Wolves in sheep’s clothing? The future of retail partnerships
Retail partnerships used to be straightforward. Partners had specific services, and retailers paid money to access these services. Think wholesaling, TV advertising, software licenses and bank accounts. It was a simple service for a fee model.
These days partnerships aren’t as straightforward. The lines between retailer and partner are blurred. The partner you jump into bed with tonight might be a rude shock the next morning. Let me give you some examples.
Google powered up a whole new industry called Search Engine Optimisation. Retailers poured money into technical optimisation, rich content and black hatters to get up the top of the rankings. Then Google introduced paid search in all its forms. The game and the rankings reset overnight. It turns out that Google was an advertising platform, not a search engine.
Facebook whipped brands into a social media frenzy. They threw eyeballs in front of brand pages as long as you kept filling Facebook’s platform with engaging content to keep users coming back. Then they introduce “sponsored content”. Good luck reaching at least 5% of your audience now without spending any ad dollars.
Celebrities and influencers once exchanged their image for cash. Think Michael Jordan and Cindy Crawford. They are now becoming retail brands on their own. Today’s influencers such as Rhianna, Gwyneth Paltrow and Kylie Jenner will no longer flog your product. They’ll make their own. And make millions.
Email is held up as the holy grail of customer ownership. It is YOUR database – no one could take this away from you. That is until companies such as Mailchimp went from fixed licenses to charging based on database size and emails sent. It’s a subtle step, but the email model is evolving to charge you to access your customers.
Marketplaces such as Amazon and eBay tout themselves as another retail channel to expand your reach. They lure retailers with significant trial discounts and promotional opportunities. It’s not a sales game for them; it’s YOUR customers on THEIR platform. Nike just ended this game with Amazon and left the platform in a very public split.
Buy now, pay later
Payment providers used to be in the background as a way to transfer cash. They are now their own ecosystems. Offerings such as Afterpay have revolutionised payments with their buy now pay later product. They won over customers and made it impossible for retailers to refuse them. They recently announced that they are spending $200m to develop customer insights for retailers. Are they really in the payments game?
While not a new phenomenon, supermarkets are aggressively cutting out brands in favour of home brand product. Coles recently called out home brand development as key to their competitive edge. Home brands currently make up 30 per cent of the mix – they are aiming for 40 per cent by 2023. The rise of international competitors such as Aldi and online giants such as Amazon will only accelerate the branded shut out.
Does this mean retailers can’t trust partners?
No. And the answer is certainly not to avoid partnerships. If you don’t partner in today’s world, you won’t survive. But you need to enter into partnerships with your eyes open on what they are. And what they could become. Today’s partner may become tomorrow’s trap, or worse still, competitor.
Before entering a partnership, ask yourself:
- What direction is my partner heading? Be realistic about the game that your partners are in. Is the service they are offering today, the service that they intend to stay in?
- What am I really handing over here? It’s likely more than a cash transaction. Is it purely transactional, or am I also handing over access to my data, resources or customers?
- How can I spread the risk? The writing won’t always be on the wall. How do you cover your risk so that your business won’t be disrupted when your partners inevitably evolve?
The point is, today’s retail landscape is complex and evolving. The world of retail is no longer linear. The ecosystem is getting tighter. With this comes fantastic partnership and growth opportunities – just go in with your eyes wide open.
Nathan Bush is the founder of e-commerce consultancy at 12HIGH. He was previously group digital manager at Super Retail Group and was placed in the Top 50 People in E-commerce four years in a row.