Why collaboration over competition can be the winning formula in retail?

Retail is one of the most successful and thriving sectors in the region, and hence, it comes as no surprise that many players – local, regional, and global – try every year to enter this sector and market with their most enticing products and brands to lure consumers. According to estimates, the UAE has ranked 5^th among the top ten retail destinations in the world with highly anticipated events like the Expo 2020 and Qatar World Cup 2022 projected to boost inbound tourism even more.

Traditionally, retailers were constantly and consistently seen crossing swords, trying to ‘beat’ each other in this unspoken competition and outdo each other in the war for survival in this cut-throat market. But come the pandemic, there was a global realisation transcending nations, industries, sectors, or even people’s individual differences. People, despite being in different boats, were faced with the same storm disguised as the Novel Coronavirus. Sentiments of profit margins, bottom-line, rat-race started getting replaced with that of survival, sustenance, and empathy. Retailers stopped seeing themselves just as businessmen trying to blindly sell products but started putting themselves in the shoes of the customers, suppliers, and other retailers.  What people also came to realise is that, in order to survive, they needed to work with each other collectively and collaboratively as opposed to against each other.

Now, collaborations in the retail space isn’t a new phenomenon. In fact, it is one of the trends that has dominated the market for years as a key marketing gimmick. However, the nuances and equations between the collaborators in addition to the sheer scale at which it is taking place today is what has dramatically altered in the past couple of years.

Kanye West, Gap and Balenciaga recently announced that they will be joining forces for a 10-year collaboration. You heard that right – a whole decade’s bond. What’s interesting is, Gap has been struggling to stay afloat for years, but one of its most successful launches was a collection of hoodies it launched in partnership with Ye last year, which quickly became a collector’s item on resale sites. There have also been some short-term goal-oriented collaborations such as the Burger King’s ‘A Day Without Whopper’ campaign, where Burger king was trying to push sales towards a McDonald’s fundraiser. Celebrities collaborating with brands (Puma X Rihanna), brands collaborating with other brands (Nike x Sacai), retailers collaborating with brands (Target x Lego) and retailers getting into partnerships with other retailers (Apparel Group X Baraka Retail Group) are all different forms of alliances the world has been witnessing and consumers have been encouraging off late. As long as the goals and agenda are aligned, all parties involved can benefit tremendously.

Retailer X Retailer

There is a whole revolution happening in the direction of collaborations and partnerships and that is where the future of retail is headed towards, according to many. “The main message from the pandemic is that no one is safe on their own, we can only succeed together. The more we engage together, the better the outcomes would be. The important factor would be to find the right dots to connect,” said Ahmed Ragab, CEO of Baraka Retail Group, recipient of the Most Admired Retail Collaboration of the Year Award at the RetailME Awards 2021.

“Collaboration is the story created from merging or blending brands together. When two retailers come together, it is usually a partnership or a joint venture,” he said, noting that partnerships and collaborations shouldn’t necessarily be termed interchangeably.

“Apparel Group and Baraka have a joint venture since 2016 and our partnership is only strengthening and growing. We have an equity-based partnership model with Apparel Group in Dubai and Cairo. Logistics was one of our major considerations for this partnership. Every retailer in a partnership is after the footprint in the partner’s market,” he said.

Data from Accenture indicates that successful collaborations can cut a brand’s logistics costs by 3-4% and manufacturing costs by 5-15%. Further, collaborations can raise a store’s shelf-stock by 5-8% while optimising inventory management for brick-and-mortars.

Out-of-stock online goods are said to cost brands up to $17 billion per year and supply chain delays in the latter half of 2021 have only contributed to this net loss. But successful brand collaborations can bring this number down while boasting a broad scope of marketplace opportunities.

Apart from logistics, partnerships can play a pivotal role in helping gain exposure to newer audiences and customers, and markets, especially in the case of brick-and-mortar. “I had asked Apparel Group’s Nilesh Ved, ‘Why would you do a partnership with us in Egypt considering you already have a big established network in the other markets?’ He said that he knew that in some markets, without strong local partnerships, it would be very difficult to find your way inside. And that’s where we started adding value to him in Egypt and vice versa,” he recalled.

Retailer X Brands

However, according to Ahmed, the joint venture with Apparel Group or any other retailer on an equity-basis isn’t quite the definition of today’s collaboration. The global trend of retailers opting to collaborate more with other brands and content creators predominantly revolves around one factor – stories.

“Today people are more interested in connecting to stories and statements rather than buying products. Products in itself aren’t exciting anymore, but if you offer a product attached to a story or a strong statement, it has been proven to be the most successful launches in the global scene in the past three years,” he explained.

In line with the shift in customer behaviour, Baraka Retail Group partook in three key collaborations last year. Baraka and Baky Hospitality joined hands to launch Yuth, a pop-up brand that entails a customised collection of New Balance shoes, eyewear, jewelry, and a clothing line, all of which are limited edition pieces. The second one was with the iconic Amr Diab, where under the partnership, he launched a series of lifestyle products, ranging from eyewear, to customised footwear, everyday fashion, jewelry and accessories, as well as a health care products range under the name 34. Dubai based label Karen Wazen Eyewear also launched with Baraka Group, becoming the eyewear brand’s first and exclusive retail partner in Egypt.

“Our first collaboration was with Karen Wazen and we started promoting her eyewear brand in Egypt. We then started creating a structure to ensure the right brand and story creation by hiring the right script-writers, initiating regional launches of products and stories,” he said.

“Collaborations have benefitted us tremendously and I can enumerate it using two different parameters. One is sell-through i.e the normal trading balance sheet. On the basis of this parameter, it has proven successful as the sell-through has exceeded 80-90%, which is much higher than industry averages. Second indicator is the increased number of new customers. We have witnessed a 26% increase in new customers in our stores, related directly to our collaborations,” he explained.

Baraka Retail Group is heavily investing in strategic collaboration for 2022 after having discerned its many potentials and benefits. “We are also launching a new concept to the Middle Eastern market in March – the drop concept – where we will have collabs going on all year long with different kinds of celebrities connecting to our story. And we will be creating products coming out from these stories. The future of retail, according to us, is in these collaborations,” he added.

Bricks X Clicks

And then, there is a third type of collaboration, which is a figment of the lockdown restrictions where even the most traditional brick-and-mortar stores realised that without a strong digital and e-commerce presence, their business will not be able to survive. When two worlds collide, partners emerge. One of the strongest partnerships of the last few years has been the strategic tie-up between Harrods, the world’s most famous luxury department store and Farfetch, luxury e-commerce giant. It was announced in 2020 that Harrods will leverage the full power of Farfetch’s enterprise white-label offering, Farfetch Black & White Solutions, to create a state-of-the-art global online destination for the iconic department store’s customer base. The partnership saw Harrods use and benefit from all of the core components of Farfetch Black & White, including e-commerce management, operations support, international logistics support, and technical support. Harrods continues to operate and manage trading on the site, including marketing, brand relationship and product strategy, all creative and editorial content, and customer services.

CEO and Managing Director of Harrods, Michael Ward attended the Futr World Summit 2021 that took place in Abu Dhabi last month to discuss ‘Partnerships That Go Beyond Boundaries’ and RetailME caught up with him.

“Farfetch Black & White builds leading multi-channel e-commerce platforms that enable retailers and brands to seamlessly interact with their consumers, while allowing them to focus on the creative aspects of their businesses,” said Michael.

“Our partnership with Farfetch means that, from a dot.com perspective, we have the ability to interact with the customer across all platforms. We have also developed online/virtual shopping, which allows you to shop from anywhere in the world and we are developing different touchpoints,” he said.

As with any partnership or collaboration, the key is to have a shared objective, and in the case of Harrods x Farfetch, it is for customers to experience the best digital luxury shopping experience.

“Harrods is famous for its exemplary, innovative and creative approach to customer service and ‘art of the possible’ philosophy. Achieving the highest level of customer service in a digital world can be difficult, which is why Harrods has chosen to partner with Farfetch Black & White Solutions. Our experience of building platform technology for luxury brands means that Harrods’ online offer will be every bit as exciting as the in-store experience,” said Kerem Atasoy, VP – Commercial at Farfetch.

“Harrods has a global customer base, fantastic product offering, and exceptional services such as its loyalty programme. We will leverage all of our experience in managing technical and logistical complexity for luxury brand partners to deliver everything required to achieve the best digital luxury experience for Harrods’ customers,” he added.

Retailers, in essence, are in the market to sell more pieces to more people and create more profits with a higher customer base. By joining hands with like-minded individuals and organisations who have similar objectives and goals, brands and businesses increase their chance at doubling what they want to achieve. They get to form new markets with two (or more) sets of customers, create better brand awareness, ensure higher customer retention by encouraging existing customers to stick around for new launches, promote a cause and thus position themselves in tune with what their customers find relevant.

While the sudden PR boost that comes out of a campaign collaboration or even a long-term partnership is brilliant promotion, it will eventually fade. What needs to make sense after the initial hoo-ha are the numbers. If the business case makes sense for both parties numerically, then the partnership is a success. In 2022, we are bound to see more exciting collaborations and partnerships in the market – so find the right partners, connect the right dots, and push the right buttons to elevate shopping experiences for your customers like never before.