Amazon Doesn't Have to Be Retail's Worst Nightmare
(Bloomberg) -- For years now, it's been a common view in the retail world that a win for Amazon.com Inc. is a loss for some old-school retailers. But these days, that’s not necessarily the case.
Traditional brick-and mortar chains are starting to strike some innovative partnerships with their arch-competitor, turning to unconventional arrangements in the hopes of getting more shoppers back into their stores. If executed properly, there's a good chance these once-unthinkable alliances end up being a rare win-win scenario, with both the legacy retailer and Amazon getting something they need to unlock new growth.
The clearest example of this is Kohl's Corp., which has a pilot program underway in which Amazon shoppers can return certain items to select Kohl's stores instead of packing them up and taking them to the post office. The idea is that it might draw heavier foot traffic to Kohl's outlets, including from customers who wouldn't have shopped there otherwise.
There are early signs the model is working. Chuck Grom, a retail analyst at Gordon Haskett Research Advisors, found that since the program has launched, traffic to Kohl's stores that offer Amazon returns has been 8.5 percent higher than nearby stores that don’t offer that service. And importantly, stores that offer Amazon returns appear to be doing a better job of attracting customers that aren’t Kohl’s regulars:
Amazon, meanwhile, gets help overcoming a key hurdle it faces as an e-commerce-based business: People tend to prefer making returns to stores. Amazon may be expanding its network of physical retail locations, but right now it simply doesn't have a lot of options for in-store returns.
Other potential win-win experiments are just getting started. Chico's FAS Inc. has begun selling some items from its namesake clothing brand on Amazon, but it gives customers the option to return those purchases to Chico's stores. In an interview on CNBC last week, CEO Shelley Broader hinted that she sees this as a potentially powerful tool for driving traffic to a fleet of stores that badly needs it.
Also last week, Sears Holdings Corp. announced that Sears Auto Centers would offer installation services to customers who buy tires on Amazon, with an option at checkout to ship the tires directly to a Sears location. It’s yet another example of a brick-and-mortar retailer finding an opening to steer Amazon customers to its doors.
Big chains are right to give these unconventional arrangements a try, and I applaud traditional retailers for thinking creatively and trying to find ways to draft off Amazon's success. Kohl's, Chico's and especially Sears cannot afford to keep doing business as usual if they want to ride out the retail apocalypse.
Of course, they need to remember that these Amazon relationships are still risky. Kohl's, for example, should fight hard to try to ensure that Amazon doesn't set up similar partnerships with its competitors. If the retailer ends up accepting Amazon returns nationwide, it has to be something shoppers can only do at Kohl's — or at least something shoppers can't do at any other department store.
Similarly, retailers shouldn’t necessarily think of these Amazon alliances as long-term solutions. As my colleague Shira Ovide has pointed out, Amazon is getting serious about brick-and-mortar retailing. It may one day have a big enough network of shops or package drop-off outposts that it no longer feels the need to partner with other retailers to offer consumers more options for returns or services.
Retailers need to be clear-eyed about those possibilities. But that shouldn't stop them from seeking inventive ways to let Amazon help, rather than impede, their digital transformations.
©2018 Bloomberg L.P.