Tag Archives: omnichannel

Sleeping with the enemy … or strategic collaboration?

By Chris Petersen and Adam Simon

One of the epic battles in the history of retail is the escalating war between the behemoths Walmart and Amazon. While Amazon’s total sales still lag behind those of Walmart’s, the annual double-digit growth of Amazon puts it on a trajectory to surpass the world’s largest retailer. However, the sleeping giant has awoken! Walmart is now creating new levels of innovation online, with click and collect and automated customer convenience at check out.   The rapid innovation and growth of these giants is certainly not great news for the rest of retail. Have we reached the age of “if you can’t beat them, join them”? Many retailers and brands are seeing opportunities in choosing a side. Are there any other alternatives left?

The retail goliath’s all-out war for customers via “marketplace partners”
In the battle of Amazon versus Walmart, it is no longer a war of ecommerce versus stores. Competing in today’s marketplace for omnichannel consumers requires massive infrastructure, systems, and logistics for the last mile all the way to the customer’s door. It also requires a vast assortment of products, including the most popular brands.

Increasingly, both Amazon and Walmart are searching for unique brands and products that differentiate, and attract customers to their ecosystem. For many brands, and even retailers, the choice seems to be that it is easier to partner with a giant rather than try to beat them.

Will those jumping in bed with Amazon see a “Prime” Future?
Amazon is so much more than a “retailer” – it is become an ecosystem of ecommerce, distribution and even building devices. A huge part of that ecosystem is the “Prime”, which fuels repeat visits and growth from Amazon’s most profitable customers. To attract Prime members, Amazon needs prime brands and offerings.

Best Buy electronics has recently “teamed up” with Amazon for voice shopping via Alexa in order to tap into Amazon prime customers and traffic. Kohl’s department stores has gone even further by opening Amazon product sections in their stores, and new processing for Amazon returns to Kohl’s stores.

From Nike collaborating on curated Amazon assortments, to Calvin Klein collaborating on pop-up stores with Amazon, both brands and retailers are strategically collaborating in new ways to tap into Amazon’s ecosystem and traffic. Amazon wins with prime products and new offerings.

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Walmart is rapidly recruiting its own coalition of brands and retailers
Walmart is no longer just playing catchup. They have leapfrogged Amazon in a number of areas, especially in click and collect. They also recognize the importance of assortment breadth and premier brands. In addition to purchasing millennial appealing brands like Bonobos and Moosejaw, Walmart is also focusing on curating premium brands and products. Who would have imagined that Walmart would now be collaborating with Lord & Taylor! As department stores struggle, Walmart offers a potential for Lord & Taylor to reach the masses, and at the same time, Walmart brings cache products to Walmart.com.

While Amazon may have Alexa, Walmart has aggressively collaborated with Google in voice shopping. Each giant is now literally matching each other blow by blow. Where does that leave the rest of retailers and consumer brands?

The upside of strategic collaboration with one of the giants
Simply put, omnichannel is not rapidly scaling throughout the rest of retail for many reasons.   The retailer conundrum is that if they make the extensive investments to expand online and home delivery, they starve their stores of much needed investment required to differentiate customer experience. Strategic collaboration with Amazon or Walmart offers many benefits: immediate turnkey access to ecosystems with massive traffic, no major capital investments for distribution and home delivery, reduced risk and costs. There are many upsides in reaching the masses to grow revenue by collaborating Amazon or Walmart, at least short term.

What is the downside of sleeping with an elephant?
There is a huge danger of “selling your soul” in order to survive in the short term, especially if you are a retailer. Whether it is collaborating with Amazon or Walmart, both brands and retailers must constantly evaluate:

  • Can we curate a “marketplace assortment” that sells online, without giving away our core value propositions that bring customers to our brand and stores?
  • If Amazon and Walmart own the interface of the sale, how do we engage customers?
  • How can we remain relevant to customers by offering better solutions and services?
  • What can we do better that the giants do not already do for customers?

With their vast infrastructure, systems, data and analytics Amazon and Walmart have the “big data” to leverage the most profitable products and customer segments for their gain. Are there any alternatives for the rest of retail?

Collaborating on data as the new currency for Customer Experience (CX)
The bottom line: retail is not dead. It is mediocre retailing focused on product and price that is dying! If it is only about products at a price, that is the forte of Walmart and Amazon and they are winning hands down.

The future for the rest of retail lies in creating relevance beyond products, price and promotions. Data is the new currency for strategic collaboration to differentiate value. Not just any data. The new strategic currency is “rich data” about how to establish the power of CX – Customer experience.

The most powerful untapped “gold” is the behavior of customers: before, during and after the sale. Beyond the giants, the innovative retailers, brands and distributors are strategically collaborating to create alternatives focused on how to engage customers throughout their journey, and how to deliver “knock your socks off” services that bring them back for more.

The alterative to “sleeping with the “enemy” requires both consumer brands and retailers to change the past paradigms of negotiating solely on products and price. The future of retail success lies in collaborating to create customer relationships, not the products sold.

Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global Brand, Distributor and Retailer will share their perspectives on strategic collaboration.

If you are interested in more information on this CES event, contact tgibbons@contextworld.com.

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What is your purpose?

By Chris Petersen and Adam Simon

One of the most impressive speakers at the recent Gitex Conference on Digital Marketing, was Christian Eid, the VP of Marketing at Careem, the start-up which has shaken up the Middle East with its model-busting alternative to Uber. Above all, he stated, you have to know what your purpose is. How important is this for strategic collaboration? Continue reading

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Potential, Pitfalls of Strategic Collaboration

By Chris Petersen and Adam Simon

In this recent blog series we have repeatedly used the term “strategic collaboration”.   Collaboration is certainly not new. Business have been working in partnership and alliances for centuries. What is new in the retail marketplace are the rising demands of customers creating unprecedented demands on service levels and resources. Traditional supply chains are inadequate for both selling and delivering products to customers any time and everywhere.

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Beyond product transactions, customers are driving new expectations of choice, convenience and customization. These demands challenge the resources of even the world’s largest retailers. Increasingly, retail is becoming an ecosystem of collaborative partnerships. Future success will increasingly depend upon optimizing the joint strategic potential of collaborating with partners, and avoiding the landmines of misaligned objectives and communication that undermine relationships and results.

What moves a transactional relationship to strategic collaboration?
There are a number of business relationships that are by their nature purely transactional. Retailers do need to purchase distribution and logistics to go the last mile to the customer’s door. What makes these relationships become strategic collaboration is twofold: 1) focus on objectives that create strategic competitive advantage for both partners, and 2) a trust relationship of exchange that focuses on creating results that count for both partners.

Pitfalls of partnering without a strategy
Amazon is particularly adept at innovation. It’s in their DNA to design customer centric services that create lasting, differentiated profitable relationships with customers. They have more collaborative partnerships and retail pilots than anyone in the west.

Amazon has recently created a strategic collaboration with Kohl’s department stores for selling Amazon devices and taking Amazon returns. This is a competitive advantage for Kohl’s stores in the short-term. However, Amazon also competes with Kohl’s the retailer in almost every product category. So what might be strategic now could be cannibalism in the near future.

Amazon is very strategic in structuring its business relationships. But that does not make Amazon a partner that collaborates particularly well. Especially with retailers. Amazon high profile partnerships have turned out badly for a number of retailers, including Barnes & Noble, Toys R Us and mass merchant Target. In these three cases the retailers were essentially outsourcing key elements of their customer strategy.   Lessons learned: if Amazon can ultimately compete with you as a retailer or distributor, they will, and be the stronger for it.   As a brand or retailer they must avoid the landmines by focusing AND managing the critical success factors of collaboration.

5 Critical Success Factors and Requirements for Strategic Collaboration
Volumes have literally been written on the components of partnership and collaboration. Our focus here is the emerging retail ecosystem and the new levels of cross collaboration required to fill gaps and scale services that meet the rising demands of today’s consumers. To thrive, the retail C-Suite must be engaged and focused on these five essentials:

  1. Strategic Alignment

There is nothing wrong with outsourcing, companies do it all of the time. But true collaboration is not “transactional”. To collaborate means to: work jointly on an activity, especially to produce or create something”. Strategic collaboration requires that both parties clearly articulate objectives that matter strategically, and clearly define the joint processes they will employ to create/achieve them.

  1. Specific Objectives

In order to avoid the pitfall of the partnership being one sided, both parties need to clearly identify specific objectives they expect to achieve, individually AND together. The more the collaboration involves innovative transformation, the more important jointly defined objectives become.

  1. Measurable Outcomes

Intentions are NOT enough. To successfully create a win-win scenario there must be more than a mere transactional parameters. There needs to focus on measureable results. In a true collaboration relationship, the measurable outcomes must be jointly owned by both partners. You can’t jointly manage what you can’t measure AND share.   A fundamental requirement of collaboration is joint scoreboard with all the objectives, KPIs and joint outcomes visible for the collaborating partners.

  1. Data is the New Currency for Strategic Collaboration

Strategic collaboration is built upon a foundation of shared information and insights. Case in point is the “last mile of delivery”. In order for distributors to ensure that they have products in stock and the capacity for drop shipment, they need accurate timely data from their retailers. Weekly sales data is no longer sufficient. The retail ecosystem built to serve customer expectations for any time and everywhere. It requires accurately and timely sales and inventory data daily. There can no longer be separate retailer and vendor forecasts – there must be a shared forecast built upon shared, timely data exchange.

  1. Trust built upon open communication and sharing at ALL levels

True collaboration cannot be based upon guesses, hearsay and yesterday’s communication. The foundation of trust begins at the very top and flows all the way down. Trust requires on-going communication of the processes, the insights learned that will benefit both partners, and how to sustain achieving results. Simply, trust is built upon two way communication. Collaboration requires a deeper level of sharing required to align, create, manage and measure joint results.
Every retailer has a choice. They can wait until they are “ready”, or take action now to collaborate strategically to create a niche that makes them relevant. Customers will decide every day who wins by voting with their physical and digital wallet.

Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global Brand, Distributor and Retailer will share their perspectives on strategic collaboration.

If you are interested in more information on this CES event, contact tgibbons@contextworld.com.

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Are these the “best or worst of times” for consumer brands?

By Chris Petersen and Adam Simon

Charles Dickens begins his historical novel with the classic opening: It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity”.

Dickens’ words also accurately describe the paradox facing consumer brands today.   In many ways, brands have unprecedented opportunities to reach consumers.   Yet, the consumer transformation to omnichannel has disrupted historical retail models creating new challenges. Those brands that thrive will be those that collaborate in ways that adapt to the changing dynamics of the retail ecosystem.

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Why these are the BEST of times for consumer brands
Prior to the rise of ecommerce, the route to market for consumer brands was primarily through the retail store.   The supply chain was essentially a linear model from manufactures, to distributors to retailers.   Today’s omnichannel consumers have disrupted that model and now expect to shop, purchase and take delivery anytime and everywhere.   This has created some dynamic new opportunities for brands marketing and selling products to consumers.

Direct Sales to Consumers
As consumers increasingly shop and purchase online, manufactures have an increasing opportunity to sell direct to consumers through their own ecommerce.   Direct channels can increase margin, but more importantly, they enable direct relationships with customers.

New Marketing Opportunities
More than 70% of customers begin their purchase journey online. Brands have an opportunity to engage customers early and often through multiple touch points, in addition to customer experiences in store.

Reach – Products and Supply at More Places
Through the integration of physical and digital retail, brands can effectively spread their supply across more places and use “virtual inventory” to reach more customers.

Long tail – Opportunities for Premium Mix and Revenue
The number of products carried in physical stores were limited by physical space and open to buy capital.   The growth of ecommerce enables means making a full range of products available to many more customers locally and globally.

Why these are the WORST of times for consumer brands
The rise of the omnichannel customer has swung the pendulum to be more customer centric. While the situation today might not constitute the “worst” that can happen, current customer behaviors certainly post major challenges to brands, their previous strategies and program effectiveness.

Commoditization of Products
The power of ecommerce and omnichannel customers is reaching customers anytime and everywhere. The corresponding challenge is the explosion of everyone’s products everywhere. Even if brands go direct, they are still competing with over 400 million products available on just Amazon, not to mention what’s available on Alibaba and Google.

Slippery Slope of Price Erosion
The challenge of ecommerce is transparency and ease of product and price comparison. The ecommerce giants can change pricing dynamically, by market hourly.   Once online, prices become the lowest common denominator. Even major retail stores have now realized that they must match prices online.

The missing 5th P – Personalization
Ecommerce has for the most part been an electronic catalog of what’s available at a price.   Brands have little opportunity to differentiate product or their value add services selling through ecommerce. Brands need to find ways to personalize solutions and services before and after the sale.

Connecting the Brand and User Experience
The experience online has been primarily features, function and price. Brands need more innovative ways to connect at multiple points with the customer, especially early in the journey, and at the critical points of decision to purchase which now occur across channels.

The bottom line: “All of the above” requires strategic collaboration
Brands have more opportunities than ever to reach today’s consumers.   Herein also lies the challenges of having the right media and resources to leverage those points of contact to optimize the brand experience.  The reality today is that few brands have the capacity or resources to able to do it all. Indeed, future success for consumer brands lies in their effectiveness to:

  • Optimize brand value beyond commoditization of product and price
  • Create an engaging brand experience across multiple channels
  • Solve for optimizing supply at the right time and place
  • The ability to solve for the last mile to the customer’s door
  • Personalizing service that meets customer expectations

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Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global Brand, Distributor and Retailer will share their perspectives on strategic collaboration.

If you are interested in more information on this CES event, contact tgibbons@contextworld.com.

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What’s changing retail – Strategic distributor collaboration

By Chris Petersen and Adam Simon

Distributors have been part of the traditional supply chain for decades.   They were often called the “box movers” of the industry because they quite literally performed the essential service of moving mass quantities of products from suppliers to retailers’ warehouses.   While distributors still function in that role, what is rapidly changing retail is the customer demand of fulfilling a single unit to a local point they choose.   The rising expectations of consumers are creating stress points on logistics and profitability for both retailers and brands.   The capabilities for local distribution the last mile are not only a cornerstone of the new retail ecosystem, distributors are emerging as innovation partners creating strategic opportunities for both retailers and brands. Continue reading

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Four demands driving new levels of strategic collaboration

By Chris Petersen and Adam Simon

The transformation from sales transactions to collaborative networks
The traditional supply chain was based upon a sales transaction model of brands selling products to distributors, distributors to resellers and retailers. Once the products arrived at the retailer’s doorstep, it was their responsibility to warehouse it and sell it through to the customer. In this traditional model retailers did work with brands and distributors, but those relationships were primarily transactional negotiations based on product, price and promotions to sell products.

The traditional retail model and the economics have changed. What is driving the change are customers who have “escaped the traditional funnel”. Today’s consumers are not bound by channel, place or time. They expect unprecedented choice of products, where they shop and how they take delivery. Traditional retailers do not have the infrastructure, resources, the inventory required, or enough of their own trucks to deliver to individual customers.

To survive, retailers need more than products and “box movers”. To thrive, retailers need a collaborative network of partners who can help strategically address rising customer demands, enabling a shift from sales transactions to customer relationships.

Customer demands driving the retailer’s need for strategic collaboration
It’s a great time to be a customer. It’s a very challenging time to be a profitable retailer. The simple economic reality is that only the world’s largest retailers can attempt to offer end to end solutions that meet omnichannel customer expectations. Even a retail giant like Walmart cannot afford to carry all of the inventory required for the millions of products now online. And, the ecommerce giants Amazon and Alibaba built their business by collaborating with an ecosystem of partners for overnight delivery and customer services.

Let’s be clear. Collaboration is not “free”. Two-day shipping is not free. Home delivery is not free. Retailers cannot afford to “solve it all”. Retailers must selectively find solutions to remain competitive, and where possible, find partners who will work collaboratively to build solutions that optimize the retailer’s relationships with core customers.

There are four core customer drivers in today’s omnichannel market place where retailers must find collaborative solutions:

  1. Choice – Solutions to deliver on customer expectation for more product range

Almost all retailers are expanding assortments online in order to offer competitive choices. A wider range of products equates to inventory, which is one of the most costly retailer investments. Increasing assortments requires strategic relationships with distributors for both the inventory and warehousing to store it. However, it is the convenience of last mile delivery to the customer’s door which is requiring most retailers to strategically search for collaborative solutions like drop shipments from brands and distributors.

  1. Convenience – Solutions that let customers have it their way

It is one thing to offer the products online, it quite another to be able to offer the convenience of “real time retail”. The majority of customers expect to “see” not only what is on the store shelf, but the delivery time for products not carried in store. This requires strategic collaboration with brands and distributors to share new levels of data, and participation in joint fulfillment. Customers are increasingly purchasing from retailers where the returns process is fast and convenient, creating a growing need for cost effective reverse logistics.

  1. Customized – Customers demand for solutions requires partnerships

Customers are increasingly looking for more than products at a price, they want customized experiences and solutions that fit their lifestyle. Case in point, smart home and IoT products. Customers want and need services that assist in configuring and installing products. Even retailers like Best Buy with a “Geek Squad” are strategically collaborating with services and installers to increase bandwidth required to meet consumer demand for customized services.

  1. Connected Customers expect communication before, during and after

Today’s purchase is a journey, not an event. Customers expect to research online, and have online follow them to the store. They also expect real time information on the status of orders, pickup and delivery. With multiple partners stocking and delivering products, this requires new levels of information that must seamlessly connect and be available to customers. The best of breed not only collaborate with customers during the sale, but connect with customers after the sale on satisfaction and future services.

Replacing the 4Ps with the 4Cs Requires Collaborative Partnerships
The traditional 4Ps of Product, Price, Promotion and Place have been transformed by todays empowered customers. To meet the rising expectations for the 4 Cs of Choice, Convenience, Customized, Connections will require competencies and resources beyond the bandwidth of most retailers. Future success will require more than product sales today. Retailers now must strategically collaborate with partners in ways that will enable them to create, and sustain relationships that transcend the sale of a product.

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Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global Brand, Distributor and Retailer will share their perspectives on strategic collaboration.

If you are interested in more information on this CES event, contact tgibbons@contextworld.com.

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When ecommerce dominates, do you compete or collaborate?

By Chris Petersen and Adam Simon

There is a tipping point coming where ecommerce will overtake traditional retail sales. That critical mass is not as far off as many might think. Doug Stephens recently published some interesting forecasts on the growth of ecommerce, particularly the top 3 giants. Based upon the recurring annual growth rates of 12 to 35% for the large ecommerce players:

  • Ecommerce will be 25% of total US retail in 6 years, and may exceed 30% of the UK
  • Amazon, Alibaba and eBay will control 40% of global ecommerce within just 3 years
  • Within just 15 years ecommerce will overtake traditional retail sales accounting for more than 50% share of consumer sales

This is highly relevant in the Middle East with the takeover of Souq.com by Amazon, and the recent price-slashing at the beginning of this month. Other than being swept away by the tidal wave of ecommerce giants, what are the choices for brands, distributors and traditional retailers? Continue reading

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