Month: June 2019

CEO Michelle Gass justified this and laid out the future of Kohl’s partnership with Amazon to investors during the retailer’s first-quarter earnings call at the end of May, making the case that driving more Amazon customers into stores to let them return orders at Kohl’s locations, which Kohl’s then ship back on their behalf, brings in new and younger Kohl’s customers. Speaking with investors, Gass referred to the service expansion the company’s “single biggest initiative of the year.”

But by getting into bed with Amazon, the retailer is looking to revive the value proposition it pitches to customers in the Amazon age and re-solidify its relevance in retail. Other retailers are doing so, both directly and indirectly. Walmart fired shots when it announced it would offer one-day delivery just weeks after Amazon said it had invested $800 million in reducing Prime shipping speeds from two days to one. Target’s turned its store fleet into an online order fulfillment army, enabling capabilities like buy online, pick up in store and ship from store to such great effect that 80% of Target’s online orders are now fulfilled by stores.

Retailers are weaponizing their assets as defense mechanisms against Amazon, and for Target and Walmart, it’s working: Target sales were up 5%, while Walmart’s were up 3.4%, during a quarter that otherwise saw consistent retail carnage.

The success of retailers like Walmart and Target send a clear message to the stores that are struggling: Blaming Amazon for retail’s current issues is getting harder to justify. Instead, a combination of forces have contributed to sealing the fate of some of the industry’s less-adaptable players, from a failure to seize on e-commerce earlier, to internal silos, to lost footing on what customers actually want.

Of course, Amazon is still in the subtext of retailer’s excuses for poor performance. Executives rarely name drop Amazon directly when attributing excusing sales, unlike, say, bad weather. Instead, they have a series of code words they use to deflect blame around declining foot traffic and revenues to Amazon.

“Changing customer behavior” is a veiled term to pin onus on online shopping and price comparing, a habit Amazon didn’t invent but disproportionately benefits from. “Customer expectations” boils down to customers’ new-found need to receive items they order online in two-business days, max, thanks to Amazon’s increasingly fast-paced order fulfillment. Even “loyalty” is a retail component that now conjures up the ultimate loyalty program, Amazon Prime.

“Amazon is, undeniably, creating new standards for customers’ expectations across the board, with offers like one-day shipping,” said Jon Reily, evp of retail and e-commerce at Publicis Sapient. “And unlike other retailers, it’s built itself a warchest that can sustain these expensive strategies. Other companies going forward will be judged on whether or not they can rebuild their own logistics to compete.”

But it’s not Amazon’s existence or cut-throat competitive strategies that have sealed the fate of other retailers that are losing market share, like JCPenney, Bed Bath & Beyond and Sears. Instead, it was a series of executional and strategic missteps over a critical window of time during which today’s better-equipped competitors were taking action in areas like e-commerce and logistics as well as experiences and services.

“Amazon isn’t the boogeyman, it’s a competitor,” said Bryan Gildenberg, chief knowledge officer and retail lead at Kantar Consulting. “Are there specific problems Amazon presents? Sure. The biggest one isn’t a general problem, it’s specific: Amazon Prime members will rely more on Amazon over time. So time is the most significant factor here.”

A slowness to respond to the digital forces sparking change in retail is sealing the fate of bigger retailers, not Amazon itself. At Bed Bath & Beyond, it took three years to launch a new e-commerce site. At former employee at Payless, which filed for bankruptcy a second time earlier this year, spoke of similar delays to tech updates: a site that was supposed to launch in 2018 never materialized.

Amazon is killing retail, it’s that brands where consumers can find a clear purpose and promise are winning

For companies like Sears and JCPenney, a critical error was investing in e-commerce as a separate, siloed business, not a seamless integration alongside physical commerce. Treating online retail as a distinctly different component of a company, rather than a complementary one, severs the ability for a retailer to connect customer data insights across channels and incorporate attractive capabilities like ship-from-store and buy online, pick up in store.

“JCPenney went down the same road as Sears: They both thought of e-commerce as a separate business, and were channel-centric. Because of that, they didn’t understand that there’s so much overlap between [online and in-store] customers, and that there’s really one experience from a customer perspective,” said Steve Dennis, the CEO of retail consultancy SageBerry and former vp of corporate strategy at Sears. “JCPenney underinvested in digital as part of the customer journey and ran the e-commerce business very separately. So not only is that not what the customer wants, it means you have fragmented customer data, so targeted marketing falls behind, and you lose ground.”

Instead, retailers like JCPenney, Sears and Bed Bath & Beyond defaulted to relying on heavy promotional cycles in an effort to win price-conscious customers, hinging value proposition not on compelling merchandise, in-store experience or convenience, but consistent sales — a losing strategy when up against Amazon’s pricing structure and discount retailers like Walmart, TJMaxx and HomeGoods.

“What’s happening today is not that Amazon is killing retail, it’s that brands, where consumers can find a clear purpose and promise, are winning. And for retailers like Kohl’s, JCPenney and Bed Bath & Beyond, the promise isn’t clear,” said Gildenberg. “And when a value proposition doesn’t evolve, it doesn’t just stay the same. Customers start to replace it, and it gets jumbled and fragmented. It’s like a puzzle where pieces have been taken out.”

Kohl’s is hoping it can insert renewed purpose by becoming a physical retail partner for Amazon’s returns, but if it doesn’t also succeed where other retailers have — in delivery logistics, merchandise and experience — cozying up to Amazon won’t save it. But, according to Dennis, it’s at least a proactive strategy that serves as an understanding of customer behavior, rather than just blaming Amazon for troubles.

“It’s a cop-out to say Amazon is killing retail,” he said. “Nothing prevented JCPenney and Sears from acting faster online other than themselves. It’s a missed opportunity.”

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The post The ‘blame Amazon’ era of bad retail is over appeared first on Digiday.

How have customer expectations around the in-store experience changed?
The rise of Amazon specifically has [raised] everyone’s bar in terms of expecting shipment. It’s common for a customer to walk in and if the product’s not there, a majority of them are comfortable saying sure, ship it to me. They’ve done an online order before, they’re familiar with how that process works, so it’s certainly become more an expectation. Outdoor Voices as a brand is in such a great spot because we built our foundational technology like this, in a way it just makes it easy to [roll out these capabilities] versus being a brand that’s been around for 20 to 30 [years] that has more legacy technology systems, which make it difficult to transition to a more modern approach. We can use our youth to our advantage.

I think the fact that we started online is probably not something that a customer is just thinking about at the front of their mind. They just think about us as a more modern brand and maybe expect more modern functionality, and that’s what we want to make sure we provide.

Why did Outdoor Voices decide to partner with Instagram on the testing of checkout?
It is an incredibly important channel for us in just communicating with customer — it’s where our brand probably comes to life the most across all of the social channels, so internally it’s just an  incredibly important platform for us. Looking for ways to streamline that experience for the user if they see something they like [on Instagram,] trying to make it easier for them to be purchase that, was just a no-brainer to me.

When a customer buys something through Instagram instead of your own website, you get less data on that customer. So how do you try to balance that — making it easier for customers to buy on platforms they’re already on versus directing them to your own website?
The data angle is certainly important. Obviously, the more data you have on a customer, the more personalized of an experience you can provide to them. But we also believe that our communication style in general with the customer is what sets us apart from other brands. We want to be essentially a friend encouraging you to get into recreational activity. In terms of evaluating partners and platforms, an important part of that evaluation is to make sure that we can [still] find a way to maintain a relationship with the customer.

How important is personalization to you, and how are you using tech to try to personalize the experience for Outdoor Voices’ customers?
Anything that we can glean from maybe from previous purchases, [like] specific sizes they’ve bought, we try to make sure the sizes are automatically displayed or are just more [prominent] to them as they search around the site. Being able to provide recommendations [around different colors and types of fabrics] is incredibly important, and learning what activities they like to do allows us to potentially share some recreational-specific content that inspires them to go to events and meet people from the community.

If [personalization] is the only thing you think about it almost becomes robotic. There’s not that flair that we’re looking for in that relationship with a customer where we can be inspiring. We’re not just trying to be an Amazon that’s 100% optimized to show the things that you’re probably going to buy. Our founder Tyler Haney describes it as “we want to be the friend that brings the orange slices on a hike.” And you can’t just personalize all the way through that process, you’ve got to have more of a human connection and a human interaction to drive that home.

What’s Outdoor Voices’ mobile strategy, and how are you thinking about trying to communicate with customers through your app?
Last year we launched the OV Trail Shop, which was about using augmented reality as a way to encourage people to get off the trail. We did a launch for that as just kind of a proof of concept of how we can leverage technology to encourage people to be active. Mobile is an incredibly important item for me, and that’s something we’re working deeply on.

From my perspective you’ve got to follow this content-community-product triangle to create a mobile experience that really resonates with the customer and makes them want to come back.

The post How Outdoor Voices’ vp of technology connects customer data and community appeared first on Digiday.

Tasty is the centerpiece of BuzzFeed’s licensing business. Two years after making its first move into brand licensing with a set of cookbooks and then a growing line of cookware at Walmart last year, the BuzzFeed-built media brand has begun to invade the aisles of grocery stores. A few months ago, Tasty launched a pair of Tasty-branded food products, with a suite of ice cream flavors created in partnership with Nestle and a spice blends created with McCormick. Over the second half of 2019, Tasty will launch a set of meal kits produced in partnership with Mistica, a cake decoration product with Wilton, a set of wines with Wines That Rock, a line of kitchen appliances with Cuisinart and premade side dishes with Food Story.

Tasty is also in the early stages of product development with several large CPG companies on Tasty-branded products including soups, pastas, baking kits and smoothies, the company said. Those products are expected to launch next year.

Sales of the cookbooks remain strong with more than 800,000 sold to date, BuzzFeed said. The kitchenware line, which sells exclusively through Walmart, has sold 4 million items since launch. And Tasty continues to build on the progress it made in those categories, the first two that Eric Karp, BuzzFeed’s global head of licensing, wanted Tasty to manifest in. Tasty will launch a fourth cookbook in the fall, and its cookware line, which began with 90 products, will now have some 120 total items at Walmart. Walmart has also expanded the amount of floor space that BuzzFeed gets at each of its locations. Later this year, Tasty’s kitchenware program will expand outside the U.S., thanks to partnerships with kitchenware manufacturers Fackelmann in Europe, the Middle East and Africa and Continente in Latin America, according to BuzzFeed. 

But Tasty wants to take that strong growth as a way to prove its ability to drive sales for advertisers, too. BuzzFeed is using those sales figures as a proof point in conversations with its largest CPG advertising partners, hoping to partner with them on packaging and in-store consumer promotions that BuzzFeed says drive increases in sales. For example, a Tasty consumer promotion helped one refrigerated beverage advertiser gather an additional 1 million millennial customers, a BuzzFeed spokesperson said.

“What most advertising platforms miss out on are the final 20 meters of the 100-meter dash,” Karp said. “A campaign creates awareness, drives urgency, but once folks get into those stores, the message is lost, and you simply see your typical retail displays. If we can take elements of the campaign we’ve created and dress that point of sale, and remind folks of the content we create in the first place, and do so in a way that’s authentic, we can drive conversion at point of purchase.”

Those extra services cost brands money, Karp said, though they charge less than the “full street value” of those services; the overarching priority, Karp said, is to ensure that the brands’ investment leads to results.

“We want to make sure that we’re not nickel-and-diming,” Karp said. “It’s important that [advertisers] finish up each campaign and say, ‘This moved the needle.’”

Historically, publishers have been hesitant to pursue brand licensing because they wanted to avoid upsetting their biggest advertisers. Karp said he thinks Tasty can get around that thanks to direct relationships to companies that operate several brands at once in a given product category.

But getting into brand licensing makes sense for Tasty, which is on a mission with the rest of BuzzFeed to diversify revenues and become profitable. BuzzFeed has raised more than $496 million in venture capital.

Moving into prepared foods is an opportunity for fast, if low-margin, growth; margins are typically 1-2 percent on products sold there.

“That category is growing exponentially,” said Karina Masolova, the editor of the Licensing Letter, which tracks the licensing industry. “Part of the reason why is the technology has gotten a lot better; you can introduce more formats to shelves, they last longer, frozen food tastes better.”

On the other side of the coin, BuzzFeed presents an opportunity to older brands desperate to reboot their images in the eyes of younger consumers.

“Given the current consumer’s changing eating patterns, we are seeing there is less focus on center-store categories,” said Tory Gundelach, vp of retail insights at Kantar Consulting, referring to a part of the grocery store typically dominated by prepared foods and products sold by CPG companies. “Those brands are really looking to reinvent themselves. Partnering with Tasty, which is a digitally-native content brand, is really aimed at changing the perception of some of those traditional brands that just don’t resonate as well.”

The post With Tasty as centerpiece, BuzzFeed aims for $260m in branded product sales appeared first on Digiday.

Additionally, the company has been running a test this year with a number of TV networks to funnel the networks’ Fire TV inventory into Amazon’s DSP. In the test, the networks are able to directly sell their Fire TV apps’ inventory to advertisers, and the advertisers are required to use Amazon’s DSP to place those buys, which gives the advertisers the ability to use Amazon’s shopper data to target their ads in the networks’ apps, according to two industry executives with knowledge of the matter. An Amazon spokesperson declined to comment.

Amazon appears to see connected TV as an opportunity to take a leadership position in a market that its main advertising rivals have yet to dominate. Facebook tried to erect a connected TV advertising network before shutting it down last year, while Google’s DSP has been making inroads in the connected TV market with the number of advertisers using Google’s DSP to run connected TV campaigns increasing by 137% over the past year, the company said in May 2019.

Amazon is effectively trying to create a connected TV advertising flywheel. If it can get more inventory from Fire TV apps, especially inventory from TV networks, then it stands to get more investment from advertisers into its DSP, which can help it to attract more and higher quality inventory from media companies. The engine spinning that flywheel is the access to Amazon’s shopper data. It’s a model that Amazon has previously used to get inventory from publishers for its DSP.

Attracting demand by accruing inventory
In December 2016, Amazon introduced its Transparent Ad Marketplace for publishers to auction off their sites’ and mobile apps’ display and video inventory. A header bidding tool, TAM enabled publishers to auction off their inventory to multiple demand sources simultaneously, including Amazon.

The primary lure for publishers to sell their inventory through TAM was being able to sell ads targeted based on Amazon’s shopper data because advertisers would likely pay more for those targeted ads and therefore publishers would stand to make more money.

However, for a publisher to sell ads through TAM targeted using Amazon’s shopper data, the publisher had to add at least one other demand source to TAM. “If you just wanted to use Amazon, then you wouldn’t get access to the shopper data,” said one publishing exec. That may seem counterintuitive for Amazon to require publishers to add demand sources to compete with Amazon, but it appears Amazon’s belief was that having multiple demand sources plug into TAM and the resulting competition for inventory would stand to make TAM — and by extension, Amazon — more valuable for publishers. Amazon appears to have been right in that belief.

Some publishers have seen TAM become a top-5 programmatic revenue source, according to two publishing executives. “They’ve rapidly made up a lot of ground in the header market and getting access to inventory and making a real business out of it,” said a second publishing exec. “But there’s a question now of how do they get into the premium marketplace?”

The answer appears to be, once again, Amazon’s DSP. In addition to the programmatic direct test with TV networks’ Fire TV apps, Amazon began testing programmatic direct deals for publishers’ online inventory purchased through Amazon’s DSP since last year, according to AdExchanger. In both examples, Amazon allows the publisher to own the advertiser relationship and serves as the data and technology provider, which publishers see as a win-win.

“The idea that Amazon data can be leveraged by a publisher to do business directly with a marketing partner and Amazon empowers that transaction in a privacy-compliant manner — to me that has a ton of value,” said a third publishing exec.

Media companies’ concerns
However, publishing and TV executives alike are concerned about giving Amazon too much power. They are wary that Amazon could use the advertiser demand that publishers funnel to its DSP to disintermediate media companies’ relationships with advertisers. This has already been a sore spot among publishers with TAM because Amazon does not share with publishers which advertisers are buying their inventory. “It’s only transparent on one side. The advertiser knows what they’re buying, but the seller does not know who’s buying them,” said the first publishing exec.

Even when it comes to the programmatic direct deals that Amazon’s DSP is facilitating, there is a concern that the arrangements could become a Trojan horse. For now, Amazon may use the deals to get publishers to provide it with access to higher quality inventory, and publishers may be comfortable with that because, in these programmatic direct arrangements, they are still the ones dealing with the advertiser directly. But Amazon could parlay advertisers’ adoption of its DSP to eventually revert publishers to the role of inventory provider.

“There is a risk that we’re creating a marketplace for them as TV content sellers,” said a TV network executive regarding the Fire TV test. “We’re getting buyers comfortable with using Amazon data in connected TV environments, and then Amazon over time will start to absorb those dollars back in and they’ll sell it according to their plans. Are we setting the market for them? Maybe, probably.”

The post How Amazon is using its DSP to get more high-quality inventory from publishers appeared first on Digiday.