Update: The Amazon Tsunami

No matter what segment of retailing you are in or what merchandise you are selling, every retailer is keeping a wary eye on Amazon. As we sure do. 

But, the Thursday, April 7 edition of The Wall Street Journal had an update on Amazon that, once again, can take your breath away: "Amazon’s Fashion Secret: Full Price", by Suzanne Kapner.

According to Kapner: “Dozens of brands now sell directly to Amazon, including department store stalwarts such as Nicole Miller, Calvin Klein, Kate Spade, Lacoste and Levi Strauss. And, just recently, Ralph Lauren shoes."

Why is this happening? For brands, Amazon offers growth – now without having to discount – at a time when department store sales are sluggish. 

Indeed during one 21-day time period (Jan. 28–Feb. 17), “Including sales by third parties, Amazon had higher average prices than Macy’s and Kohl’s on 69 items of women’s and men’s clothing and shoes.”

Of course, some department store executives still cling to the idea that Amazon will not be prepared to deal with returns. Hmm. Amazon has proven time and again that operational and logistics issues are not a deterrent.

Moreover, Kapner reports, “Amazon has advantages [for the brands] that traditional retailers are finding hard to match, including analytics data that help brands target shoppers by letting them know which styles and sizes sell best by region, and more sophisticated pricing.”

Ahh yes, “dynamic pricing”. Amazon’s unmatched analytics (and algorithms) allow much more responsive pricing than department stores.  For Amazon, price changes occur online, without having to be matched in hundreds of stores across the country. 

In fact, during that same 21-day time period, “Amazon changed prices 9.2 times on average per item, while Macy’s changed prices 2.1 times and Kohl’s did so 1.5 times.”


"Of course, Amazon will not depend on the brands for its growth; it is making many other inroads into fashion. It has acquired online sellers of designer brands, hired talent, launched a flash sale site, improved its presentation (its photography studio in Brooklyn creates magazine-like spreads for its site), created its own private-label products, and launched a live fashion show that streams each evening on the web."

But the key value persists: Amazon continues to relentlessly seek and capture the real prize, more and more customer data. Their stated goal: "turn the art of retailing into the science of retailing."

Can this tsunami be thwarted? Hmm.

Well, others have been. Think Kresge, Montgomery Ward, several "big box" specialty stores, many department stores, Sears, now maybe Wal-Mart. 

Stay tuned......

The Lure of Retailing for Manufacturers

According to a recently published eBook by Channel Advisor*, branded manufacturers are wondering: "Should we complement the traditional model of selling solely to wholesalers and retailers by selling directly to consumers?"

And the encouraging advice offered to these suppliers by Channel Advisor?

• "The short answer: Yes, you should."
• "Luxury brands, apparel brands, household product brands – they're all joining the party."

Meanwhile, The ROI's recent survey of retailers (see all results here) confirmed that manufacturers are seizing this opportunity. Indeed, this prompted some retailers to write:

• "We need less on-line competition from our vendors." 
• "Vendors selling directly to the consumer is a huge problem." 

No question, this is a sensitive issue for retailers, and often a frustration. 

But is it really a problem? 

Keep in mind that, over the years, many manufacturers have tried it and failed. Not all, but many. They think that retailing looks so easy! 

But, success in retailing requires a special mix of skills that very few manufacturers can accumulate.

One seasoned specialty store retailer we know exclaims, "Whenever someone says to me they want to open a store like mine, I say 'Great! You should do it!'"

Why so encouraging? He knows that only the pros can make retailing look easy, and work well.

Perhaps those manufacturers tempted to heed Channel Advisor's advice should also be reminded of this old saw: "The best way to make a small fortune in retailing? Start with a large one!" 

Manufacturers selling direct to customers is a genuine frustration. But.... 

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*"Branded Manufacturers: Should You Sell Direct?"
Channel Advisor eBook