Monday February 6th, 2012 - 12:41PM
Target’s recent letter to vendors asking them to help prevent online-only retailers from undercutting store selection and pricing didn’t specify Amazon.com. It didn’t have to.
Amazon gets plenty of static for shunning minimum-advertised-price (MAP) agreements. So do vendors that sell the e-tail giant while enforcing MAP with traditional retailers and other online-only outlets.
Top brick-and-mortar chains also need to take their share of the heat for a business model so focused on weekly sales, coupons and sinking pricepoints that they have become more vulnerable to Amazon’s leaner infrastructure, all-inclusive selections and irrepressible price policies.
Expect other big traditional retailers to formalize similar demands of vendors in the wake of Target’s letter. And expect more headaches for vendors yet again facing the cumbersome and costly task of segmenting key products and lines if they want to sell store-rooted retailers, Amazon and other e-tail pure-players— with no guarantees any of them will bite.
We’ll find out if brick-and-mortar retailing has lost some leverage, or if vendors are willing to play hardball with Amazon and the like.
Before online sales took off, Amazon openly acknowledged its role as an online research outlet that helped drive brick-and-mortar sales. Now the table is turned on even the biggest of traditional operators rightfully worried their stores are becoming showrooms for online-only retailers.
Is it really possible that today’s national power chains could go the way of catalog showrooms if they can’t adapt swiftly enough to counter all those sales shifting to best-price-focused, online-only players? It’s hard to fathom, but the retail scrap heap is littered with retail brands once thought to be invincible, and more will follow.
Anchoring Their Future
Target and other traditional retailers know their own online growth doesn’t trump the need for productive stores to anchor their future. Squeezing vendors will get these retailers only so far if they can’t alter the pursuit-for-the-best-discount mentality on which online-only retailers such as Amazon have preyed.
Just one day after the Target letter went public, Ron Johnson and his team went public with their initial strategy to remake J.C. Penney’s stores into a more compelling consumer draw. The plan calls for brand-dominant “shops” and personalized services that don’t rely on hundreds of sales each year.
Suppress The Urge
Reinvention is the new offspring of necessity for traditional retailers. They need to create new store concepts and methods that suppress the price-comparison urge as intently as they ask vendors for protection from Amazon and other online-only retailers.
Even the most compelling store experience won’t keep shoppers engaged and coming back if the products that populate the store aren’t equally captivating. It’s unlikely we’ll see a day when every item in every category in every department in every store is an exclusive national brand, even though it sometimes seems we’re headed there.
So, yes, vendors must be creative, nimble, assertive and well-financed if they have any intention to develop meaningful custom solutions that can keep every potential customer satisfied— from traditional retailers to Amazon to anyone else that might emerge to challenge the market’s rules.
That traditional retailers are crying foul might be understandable. Any plans to level the playing field, however, have to go deeper than asking vendors for more help.