Reviewing Retail in 2017, Part 2: Collaborations

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As retail’s foundations shifted in 2017, legacy retailers sought out collaborations designed to drive shopper traffic, build their appeal to demographics such as millennials and maximize the value of their real estate holdings. This trend was particularly apparent in the US, but we also saw European and Asian retailers enter partnerships to tap new technologies and develop cross-channel offerings. This is the second of two notes where we review the year in retail; last week, we discussed 2017’s notable retail mergers, acquisitions and investments.

Retailer-Retailer Collaborations

We saw a large number of collaborations between retailers this year, and these served a multitude of purposes.

Piggybacking on Amazon’s growth: Both Sears and Kohl’s partnered with Amazon in 2017. In July, Sears began selling private label appliances on Amazon.com, and it added private label car batteries and tires to the offering in December. In a more striking partnership, Kohl’s agreed to two tie-ups with Amazon. First, Kohl’s started selling Amazon’s tech products in dedicated in-store departments. Later, it began using its stores as drop-off points for returns by Amazon customers. The Kohl’s-Amazon partnership raises two questions, neither of which has been answered so far: Will other retailers follow Kohl’s in collaborating with Amazon? And will this collaboration offer Kohl’s some immunity from Amazon’s impact on US department stores?

Implementing new technologies: In November, French grocery retailer Groupe Casino became the first non-UK retailer to license Ocado’s hardware and software for use in high-tech online grocery fulfillment centers. This was a long-awaited agreement. Back in February, Alibaba Group signed a partnership with Chinese retailer Bailian Group to develop new retail technologies, launch new cross-channel retail services, improve supply chain management and adopt technologies to improve customer service capabilities.

Tapping high-growth markets: In August, Walmart and JD.com announced that they were expanding their strategic partnership in China by further integrating their platforms, supply chains and customer resources. The retailers also collaborated on the inaugural 8.8 shopping festival in China on August 8.

Offering convenience: In April, Uniqlo partnered with 7-Eleven in South Korea to enable Uniqlo customers to pick up their Internet purchases from the convenience store chain.

Broadening choice: Under an agreement announced in November, Lord & Taylor will open a storefront on Walmart’s online marketplace site in early 2018. Denise Incandela, Head of Fashion at Walmart US eCommerce, told Reuters, “Our goal is to create a premium fashion destination within Walmart.com.”

Retailer-Brand Collaborations

Brick-and-mortar retailers sought out collaborations with brands that could bring product exclusivity or experiences to their stores. In May this year, Target brought Casper mattresses to physical stores for the first time, following Target’s introduction of Harry’s shaving products in 2016. In August, Germany’s KaDeWe Group followed Target’s lead and began selling Casper mattresses in its own stores.

In November, the Macy’s flagship store in New York’s Herald Square unveiled a 1,000-square-foot Samsung smart product experience area. According to Samsung, this was the first installation of its kind in the US, and the combination of retail and entertainment brought 200–300 customers into the store per day in November to try the virtual reality experience.

Online, Nike was among the brands to start selling on Amazon this year. And Calvin Klein opted to sell its new underwear styles only on Amazon and through pop-up stores instead of through traditional channels such as department stores.

Retailer-Service Collaborations

In the most striking retailer-service collaboration of the year, Hudson’s Bay Company (HBC) entered into a strategic relationship with office-space provider WeWork. HBC sold its Lord & Taylor New York flagship to WeWork’s real estate company. WeWork will use the building as its headquarters and lease some of the office space to other companies; a smaller Lord & Taylor store will occupy part of the building. HBC will also lease space in some of its other stores to WeWork. Rhône, the partner in WeWork’s real estate joint venture, will make a $500 million equity investment in HBC.

The move illustrates the reduced need for square footage at department stores and suggests that there are possibilities for other hard-hit retailers and property owners to generate value from their surfeit of underproductive retail space.

We wonder if we will see other large-store retailers search out similar agreements with service providers in 2018. Even if we do not, there is little doubt that we will continue to see retailers take original approaches to strategic relationships next year as they seek to drive traffic, tap high-growth platforms, adopt new technologies and maximize the value of their real estate portfolios.

As retail’s foundations shifted in 2017, legacy retailers sought out collaborations designed to drive shopper traffic, build their appeal to demographics such as millennials and maximize the value of their real estate holdings. This trend was particularly apparent in the US, but we also saw European and Asian retailers enter partnerships to tap new technologies and develop cross-channel offerings. This is the second of two notes where we review the year in retail; last week, we discussed 2017’s notable retail mergers, acquisitions and investments.

Other pieces you may find interesting include: Walmart and JD.com Expand Strategic Partnership in China Reviewing Retail in 2017, Part 1: Mergers, Acquisitions and InvestmentsHudson’s Bay Company and WeWork Redefine the Traditional Department StoreMacy’s Flagship Creates a New Retail Experience with Samsung Smart Store

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