changes in retail

Black Friday 2016 – An Emphatic Sign That Retail Has Fundamentally Changed

It’s been a year of transition for many retailers. Some in the industry would look at those changes in business strategy as a tipping point years in the making. Others could claim that it’s as unexpected as the Cubs winning the World Series.

We’ve all heard about how retail has been struggling lately. Consumers don’t shop the same way they used to, and traditional retailers are suffering mightily.

Fulfillment is the New Black…Friday

From the consumer’s perspective, things have changed for the better. Frankly, why would consumers care that retailers are having a hard time playing catch up? When technology works great, it’s a wonderful thing. I can get my package in 2-days with confidence? Sweet! Sign me up. Before our eyes we’ve seen the rise of fulfillment excellence become as important to conversions as price and customer service. Whoever can execute all three with aplomb, well then, we have a winner.

Speaking of a winner, have you heard about what Amazon did in sales over the Cyber Five weekend (or Turkey Five as someone coined)? How about $4.7 billion – or roughly 37% of the holiday weekend web sales. Now that’s winning Charlie Sheen!

Internet Retailer estimates more than $4.7 billion in sales happened on Amazon from Thanksgiving through Cyber Monday.

Key Road Signs That Point to A New Path for Retail

Back to that transition theme. What’s a retailer or brand to do? Some fascinating indicators have popped up in 2016 that deserve mention.

The Amazon Flywheel

Back in May of this year, Gap’s CEO Art Peck stated, “To not be considering Amazon and others would be—in my view—delusional…” We recall an eerily similar statement made that same week by Amazon’s Jeff Bezos, who said about Prime membership, “It is the company’s goal to make it irresponsible to not be a Prime member.”

It certainly feels like the Amazon Flywheel is in full-effect! Based on these most recent numbers, it seems irresponsible for any brand or retailer not to consider deeply how they should play not, or play nice with Amazon. Fiscally, is it more responsible to give Amazon its cut to gain access to this incredible audience base, or to build massive, multichannel marketing campaigns to drive consumers to your own domain? Will your fulfillment and customer service, your differentiation, be enough to have these consumers visit your site again? Is this a viable long-term strategy?

Seismic Demographic Shifts

While there’s tremendous reward, and risk, with any adopted strategy, retailers need to set convention aside for a moment and think like a Millennial. Massive demographic shifts, with aging baby boomers and hordes of Millennials not acting like they are ‘supposed to,’ has the retail whole world in flux. Exciting times! Point being, new thinking is needed within the industry. Technology will continue to be the change agent in how we act as consumers.

It’s Complicated Being a Brand

Some brands are doing an effective job in being both a wholesale provider to Amazon (first-party) as well as running an effective marketplace business (third-party) on the channel. Retailers with some amount of proprietary or exclusive SKUs can also employ a successful marriage of first- and third-party business.

Differentiation is an interesting topic, as it’s something brands and retailers are trying so desperately to achieve to woo consumers. Differentiation is difficult to achieve on the Amazon Marketplace, but not so much on your own domain. Amazon has done a very good job of commoditizing all retail by creating an environment that is seamless in its ability to compare and purchase with the utmost trust – in some ways, choosing one brand over another is irrelevant. Often as a Prime customer you’ll choose Prime as a filter set before you filter by brand. While brands and product still matter most, because they’re the ‘what’ we’re buying, there’s no differentiation required in ‘where’ we buy from (especially if a majority of buying happens on Amazon). Showrooming? Webrooming? As long as customers are buying your product, and you know the profit margins and percentages of where your transactions are taking place, why waste time on fighting changed consumer behavior?

Taking a Cue from Amazon

In November of 2016, Crate and Barrel announced the launch of the “Crate and Barrel Exclusive Marketplace, a highly curated marketplace offering consumers a broader selection of products based on Crate and Barrel’s merchandising expertise.” So while well-known players like Walmart and Sears launched marketplaces in the past, non-mass merchandisers are now entering the fray too. It certainly sounds plausible that consumers could be attracted to these unique products, products which weren’t previously available to C&B customers but now are. If the financials are right, it makes sense! Assortment is a wonderful thing, but I wonder if this will have any effect on customer acquisition without major marketing support. If it’s supporting the satisfaction of their most loyal and important customers, then maybe it’s a worthwhile approach in any event.

A Long Standing Relationship with Your Customer is Your Goal

Let’s not diminish the role your own domain has on how customers view your products. How else can brands create the right lens through which to look? What are some of the more compelling ways to drive customers to your brand? Here are some good focal points:

  • Community, a social connection point for like-minded individuals
  • Loyalty programs, which provide incentives for repeat customers
  • Exclusive access to products or events
  • Recurring delivery / subscribe & save programs can create predictable revenue
  • Content, content and more content – immerse consumers in your brand
  • Limited-time discounts (usually aggressive) not available on other channels
  • Technology features that provide enhanced shopping experiences

Marketers dream about having that one-on-one, personal connection with customers. They need to keep driving the initiatives that allow for this relationship to take root and develop, whether on their own websites or on a third-party marketplace.

Brands That Differentiate Materially Have the Best Chance of Winning

Want a gold-standard brand that’s been striking out on its own path since the beginning? Look no further than Patagonia. Patagonia.com and their print catalog are tantalizing journeys into far-off locales, filled with imagery, content and perspective that goes far beyond products and shopping.

Granted, the brand has a unique foothold with such a compelling founder as Yvon Chouinard. Many brands (and most retailers) aren’t quite set-up with such a ready-made view point. That’s too simplistic though. If their approach wasn’t authentic, they would not have achieved such resounding success in building a lifestyle brand that resonates well-beyond technical fabrics.

Speaking of success, how did Patagonia do on Black Friday? The company announced they would give 100% of their global retail and online Black Friday sales directly to grassroots nonprofits. Their goal was to reach $2 million in sales. They absolutely crushed that number achieving $10MM.

It’s no coincidence that outdoor brands like Patagonia and REI gave time off to their employees during the often grueling Thanksgiving week. They know that happy employees make better products, and treat customers better when they’re personally satisfied. Outdoor brands also have a keen eye on the planet, and their customers often appreciate this interconnectedness. It means something to them. What can brands in other product categories do to appeal to their customer base and foster a deeper relationship? Time will tell who does it best and how.

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