Five Trends Disrupting Retail Now
The world of retail and branded consumer products is changing more rapidly than ever before. In the last few months, we have had the chance to study many of the companies disrupting traditional retail. Below are some of the most important trends we are seeing play out for retailers and brands.
1. Customer First or Fail
It is a great time to be a consumer. Every disruptor in the consumer space is obsessively focused on the customer experience and solving customer friction points. They are focused on improved distribution, more relevant products and information, faster and cheaper fulfillment, the best service, reducing waste, simplified (often lower) pricing and, in many cases, better product. Disruptors seek to build personal relationships with customers. Many next-gen companies are opening up new distribution channels and taking advantage of stale customer relationships. Stale customer relationships often exist in situations where retailers distribute third-party brands. The brands do not control the customer interaction and the retailers cannot react to product feedback. Disruptors are building business models around the cracks in traditional retail.
2. Data-Driven Business Strategy
Digitally native companies approach data much differently than traditional retailers. These disruptive companies are religious about measurement, attribution and knowing their customer. They work to lower customer acquisition cost, increase the percentage of repeat customers and increase lifetime customer value. As they open physical stores, digital first companies are maintaining a data-centric approach and using data to enhance customer experience, understand the customer journey and eliminate friction points. Many digital-first companies are now opening stores because they have found stores are better for customer acquisition while digital is better for replenishment (once you own the customer). Stores are more effective for high-touch service and education. It is easier to achieve profitability in a store than online. Focus has shifted from which channel to how to deploy capital in a way that promotes stickiness of customer interaction and how to use data analytics to make decisions in all channels. In contrast, most traditional retailers are either drowning in data without a clear view of the purchase funnel or lack data altogether.
3. Customization Replaces Curation
Curation has been a hallmark of successful retail in the last decade, but a shift is happening. Businesses like Scoop and Kitson (which both went bankrupt recently) were built on unique curation. The data-driven approach has led to customization as a replacement for curation. The consumer has less interest in a brand or retailer’s one-note edit point or aesthetic. Instead, shoppers are coming to expect that brands will use data to show them hyper-relevant items that have been selected specifically for them. The secret sauce that allows retailers to do this has two ingredients, data obviously, but also an endless aisle behind the data to both support the recommendations and allow the consumer to go beyond the recommendations if they choose.
Companies including Stitch Fix, Birchbox and Airbnb are effectively using data to customize offerings and experiences. All are using both customer survey data and observed behavior. Often customers will report one thing but behavior will point to something different, so it is important to supplement survey work with passively collected data. Those using data to customize offerings note that if you ask the customer for information, they expect you to use it to make their experience better. Said another way, brands should only ask questions that will improve customer experience. Customization helps brands forge stronger customer relationships and foster loyalty. Very few traditional retailers are customizing offerings.
4. Authenticity,Content &Influencers
As companies attempt to build closer personal relationships with customers, it is more important than ever to be authentic in customer interactions. Today’s most successful brands start with a brand ethos that translates to product direction, brand voice, customer service and brand ambassadors. The most popular approaches are that of brand as best friend, brand as trusted advisor and brand with insider access. Consistency is key across all customer interactions and positioning cannot be built over night. Millennials in particular see through inauthenticity and there is nothing worse than a fake friend.
Social media content is now the primary vehicle for brand marketing. Content can help brands build trust and reinforce positioning and does not always need to relate directly to product sales. One of the key note speakers at a recent conference encouraged brands to stop attempting to be amazing in every interaction and instead be useful. It is rare that one piece of content will do the job. Content should be consistent in both tone and frequency.
Most brands are courting influencers to evangelize brands and products and to amplify brand content. Social media content is the gateway for most brands to reach influencers, thought very few brands attract influencers organically. The key is to reach the right influencers for your brand. The athletic apparel and fitness brands are relying heavily on fitness instructors while makeup artists have become a hot commodity for beauty brands. Moving the customer into the category of brand evangelist through content that resonates can be a powerful tool to create viral growth. Of course many brands are paying celebrities and fashion bloggers to promote brands, but this can sometimes be viewed as inauthentic.
5. Constant Reinvention vs. Set and Forget
It is increasingly difficult to catch and keep consumer attention. The old model of investing in remodeling stores or re-skinning the website every few years is dated and dangerous. The best companies are constantly changing and traditional brick and mortar retailers are falling behind. Even some luxury department stores change window displays in New York flagships only every three to four weeks – these stores do tens and in some cases hundreds of millions in volume. While it will cost more to do it more frequently but the alternative is irrelevance. During recent store checks at one of the top malls in the country, most retail storefronts looked extremely dated and very similar. Anthropologie and Free People were the only national retailers that looked fresh, which should be no surprise given they employ store-level visual teams. Similarly, many national retailers have extremely dated websites and mobile sites that are even worse. It is time for retailers to embrace constant innovation.