The Tipping Point in Retail & How Brands Rebalance
August 4, 2017 | Contributed by: Brett Knobloch
News from the last 30 days has us convinced that a tipping point has been reached with major brands selling online through Amazon. Once a sensitive subject among major brands who feared a backlash and loss of business from their traditional retail channel, the floodgates now appear to be open.
The June 22 edition of the Wall Street Journal, “Nike No Longer Runs From Amazon” broke the news of Nike reversing a long held stance of only selling through department stores and specialty retail outlets. Citing the decline of traditional retail volume, it felt the need to strike a deal directly with Amazon.
For its part, Amazon will crack down on 3rd party sites and counterfeit goods, which helps Nike. Nevertheless, footwear retailer stocks Footlocker and Finish Line took a beating on the news.
On July 24, Total Retail published a story saying that Sears has struck a deal with Amazon to sell Alexa-enabled Kenmore brand appliances through Amazon. Given that its traditional retail footprint continues to shrink – from 3,500 stores in 2011 down to only 651 today – Sears is offering one of its most iconic brands directly to Amazon.
What impact will this “green light” have on other iconic brands, home appliance manufactures, apparel and hundreds of other items sold through traditional retail outlets? Amazon is widely seen as a juggernaut that will continue to grow and innovate, with perhaps only Walmart being positioned well enough online to slow it down. Is traditional retail dead?
Rebalancing the Pendulum
For brands, if one retailer (online or traditional) dominates distribution or channel strategy, the said retailer effectively owns the brand. We learned this cautionary tale at an early age about “putting all your eggs in one basket.” The same logic applies here.
Brands should seek a balance of power with no one particular channel or retailer having the upper hand. In order to rebalance the scales, brands must level the playing field by helping its traditional channel partners.
One way they are doing this is through “collaborative commerce,” where a brand assists in making the sale and passing that along to their channel network. Brands like John Deere have been doing this for years. A simple to use checkout process guides the consumer to select a unit, accessories and select from a list of nearby dealers that can fulfill the purchase.
Dealers make sales. Brands offer convenience and control. Consumers are happy with brand and local dealer. Win-Win-Win. This is just one way that balance is achieved, and for iconic brands that are in it for the long haul, balance will continue to be important strategy.