With many retailers struggling, some of their suppliers signaled an intent to sell directly to consumers, like internet marketers do. This cuts out retailer middlemen.
For example, Procter and Gamble is trying direct-to-consumer selling, according to a July Wall Street Journal article which I commented on in my most recent newsletter about P&G’s interest in cutting middlemen. As I discussed in that newsletter, companies like Procter and Gamble have valuable strengths in their relationships with retailers. And, building on strengths—not throwing them away—is generally what succeeds.
That’s why it’s encouraging to see how Estee Lauder is dealing with its middlemen. Estee Lauder’s approach supports its middlemen, rather than striving to eliminate them. According to the August 20-21, 2016 Wall Street Journal article “Estee Lauder Battles Macy’s Malaise” by Sharon Terlep, a substantial portion (roughly 30%) of Estee Lauder’s sales comes from its department store middlemen. The article points out that Estee Lauder’s biggest customer is the department store Macy’s, “which recently disclosed it will close 100 stores by early next year”. But, rather than striving to eliminate struggling department store middlemen, Estee Lauder is taking steps to boost its business in ways that can benefit both itself and Macy’s. Estee Lauder “plans to help department stores lure in more shoppers by offering new products and services from make-up lessons to makeovers,” according to the Wall Street Journal article.
As I see it based upon my 25+ years researching business success and failure patterns, Estee Lauder is headed in the right direction. Lauder is building on its strength with department store relationships as well as upon its strengths of frequent past success with retail store traffic building sales promotions, for example for its Clinique brand. Although it is beyond the scope of this article to evaluate each individual traffic boosting technique that Estee Lauder might offer, the general concept of working together with its middlemen does have advantages over trying to eliminate them.
For Estee Lauder, treating its middlemen like the valuable resource that they are can be good for business. Of course, Estee Lauder’s moves are not intended to be a magic bullet that can turn around ailing department stores. But, Estee Lauder is building upon its strengths, and that’s generally how companies flourish.
