When I read that Amazon was in talks to partner with big fashion retailers like J. Crew, Abercrombie & Fitch and Neiman Marcus, it got my attention. Despite Amazon’s leadership position in online retail, you typically don’t associate these higher-end clothing retailers with a mainstream site that targets essentially everyone.
If we were talking about a partnership between Amazon and Wal-Mart WMT -0.94% or even Costco, that would be far less surprising because of their parallels in broad customer bases and emphasis on low prices. But rather than partnering, Wal-Mart is making its own investments to level the playing field with Amazon. So why are fancier retailers like Neiman Marcus considering such a partnership? What are the risks? And do these risks outweigh the possible benefits? I think they do.
For starters, look at the recent Amazon-Hachette dispute that followed failed contract negotiations. According to recent reports, Amazon AMZN -0.53% raised prices for Hachette books and prolonged delivery times in what the New York Times calls “scorched-earth tactics.” Fashion retailers aren’t likely to fare any better in their negotiations over the long-term.
Also, consider that Amazon has nothing to lose in these partnerships. They are a completely win-win proposition. The company needs to satisfy different stakeholders yet remain true to its customer-centric model. It needs to deliver that symbolic smile on its boxes to customers.
Read the full post at Fortune.
Sharmila C. Chatterjee is a senior lecturer of marketing and academic head of the Enterprise Management Track at MIT Sloan School of Management.