How Brands and Retailers Can Compete in the Age of Amazon

“The reality is Amazon is what it is, and if you think you can beat it at its game, then you’re fooling yourself.” That was the message from Rick Muskat, a principal with the footwear company Deer Stags, at a panel discussion today at the FN Platform trade show in Las Vegas.

Muskat, along with Birkenstock USA president David Kahan, Famous Footwear president Rick Ausick and Shoe Parlor co-owner Jason Rogowsky, discussed the impact that Amazon.com is having on retailers and brands in a conversation with Susquehanna Financial analyst Sam Poser.

Muskat, whose roughly 80-year-old family business counts Amazon among its vendors, added that for retailers, the idea isn’t to compete on a level with the internet marketplace but to create a different value proposition. “The question is, how do you communicate with the consumer in a way that means something to them,” he said.

Kahan echoed that same sentiment. “Don’t give consumers a reason to go to Amazon,” he said. “A lot of retailers have taken their consumers for granted. And instead you should be wrapping yourselves around them with emails and marketing.”

He pointed to Famous Footwear’s successful messaging strategies, which are built around data analysis. “Famous is a data-gathering organization,” said Kahan. “Make sure you, as a retailer, own your database and are marketing to your database.”

For his part, Ausick said Famous has spent time developing its online strategy around strong storytelling. As an example, he cited the chain’s “Nike Hub” back-to-school web initiative, which highlighted the hot seasonal brand through videos and styling how-tos. “We found that people spent 40 percent more time on the site and bought more from us,” said Ausick. “That tells us that people want that rich online experience.”

For brands, Amazon’s digital dominance presents other challenges. In particular, the panel highlighted issues of fulfillment and pricing.

Deer Stags’ Muskat said his firm has had to adjust its inventory management to keep up with the pace of online orders, and is investing heavily in business software and data analysis. The firm also has a strict pricing policy (known as a MAP policy) and monitors it closely to ensure that retail partners aren’t undercutting each other and forcing down prices on Amazon. (Amazon’s algorithm scans the web to match the lowest available price.)

However, issues still remain. For one, the time and money required to police the Amazon marketplace of unsanctioned price cuts and counterfeit goods is extensive, according to Kahan. “We aren’t Interpol or the CIA. We don’t have the resources to track down all of these people,” he said.

Kahan quite publicly withdrew Birkenstock from the Amazon marketplaces last year citing “unacceptable business practices,” and instead has focused on the independent retail channel. “We have a different point of view than some,” he said. “We see ourselves as stewards of a brand and view everything through the lens of our relationship with the end user. We decided that wherever we’re in contact with the consumer has to be the best.”

But in the end, he admitted, Amazon isn’t going anywhere, so companies need to do what’s best for their business.

And for many brands and retailers, there are major advantages to working with the e-tail giant. Shoe Parlor’s Rogowsky said his company has gained a great deal of exposure by selling through Amazon. “It is the biggest online mall in the world. And while our brick-and-mortar business is excellent, without that mall we wouldn’t be able to drive that same level of online traffic on our own,” he said.

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