So, yes, Zalando would like to have Zara and H&M selling fashion on Zalando, why wouldn’t it?
But what if they never come? Or, what if the GAP CEO changes his mind? Or, more to the point, why does the GAP CEO in the first place consider using Amazon to reach GAP’s customers?
I wrote about why transforming the traditional online retail operation at Zalando into a platform makes sense on numerous times, but to answer these questions, this should suffice:
Done right, this ‘opening up’ leads to a virtuous cycle. The final stage of this would be people looking too Zalando as their default destination for fashion shopping, their fashion search engine, their fashion social network, their fashion browser – take your pick.
The problem for vertical retailers like the three mentioned above goes, in broad strokes, like this:
- Zara, H&M and GAP (and similar retailers) are very much tied to the brands people associate with their clothing. There are expectations one has before entering those stores.
- Platforms/marketplaces like Zalando and Amazon are the new malls.
- Those “new malls” offer distribution for those retailers, if they choose to participate.
- But here’s the kicker: If they don’t, these vertically aligned retailers offer up a vacuum for other (newer) brands to fill.
- What Zalando’s platform is effectively doing on the brand/retailer side is destroying the moat around existing chains of fashion stores. If a new H&M wanted to become big pre-Zalando it had to invest in brick-and-mortar stores. It first had to build up stores around the country the company wanted to participate in. Now, that H&M 2.0 can go straight to Zalando and Amazon. Zalando especially, with the company’s mobile brand-friendly marketplaces like Fleek, is perfectly suited to boost a H&M 2.0 if there ever will be one.
- Look to the interplay between Amazon Prime and Marketplace to see how these distribution channels will supercharge themselves.
Make no mistake, those new, purely online driven, fashion brands are coming, no matter what. And they will grow to similar sizes of Zara et al. And most likely, they will grow even faster. (Remember, no moats, no costly and time-consuming investments in chains of stores.) The only question is what kind of competition they will face on top of the platforms.
GAP, Zara and H&M will not have the fortune to build new company structures around the new market dynamics but they will have the advantage of very well known brands.
I implied here the market power those platform providers can exert over all the other companies in their respective industries. Effectively, a successful platform eventually becomes a monopsony:
This gravity pull by platforms/marketplaces should not be underestimated.
It can be observed at Amazon’s marketplace, one of it’s three pillars. Once huge enough, the marketplace vendor can dictate terms to, for example, participating brands. With Amazon, those terms are increasingly at the squeezing side of things. Access to customers is always valuable, and thus a great lever in negotiations.
This is the point: The one who owns the customer will own the rest of the industry as well.
The thing, though, is ignoring and rejecting them and continuing business as usual as if the world is not in fact changing is not an option if GAP, H&M and Zara want to still be around in few decades.
All this may be years off, but it will come, eventually.
- Gap CEO Would Consider Using Amazon to Reach Customers
- How Zalando Will Persuade Zara and H&M to Join its Platform
- Zalando’s B2B Expansion: Investment in Le New Black, 120+ Brand Shops on Zalando
- Capital Markets Day ’16: Zalando sees Itself as the Spotify of Fashion
- How Fleek is Trying to Fulfill Zalando’s Claim of Being the “Spotify of Fashion”
- Zalando buys Marketplace Services Provider Tradebyte to Bolster Platform Strategy
- Prime Dynamics: Merchant Increased Sales by 20 Percent with Seller Fulfilled Prime