Retail Game Plan: Partnering With Amazon, Instead of Fighting It

January 23, 2018

The battle against Amazon within an increasingly competitive retail arena is creating a lot of casualties — and there are retailers that would rather be playing on the same team. That’s why some are now partnering with Amazon, hoping to boost sales and reach more consumers.

Recent figures show just how much of a threat that e-commerce has become for traditional brick-and-mortar retailers. In 2016, an estimated 43 percent of all online retail sales in the U.S. went through Amazon, according to Business Insider. Some industry sources predicted that half of all online holiday sales in 2017 would funnel through Amazon.

It’s the combination of Amazon’s powerful platform and a changing omnichannel marketplace that has some retailers saying, “If you can’t beat ’em, join ’em.” That advice is directed at both offline and online businesses. Here are some key lessons for all.

Brick-and-Mortar Partners

Phoenix-based Tuft & Needle is attempting to disrupt retail mattress sales — and it’s using a little help from Amazon to do it.

Tuft & Needle’s business model aims to reduce high markups and offer a more “honestly priced” foam mattress. The online startup launched five years ago, but sales and online reviews soared when it began selling on Amazon.

When Tuft & Needle decided to expand with brick-and-mortar stores, partnering with Amazon was a logical choice. Tuft & Needle plans to open 30 showrooms over the next three years, all branded “Tuft & Needle – Powered by Amazon.”

The Tuft & Needle name gets top billing, but the Amazon name will be front and center in the store signage and logo. Stores will also showcase and sell a selection of Amazon gadgets.

Even big-name retailers like Kohl’s are partnering with Amazon. In October 2017, Kohl’s introduced Amazon “smart home experience” stores at 10 locations in Los Angeles and Chicago. Kohl’s dedicated about 1,000 square feet to each store-within-a-store concept. The sites will sell Amazon devices, such as the Echo Dot and Fire tablets, as well as accessories and smart-home products and services. Amazon sales associates will staff the experience stores.

Those partnerships can be a win-win for both sides. From Amazon’s perspective, deals with the likes of Tuft & Needle take it into larger items that have been a tougher sell online. Most people still prefer to visit showrooms and “try before they buy” furniture, appliances and smart-home gadgets that require some demonstration.

Sharing an Online Channel

Emerging and established retailers alike see online partnerships with Amazon as a means to increase sales, boost brand awareness and reach a broader audience.

Struggling Sears signed an agreement to sell Kenmore appliances on Amazon last summer and expanded it to include DieHard batteries and tires. Amazon gives Sears an alternative channel to increase revenue as its stores struggle to attract customers.

Collaborating with competitors could represent a significant evolutionary turning point in retail. It’s no longer traditional retailers vs. online retailers. Amazon’s push into the brick-and-mortar space with pop-ups, bookstores and its recent acquisition of Whole Foods shows how the lines between online and offline sales continue to blur.

What’s Next

The future of retail is all about creating a robust omnichannel platform.

Retailers need to think creatively to serve customers where they want to shop, whether that’s online or in stores.

Retailers also recognize that they can share resources and customers, especially if it helps them operate more efficiently and add value to the overall customer experience.

Michelle Gass, Kohl’s chief merchandising and customer officer, acknowledged that the chain’s “future as a best-in-class omnichannel retailer will be driven by how inventive, compelling and unique we can make our store experience.”

By better understanding how they can work with Amazon — as opposed to against it — other retailers will also be better equipped to move their businesses forward.