Retailers are looking for every advantage to protect their market share from the fast-growing niche startups.
Just this month Nordstrom took a significant investment in Shoes of Prey, an online retailer that sells customizable shoes.
And this is just another instance in a pattern of similar acquisitions – Trunk Club, HauteLook – and as a result Nordstrom manages one of the top omnichannel operations in retail.
But even the most successful of these e-commerce brands find themselves with growing pains as they mature and struggle to adapt their business model.
They tend to be far more niche in nature than a traditional retailer, limiting the ceiling of potential customer penetration. And customers still like to try on or feel a product before purchasing – meaning retailers really can’t afford to exclusively engage the customer online.
Birchbox experienced these very challenges in their business and are beginning to pursue a brick and mortar strategy; their CEO even acknowledged that as they evolved and grew into a larger company, “We can’t be just one channel.”
Acquisitions: A Beacon of Hope
Acquiring an existing e-commerce brand has a number of distinct advantages for both parties, especially when weighing it against building a platform from the ground-up.
For example, some of the advantages that brick and mortar retailers gain when acquiring the right online retailer for their brand include:
- An online sales tool that can be adjusted and leveraged across the company’s brands.
- Talented individuals with online expertise and outside minds with new ideas, which can have a significant and beneficial effect on more traditional retail companies.
- Access to a wealth of new customer data. And by mining this data, the traditional retailer can discover insights that can impact all brands and channels.
On the flipside, by partnering with a traditional brick and mortar retailer, an e-commerce start-up can:
- Gain immediate access to multiple channels and a wide store network. The start-up can interact with its customers in a brand new way as well as introduce itself to a new segment of customer.
- Have access to the expertise of big retail executives and board members, helping them successfully navigate the multiple channels of brick-and-mortar.
- Obtain significant resources that are often used to refine and improve the online sales platform and pump up marketing to draw new customers.
And acquisition activity is only picking up. Canadian retailer Hudson’s Bay Company is rumored to be buying fashion deals site Gilt. Both companies have struggled some lately, but this deal really fills a need for both sides – HBC needs a strong e-commerce platform to be successful; Gilt’s slump is in part due to its one-dimensionality and this deal provides it with brick and mortar channels.
As this trend continues well into 2016, have you considered it as a potential growth avenue for your brand? If so, let’s talk about how customer analytics can help shape your omnichannel strategy.