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For the last couple of weeks, we were all watching the commotion surrounding Amazon's purchase of Whole Foods. You've seen the jokes; our favorite is above...
While that is big worrisome news for most everyone in food & groceries (except Walmart, for whom it was 'a mere smidge'), we at ArcherPoint Retail were really listening for Amazonian plans featuring the Fashion & Apparel sector, as it is one of our specializations.
We found that news and more. Between Amazon's announcement of the Prime Wardrobe program (plus its private label apparel brands) and Walmart's Bonobos deal (plus ModCloth, Shoebuy, and Moosejaw deals...), many are saying that this is a perfect storm, and the coming of the end of retail as we know it.
You could say it's a crushing disruption for the industry and pack up your shop...but you'd be missing the potential for small and midmarket fashion and specialty retailers.
We say this for two very fundamental reasons:
1. Retail shopping habits keep changing – yet the reasons behind them have remained the same since the onset of eCommerce. As someone once said, there are really only two kinds of shoppers: risk-averse ones that want a tactile experience, most likely in a store, and ones that don’t want to be in a store at all (they don’t mind the risk of an item not fitting—they order it in three sizes and just send two items back).
From there you can experiment with a host of differentiators that attract and retain the customers you want—all the while keeping an eye on market intel. Figure out which criteria you’ll satisfy and can excel at, and you’ve got a formula for success. Which leads us to No. 2…
2. Amazon is getting physical, growing its offline presence with acquisitions. According to Michael Corkery, “Some of the best evidence that brick-and-mortar retail is still viable may be Amazon’s experimentation with operating physical stores of its own.”
Here is corroboration that Amazon is still on the path to customer experience nirvana, just like you. Market domination is one goal; being part of a business you love, and your customers love, is a whole different goal. It’s a relationship goal; a lifestyle. When done well (according to your customers) it’s not easily replaced.
At the 10,000-foot view, what is Whole Foods getting? A much-needed infusion of agile technology to run the business successfully. What is Amazon getting? An upscale grocery business that’s closer to the customer.
In fashion and apparel, Amazon aims to hit traditional retailers (and their risk-averse customer segments) squarely in the dressing room with Prime Wardrobe’s ‘try-on-at-home’ service.
Free shipping and free return are Prime member perks, and this could get costly. But Amazon’s got some cushions (among many more) to soften any blows as they build this business according to Nick Wingfield of The New York Times: Prime’s annual subscription fees, powerful predictive analytics to make better recommendations, and subtle incentives that will actually discourage clothing returns (such as graded discounts for keeping more items per order).
And in spite of those buffers, Wingfield recently wrote, “there’s little chance Amazon will come to have in apparel the crushing dominance it has established in, say, books, because of the way clothing sales are fragmented among so many retailers.
"Last year, the company’s gross merchandise apparel sales — Amazon’s direct sales of clothing plus the commission it collects on sales by independent merchants on its site — were $22 billion, or 6.6 percent of the market, Cowen and Company (a stock research firm) estimated. By 2021, the firm has forecast, Amazon will account for just over 16 percent of apparel sales.
Apparently there’s still plenty of space in that dressing room.
With that in mind, here’s some simple food for thought (pardon the pun); some lessons for midmarket specialty retailers.
1. Align for the long-term. Redesign your business model with a comprehensive intelligent omnichannel infrastructure that scales with your growth; so your business can provide you with everything you need to give your ideal customers what they want.
2. Operate from a truly customer-centric omnichannel culture. Design your business infrastructure around the customer experience on which you would stake your reputation—aligning and investing in people, processes, data, and technology to support that goal.
For Amazon’s Bezos, business is about making customers’ lives better by continually removing frictions from the shopping experience. For luxury retailer Net-a-Porter, it’s about curating the EIP Lifestyle (Extremely Important Person), and their customers dig it.
3. Build partnerships that enhance business capabilities. A cautionary tale, according to L2inc’s Scott Galloway: “Target and P&G are a model for cooperation in the face of the real enemy. When Amazon started drop-shipping from P&G’s warehouses, Target got angry. The reality is if Target had those capabilities, P&G would have presented the same opportunity. Retailers need to more tightly integrate their supply chain with key brand partners and think about flexible / integrated inventory sourcing models.”  
Here's an interesting 'partnership' — Check out how real estate is helping smaller retailers compete: "Instead of ambitious plans to turn a big Red Hook industrial waterfront site into a glassy tech office compound, the site’s existing warehouses will be modernized and used as facilities to store items purchased online for quick delivery in NYC," writes Amy Zimmer of dnainfo.com.
Amazon and Whole Foods. Red Hook and retailers. Rogers and Astaire. Whether it has to do with suppliers, fulfillment, distribution, customers, or causes, a partnership (or several) can make the difference when it comes to keeping your ideal customers close, and well-heeled competitors with deep-pockets at bay.
 
Beam me up, Alexa.
 

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