‘New Retail’

With the StitchFix IPO recently, I’ve noticed a re-emerging narrative around the ‘new retail’ theme. StitchFix falls under this new retail theme, as I’d argue does Dollar Shave club (purchased by Gillette), Bonobos (purchased by WalMart), and Trunk Club (purchased by Nordstrom). You have probably seen many ads on Facebook as well for companies in any of these spaces trying to build a brand around this new retail theme.

The Internet has allowed for these types of companies, who can use the Internet (mostly Facebook) to acquire new customers, build a brand, and offer more personalized and differentiated services to customers. For a number of the companies mentioned to have success, it must signal a pain point in traditional retail that is not meeting customers, and mostly younger customers needs. The opportunity is real, but I’m not sure we have yet solved the retail problem.

Online and Offline
It seems clear that a new retail strategy will have to include offline experiences, combined with online experiences, and a deep level of personalization. While many companies are heavily investing in one or two of those vectors, there aren’t any focusing on all three holistically. Understandably, the personalization angle has been tricky, and companies like Trunk Club and StitchFix try to solve this with human curation. The human curation part of this equation can likely be solved by a fashion-focused artificial intelligence. But seeing, trying on, feeling the fabric, etc., are all things we can’t do online but are yet strong purchase drivers which can only take place in a store. This is why physical retail isn’t going away; it will simply have to evolve to more personalized experiences and services.

It is also important to understand the evolving role technology is playing in shopping/commerce and how that needs to fit into the new retail equation. Here are some key points to consider:

  • Over half of consumers in the US now start their purchase journey from a mobile device. This point refers to when they are exploring but not yet made up their mind on what to buy.

  • Search engines and consumer reviews are the core of product research
  • Video is becoming a key driver of influence in the purchase journey. Consumers are now rating a video review, or a more in-depth product video as a higher influence to complete a purchase. This demonstrates how technology and more immersive media perhaps like augmented reality or virtual reality can be used to further influence the transaction.
  • Free delivery is the largest factor that increases purchase transaction, and it ranks higher than same day, or next day offerings. People would rather have free delivery than pay extra to have it faster.

These evolving dynamics point out why a hybrid retail experience between online and offline will be necessary, with technology being the thing that brings the two together for a more personalized experience. Technology plays a central role in online retail experiences, yet technology plays almost no role in offline retail experiences. Bridging this gap is what will be at the core of a holistic new retail strategy.

Becoming Tech Companies
One of the best ways to understand how technology could disrupt industries where consumer-facing technology was not as prevalent is to understand that every consumer-facing business will be forced to become tech company or they will be disrupted by one. So retailers need to become tech companies, or they will be disrupted by Amazon or one of these brands/retailers that start online then start moving offline.

You may not know this but most of those ‘new retail’ brands trying to sell shoes, customized clothing or accessories boxes, beauty products, etc., are all funded by VCs whose central thesis is that many of these old retailers can not become tech companies, and thus these brands that start tech first and then expand into physical retail will eat traditional retailers.

There is truth to their thesis that older more traditional retailers will be challenged to become tech companies, which is why many have purchased companies in the new retail category, however, I would not discount them either since they know technology and re-inventing the retail experience is central to fighting disruption. The question in my mind is whether or not they can move fast enough, not whether they can do it.

With the arrival now of augmented reality, and computing vision/machine learning a tool retailers can use, I feel we may be on the cusp of some new and innovative experiences in retail and commerce. Warby Parker’s app using Apple’s ARKit to scan your face and match you with specific glasses that fit your face is an early example loaded with potential.

Consumers love shopping, but often hate it at the same time because it is frustrating. My wife’s shops online a great deal because we simply don’t have time to shop for clothes very often. Her best description of the experience is that it is like a disappointing Christmas. You get all excited about getting the present (the package) only to realize you have to return or exchange it. I feel her pain, as do many others. Once we can fix the frustration of retail and online retail, then we will see the S-curve growth of e-commerce we are all waiting for.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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