyone on the other side to drown.

Shep Hyken
BrainTrust

For these big brands, Amazon is another channel. You get the benefit of widespread distribution with one of the most powerful retailers and search engines (yes, Amazon is a search engine) on the planet. So what took them so long?

Anne Howe
BrainTrust

It’s a huge benefit for Chico’s to be a part of the Prime marketplace on Amazon because the Chico’s brand has a unique sizing system that new customers will need to get acquainted with. This move allows Chico’s to cut back on store count, but I suspect the brand will have to be more savvy in “outfits and accessories” merchandising to maximize the Chico’s experience online.

Paula Rosenblum
BrainTrust

This is a very strange and self-defeating trend. Retailers fear Amazon, but now they’re selling on it. Amazon is suddenly making a significant profit, and I believe that’s a result of two things on the retail side: 1.) Expansion of the marketplace in general, and 2.) Third-party Prime sellers.

I hope everyone remembers this as Amazon suddenly becomes even more profitable. And uses their customers’ email addresses to send ads for their own private label.

I understand people believe that Amazon is the default product search engine, but I still think it’s a bad decision. Really bad.

Phil Masiello
BrainTrust

49 percent of U.S. households have Prime memberships. Amazon.com has over 7 million daily site visits and over 50 percent of all U.S. e-commerce sales flow through Amazon along with 4 percent of all U.S. retail sales.

Not every person in the U.S. knows Chico’s or many of the other brands. Plus with the enormous traffic flowing through Amazon, every brand should be represented on the marketplace. Because that is where the customer is.

So if you want to grow your brand, use every tool necessary. And if you are smart, like Chico’s, you will control the brand, price points, brand image and other aspects so you are not competing with resellers.

Great move.

Brandon Rael
BrainTrust

The challenge for Chico’s and similarly-sized retailers is that the default search engine for retail shopping, especially from a mobile perspective, has evolved to be Amazon. It’s critical, however, that even if you are maintaining a brand presence on Amazon’s platform, you balance your own messaging while taking advantage of the marketplace’s discovery capabilities.

It’s a delicate balancing act, as ultimately the Amazon marketplace reach and capabilities increase in size and scope, while the retailer now has another channel to engage with their customers.

The customer will also benefit by taking advantage of the Amazon Prime shipping savings, etc.

Neil Saunders
BrainTrust

This is very much a doubled-edged sword and brands like Chico’s need to take care they don’t cut themselves with this type of strategy.

Amazon is a powerful channel and can be used to increase exposure and sales volumes. However, there are two dangers.

First, this helps strengthen Amazon and, ultimately, its own ambitions in apparel — which are mostly around its own-labels.

Second, it has the potential to cannibalize sales from Chico’s own stores. This is especially so as, in my view, most of Chico’s stores do not add all that much value to the shopping experience.

Each retailer is unique but, in Chico’s case, I see this as a matter of short-term gain for long-term pain.

Mohamed Amer
BrainTrust
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
1 year 3 months ago
Thinking in zero-sum terms can be dangerous. Someone’s win does not always equate to another’s loss. As a whole, retail can grow and while the growth rates may be different by format and “channel,” there’s growth to be had and it’s better than the alternative. The trick is to find a path that is best suited for your own brand and customers. Although it carries some risk, Chico’s decision is sound and worth taking. They have instilled some controls to protect the brand while gaining increased awareness through Amazon. What will be interesting to see is if Chico’s can use the customer traffic on Amazon to enhance the in-store experience at their banners. For its part, Amazon gains one more brand on their site that increases the value of Prime membership. Most importantly, the customer gets easy access to select lines of products from Chico’s within the Amazon services umbrella. Each retailer has to decide how to deliver value and remain a viable business. The days of going it alone and relying on a merchant’s… Read more »
Richard J. George, Ph.D.
BrainTrust

The key metric in this article was the 5.2 percent same-store sales loss during the fourth quarter, which happens to include the inflated holiday shopping period. While one can argue that the Amazon relationship is not ideal for Chico’s, one cannot argue that Chico’s can afford to stand pat in the marketplace. Despite the noted downsides in the article and made by other BrainTrust panelists, Amazon gives Chico’s terrific exposure and an opportunity to learn from the relationship. This may not be a forever deal but it is one that needs to be undertaken now. I believe the floodgates have already opened. The challenge for such retailers today is to develop a dual strategy for online as well as brick-and-mortar to meet the changing need of its current and future customer base — no easy task.

Ricardo Belmar
BrainTrust

While this is definitely a trend, I don’t know that I would say the floodgates are opening. Retailers like Chico’s are simply recognizing they can use Amazon’s marketplace as yet another sales channel to reach their customer. The risk is that the customer feels more like an Amazon customer than a Chico’s customer. If Chico’s maintains integration of these purchases into their customer’s purchase history such that when they arrive in-store, associates can still access this purchase history via a tablet then they will have successfully enabled Amazon as another channel without losing the customer in the process.

Harley Feldman
BrainTrust

Not floodgates, but cracking in the dike. Clearly some retailers have determined that Amazon can attract more customers than they can on their own. This will be trend, but not everyone will join the party. Even Chico’s is setting a limit to the products sold on Amazon vs. their own site. Chico’s will determine over time if this use of Amazon is worth the margin they will be giving away on the Amazon-listed products.

Adrian Weidmann
BrainTrust

Joining the Amazon marketplace seems like a good idea but beware! As soon as Amazon gets your data they will be sending and promoting their brands, products and services. There will be a short-term gain for Chico’s but Amazon will absorb their shoppers. History does repeat itself — The Greeks defeating the Trojans using their Trojan Horse. In nature, it’s the lamprey eel. Believing that joining the Amazon marketplace is beneficial for your brand is simply an ill-informed bad decision.

Seth Nagle
BrainTrust

Partnering with Amazon is a great opportunity for retailers to gain new shoppers as Amazon continues to be a daily touchpoint for many households across the U.S.

It’s imperative though that retailers have a sound strategy and stay true to their brand and avoid the race to the bottom when it comes to pricing.

Georganne Bender
BrainTrust

Chico’s is known for its hands-on approach to helping shoppers. Fans say that one of the best thing about shopping there is the customer service — those associates know how to dress a customer, right down to the last accessory. Not every item will be listed on Amazon and Chico’s is maintaining control of the marketing, pricing and promotions, so that’s a good thing. It does feel weird to think of established retailers selling on Amazon, yet we’re okay with finding items from other retailers displayed at Nordstrom or sold on QVC. Chico’s is taking a calculated risk, I say good for them.

Byron Kerr
BrainTrust
Byron Kerr
Head of eCommerce, Tuft & Needle
1 year 3 months ago

Happy to see a brand leverage Amazon in a brand-accreditive way. Chico’s can play a differentiated SKU/experience where Amazon may hold certain staples but their own site or brick-and-mortar stores carry exclusives only available there. Leveraging Amazon as a sales/branding channel while maintaining strategic, engaging relationships in-store can allow brands like Chico’s to still maintain that intimate relationship with customers who desire that.

Nike is doing the same thing on another level selling staples on Amazon while leveraging AR experiential shopping for new products, building communities and tribes to enhance digital adoption.

Kevin Simonson
Guest

Great article! Thanks George.

Not surprised about this partnership. Amazon makes a lot of money for a lot of companies. $177 billion dollars, according to recent projections. Not bad. It’s certainly more money than the revenue generated on most e-commerce websites.

But companies should remember this: Amazon is a marketplace. It’s not a tool to help you specifically make more money.

Our agency still prioritizes Amazon as a focus channel alongside search and social. We view it as extremely important for modern, growing e-commerce brands. We work with several of our clients on both paid Amazon and operational management, and have seen outstanding results. But only if it’s integrated with your other digital marketing efforts.

Peter Luff
BrainTrust

Looking past the Amazon brand and its association as a threat to retailers, the market place is just like an e-mall. It attracts lots of traffic, so as long as the commercials stack up similar to bricks and mortar mall, why not consider it as just another outlet for your offering? Retail is changing; it’s certainly worth considering as part of your whole go-to-market strategy.

Ed Rosenbaum
BrainTrust

This is starting to remind me of when the Internet got started. Someone tried to explain it as a comparison to a mall where we could walk down the aisles and see stores on either side. Thus having the ability to go in any store we wanted; and then enter others as our needs dictated. If you have that vivid an imagination, as I am accused of sometimes, you can see how it could be compared to the Internet.

Now fast forward to today. Can we be seeing the “new Internet” as it relates to only retail in the form of Amazon? I can see the similarity over time. But I am not clairvoyant enough to forecast where it might lead.

Phil Rubin
BrainTrust
1 year 3 months ago

For a number of retailers with a “nothing special” customer experience and/or brand — online or physical — Amazon is their only hope. For others, like Nike, it’s a strategic relationship that follows the recognition that with 100 million Prime members, everything even a leading brand like Nike does is relative to AMZN.

There is no better retail customer experience than what Amazon provides and when you can work on more or less your own brand terms, as Nike is doing, it’s a win-win proposition.

The challenge for most retailers, leading them to see AMZN as their best hope forward, is that they have failed to:

  • invest in the customer and run their business with the customer at the center
  • recognize the value in customer data and relevance, and the corresponding degradation of that value by being overly reliant on discounting
  • build a compelling and unique brand proposition

While it’s easy for retailers to see AMZN as Darth Vader, it’s also true that “the enemy of my enemy is my friend.”

Craig Sundstrom
Guest

“…same-store sales fall 5.2 percent during the fourth quarter…”

Hard not to believe this isn’t the motivator behind the action. So unless there are a flood of similarly poorly performing retailers who are willing to cross their fingers, I don’t see a mass migration. (Not that there aren’t benefits — and costs — of getting in bed with Amazon regardless of how well you might be doing.)

Boy, if Faust could teach Retailing 101 today….

Joan Treistman
BrainTrust

As long as Chico’s and other retailers continue to differentiate their inventory in alignment with their brand’s equity I think Amazon is a wonderful opportunity. Retailers will have to learn how to navigate potential pitfalls that will blur their identity with (in Chico’s case) other apparel offered on Amazon. At the same time retailers will recognize and profit because for many reasons including shoppers’ convenience and accessibility Amazon is another low rent/high traffic address.

Mike Osorio
BrainTrust

In a well orchestrated strategy, I believe most consumer brands and retailers would benefit from siting on Amazon’s platform. As some here have mentioned, it is a typical low rent/high traffic real estate play. The winners will be those that have differentiation for their products, the way they interact with the consumer, etc., that allows them to stand out as consumers search on the platform. While the difficult business trend may have pushed them to make the decision now, I think it would still a good decision even if comps were +5% instead of -5% if they follow the points above.

Javier Cazares
Guest

This is a natural consequence of the Amazon power. Retailers this size and with similar challenges will consider this same strategy as part of their unified commerce strategy. It is wise to stop fighting the giant enemy to better focus on enhancing their brand. Many more to follow.

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Braintrust
"Retailers are realizing that there are ways to leverage this platform, without completely compromising their traditional brick-and-mortar business."
"There is no better retail customer experience than what Amazon provides and when you can work on more or less your own brand terms..."
"There will be a short-term gain for Chico’s but Amazon will absorb their shoppers. History does repeat itself..."

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