Why big brands are moving away from Amazon

While it caused rever­ber­a­tions across retail­ing, Nike’s move to pull its prod­ucts from Ama­zon could be just the start of the shake-up.

Nike’s deci­sion fol­lows a two-year pilot, which saw the sports­wear brand work with Ama­zon to reduce the sale of coun­ter­feits on the site and increase those of its own prod­ucts. But the results must have fall­en short because, in Novem­ber, Nike announced it would be for­sak­ing the online retail giant to focus on sell­ing direct­ly to cus­tomers.

Ana­lysts now believe oth­er brands may fol­low suit, antic­i­pat­ing major growth in direct-to-con­sumer (D2C) sales glob­al­ly. In the UK alone, Bar­clays Cor­po­rate Bank­ing says 77 per cent of all man­u­fac­tur­ers intend to invest in D2C in 2020 and this could mean more will be cut­ting ties with online mar­ket­places – though this is eas­i­er to do in stores than online. The trend for so-called immer­sive retail in bricks-and-mor­tar stores has seen brands such as Nord­strom offer­ing spa ser­vices and art instal­la­tions in its new sev­en-floor New York flag­ship and Lul­ule­mon installing work­out stu­dios and snack bars in its just-launched Mall of Amer­i­ca con­cept store.

Advanced 3D mod­el­ing is proven to lead to high­er sales con­ver­sions as well as reduced prod­uct returns

Mean­while, Nike’s rival adi­das has recent­ly unveiled a flag­ship immer­sive retail space on London’s Oxford Street, packed with expe­ri­en­tial retail fea­tures, includ­ing dig­i­tal mir­rors in fit­ting rooms that let shop­pers see what they look like in a real-world sce­nario.

Physical retail vs digital retail

If Nike has turned its back on Ama­zon to improve the online shop­ping expe­ri­ence, what hopes does it have of repli­cat­ing the type of immer­sive retail expe­ri­ence seen late­ly on the high street? It might want to look to brands like Levi’s, Tom­my Hil­figer and Sam­sung, which have all part­nered with expe­ri­en­tial ecom­merce plat­form Obsess to build vir­tu­al real­i­ty stores.

Neha Singh, founder and chief exec­u­tive of Obsess, believes retail­ers need to go beyond the grid-of-thumb­nails Ama­zon cre­at­ed to sell books 25 years ago. “A com­mon con­sumer behav­iour is ‘hedo­nic shop­ping’ where you enjoy the process of brows­ing for inspi­ra­tion,” she says. “The con­sumer spend in that behav­iour actu­al­ly ends up being greater, but this pri­mar­i­ly hap­pens offline today. We are bring­ing that same con­sumer behav­iour to online shop­ping.”

Of course, ease of dis­cov­ery isn’t the only rea­son peo­ple like shop­ping in real life. As tac­tile beings, we also like to see how prod­ucts fit and feel. Meet­ing this need dig­i­tal­ly is a major chal­lenge, but one way retail­ers are try­ing is with advanced 3D mod­el­ling that, thanks to vir­tu­al real­i­ty, enables shop­pers to visu­alise how prod­ucts would look in their homes.

“This is proven to lead to high­er sales con­ver­sions as well as reduced prod­uct returns, which are a huge oper­a­tional expense for brands and retail­ers,” says Dalia Lasaite, co-founder and chief exec­u­tive
of CGTrad­er.

The D2C brands winning at immersive retail

As excit­ing as these solu­tions may be, pro­vid­ing immer­sive retail expe­ri­ences on your web­site or app doesn’t nec­es­sar­i­ly mean you’ll suc­ceed as a D2C brand. Nail­ing social media is just as impor­tant, if not more so.

“The con­nec­tion between blogs, vlogs, YouTube chan­nels, prod­uct pages, Insta­gram posts and in-store touch­points is cru­cial,” says Benoit Sou­caret, cre­ative direc­tor of expe­ri­ence design at LiveArea. “Savvy brands are inte­grat­ing and align­ing social and cus­tomer jour­neys, so buy­ers have the com­plete pic­ture.

“In beau­ty, for instance, it’s no good hav­ing an influ­encer tuto­r­i­al video trend­ing online if con­sumers can’t eas­i­ly find the prod­uct, check it suits their skin tone, com­plete the look with oth­er prod­ucts and buy eas­i­ly on their mobile device. Web­site mer­chan­dis­ing strate­gies should be aligned with oth­er chan­nels to make this jour­ney as seam­less as pos­si­ble.”

Cos­met­ics brand Glossier is a D2C retail­er that does this, devel­op­ing new prod­ucts from feed­back in social com­ments, col­lab­o­rat­ing with influ­encers and deploy­ing user-gen­er­at­ed con­tent pulled from its social chan­nels.

“The site’s reviews sys­tem helps users find reviews that are most rel­e­vant to them, fil­ter­ing by age, skin type and gen­der for each prod­uct,” says Mr Sou­caret. “And dis­count­ed prod­uct bun­dles are avail­able to tri­al var­i­ous prod­ucts and looks. The sim­plic­i­ty and cus­tomer-focused ethos of the brand is coher­ent through­out all stages of the cus­tomer jour­ney.”

Anoth­er exam­ple of D2C done well is Dol­lar Shave Club, which has built a bil­lion-dol­lar empire by offer­ing a bet­ter groom­ing expe­ri­ence at a more afford­able price. Dol­lar Shave Club also demon­strates the pow­er of the sub­scrip­tion mod­el, some­thing that Nike is exper­i­ment­ing with through its Nike Adven­ture Club for kids.

So long, Amazon

When Nike announced its split from Ama­zon, it said it want­ed to “focus on ele­vat­ing con­sumer expe­ri­ences through more direct, per­son­al rela­tion­ships”. One way it’s already suc­cess­ful­ly doing this is through its Nike­Plus pro­gramme, which boasts 185 mil­lion mem­bers.

Mem­bers can unlock all sorts of ben­e­fits by using Nike’s app in-store, like the abil­i­ty to request shoes to try on and check­out with­out queue­ing. But they can also enjoy perks at home, for exam­ple, by using it to mea­sure their shoe size through their smartphone’s cam­era. Nike says it aims to make stores “an exten­sion of the mobile expe­ri­ence” by tight­en­ing the rela­tion­ship between the chan­nels.

While it all adds up to a great retail expe­ri­ence, it doesn’t come cheap; Nike invest­ed $1 bil­lion in immer­sive retail capa­bil­i­ties and con­cepts dur­ing the fis­cal year 2019. It’s clear that any con­sumer brands walk­ing away from Ama­zon to focus on a cus­tomer-first busi­ness mod­el will need deep pock­ets.