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

The Case of the Missing Customers

We're heard from several very experienced retailers this past week that sales and in-store traffic have just dropped off since early February. Altogether spooky.

Indeed, 6 out of 10 respondents to our recent survey of retailers reported that customer counts (transactions) are down so far this year.

What's going on? Where are the customers? 

We can only speculate, but our suspicion: the 2016 Presidential campaigns continues to dominate the news in unprecedented and relentless fashion. Every day, the news is full of more uncertainty and disruption. 

And this democracy-in-action upheaval is taking a toll on retailing. This year, there is no "business as usual"!

• In a nation whose favorite spectator sports are auto racing and football, it's no wonder that this politcal spectacle has commanded our attention: When and where will the next collision occur?
• In this case, a "collision" is, distractingly and potentially, a major change in how our country is run, and how it is perceived around the world.

In fact, it seems to us that no "news item" in recent history has ever been more captivating. It not only is being watched; it is being stared at, mouths agape! 

Our hypothesis: You bet, most customers are distracted. And concerned. And spending less confidently. Aren't you too?

Your Shoppers Deserve to Know You Better

We hear it over and over. "Good business citizenship" matters to shoppers. They vote with their feet, their wallets, and their hearts, and increasingly choose those retailers who "do the right thing", whether it's how they source product, hire and pay employees, reduce environmental impacts, etc.

Followers of The Retail Owners Institute® know that one of our beliefs is that "Retail is a mirror of society."  And independent retailers, especially, are often in the forefront of "good business citizenship".

So, why not let your customers know?  As Joe Kefauver wrote in Retailing Today*:

• "Is there a fun way to let people know how many employees at a certain location have gone from entry level to a management position?
• "Can a company creatively communicate how many volunteer hours or non-profit dollars a certain establishment contributed to the community over the past year?
• "How is a given unit and its larger company talking about the use of its culture of opportunity to help leaders in a city solve problems?"

These are the things that independent retailers do day in and day out, without perhaps even realizing how special they are!  And especially in today's world, these are your competitive edge!

• Many of you are using social media to promote sales events, new product arrivals, etc.
• You already are finding how to convey your store's personality when it comes to your merchandise.
• Why not also use it to share how you do business? That is what increasingly matters to your customers.
• As a retailer, you likely are one of the civic leaders in your community. It's okay to let people know.

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* "What retailers can learn from Uber's playbook", Guest Viewpoint by Joe Kefauver. Retailing Today, February 3, 2016.

About Those Wal-Mart Store Closings

Perhaps you also have noticed the recent announcements that Wal-Mart will be closing 269 stores, 154 of which are in the U.S. In several breathless pieces about this announcement, much attention was focused on the negative impacts the closings will have on their respective communities. Perhaps so.

Maybe the spirit of The Retail Owners Institute® is misguided, or we're looking through rose-colored glasses, but we can see opportunities galore! Consider this:

For every $1 million in sales that a closing Wal-Mart was doing, there's $500K of volume for each of two new or expanding merchants. So, closing a $10 million store might sprout 20 small businesses right down old Main Street!

In most communities, there are several good merchants already. We can imagine those folks stepping up quickly to help fill the vacuum a closed Wal-Mart created by adding stores without adding much administrative overhead. One good bookkeeper can handle more than one store. Same with POS systems, for example.

Or, a Wal-Mart closing can prompt new retailers, who can take advantage of the many in-the-cloud resources to reduce admin costs and introduce new retail concepts to a community.

Take That, Chicken Little! The Sky Is NOT Falling!

See, there well could be great opportunities out there. At least for those who are not distracted by the negativity. And retailers, more than most any other group of business owners, are incredibly optimistic.