Over the last few years, many luxury brands have announced departures from major distribution relationships with retailers, but over time, more and more brands have followed suit…many of whom play in more mainstream product categories. One recent announcement was Nike, last October. The company said it would be focusing on “direct-to-consumer retail” and just “40 select retail partners…Those partners will be those who are willing to create a unique, branded Nike space within the store and have specific Nike-trained employees to assist with sales.”
In our work with retailers and manufacturers, this is definitely something we could see coming. And it’s not just an issue that luxury brands are dealing with. As the market has become more and more competitive, many retailers feel locked in a constant battle for price and share. Meanwhile, manufacturers and brands, who frequently have a deeper understanding of market needs, feel like they are constantly pushing for a broader context and understanding of their customers, urge merchandisers to look beyond price for levers that deepen customer satisfaction, while expanding margins for all.
Online markets only add fuel to the fire. With their low overhead, they exert even more price pressure on brick and mortar retailers. In an effort to remain competitive, some retailers have undergone such drastic cost cutting strategies that it affects not only their product assortment, but their staffing, further aggravating their ability to create the rich customer experiences that many buyer’s today feel like they deserve, especially if you expect them to make the effort to go to an actual store.
Many retailers have stubbornly remained focused on same store sales as their measure of success, which can force them to be myopically focused on the initial sale. And, in a constant race to the bottom on price promotion, they’ve forgone all semblance of customer service, frustrating buyers and brand owners alike.
Customers are tired of receiving crummy – or no customer service. Manufacturers are tired of their brand image suffering due to lack of sales experience and control over the in store customer experience.
Brands now have the ability to develop a one-on-one relationship with their customers, as well as the technical ability to sell direct, so isn’t it logical for more Brand owners to question their reliance on retail partnerships that may detract from the sum of their brand experience?
But the news isn’t all bad. Top notch retailers do exist, ones that know how to partner with their vendors, to create valued customer experiences around the Brands and products that they carry. They understand that not all consumers are shopping solely on price – that many are shopping for attributes, and experiences – that go far beyond price.
These are the retailers that know by partnering with their brands to truly understand their customers, and their specific needs within each product category, not only will they find better sales success, they’ll keep their customers more satisfied and coming back time and time again.
For more reading on the subject, please check out Doug Stephens great article in the Retail Prophet….