Merchants might not be technologists, but the modern-day race to thrive in specialty retailing is increasingly becoming a question of digital dominance and, at least according to L2, Sephora and Victoria’s Secret are leading the way.
Both brands received L2’s highest rating, “genius,” in the research firm’s annual report on the digital acumen of top the 100 specialty retailers. Those joining the two at the head of the class in apparel and beauty included Old Navy, Ulta, Kate Spade, Coach and American Eagle.
In ranking brands as “genius,” “gifted,” “average,” “challenged” or “feeble,” the firm looked at metrics around areas including web site and e-commerce (which counted for 35 percent of the total score), digital marketing (35 percent), mobile presence (20 percent) and social media (10 percent).
Victoria’s Secret came out ahead for its social media play, with an average of more than 250,000 interactions on each Instagram post, its early adoption of Snapchat and contests such as its #DIYPantyContest.
Sephora garnered a top score, in part, through mobile innovations such as its “Sephora to Go” app, its “Virtual Lipstick Assistant” tool and its rewards program. L2 noted that interactive tools encourage social sharing and commerce by linking back to product pages throughout.
Overall business strength didn’t directly seem to correlate with the rankings.
The struggling Gap Inc.’s Old Navy, Gap and Banana Republic divisions each garnered a “gifted” ranking, with Old Navy winning points for its high numbers of YouTube video views and for building upon the entire company’s infrastructure. Old Navy also got credit for its tight focus on sub-categories, such as swimwear, accessories, men’s and plus sizes.
Gap’s chief executive officer Art Peck recently addressed the digital push, saying the company was committed to being where the shoppers are.
“Today, our customers have obviously moved in digital very significantly to a mobile experience,” he told investors in May. “And we are running as quickly as we can to make sure that we run alongside of them every day.”
Forever 21 and H&M were also named “gifted,” while Topshop was among the “challenged.”
Zales, Tiffany & Co. and Fossil were among leading jewelry and accessories names.
In a conference call after the first quarter, Tiffany & Co. vice president of investor relations Mark Aaron said Tiffany’s e-commerce sales accounted for 6 percent of worldwide sales in 2015. After sharing overall declines, he said: “It’s worth noting that worldwide e-commerce sales rose slightly in the first quarter. We continue to believe that our dual focus on stores and online reinforces global brand and product awareness while enhancing customers’ overall experiences with Tiffany.”
Among those rated as “feeble” by L2 were Eileen Fisher, Wolford, French Connection, Space NK Apothecary and Bluemercury.
In general, L2 found that apparel and accessories brands outperformed on Instagram and combined “robust e-mail marketing with sophisticated e-commerce capabilities.”
Beauty and skin-care brands provided comprehensive search and navigation tools and dominated in the arena of search engine optimization. Watches and jewelry received a bit of a dunce hat, as researchers said that they often fell short on the brand site experience, especially “with regards to priority omnichannel investments for the sector at large.”
The research group said the prospects for specialty retail were “bleak” given declining foot traffic and the ubiquity of Amazon. L2 has previously noted that, for example, only 35 percent of specialty retail brands had established any tangible omnichannel capabilities such as reserving and picking up inventory in a store.
The report also offered an ominous perspective on the fate of second-tier retailers trying to compete against Amazon.
“The Great White Shark will feed on the weak and the slow while the ecosystem begins reshaping,” L2 said. “Distinct merchandise highlighted by deft application of new discovery channels and coupled with digital-enabled operations is elevating select players.”