For a long time, retailers talked about, worried about and developed strategies to combat the “Walmart” effect, and this was not without justification. Walmart’s dominance in the mass merchant and grocery segments has forever changed the retail landscape – long before eCommerce was even a blip on the greenscreen. These days, with customer experience and channel integration as mandates, retailers are more focused on leveraging their physical locations, aligning their IT infrastructures and strengthening their brand value propositions. And it’s hard to find a conversation or strategy that doesn’t mention Amazon, sometimes referred to as “the Walmart of eCommerce,” although now even that title has faded as Walmart struggles to compete with the online giant.
The Parker Avery Group has been working quite a bit in the luxury retail segment, and I recently came across a Bloomberg interview with New York University marketing professor Scott Galloway where he discussed how luxury brands are finding ways to work – or not work – with Amazon. Scott stated, “Amazon has now become the Tony Soprano of eCommerce.” A bold statement indeed, but he meant that brands that sell through multiple distribution channel partners basically don’t have much of a choice when it comes to selling on Amazon. Their channel partners will take care of selling those products online, regardless of any type of “Zero engagement policy” the brand has with Amazon or eBay or any other online marketplace. So if a brand choses not to advertise or sell on Amazon, their products are likely going to be sold there anyway and with a high risk of brand equity deterioration – whether perceived or real.
So I decided to do some investigating on my own. Scott and the interviewer mentioned a luxury brand of mascara, so I figured this would be a logical product to pursue. My experiment was eye opening (no pun intended). I found that the same Diorshow Iconic mascara sold online at www.dior.com for $28.50 was actually less expensive on the Dior site than it was on Amazon (the Amazon price for the same product was $35.02). I thought this was confusing – isn’t the main reason people shop on Amazon to get better pricing than in traditional retail channels? Not only was it more expensive, but Amazon also actually stated that it was 7% less than the list price of $37.74. Curious still, I proceeded to order the same products through both websites to see what the variance is in user experience and final price.
And what a difference there was.
The Dior site offered me 2 free samples of their products as well as free shipping on orders over $50 and the opportunity to become a Dior Diva. I have no idea what that entails, but it was certainly enough to intrigue me. Even the font, colors and navigation were slightly more…upscale on the Dior site. Buying the pricier Amazon mascara (remember, this is the exact same product) gave me the same experience as if I just purchased a book on garbage disposal maintenance. Not to say it was a bad experience, but I didn’t get the same luxurious treatment that Dior provided.
And isn’t that why we seek luxury?
While Amazon does offer a significant number of great products – usually at excellent values – they cannot even begin to provide the experience a strong luxury brand works so hard to maintain, market and deliver. With luxury products, price is usually much less of a consideration when compared to the total brand experience, value added services like makeup or fashion tips, the inherent confidence that the product is authentic and of high quality, and often the social stature associated with luxury products.
During the interview, Scott hypothesized that luxury brands will begin to aggressively push back on Amazon’s perceived stronghold on everything eCommerce and retail. He suggested they may soon “band together” against the online marketplace to ensure their individual brand equities remain intact.
As such, the success of luxury eCommerce through multi-brand transactional sites or department store websites made luxury houses increasingly interested in taking more control over the way their goods are presented online and delivered to customers. For instance, Giorgio Armani and Burberry currently sell most of their collections online.
Parker Avery believes this dynamic certainly provides an interesting perspective on the push towards channel integration or omnichannel – focused much more on the customer and brand experience and much less of a push towards transactional volume. Of course, assortments, customer service and sales associates as well as backend processes, data and systems must be fully aligned and integrated to support these experiences.
How luxury brands develop, compete and maintain their prominence through this changing retail world will be interesting to watch. And in their struggle to compete against Amazon and strengthen their own brand identities, non-luxury brands should pay attention.