LAS VEGAS — Breaking point or tipping point?
Retail is facing an identity crisis, whether it’s the brick-and-mortar legacy chains looking to make a go at relevance or the young bucks in the e-commerce game disrupting decades-old processes of doing business. Technology is forcing the conversation. The inaugural Shoptalk conference here, where more than 3,000 executives from across the retail and technology spectrums converged, highlighted the discourse taking place from within, ranging from the broader macro trends impacting retail to diving into the weeds of high technology.
The verdict: No one type of business model truly has a leg up on the others. What’s king today is the ability to move fast and effect change — at least that’s the view from Ron Johnson, the retail veteran who is placing his bets on his consumer electronics personal service start-up.
Retailers are not in a state of crisis, Johnson told WWD, but “they have to reimagine everything they do for this new world we’re in.”
“I think brick-and-mortar have been, over a 20-year period, resting too easy,” he said. “Whether that’s been a company like the Gap, who clearly should have seen Inditex with an entirely different business model delivering fashion quickly, but they never changed their process. That’s an example of, you could argue, arrogance, because over the past 20 years Gap could be sourcing like Inditex does. They didn’t pay attention. Same thing with these larger stores. The Internet we’ve been dealing with since 1994. They had 20 years to prepare for this new world but it feels like we’re just kind of really waking up to it.”
Retail’s not going away and, in fact, for its next act Hudson’s Bay Co. chief executive officer Jerry Storch said stores are poised for a comeback in what he titled in one of his presentation slides “The Stores Strike Back.” The company clearly believes that, with HBC set to aggressively enter the Netherlands over the next two years. Storch argued that while the Internet is transforming the industry, physical stores at the end of the day still account for most of the dollars coming in.
“The U.S. is overstored,” Storch said. “There are too many retailers. What’s going to happen is not chains should close money-making stores… What’s going to happen is giant chains are going to go bankrupt like we saw with Sports Authority or others and that’s what’s going to restore the equilibrium. If you close a physical store today, do you know where the business goes? Not to the Internet. It goes to the competitor store in the mall. It makes absolutely no sense. It’s a cure for a different disease.”
It’s perhaps not so much a cure that the industry needs as much as it is a healthier style of operating, with technology a tool to gain a competitive edge.
“When you think like a tech company does, even in these verticals, you’re using technology to enhance the relationship and, really, you’re different than the traditional consumer packaged goods company,” said Amy Errett, ceo and founder of online hair color company Madison Reed.
Technology isn’t about offering quirky gadgets; it must serve a purpose, executives repeated again and again throughout the conference.
“What we are building is a catalogue of ideas, most of which comes from business; 75 percent of all content on Pinterest is from businesses,” said Pinterest president Tim Kendall. “We don’t have to trade off between the user experience and retailer experience because their needs are completely aligned. We don’t have to tax the user with interruptive content to pay our bills. We don’t have to make that trade-off. We haven’t seen such an alignment since Google created Ad Words and put it near organic content.”
Even the thinking of distribution channels as being either physical or digital and then having an omnichannel strategy is a tired way of looking at the business, many said.
“We don’t want the experience to be from a digital perspective. [We] just want it to be a great experience, period, to bridge the off-line and the online,” said Target chief strategy and innovation officer Casey Carl. “Our guest isn’t just shopping us online; they are leveraging multiple platforms simultaneously, and we have to make sure that everything works together seamlessly.”
When the wholesale inquiries from smaller boutiques and then larger accounts such as Costco started coming in at consumer products start-up The Honest Co., it wasn’t sure which way to go. The company did some soul-searching, said cofounder and ceo Brian Lee, and what resulted was the realization that “we should not care how our products end up in that home.”
Everything — whether a company is shuttering or opening new stores or investing in mobile conversion rates and data analytics — must be done with the customer in mind as more and more choices flood the marketplace.
Whether legacy brands can turn a new leaf remains to be seen, said some observers, including Ryan Babenzien, ceo of New York-based footwear brand Greats.
“I don’t really have advice [for legacy retailers], otherwise I wouldn’t have started a vertical brand — other than advising them how to get more vertical,” he said. “Big-box retailers, you can’t get consumer-focused when you have a network of employees working a chain of 300 stores and try to get them to be a brand ambassador for every single brand they sell at that retailer. That’s impossible to do. We have 10 employees. We’re growing, but it’s hard enough to get all 10 of us on the exact same page [of] ‘this is the story of Greats. This is what we stand for. This is what we’re all about.’ You have people with 800 brands in store.…So for those multibrand retailers, I think it’s going to be a real challenge to pull out of what’s happening.”
New brands see opportunity in the industry reset taking place because, some argue, they know their customers better. That’s why subscription beauty box company Birchbox started. The aim was to serve what it saw as an underpenetrated beauty category on the Internet that the rest of the industry wasn’t recognizing because it was too busy creating new product, said cofounder and ceo Katia Beauchamp.
“What we’ve learned is that we are training and awakening a whole new consumer for this industry,” Beauchamp said. “The Internet is changing the potential of everybody’s consumer.”
Technology is that bridge for companies to the next generation of consumers who expect more from the brands they are shopping.
“Building a business used to be about the four Ps: product, place, price and promotion. And now you have to build an experience,” said Michael Dubin, founder and ceo of Venice, Calif.-based Dollar Shave Club.
Even with all of these insights, viewpoints and alternative ways to approach the business, it all comes back to Johnson’s belief that speed and dexterity in making decisions wins.
“There are a lot of challenges for the larger companies to really succeed in this world — not that they can’t,” he said. “They’ve got the resources. They’ve got physical stores that the digital world doesn’t have. They’ve got budgets. They’ve got tools. But they’ve got to make big bets.”