Will Smaller Retailers Agree to Ride the Amazon Retail Wave?
There’s an old saying that goes: “If you can’t beat them, join them.” That seems to be the line of reasoning many brick-and-mortar retailers are now operating under as they consider whether to team with the e-commerce giant Amazon.com (NASDAQ:AMZN). Smaller retail companies understand that, even as a whole, they’re no match for the retail behemoth that is Amazon, but many have consistently wondered if it’s in their best interest to keep on fighting, or concede and join the enemy. Now, it looks like they’re ready to do a little bit of both.
The Wall Street Journal reported last week that several retailers previously shunned the online marketplace — including J. Crew, Ralph Lauren, Abercrombie & Fitch (NYSE:ANF), and Neiman Marcus Group – are in talks with Amazon over the possibility of Amazon.com hosting listings of the companies’ apparel as part of a partnership that both parties could benefit from. Amazon’s listings would be links to the retailers’ own sites, boosting its traffic, and also serving to help Amazon collect more customer data, making its service the most appealing it can be as it gears up to raise the price of its popular Prime program.
It sounds like a win/win for all, but don’t forget brick-and-mortar companies have battled fiercely with Amazon over the retail space that was once its own. Whether Amazon is helping these companies’ business or not, a relationship with the Seattle, Washington-based corporation would help it gather even more data on the most recent consumer trends, and Amazon could turn around and use that to further undermine its competitors. According to the Journal, Amazon has already upset some of the retailers on its site who believe the company uses its marketplace as a lab to test pricing strategies and recognize new products to sell, without always looking out for the best interest of its alleged partners.
Still, Amazon’s offer to the retailers in question is an appealing one, as it promises not to sell the goods directly, but rather provide links to the retailers’ own sites. The Journal says that according to an insider source, under one scenario that has been considered, Amazon would offer the goods with free shipping to its Prime customers, and then retailers would be responsible for arranging and paying for the deliveries.
That Prime free shipping guarantee is what Amazon continues to believe will draw in more and more customers, even as it plans to raise the price of its program $20 to 40. The retail giant currently has more than 20 million Prime customers, mostly in the U.S., but there has been speculation over whether Amazon can maintain those membership totals if it raises prices, and it is clear that these latest partnerships could definitely help. Amazon already has an program where smaller retailers pay Amazon a sum to direct traffic to their websites and for any resulting transactions, but more settlements with bigger retailers could help the company further boost the appeal of its offerings, and convince shoppers that the elevated price of a Prime membership is worth it.
So now it’s up to the anti-Amazons to decide. Resist the Amazon current or ride the wave? Online retail still only accounts for 10 percent of the total retail industry, but that number is growing quickly, and if companies want to survive in the evolving retail landscape, it may need to make some sacrifices.