Is co-opetition the future of physical retail?

More and more physical retailers are becoming ‘frenemies’ with Amazon in a bid to stay relevant and reach new customers.
20 May 2019 | 21 Shares

Whole Foods was bought by Amazon in 2017. Source: Shutterstock

Amazon has teamed up with Next for the UK launch of Counter, enabling the e-commerce giant’s customers to pick up parcels via a network of partner retailers.

The service, which works with one-day and standard shipping and is available at no extra cost to Prime members, is also being rolled out in Italy, with Giunti, Fermopoint and SisalPay onboard.

Lord Wolfson, CEO at Next, said that Amazon Counter combines the internet’s power to offer unprecedented choice with all the convenience of local stores. In a tough retail environment, the hope is that this will contribute to the relevance and vibrancy of Next’s stores.

The deal makes sense in many ways. In the UK, Amazon is the fifth largest retailer, whilst nearly 20 percent of retail sales now take place online. You can either curse these rapidly changing times, complain about uneven playing fields, etc, or figure out how to repurpose your physical spaces. According to NBK Retail’s Natalie Berg, key here is becoming frictionless, experiential and a hub for fulfillment.

Some consider it a case of playing with fire. Toys R Us, Borders and Circuit City were among Amazon’s first ‘frenemies’ in the early noughties when they outsourced their e-commerce business to the Jeff Bezos-driven juggernaut. And we all know how things worked out for them.

It also recently emerged that Whole Foods Market saw an increase in foot traffic in the first quarter of 2019 versus the same quarter in 2018, according to data from inMarket.

However, the grocer, which was acquired by Amazon in 2017, also saw visits of less than five minutes rise 10 percent, which, to quote inMarket, may be due in part to the increased rate of additional Amazon Lockers.

Nonetheless, smart retailers continue to seek ways to use Amazon to their advantage. To quote the recently released book, Amazon: How the World’s Most Relentless Retailer Will Continue To Revolutionise Commerce, more retailers will cozy up to Amazon if it helps them to achieve greater reach (marketplace), drive traffic to stores (Amazon popups, Click & Collect, in-store returns) or improve the customer experience (same-day delivery, voice-activated shopping).

Kohl’s

The Next partnership is not dissimilar to a Kohl’s tie-up in the US. The retailer is expanding its Amazon returns program nationwide in July. A pilot, which launched in Chicago and Los Angeles in 2017, lead to 9 percent growth in new customers and 8 percent growth in revenues compared with national growth of 1 percent and 2 percent, respectively, according to data analyzed by Earnest Research.

Amazon is a mighty e-commerce force, but it also needs a bricks-and-mortar presence to better facilitate a returns experience and allay concerns about shopping online for clothes, an area that it has yet to conquer and arguably never will.

Kohl’s, meanwhile, has the opportunity to remind consumers of the advantages of the physical store. Next will be hoping that its aforementioned counter partnership will be similarly beneficial.

More than half of the latter’s sales now take place online and a good chunk of those are collected in-store. It understands that the store’s role is no longer purely about selling and, in these omnichannel times, can offer an experience shoppers can’t get online.

It could be argued that becoming buddies with Amazon brings its fair share of risks, but equally, Michael Corleone’s comment in The Godfather has relevance here: “Keep your friends close and your enemies closer.”