We have talked about the complex relationship between “bricks and clicks” in the past. That relationship is always evolving, and there are important trends brands and retailers should watch. While many brands and retailers view online mega-stores as the enemy, it turns out strategic alliances could be the ultimate key to success.
If You Can’t Beat ‘Em, Join ‘Em
We’ve been bombarded with the idea that online shopping is decimating the brick-and-mortar retail space. The reality is, as of 2016, only 11% of all sales are from online sources. However, that number is up 15% from 2015. While the takeover is slow, no one can deny consumers turn to online mega-retailers like Amazon every single day.
Small brands and national brands alike have struggled against the success of online behemoths like Amazon for years. However, by participating in marketplaces on websites like Amazon, those brands can ensure their products are getting in front of consumers who regularly utilize online mega-stores. For a fee, brands can sell their goods directly on these third-party sites. That fee does eat into margins, but it can level the playing field and allow brands to compete with sites like Amazon in new ways.
Many brands don’t like the idea of getting “into bed” with Amazon, and frankly, the fees for sellers can be quite high. There are other sites that offer marketplaces like eBay, the second largest online retailer on the internet. Right behind eBay is Wal-Mart which has been making a major play for Amazon’s market share in the last two years. Jet.com is owned by Wal-Mart and has a similar fee structure, but lacks the market share and name recognition of its parent company. There are certainly pros and cons to participating in marketplaces. Margins can suffer, but the exposure and the ability to piggyback on the success of online giants to attract new customers and even retain current customers may be worth it for specific products.
Introducing the “Reverse” Marketplace
It’s not just brands that need Amazon. Interestingly, Amazon is starting to need other retailers to expand its own services. When it comes to things like electronics for example, consumers often want to see, touch and test what they are going to purchase. People also still want a positive retail experience. Despite the convince of online shopping, there are times when customers want to talk to a human being, to have a pleasant shopping experience, and take their products home with them that day.
Amazon recently teamed up with Kohls stores to deliver a more personalized in-store shopping experience. Kohls has agreed to accept Amazon returns in-store as a means of driving foot traffic, but in establishing that relationship, Kohls also saw another opportunity that would be mutually beneficial to both parties.
Taking note of the success of Best Buy’s store-within-a-store concept, wherein retail locations offer dedicated space to brands like Apple, Samsung, Sony and HP; Kohls is offering a similar experience with Amazon. Select Kohls stores will have mini Amazon stores where customers can see, test and purchase electronics, like the Amazon Echo. Kohls gets the benefit of attracting new shoppers for a whole new line of products, and Amazon gets to deliver an entirely new type of experience for its customers, as well.
Blurred Lines, Bigger Bottom Lines
In today’s market, the lines between online shopping and brick-and-mortar shopping are getting blurrier. The way consumers browse and shop for items is constantly in flux, and winning retailers will find ways to leverage marketplaces and engage in mutually beneficial brick-and-mortar partnerships in order to deliver the experience their customers are looking for.