Blog postsFebruary 27, 2018
3 Reasons Retail Partnerships and Acquisitions Fuel Market Growth
It’s safe to say, and even redundant, that trying to compete with the Walmarts and the Amazons of the world with equivalent business models is out of reach for most retailers.
It’s safe to say, and even redundant, that trying to compete with the Walmarts and the Amazons of the world with equivalent business models is out of reach for most retailers. Giant brick-and-mortar and online retailers have too much clout, history, and investment in their distribution and fulfillment networks for most other retailers to even consider competing on an organic scale.
But, your delivery promise and logistics strategy is more important than ever. Making friends in the form of strong partnerships and fruitful acquisitions is now more than just good business—it’s a necessity. From a logistics standpoint, you can gain a lot of momentum by teaming up with technology providers that reduce traditional costs of warehousing and moving goods from point A to your customers’ doorsteps. With the right solution, you can expand your distribution footprint, improve your delivery promise, and make your customers happy. That trifecta is how more retailers can compete with giants.
The right partnership or acquisition can cultivate efficiency, streamline fulfillment, and grow a customer base.
Amazon is leading the market in eCommerce sales by a staggering $78 Billion. Combined with the customer expectation of purchases arriving on their doorstep, literally tomorrow, there’s an inarguable case for the importance of partnerships in retail. There is room to take back some of that market through creative logistics.
Retailers—of all sizes—are jumping on this trend. 2017 saw a striking increase in legacy retailer partnerships and acquisitions with more to come in 2018. In our 2018 Retail and Logistics Trends report, we assert that partnerships and acquisitions will continue to be a key strategy for gaining market share. Keep reading for three reasons why this matters and how your logistics strategy underpins the success of your operations.
1.) Legacy retailers are on board
Aside from Amazon purchasing Whole Foods, they partnered with Kohl’s to process Amazon returns as well, and have also set up a store within a store to sell a small selection of Amazon goods. This is an obvious win for Amazon, but is also an opportunity for Kohl’s to rent out some of its own square footage and grow its own digital fulfillment operations.
On a global scale, Alibaba formed a strategic partnership with Bailian Group, a large retail conglomerate in China with nearly 5,000 brick-and-mortar outlets spread across 200 cities. The goal of the partnership is the same as Walmart and Jet’s, to integrate in-store shopping, big data, and online sales into seamless shopping experiences for customers.
Other notable logistics partnerships from 2017 include:
- Walmart’s acquisition of Parcel, Hayneedle.com, Shoebuy.com, Moosejaw, Modcloth.com, and Bonobos
- Walmart partnership with Google to offer Walmart products for voice shopping through Google Assistant
- Target acquisition of Grand Junction for same-day delivery Walgreens partnership with FedEx
- PetSmart acquisition of Chewy.com to compete with Petco
- Ace Hardware’s partnership with The Grommet to offer small business goods in their stores
What’s clear about the above list is that partnerships and acquisitions are an important strategy for all retailers. For some with deeper pockets, a strong acquisition strategy makes the most sense. A perfect example of this is Walmart buying Modcloth, Bonobos, and Shoes.com et al. Walmart, a company especially known for its own brand, has acquired a handful of companies with a strong following to inorganically build its eCommerce reach.
For those that aren’t in the market to acquire, strategic partnerships will make them stand out. This is especially true with eCommerce. The new benchmarks of success is fulfillment, last-mile delivery, and transportation, and will continue to spur the need to outsource operations. It’s simply too much to do independently. Outsourcing operations accelerates growth without the dependence on traditional methods of building static, in-house distribution networks.
2.) Next-day delivery requires a new level of supply chain flexibility
Because the increase of eCommerce and omnichannel shopping has upended the way people traditionally buy products, businesses have to reconsider their supply chains. With all the variables retailers deal with every day—seasonal swings, return issues, opening new markets, and rolling out new products—responsiveness is key.
In order to offer a responsive service, retailers must address the changing factors with scalable and secure solutions that work with their existing infrastructure. Responsiveness only happens with fast-paced, nimble shipping solutions. Sometimes that means finding warehouse space immediately—not entering into a traditional, long-term warehouse lease.
That’s when unique warehouse and distribution center capabilities and solutions are increasingly necessary. Next-day delivery will quickly become the new Amazon Prime standard. Having a strong partnership with logistics solutions providers can help you give the big shots a run for their money. More next-day delivery means more customers and an increase in market share.
A recent McKinsey report makes the case that with 2-3 well-placed, in-house distribution centers (DCs), a successful retailer can achieve two-day shipping. But, for next day delivery, the physical upgrade to in-house supply chains would be prohibitive. Or, another expensive alternative would require retailers without enough DCs to pay a premium for priority shipping. The right partnership can make next-day delivery a reality for smaller retail disruptors.
3) Logistics-as-a-Service (LaaS) lowers the barriers of entry
As next-day delivery grows in demand, along with the demand for third-party logistics (3PLs), retailers will experience increased pressure to develop dynamic shipper and 3PL relationships.
Instead of treating 3PLs as a necessary mode of doing business, supply-chain managers, brick-and-mortar retail business owners, and eCommerce brands will need to create strategic partnerships. These partnerships will ensure the successful matchup of customer expectations and customer experiences. On the other side of the coin, logistics companies are offering more customized services. Think easy-to-use customer dashboards and software, innovative pricing, and exceptional customer service that support retailers throughout the warehouse-to-doorstep life cycle.
In our whitepaper, Catching up with Amazon, we detail how until just very recently, business have had limited options to creating fulfillment networks.
- Build and operate an in-house network
- Contract with a 3PL to establish new fulfillment centers
- Sell through Amazon’s Fulfillment by Amazon (FBA) services
- Or some combination of the above
Conversely, businesses can forge new relationships with partners offering what they need—on-demand fulfillment. Retailers can sign on and search for the services and locations they need to create a dynamic fulfillment network. With no capital outlays or long-term commitments, you can significantly reduce the costs, time, and complexities involved in network expansion.
There’s a lot happening in the world of retail. As omnichannel shopping and eCommerce continues to grow in popularity, logistics will only become more complicated. Being on the frontlines means creating a seamless omnichannel shopping experience for customers and having a competitive delivery promise. Every business has different needs, but as you grow and expand your customer base, consider how new logistics technologies and solutions providers can help you get there faster.