Why Consumer and Retail Brands Should Collaborate—Not Compete

Blog Post
January 26, 2018

Sometimes, 1 + 1 actually equals 3. Or 4 or 5 or more. And today I'm suggesting that if retail brands were to team up with the consumer brands they sell, they would both be able to better serve their customers and end up at that 3+ number.

That sounds like a lot of work. Why bother?

We've discussed how important customer experience is for consumer and retail brands (remember: 86% of customers are willing to pay more for a great customer experience—and if you don't provide that positive experience, 89% of consumers will jump ship for another brand). So, if you want to earn and keep valuable customers, providing a top-notch, contextual experience should be your number on concern in 2018.

To make that happen, you just might need to team up with some unlikely bedfellows.

Historically, not best friends.

So, retail and consumer brands need to provide exceptional experiences for consumers. Historically, though, the relationship between consumer brands and the retailers that sell them has been somewhat challenging—if not adversarial. John Deighton, Baker Foundation Professor of Business Administration at Harvard Business School, explains in our interview:

"Economists (the dismal scientists) are not optimistic about retailers and brands working together. Typically the retailer wants to sell the highest margin product in the category, while the brand wants to sell its product. If customers are anonymous to the retailer, it knows nothing about the customer’s willingness to pay. So it gets the highest margin by selling the one it paid least to buy. If the brand wants to be that product and has no brand power, it has no choice but to cut its cost to the retailer. But so do its competitors. So retailer and brands are adversaries, and the profits are determined by the clash of retailer power against brand power. Competition can be close to ruinous."

One result of this adversarial relationship is that consumer and retail brands have been reticent to share their shopper data with each other.

Beyond just missing out on customer identifications and contact information, this lack of data transparency also means brands have been deprived of behavioral data that is important to understanding customer needs and personalizing the experience to meet these needs.

Put simply, neither the consumer brand nor the retailer has a single view of customer. And without this single view of customer, both brands—and ultimately the customer—lose out. 

"I already bought the coat!"

Let's imagine for a moment that you recently visited a Burberry store and purchased a winter coat. You're loving the coat and decide to pick up a scarf to match—you purchase it online from Nordstrom. Now Nordstrom is sending you emails and serving you up display ads for the Burberry winter coat you just bought, and Burberry has sent you an offer for scarves. 

Or, let's imagine you browsed for that Burberry coat online but went into the store to try it on and make the purchase. Now, you're seeing retargeting ads everywhere you go online pushing that coat in your face. But you already bought the coat.

You're reaction:


These two fictional situations obviously present less than ideal experiences for the shopper—but they happen all the time with all kinds of brands! It would certainly make more sense for both Nordstrom and Burberry to suggest more complementary items for you (gloves, maybe?). But retail and consumer brands don't currently work together in this way. They don't share data openly, which limits their view of you as a customer and limits the relevance of their communications with you.

Become the oxpecker and the zebra.

Oxpeckers (birds) have a symbiotic relationship with zebras (and rhinoceroses). Oxpeckers land on rhinos or zebras and eat ticks and other parasites that live on their skin. The oxpeckers get food and the beasts get pest control. Also, when there is danger, the oxpeckers fly upward and scream a warning, warning the animals.

Because they help each other out, they both do better than if they were to exist in isolation. Retailers and consumer brands could also work together to better serve the customer—and therefore ultimately see more success themselves.

Yes, this could be a bit difficult at the outset. But the potential is worth the challenge. Deighton explains:

"If customers are not anonymous, and in particular, if there is enough information about the market to enable retailer and brands to agree which customers are best for which brands, inter-brand competition is reduced. Collaboration replaces competition if all parties can see that being too greedy is ruinous. Brand power works to the benefit of retailer power, and vice versa. It’s a precarious balance. Only when there is rich customer data from both retailers and the brands, and it’s shared with mutual trust, are both sides better off collaborating than competing."

Remember, you can tell customers what your brand is all day, but people will perceive your brand based on their own experiences with it. This means that, whether they're interacting with the Burberry brand on burberry.com or in a department store, or on nordstrom.com, it's all one brand to them. They don't know (or care) what goes on in the background—you just need to provide a hyper-personalized, valuable experience for them on the front end.

And retail and consumer brands are more likely to succeed in providing these all-important experiences by working together.