FEATURE
The Existential Question Facing Every Retailer Today
By Doug Stephens
" This article originally appeared on the Business of Fashion "
Retailers must create radical value , not just for consumers , but for brands .
Bad retailers will never run out of customers . History suggests that there is always a segment of the consumer population willing to trade down if they believe they can save a dollar or two . Some retailers , like long-beleaguered J . C . Penney , have spent decades proving this thesis .
No , bad retailers will never run out of customers . But they will run out of brands . And the reason for that comes down to simple math .
At its core , retail has always been a value exchange between brands , consumers and retailers , with retailers occupying the precarious middle part of the equation . For the relationship to hold , each party must contribute value to the others , leaving each stakeholder feeling richer . But in a post-industrial and increasingly post-digital and post-pandemic world , the retailer ’ s place in that equation has become more complicated .
Only a decade or two ago , delivering value as a retailer was relatively simple . Brands brought product design , quality and name recognition to the equation . Consumers brought demand and dollars . And retailers , in most cases , needed only to provide physical points of distribution for products coupled with a willingness to relay product information on behalf of the brand to consumers . Everyone was satisfied — until now , that is .
The problem today is that while the value contributed by brands and consumers has remained more or less constant , the contribution traditionally made by retailers is now all but worthless . Consumers , with the internet at their fingertips , no longer require retailers to act as porters of product information .
Likewise , brands with unmitigated digital access to hundreds of millions of consumers no longer need to rely on a third-party retailer ’ s physical assets for customer acquisition or product distribution . In other words , consumers and brands have all the tools they need to carry on quite capably without retailers . Hence , brands like Nike are ramping up their direct-to-consumer strategies and dispensing , to a large extent , with wholesale .
It has all driven us to a rather dramatic moment in retail history . A point where retailers across all categories , including fashion , have to completely rethink the value they bring to their part of the equation . They must once and for all retire easy scapegoats like Amazon , e-commerce and Millennials because the real enemy is none of these external forces , but rather their own failures to beat back irrelevance , a condition for which there is only one cure . They must reinvent themselves and contribute new radical value , not only for consumers but for brands , too .
This notion of radical value is important . For example , love them or not , brands are drawn by the tens of thousands to sell on Amazon because Amazon radically redefined our sense of selection and convenience . And , in the process they formed a global tribe of Prime Members almost 200 million deep . Similarly , Alibaba has executed a radical level of integration into the lives of its customers , offering brands access to the world ’ s largest single market of shoppers .
In order to survive , all retailers must create similarly radical levels of value .
It starts with creating radical value for customers . Retailers can and must create radical value in one or more of four areas : culture , entertainment , expertise or product .
Radical Cultural Value
Outdoor retailer Patagonia creates radical cultural value through its single-minded focus on environmental stewardship , placing this imperative at the core of everything the business does , right up to baking it into its financial model , making Patagonia as much a social movement as a mere retailer : a lightning rod for likeminded customers and staff . All organisational objectives , communications and initiatives ladder back up to environmental protection , making Patagonia a tribal outpost for customers who share its values .
Radical Entertainment Value
Retailers can also create customer value with entertainment . UK department store Selfridges creates radical entertainment value through an intense focus on experience . From streetwear departments with skate bowls to creative pop-ups and unique food and beverage installations , the experience at Selfridges has , to a great extent , become the product itself . The years leading up to the pandemic saw the retailer make huge investments in what managing director Andrew Keith recently called “ all the magic that goes on in the store .”
Radical Expertise Value
New York ’ s new Allure beauty store — a partnership between publisher Condé Nast and retail platform Stour , to which , in full disclosure , I ’ m an advisor — delivers radical levels of expertise and category authority in-store . They do so not by hiring retail workers who become experts in beauty , but instead by hiring beauty influencers looking to broaden their reach through retail . The result is a dynamic team of influential beauty experts , all of whom speak with authority from personal experience and do so both with customers in-store and through social content shared to the retailer ’ s growing legion of followers .
Radical Product / Channel Value
Finally , there are those retailers that bring radical levels of product design , channel control or consolidation to the table . Luxottica , for example , is estimated to control 40 to 60 percent of the global eyewear market , making it almost impossible to do business in the optical category without doing business with Luxottica . Retailers that so thoroughly control access and distribution within a category carry obvious value to consumers as a go-to destination .
Other retailers create products that become so dominant in their categories that they become a magnet for associated products . Apple is one obvious example . If you make iPhone cases or any other tech accessory , chances are you ’ d clamour to obtain space in an Apple store because Apple contributes radical levels of design to both its products and its stores .
But what ’ s particularly interesting is that , in most cases , the same retailers that create radical value for consumers also tend to create equally radical levels of value for the brands they partner with .
In becoming a cultural flagbearer for the environment , Patagonia brings to its brand partners an army of loyal and highly engaged army of customers to whom they otherwise wouldn ’ t have such easy access .
Retailers like New York City-based Camp create elaborate in-store theatre and events for parents and children , but in doing so also provide hands-on and contextual opportunities for children to engage with their brand partners ’ products ; opportunities that simply can ’ t be delivered online or in other conventional toy stores .
B8TA , arguably one of the most successful retail startups in the market , brings an entertaining and tightly curated selection of unique products to their customers — products not easily found elsewhere — but in doing so , also offer access to a robust data-set to their brand partners , providing them with intelligence and insights they wouldn ’ t otherwise have access to .
The Allure Store not only delivers an authoritative level of beauty expertise to their customers , they also act as a marketing fly-wheel for brands , producing radical levels of compelling product content and in-store activations , all of which would carry significant cost if brands were to produce it themselves .
The common thread here is that these retailers are fundamentally changing the conversation they ’ re having with their brand partners . For too long , we ’ ve assumed the retailer-brand relationship to be transactional — purely based on volume , margin and incentives . But brands today are asking for more . They want market intelligence ; they want ( at the very least ) co-ownership of the consumer relationship ; they want their unique brand stories articulated and animated with excellence and their prices treated with integrity .
Retailers that appreciate this shift and deliver radical value back to brands will do infinitely better in the long-term than those retailers who do nothing but extract value from the relationship . Because , in the end , retailers that do not become a source of radical value for brands will awaken one day to find their sales floors empty of branded goods .
Doug Stephens is the founder of Retail Prophet and the author of three books on the future of retail , including the recently released ‘ Resurrecting Retail : The Future of Business in a Post-Pandemic World .’
Source : The Retail Prophet https :// www . retailprophet . com / 2021 / 10 / 01 / the-existential-question-facing-every-retailer-today /
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