How Startups Can Build Footfall, Influence and Trust Through Retail Partnerships

Swedish fintech Klarna changed how consumers — particularly younger consumers — buy and pay for goods. Its model, which countless other rivals have since replicated, is simple. Rather than pay the entire sum upfront, the consumer pays a portion, and Klarna fronts the rest, which the consumer repays in manageable bi-monthly or monthly installments.

At first, this was a totally online affair. But in the explosive years following its debut, Klarna has inked lucrative deals with legacy retailers, allowing consumers to pay for goods in installments when shopping at the local mall.

The juxtaposition of a high-growth, high-tech digital brand and a legacy retailer — like GameStop or H&M — seems odd. These are two worlds: one with seemingly limitless growth potential, and another that has been locked in a perpetual spiral of decline since the Great Recession.

Of course, that’s a hugely simplistic perspective, and one detached from the reality on the ground. While it’s fair to say that legacy retailers have struggled in recent years, they remain hugely powerful and influential institutions. Despite their struggles, they still draw flocks of customers, even with the convenience of online shopping, and many possess incredible name power. A great example is GameStop, which engenders so much nostalgia and affection that it upended the financial markets in January 2022.

Put another way: legacy retailers matter. As the experience of Klarna — and countless other fintech companies — shows, a successful partnership between a mall-bound or Main Street retailer and a digital B2C upstart can prove transformative for both companies.

The Anatomy of a Partnership 

These partnerships are nothing new, although they have many manifestations. The form ultimately differs depending on the nature of the digital business. A company selling a physical product, albeit through primarily digital channels, will have a fundamentally different relationship than one offering an intangible service, like a fintech company.

But whether the retailer is handling distribution (as is the case with Harry’s, which now distributes its razors through in-person stores such as Costco and Target), facilitates lead generation and customer acquisition, or merely uses the digital business’ technology to handle customer interactions and transactions, the benefits are the same.

It’s not merely that these legacy brands are well-embedded within the consumer psyche — although they are. It’s more fundamental than that. As many have been a permanent fixture of malls and shopping streets for decades, they instinctively command a level of trust with consumers. For a digital-centric business — particularly one that’s relatively new to the market — a partnership with an established retailer can be interpreted as a vote of confidence. One that gives them credibility in the eyes of their prospective customers.

We should also remember that in-person retailers are centered around human engagement — from the shelf-stacking assistant that welcomes you as you enter the store to the cashier that rings up your bill. Therefore, they provide the opportunity to have an organic conversation with your potential customers, away from the marketing channels you might naturally gravitate towards, like digital or video.

Data comparing the efficacy or memorability of a cashier-delivered pitch over a normal digital advertisement is thin on the ground. But even without any empirical data, this is something we instinctively know to be true. You’re more likely to remember a free-flowing conversation with a sales assistant than a single digital (or otherwise) advert — perhaps one of the hundreds you’ll see in a given day.

Most marketers working for consumer-centric businesses — whether digital or otherwise — would love the opportunity to speak to their customers for 30 seconds. The reality of our digital-centric advertising ecosystem is that this opportunity seldom presents itself. And yet, this (seemingly unassailable) goal is completely feasible when partnering with a legacy retailer.

Building the Relationship 

Although these relationships can prove hugely beneficial for the digital business, the deals themselves are often highly fraught processes. Legacy retailers don’t want to compromise their greatest asset — their brand perception — and so they’ll often undertake a rigorous due diligence process.

The actual financial terms vary. In the case of a business selling an intangible product — like a fintech service or an insurance company — they’ll insist on an upfront payment, plus a commission with each successful transaction or sale. In that respect, this model strongly resembles the affiliate marketing approach used within influencer marketing.

Of course, there’s some nuance here. Klarna is the exception to this model. Rather than pay the retailer, it takes a percentage commission from each sale — often in excess of those charged by credit card companies — plus a flat per-transaction fee, plus a monthly subscription charge. Retailers accept because Klarna assumes the risk (it provides the credit) and it can drive customers to the retailer.

There are many variables. Size is one. However, even for smaller and younger companies, the potential benefits of a retail partnership cannot be understated. And given the turmoil in the digital advertising ecosystem — driven in part by ever-evolving privacy legislations — as well as the retirement of the tracking cookie and Apple’s crackdown on in-app tracking — they can provide an essential lead-generation service.

In short, your next marketing channel is the store you shopped at as a kid. As the saying goes: What’s old is new …

Peter Mansfield is the chief marketing officer of UNest, a mobile app that makes it easy for parents to open a custodial investment account for their kids.