Winds of change in the retail business

This is part I in a series of two posts on the 'Winds of Change In The Retail Business'

We live in an exciting time for the world of shopping. Because in the next 10 years, retail will change more than it did in the past 100. Traditional retail players will need to start thinking like startups, listen to their customers and take risks. As for new entrants, there has rarely been a better moment to enter the business - as long as you’re building something for the new rules of retail, not the old ones.

A physical store is either a “post office” where you pick up your order, or a place where you go to immerse yourself. Same goes for online: either you’re a super-efficient one-click everything store, or you provide high-quality things for consumers to immerse themselves in

Let me take you through my ideas on the future of retail, by going over 5 key drivers of change for this decade. Next, I will provide specific advice to traditional retail players, new entrants and taste-making curators.

1. Power to the Consumers

In traditional retail, distribution and marketing had a lot of power. There were walls, so to say, that helped entrenched retailers make profit. Push-marketing through mass media allowed powerful brands and retailers to dictate what’s in demand. Just think of a company like Gucci in the 1990s - fuelled by the creative genius of Tom Ford and marketing prowess of Domenico De Sole.

Internet changed all this, literally reversing the power relationship. The world has become a singular showroom without walls: consumers can even buy a product from a competitor on their smartphone, while in your store. Here’s the reason why many mid-level electronics chains failed or are failing: consumers walked into It’s Electronics in the Netherlands to see products, but then ordered online for tens of euros less.

Out with the old: The executives at G-Star Raw are surprisingly young: having people who understand the digital world and shop online themselves helps G-Star create future-proof, customer-centric offerings.

Furthermore, it’s easier to share positive and negative experiences, meaning consumers always know which brands over-promise and which deliver. This all puts most power in the hands of consumers: they are more discerning, oftentimes better informed than brands or retailers, and able to spend their money elsewhere effortlessly anywhere and at any time.

2. Mixing and blending roles

Old-school fashion world consisted of brands that designed and produced products. Media like TV and magazines that sparked demand from consumers. And physical stores that fulfilled that demand. A U.S. example would be Arrow making men’s shirts, Esquire featuring those shirts in their magazines and Nordstrom selling them to masses of men walking in.

Nowadays, these roles are de-coupled, or integrated, oftentimes both: brands don’t always make their own products, retail stores run their own magazines and e-commerce, Vogue and Esquire sell products on their website. Vertically integrated companies like H&M and Suitsupply do it all. Ralph Lauren was one of the early pioneers who realized that having your own stores boosted both profit margin and customer experience.

3. Extreme Consumer Mindsets

In a world where nearly everyone shops online, I see a polarizing division. One side is the attitude of extreme convenience: things I don’t care about, I will buy at the place that offers the most convenience and/or the best price. Think a refill on ink cartridges, or a pair of plain navy socks.

La Maison Nouvelle swings both ways: Think your customers will never post pictures of their new (see through) bras on Instagram? Think again. LMN customers love their offerings and aren't afraid to show them off. The lingerie startup reciprocates by showing their intimate stuff as well: instead of slick advertising imagery, they post their hand-made in Europe process, which does wonders for their down-to-earth likability.

The other side regards products that carry emotional value: consumers are already seeking that value further amplified by a full sensory experience: people wait in line for the Louis Vuitton store and proudly carry the signature shopping bags around a posh street. Visiting Abercrombie & Fitch is about the handsome staff, the sounds, the smells, more than it is about getting an overpriced, mediocre quality t-shirt. In other words, if consumers really, really care about a product or brand, they will have the opposite of the convenience attitude: the experience attitude. There is very little middle ground between these.

This means that physical stores that try to be a bit convenient and a bit cool will fail. A physical store is either a “post office” where you pick up your order, or a place where you go to immerse yourself. Same goes for online: either you’re a super-efficient one-click everything store, or you provide high-quality things for consumers to immerse themselves in.

Following a curator means having a person you trust serve as a filter: consumers outsource the near-impossible work of filtering through all sneakers available, so they only have to check someone’s blog and see the hottest 3 or 4.

Many mid-level menswear retailers are struggling nowadays for the above reasons: they’re unable to provide maximum convenience, as online retailers like Zalando or Wehkamp have much more on offer, delivered to you fast, at a lower price. And they’re equally unable to offer maximum experience, as they have too many brands, too much clutter and too little special to offer. Speaking of experience…

4. Experience First

In traditional (clothing) retail, customers were too often seen as “walking wallets” - people you should squeeze as much money out of while they’re in store, regardless whether the products would actually be good for them.

From zero to hero: Two curators who became US celebrities through Youtube. On the left, Gary Vaynerchuck helps people understand wines by keeping it simple and cutting out the snobbery. Bethany Mota lives in the perfect zone of believably-pretty: she's the cute girl next door that shows millions of regular women how to up their beauty game.

One might say companies like Apple, Nike, Burberry, Tiffany & Co. and Abercrombie & Fitch have all perfected their own version of a customer experience. Experience is intentionally holistic: it’s an intuitive formation of meaning. Like a symphony, all aspects combine to create a feeling the customer craves for. Whether it’s being part of the beautiful, young cool crowd at Abercrombie, or being a powerful, athletic woman at Nike. Or perhaps you’re a chinese nouveau riche who feels sophisticated and successful by shopping at Louis Vuitton in Paris’ Golden Triangle. These feelings are elicited not by one thing, but by the symphony of all things: the doorman, the gleaming store, the few people inside, the well-dressed staff, the beautifully arranged displays, the smell, the music…

5. Rise of Curators

As we’re experiencing a world where the number of styles, trends, products and brands has grown exponentially, it becomes impossible for a regular person to keep track of everything. As the power has shifted, consumers trust brands and retailers less, and trust regular people more. Brands used to be filters, providers of inspiration - but that’s the role of curators now.

Curators are authentic people who are experts at a certain domain: The guy on Youtube that shows you how to fix your iPhone. The adventurous traveller that can tell you about all the hotspots in Rio de Janeiro. And that 19-year old girl who’s in love in fashion. Or the tattooed 50-year old guy who loves Italian suits.

Following a curator means having a person you trust serve as a filter: consumers outsource the near-impossible work of filtering through all sneakers available, so they only have to check someone’s blog and see the hottest 3 or 4. Obviously, curators work very well in niches - whatever you’re in to, there’s probably someone blogging or YouTubing about it.

~ Marin Licina was creative director at fashion/technology startup Pelliano and co-authored the omnichannel retail strategy for G-Star Raw. He currently works with startups in Amsterdam and San Francisco Bay areas.