Macy’s recently licensed 300-square-foot shops to Best Buy in 10 of its stores as a test. This is just one more example of how savvy retailers envision the future retail business model. The future model, using Macy’s as an example, will simply be a distribution platform branded as Macy’s. The host brand (Macy’s) will distribute a multiplicity of other retail and product brands and services (some may even be competitors), to its consumers. I use the term “distribution platform,” because as long as we continue to call Macy’s or any of the others a retail store we will never escape last century’s paradigm of a “retail store that sells stuff.” CEO Terry Lundgren and team could not envision and evolve this future model if their minds were stuck in four walls, buying wholesale goods and then selling them to customers.
Furthermore, I believe the most productive distribution models of the future will be those in which the host brand, such as Macy’s, will lease shop space to other brands, such as Best Buy, and will allow them to own and control the inventory, as well as run the operations.
Jeff Bezos was never stuck in the old paradigm, so it was easier for him to understand the big picture of distribution, and even more so with the engine called the Internet. Isn’t this platform concept precisely what the Amazon model is? He envisioned the longest, widest, biggest platform, distributing everything in the world from A to Z. Thus, Amazon is the brand, and through their platform, they can sell and distribute everything to everybody around the globe, or provide a platform/marketplace for other brands to do so. And when they open physical distribution platforms, those, too, will serve as additional Amazon platforms.
By not having to struggle his way out of the old paradigm, which most of our current retailers remain stuck in, Bezos created his own model. It’s working. Amazon is not viewed as a retail store by consumers. Likewise, their shopping expectations are not confined to a limited number of product categories or services. Customers go to Amazon for anything and everything, from aspirin to Zappos. Net-net? Amazon has an enormous advantage in the uber world of the “distribution of things.”
From Omnichannel to The DOT (Distribution of Things)
By the way, in case you’re mentally going there, this is not an article about “omnichannel.” That model already has its own limited paradigm and is provoking a lot of yawns. Too many in the industry define omnichannel as the necessity to integrate both online and store operations. But that’s not defining it broadly enough. I’ve heard the term “all-channels,” but it doesn’t clearly describe distribution of one’s goods or services on all possible platforms: stores, Internet, mobile, catalogues, kiosks, airplanes, magazines, airplanes, airports, coffee shops and on and on, as far as your imagination takes you. And yes, all of those distribution points need to be seamlessly integrated.
So, what I’m suggesting is that we take a pause and wash the old paradigm and its language out of our minds, (even if retailers must operate the old model during the interim). We should replace it with a new paradigm and new language that won’t allow old, bad habits to creep back in. In short, try to channel how visionary Bezos mind must have been thinking about reinventing distribution.
Old Paradigm Brands Have Their Limits, Too
Another reason Amazon has a built-in advantage is that as Macy’s, Best Buy and other traditional retail and product brands evolve to the new distribution paradigm, there are limits as to which brands can share other brands’ distribution platforms. These limitations are actually imposed by consumers’ perceptions of the compatibility of one brand with another. For example, in my opinion, the Best Buy brand will be compatible with Macy’s in the minds of its consumers. Both are strong national brands and Macy’s customers would not find it peculiar that a Best Buy shop would appear within the Macy’s brand, nor would it lessen the image of either brand in their minds. On the other hand, as compatible as these two brands are, would Best Buy’s customers find it peculiar to find a Macy’s shop in Best Buy? An example of utter incompatibility would be a McDonald’s shop within Bergdorf Goodman.
My point is that the Amazon brand was positioned from the get-go as all encompassing and thus compatible with every brand on the planet. The old paradigm brands have been positioned, and therefore limited, to more focused product and service niches.
I know, I know. You are thinking that Bergdorf’s would never choose the Amazon platform/marketplace to distribute its brand. To that thought I say, “Never say never.”
Traffic Building Synergies: Win and Win!!
Finally, the traffic building synergy of co-branded platforms is powerful. It yields fundamentally new customers and additional purchases for both the host and guest brands. Many of Macy’s and Best Buy destination customers will impulsively purchase something from the other brand while on the “platform.”
So clear your mind of the defunct wholesale/retail paradigm; allow the new distribution vision to take its place; find a new language, and you can capture the kind of explosive new growth that Amazon has so greedily captured.
Plus you can make money doing it.