As Amazon continues to truck along as the most dominant entity in digital commerce, struggling retailers have a momentous decision on their hands. Should they do the unthinkable and leverage Amazon’s web site for sales of their own products?
Lands’ End is about to find out whether this is a good idea or not. The brand will begin selling apparel on Amazon at the end of September. News of the partnership came shortly after the company posted a 2.5% same store sales decrease and a loss of $2 million in Q2.
The retailer, which was spun off of Sears Holdings in 2014, doesn’t have a substantial stand-alone brick-and-mortar presence outside of its 16 “Inlet” outlet stores. Lands’ End still vends its merchandise in 277 Sears stores, but the department store’s continued poor performance has certainly factored into the brand’s inability to gain much momentum outside of e-Commerce. While the move to Amazon wouldn’t cure these physical store ills, it could give Lands’ End a credible new channel that reels in a wider audience who wouldn’t be likely to enter a Sears store anyway.
Lands’ End is seeking to ensure that its Amazon channel doesn’t cannibalize its own e-Commerce sales, by limiting its assortment on the site and using it as a driver to the Lands’ End home page.
Gap, a retailer that has experienced struggles similar to those of Lands’ End and its former parent, has been tied to Amazon ever since its CEO admitted that selling on the site was an option the company would consider. While the brand has not yet taken that step, the idea that a well-known retailer would see it as a viable option reveals both the power of Amazon and the mindset of C-level execs when approaching the Amazon topic. Of course, with Amazon diving into its own private label branded apparel sales, Gap poses a risk of diluting its own brand value in linking up with the company.
Amazon Marketplace Provides Platform For Smaller Retailers
Although the benefits and risks of building a partnership with Amazon could be debated ad nauseam, the e-Commerce giant’s marketplace model has certainly been a boon for those brands that leverage the platform. Third-party sellers on Amazon Marketplace grew their gross merchandise volume (GMV) by an estimated $40 billion between 2010 and 2015, according to the Deloitte Retail Volatility Index. So while Amazon itself certainly represents a direct threat to many retailers, it has enabled plenty of smaller players to capture a piece of the e-Commerce pie.
In 2015, third-party sellers on the marketplace reeled in $47 billion, or approximately 42% of Amazon’s total GMV throughout the year.
“If you look at that, nearly half of Amazon’s business isn’t as a retailer; it’s what we call the enabler of fragmentation,” said Kasey Lobaugh, Principal and Chief Retail Innovation Officer at Deloitte Consulting LLP in an interview with Retail TouchPoints. “It isn’t their inventory they’re selling, they’re simply a marketplace that’s enabling many smaller retailers to sell through their platform. A large portion of what you would consider their own business is actually fragmented business.”
While Lands’ End is selling on Amazon’s primary e-Commerce site, not its marketplace, the number and value of sales transactions occurring on the marketplace side have to be a good sign for how brands handle working with Amazon going forward. The move is an inexpensive one for Lands’ End, and success will likely be determined by how well its individual brand experience can shine on Amazon’s platform.