Playing Nice: The Case For Retail Collaboration
I sense a change in the air these days. No, it’s not the changing of seasons, but rather a change in mentality I’m starting to see as I examine what’s happening in retail right now. What am I talking about? Well, it’s this notion that maybe, as a brand or retailer, you’ve been missing opportunities to collaborate that you previously viewed as either irrelevant or outright competitive threats. And while I really don’t want to be yet another person starting an article talking about Amazon - I believe their existence is playing a crucial role in how brands and retailers are beginning to change their view of collaboration and competition - and it’s for the better. When there’s an Amazon out there who is more agile, has seemingly limitless resources, and is eyeing your piece of the market, don’t you want and need a friend in your corner?
Let’s entertain my crazy notion for a moment here, by examining four different types of collaboration.
Clients + Vendors
I’m intent on warming you up to the idea of collaboration so I’ll start with an easy-to-stomach and also widely-proven concept, and that is working with your suppliers and vendors as partners rather than your beck-and-call. Most of us have spent time in client relationships at some point in our professional lives, and it can be both an incredibly rewarding but also a completely fraught experience at times. What’s the difference between the two ends of the spectrum? Well, when it’s successful, there are shared objectives that have been clearly laid out, a mutual respect for the respective parties’ expertise, and the resulting acknowledgement that each needs the other to get to that end goal. The other and more painful side of a dysfunctional relationship means information goes unshared, there are no initiative champions, and ultimately, a result from these efforts that falls short of expectations.
So why is it difficult to find that special something in vendor - client relationships? Especially considering that there are studies that prove that when these collaborations work, they work really well. Retail consulting firm A.T. Kearney cited that, ”Companies (who collaborate) have seen 10% to 15% lift in topline performance, 40% to 60% faster new product launches and up to 20% decline in total inventory.” Multiplied out across the different areas of your business, these kinds of gains are incredibly significant and worth a closer look.
The tough part is getting there - and like any relationship - it takes a lot of work. If you think back to that first engagement you had with a client, you didn’t know their team dynamics, the power structure, and you were learning about the nature of their business, and more likely than not, it was a bit of an uphill battle. But after one engagement, you shared information, you knew who the key stakeholders were, and with proven success, that relationship grew - when both parties equally benefitted from the results. Certainly there’s a lot more to it, and if you’re not entirely sure of the health of your relationship, we have some friendly advice to offer.
Commit yourself over the long-term to your vendor relationships, and you will reap the rewards of a deeply-invested and loyal partner - one who is ready and willing to take the road of risk and reward with you.
I can see you’re warming up to this idea of working together, so the next concept of collaboration I’d like to introduce owes its rise in large part to the digital era in which we, as brand, retailer and consumer, co-exist. Think about it. Feedback loops are almost instantaneous in nature, from ‘add to cart’ to a dissatisfied customer message on your social media channel of choice. Customers like something, they don’t like something, so what’s new? Well, in 2017, this means you’ve got to try a lot harder than having a great customer insights team and a tool measuring your various (and multiplying) points of customer data. (And by no means do we mean to diminish the importance of those to your business). You’ve got to view your customer as the driver and gatekeeper of new product and service innovation, rather than the last check before going to market.
But what does that really mean? Customer collaboration doesn’t mean you give over all control, indeed you have the supply chain expertise, the industry relationships, and capital to actually bring ideas to life. But with the customer at the center, you are able to activate and direct your energies towards what can bring about real customer value. Let’s look at different types of customer collaboration with some real-life examples.
These days, beauty brands really have a lot to teach those outside their space about customer engagement. In fact, Brit McCorquodale, Head of Marketing for Tribe Dynamics, a firm that tracks social influencer engagement, estimated that beauty brands are at least three to five years ahead of their non-beauty retail counterparts. She goes on to explain how cosmetic brands like NYX, by sending new product to customers every month, have been able to organically get product feedback, which these users in turn post through their social media channels. One of their most successful collaborations has been with YouTube star Charisma Star, whom they tapped not only for marketing but to also help design their brick-and-mortar stores. Smart social media marketing driven by their most devoted followers is a key reason for this brand’s incredible growth in sales, and when you consider that it doesn’t have to require a major investment, you have to wonder why more brands, especially those outside of beauty, aren’t being savvier in this type of customer engagement.
Another example is IKEA, who recently launched what they call Co-Create, a multi-level approach to getting new ideas that “solve big problems, for people as well as the planet.” Their five-tier approach encompasses an incubator for start-ups, research opportunities for universities, partnerships with innovation labs, an open call for customer feedback, and even maker spaces for customers to build actual product. For IKEA this isn’t just a gimmick - with increasing pressures to build a business that is both financially and environmentally sustainable - looking outside themselves is a no-brainer.
Sure, collaboration is a savvy marketing move, but when it’s done in a way that customers can experience firsthand and directly reap the benefits of, you’ve built a self-sustaining pipeline of innovation at the heart of your business.
You know your core customer like the back of your hand, right? But how well do you understand the other brands that take up mind and wallet share, and have you properly considered whether there are opportunities for you to work alongside those complementary brands? Brand partnerships are nothing new, and in fact, they are an oft-used tactic to inject newness into a brand. But there’s another component and added benefit to a complementary partnership that isn’t always fully utilized, and that is the sharing of data that can help fill in the gaps in both your customer view as well as your business processes.
But first you’ve got to make sure you’ve identified the synergies by which this partnership will work, and by that we mean clearly outlining the ultimate goal of this collaboration. In tandem, you need to be willing to share the extent to which there is overlap in your customer base, and the key here is that the overlap balances reaching new audiences, while deepening your relevance to your existing customer base. Don’t be afraid to share customer data with your partners!
Also critical in identifying the right partner is picking someone who has strength where you have weakness - what can you learn from each other? Does your potential partner have established national distribution, while you are digitally fluent? So where has this worked IRL? Look no further than Sephora’s shops within JCPenney stores. Say what you may about these two unlikely bedfellows, but both benefitted greatly from their (ongoing) partnership. JCPenney gained an audience of younger beauty customers, while Sephora established a physical footprint in smaller markets where they previously had none. Another real-world example of successful collaboration is Target and celebrity-influencer fashion website WhoWhatWear. WhoWhatWear’s fashion-forward reader is one who craves the latest celebrity and influencer styles, and as Target looked to reinvigorate its fashion efforts over the past few years, they saw an opportunity to really connect with a consumer who might have otherwise looked elsewhere for their fashion needs. And so the two partnered up in 2015, dropping monthly collections of new fashion and accessory products into Target’s massive network of stores, utilizing actual feedback from WhoWhatWear readers. Now going into its third successful year, Target has gained increased credibility amongst a fashion and digitally-attuned shopper, and WhoWhatWear was able to bring product to market, leveraging Target’s incredible network of suppliers and extensive retail distribution.
So there’s something you can each learn from the other in complementary collaborations, and yet you won’t get there if there isn’t a degree of openness and trust from the get-go, so go out there and find your better half.
Say what? You knew I was building up to something big, so I’m going to challenge how you’ve traditionally thought about your competitors and why today’s new digital world order means you should be looking at “those guys” differently. I started off today mentioning Amazon, and there are basically two ways in which we’re seeing brands and retailers react to their ongoing consolidation of power. They’ve either joined up, as brands such as Nike have done this year, or as incumbents, formed alliances with other players in their space. All we need to do is examine Wal-mart’s moves over the past few years, as it’s acquired a variety of digitally native retailers, and as of this week, announced a partnership with Lord and Taylor, to sell their product on Wal-mart’s site. Why are they doing this? Well, they’ve decided that their survival depends on reaching customers who aren’t necessarily theirs right now - the younger, more urban, and affluent shopper - and those virtual fences weren’t doing any them any favors.
But what if we take competitive collaboration one step further? At this year’s NRF Big Show, Steven Lowy, co-CEO of Westfield Properties challenged retailers to start sharing, for real, “That (the state of the retail industry) leaves us with a choice - are we going to continue to be driven by narrow-minded institutional and historical thinking, and watch our revenue suffer? Or are we going to free our data from its silos, leverage the power of our collective knowledge, and create more value for the customer?" It was an idea that many in the audience found to be contentious, but we believe this idea deserves closer examination. As we watch organizations struggle to not only find the resources to analyze and strategically digest the data that streams through their organizations, couldn’t sharing both that information and the best practices of its collection equally benefit the respective parties? To Lowy’s point that we’re often caught up in our old ways of doing things - what if instead of turning to consultants and those deeply entrenched in the organization to fix things - we look to those who also cater to the same customers, have faced similar challenges, and are also working to address their problems? We get that there is trepidation around sharing information, but start small, identify shared outcomes, and commit (and we mean really commit) resources to making this work.
So who’s going to be bold enough to step up to the plate and give competitive collaboration a try? There’s more than enough pie here for everyone.