The retail world is changing quickly, and the last five years have shown just how challenging it is for brands to adapt to these changes. Last year The Limited, once a thriving brand, shut down all 250 of its stores and let 4,000 workers go, all in one day. A few months later Bebe announced that they would also close all of their stores as another iconic brand bit the dust.
What so many brands are struggling with is the fact that consumer shopping habits have changed dramatically over the last five years, and in many cases retailers aren’t making changes fast enough to keep up. Sales cycles that often span a year or more have long been considered “normal” in the retail world, but the most innovative brands and retailers are moving much faster, leaving once-competitors in the dust often stuck in decision paralysis and never-ending A/B tests. The companies that have thrived during what many are calling a “Retail Apocalypse” are those who have embraced change, put a real focus on innovation, and stayed in lock step with consumers.
One of the best examples of a retailer that has seen incredible growth over the last five years is Stitch Fix, a relatively new entrant to the retail world but one that has embraced change and championed technologies like Machine Learning that are now becoming part and parcel with a successful innovation strategy. Stitch Fix’s founder, Katrina Lake saw how consumer shopping habits were changing and at the same time saw how brands and retailers weren’t reacting fast enough to offer the experience customers were looking for:
Lake started working on Stitch Fix during her second year at Harvard. Her academic research told her that people didn’t necessarily enjoy going into stores and sorting through hundreds of items of clothing in search for something they liked. And even online shopping was often tedious.
“As a consumer, you don’t want to choose from a million pairs of jeans,” she said. “You just want the one pair that’s going to fit you and look great on you. There was such a great opportunity there. What consumers wanted was not reflected in the marketplace.” (Source – New York Times)
At Bold Metrics we work with some of the most innovative brands and retailers on the planet. One of the topics we’re always talking about is how consumer buying habits are changing and what brands and retailers can do to benefit from the change vs. falling behind and losing marketshare to those who do.
While there are dozens of changes that have taken place over the last five years, we wanted to highlight three key areas where shopping habits have changed and where retailers and brands have a real opportunity to innovate and use these changes as a springboard for growth.
1. Shoppers are now more comfortable than ever answering questions about themselves online. Rewind ten years ago and shoppers were very cautious when it came to sharing data online, this meant that many retailers steered clear of asking questions to shoppers to drive personalization. Fast forward to 2018 and retailers like Stitch Fix, Rent The Runway, Bonobos and many more have used this to their advantage, asking shoppers questions that you probably couldn’t 5 – 10 years ago, which means they’re amassing more data than anyone else to better personalize the customer experience and path to purchase.
“Stitch Fix chief algorithms officer Eric Colson said he was surprised at how quickly customers were willing to share so much about themselves. At Netflix, where he previously led data science and engineering, the streaming-video service pushed to keep new users interested by removing as many questions at sign-up as possible. But at Stitch Fix, where building a profile can involve answering more than 80 personal questions, the follow-through rate is one of the highest Colson said he has ever seen.” (Source – Washington Post)
2. Shoppers are less brand loyal than ever, which means they are also changing brands more frequently than ever before. For brands this means the assumptions that you made about who your customer could change dramatically over the course of a year or two. It’s very unlikely that the customer you were targeting five years ago is the same customer you have today. On top of that, brands have to work even harder to make sure shoppers have a great experience every time since their customer can easily change brands overnight.
Consumers are not inclined to be loyal to brands as they once were because the underlying value of loyalty itself is no longer particularly relevant. In the old world, loyalty was good and something we aspired to give and receive across all aspects of life . . . with friends, family, employers, dentists, doctors, bankers, and maybe even the federal government. But generational experiences have made sticking with “tried and true” a sucker bet. Loyalty means remaining the same. Not exploring alternatives. Putting your head in the sand and maybe even missing a beach party. (Source – Forbes)
3. Shoppers are buying more online, period. While many brands and retailers have embraced an “omni-channel” approach to their business, ramping up eCommerce has often taken too long and left shoppers with too little to stay engaged. The brands that have fared the best over the last five years are those that have seen eCommerce as only a sliver of their business, and worked hard to change that. The retailers that have had the hardest time are those that have found themselves clinging to their in-store business putting focus on what has worked in the past rather than embracing change and trying to shift focus onto how their shopper’s buying habits have changed.
It’s not that consumers are being more cautious. Spending is up, but most of that growth is online. Traditional brick-and-mortar stores are grappling with intense transformation of their business to be more Web-based and trying to reconcile their old business model with one in which profit margins are thinner. (Source – NPR)
As a retailer in 2018, you have to realize that your shoppers and their habits have changed, reacting to this change and innovating in new ways is critical to succeeding now and in the future. Of course, this doesn’t mean that brands and retailers should abandon what has helped them get to where they are today, but it is time for those who are falling behind to admit that it’s time to make a change and take action.
Retail is famous for having 12 – 18 month sales cycles, the most innovative brands move 3x – 4x faster. Saying that it’s always taken you a year or longer to make a decision just means you’re likely falling behind more and more each year and losing marketshare to brands and retailers, like Stitch Fix, that can move a lot faster.
The good news is, the opportunity is there, the question is, who is going to allow enough disruption into their organizations to benefit from it?