This Week in Retail Marketing Innovation - June 10, 2019

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Amazon pressures small vendors to sell products through their third-party Marketplace

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Small businesses rely on large online platforms like Amazon to generate steady revenue. But within the last week, Bloomberg released an article that had Amazon’s small vendors feeling nervous.

Per Bloomberg, three inside sources stated that Amazon will soon conduct a purge of vendors selling less than $10 million per year on the site. These vendors will lose access to wholesale orders and will be encouraged to sell products individually through Amazon’s third-party Marketplace.

The goal of Amazon’s alleged plan is to switch wholesale focus to large brands such as Procter & Gamble, Sony, and Lego, which would help Amazon compete with brands such as Walmart, Target, and Best Buy.

An Amazon spokesperson quickly responded to the Bloomberg article saying, “We informed Bloomberg prior to publication of their article that their sources and story are wrong. We review our selling partner relationships on an individual basis as part of our normal course of business, and any speculation of a large-scale reduction of vendors is incorrect. Like any business, we make changes when we see an opportunity to provide customers with improved selection, value and convenience, and we do this thoughtfully and considerately on a case-by-case basis.”

While Amazon may not have a plan in place to shut out mom-and-pop shops from all wholesale orders in one fell swoop, there have already been traces of Amazon weeding them out based on Bloomberg’s criteria.

In March of this year, thousands of orders to small-scale suppliers were cancelled by Amazon for inexplicable reasons. Some vendors received a notice that said it was a technical error on Amazon’s end, while others received messages that indicated the supplier should not expect future purchase orders to be placed at all, according to Forbes.

And while it may seem cruel for the retail giant to hinder the revenue growth of small businesses, there may be an upside. It will take some time to adjust selling products individually in the Marketplace, but vendors’ margins will likely be higher because they now have access to customer information that Amazon withholds from its wholesalers.

The other line of thought is, if you have $10 million worth of products that Amazon continually repurchases wholesale, it’s likely that they would have the same level of demand when selling directly to customers, according to Ethan McAfee, CEO and founder of Amazon outsourcing partner Amify.

The effects of Amazon’s new restrictions on smaller wholesalers will likely show in the coming months. The deciding factor of success will be whether small vendors embrace selling through Marketplace, or if Amazon will be responsible for closing several small businesses.

New Ikea app will combine AR with a shoppable feed

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Ikea has announced that their brand new app is in the testing stages. The new app is said to combine the AR capabilities of their Ikea Place app with the browse/purchasing capabilities of their Ikea Store app.

The Ikea Place app allows customers to use AR to view items in their homes, but when customers are ready to make a purchase, they are redirected to the Ikea Store app, adding an extra step to the customer journey. The brand new app, however, will allow customers to view different pieces, visualize them in their space using AR, and purchase them directly through the app.

An additional feature to the app includes AR in-store, where customers can point their phones at products and change the colors and textures in real time. If the customer’s desired variation isn’t available in-store, they can add their custom item to a virtual shopping list in the new app, and purchase the item once they are no longer in-store, according to a Reuters report.

Ikea is also trying to keep up with stylistic trends of online purchasing. The app will have a “Pinterest-like feel” where customers can browse inspiration boards, reviews, and recommendations. According to an Ikea spokesperson, the app will also “enable [customers] to find, choose, and buy fast from pictures of room sets.”

The app is set to launch by the end of 2019 in France and the Netherlands. If proven as successful and accessible as Ikea plans, it will be rolled out to Ikea’s top markets, including Germany, the US, and China by the end of 2019.

Perch recognized as one of The Leading 100 Retail Technology Companies of 2019

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The Lead recently released their top 100 break-out tech startups in the fashion & retail industry list. The Lead is a trusted source that connects fashion brands and retailers, rising digital natives, emerging start-ups, investors, and ecommerce platforms together in one ecosystem.

Perch earned a spot on this list, reinforcing a mission to lead the change in retail from static physical stores to interactive, media-rich digital stores.

You can see the full list of top The Leading 100 winners here.

Lands’ End ready to grow after separation from Sears

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Lands’ End, an outdoor apparel brand created as a spinoff from retail giant Sears, is now officially branching off from it’s originator.

In early 2018, Lands’ End’s CEO announced the company would no longer be "relying on Sears.” By the end of Q4, the clothing store exited 125 Sears locations, now remaining in just 40 of them. As Sears locations continue to close, the relationship between the two retailers has come to an end.

While it’s a sad departure, Lands’ End is standing on it’s own two feet, with 16 US stores operating successfully, and a projected 10-15 stores opening by the end of 2019. Their ultimate goal is to own and operate 40-60 locations within the next few years.

Lands’ End’s online sales are also proving successful. Since their entrance to the Amazon Marketplace in 2016, online sales continue to rise more than 10% per quarter.  

Now that the business has a structured revenue model, executives need to focus on maintaining their success as a separate entity from Sears. A discussion between top executives on the RetailWire’s comment boards outlined how they believe the brand should move forward in the future:

  1. Maintain the balance between online and in-store sales.

  2. Open stores slowly and carefully to measure success.

  3. Attract a new audience, but keep creating clothing that appeals to their core customer base.

  4. Continue prioritizing quality, fair pricing, and straight-forward messaging to keep the brand promise separate from Sears.

Unfortunately, Sears was not likely to bounce back. Lands’ End understood that, and got out quickly. Now, it’s time to see how their brand will shine on its own.

Sounding Smart by The Retail Water Cooler

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S&P Global this week lowered its outlook for Nordstrom to negative as analysts with the ratings agency expect continued pressure on the department store chain's operating results. Nordstrom is hoping their new Local stores opening up in Manhattan will turn sales around.