Consumers may not currently be thinking of ever being able to buy merchandise from J. Crew, Ralph Lauren or Lord & Taylor via Amazon.com, but if the online retailer has its way, customers will be able to buy shirts, suits and other items soon.
Discussions are taking place to win over retailers that have, to date, largely avoided the online marketplace. About 10 well-known retailers are involved in the talks, including Abercrombie & Fitch Co. and Neiman Marcus Group Inc. This new initiative could be in place and ready to launch as early as the summer, according to people who are close to the matter. Amazon did not have any formal comment on the matter.
Generating traffic to the retailers’ sites. Amazon would not be selling the goods to customers directly. If the retailers currently being courted decide to come on board, they would have listings linking to their own sites. The arrangement would generate web traffic to the retailers’ sites, and Amazon would get more customer data and valuable information about buyers for its Prime shipping program as it plans to increase rates.
Mighty Amazon. Amazon currently has data on close to 240 million customers. The company is looked on with fear, even among merchants that are currently doing business on its site. One of the main issues for retailers who decide to put their products on the Amazon site is loss of control. Choosing to work with the larger company means that Amazon makes decisions about product placement on its site, as well as how the site will look. The larger retailer also chooses the photos, and for other retailers it can be difficult to turn over these decisions about their brand to another corporate entity.
This business plan is very similar to the business model that has been put in place by ShopRunner Inc. The company also offers a $79.00 membership in return for unlimited shipping to its customers. The program is offered in cooperation with several dozen retailers, including Toys ‘R’ Us and Timberland. Participating retailers handle their own deliveries to customers.
No longer just for smaller retailers. Amazon’s plan is to extend an existing program that has to date primarily attracted smaller retailers. The retailers pay fees for driving traffic to their websites and for any resulting sales. The merchants process the customers’ credit cards and Amazon collects more data about their shopping habits. Each party to the arrangement achieves a benefit that provides some value.
For Amazon, the advantage to the arrangement is that it would help to fill voids in its offerings. It would help to shore up its Prime program as it prepares to increase its annual fee by $20 for U.S. customers.
According to analysts, Amazon already has approximately more than 20 million Prime customers. Most of the people who have already signed up for the program are located in the United States.
Brick-and-mortar retailers that are considering signing on with Amazon are aware that the Prime program could give a much-needed boost to their sales. The opportunity is not without some risks, though. These retailers are very much aware that they are not the only ones that Amazon is negotiating with. They will likely have plenty of competition on the major retailer’s website.
They may also find having to fund the cost of shipping problematic. Amazon has countered by stating that some retailers may eventually have the option of being able to pay to use Amazon’s warehouses and logistics network to ship orders.