The results are unanimous: we’re so comfortable with sharing and renting that it’s changing the world of mass retail at a breakneck pace. But what does this mean for shops on the ground?
An ongoing topic at this year’s SXSW Interactive featured talks was the sharing economy and how it’s changing and disrupting consumer behaviour – not just how it’s altering the way consumers think (think how online shopping has radically changed consumer behaviour within a decade) but also the flexibility it introduces to the current generation’s work force.
One panel that I attended focused on a new generation of retail innovators who is redefining the consumer shopping landscape. The panel was moderated by Sephora’s CMO Julie Bornstein, in conversation with Katrina Lake, Founder & CEO of Stitch Fix and Jennifer Hyman, Co-Founder & CEO of Rent the Runway. These innovative retail initiatives arose from different backgrounds and industry experiences. Lake’s entry-point was social commerce; for Hyman, it was travel.
Lake’s understanding of where community, tech. fashion and beauty meet came from managing the blogger platform at venture-backed social commerce company Polyvore, giving her an understanding of the importance of service, influencers and of data to drive success. Her new business, Stitch Fix, is an accessible personal online styling service that helps woman to confidently define and experiment with their fashion and look – all through a truly customer-focused shopping experience.
For Jennifer Hyman, her background in retail started in the travel industry. She joined it shortly after 9/11, and despite the subsequent industry downturn she launched the first ever Starwood honeymoon registry, allowing customers to receive parts of their vacation instead of gifts. “Innovation born out of necessity” is how she refers to her Starwood initiative, as she makes the point that it is often those type of circumstances that makes an industry ripe for innovation. The notion of people valuing experience over ownership was what drove the Honeymoon registry initiative and also the very same insight behind Rent the Runway today.
Rent the Runway is the only online fashion-offering platform of its kind offering access to designer fashion and on a large sale. They have a current customer base of 5 million women. It has built a remarkable online rental platform for luxury goods using custom technology systems. Its aim is to disrupt the apparel business by trying to democratize women’s luxury items – and so far, it sounds like it’s working out nicely.
Given the convenience and variety of online retail as well as the fact that, in every sector of our increasingly digital-dominated lives we are valuing experience over ownership – whether it be music via Spotify, Uber for transportation or movies via Netflix – there has to be a compelling reason for consumers to sacrifice their time on a Saturday to go to a shopping mall, and that reason has to outrank the convenience of online delivery.
So what does that mean for physical retail? Answer: a renewed focus on experience and service. It could mean the traditional shopping mall experience – as the kind of service and engagement that can’t be had over an online or mobile channel – like the “Soho House version of a mall” (i.e. clubs for those in creative industries as places where like-minded people can come together to socialize, exchange ideas, and do business). Alternately, re-invention could mean the kind of customer service centre that tackles everything service related including those that you might not be able solve online.
Either way, it’s increasingly important to look holistically at new customer behaviour and the design of the end-to-end service across the digital and physical space and therefore, the role of each channel, online, mobile or physical retail store – and to measure the effectiveness of a store by looking beyond the traditional metric of sales per square foot.
Here were a few themes I picked up from the world of fashion and tech.
The mental shift from consumers to “smart” consumers. This relates to a mentality of optimising time and enjoying the flexibility that the sharing economy enables with connectivity.
Actual influencer purchasing behaviour. Lake mentioned a shift in influence from traditional magazine editorial to cross-sector bloggers – the fitness, mom and lifestyle blogs which drive the majority of Stitch Fix’s organic traffic. Blogger audiences might be small but impact is high and the most prominent and trusted bloggers influence a lot of commercial activity.
The power of great customer service. Five years ago, the ecommerce focus was almost exclusively on paid marketing, at the detriment of the traditional customer experience. Stitch Fix, for one, is building a business via Word Of Mouth and Referral, created by a great end to end customer experience, from order to delivery, and generating organic word-of-mouth through digital media. For Rent the Runway on the other hand, over 95% of business in 2014 came from offline sources – particularly helped by personal recommendations at parties and social events which is where their audience share their appreciation of these services.
Introducing new customer behaviour. Whether it’s getting into a stranger’s care to lift-share via Lyft, renting a room in a foreign country through Airbnb, or wearing rented designer clothes, the landscape is changing and what may have seemed like a crazy idea a few years ago is now commonplace. Disruption and consumer habit breaking is now the norm, and many opportunities exist for taking advantage of this dizzying speed of change.
The importance of data as a strategic advantage. This particularly applies if you’re in the business of creating data products. Rent the Runway uses data to price by demand, and it’s also a valuable asset to its suppliers. Fashion designers benefit from receiving data from patterns, informing them what Rent the Runway’s 5 million customer base are doing related to their brands. Stitch Fix is building predicative algorithms to help stylists make a selection through a customer profile and social media selections (mainly Pinterest), helping highlight the propensity for garments to be kept.
So, what about retail and the future – and is there somewhere fashion, tech and travel could overlap? The travel industry is a space dominated by service culture and service operation, so there are many lessons to be learned, some of them available to be adopted wholesale. Rent the Runway’s vision is of travel without the need for suitcases, and they’re gaining credible traction with it. Their stated mission is to iron out the little things that keep your travel experiences from being as magical as they could be – for example, upon first arrival in your hotel room, you open up the closet and are met with everything you need for your trip. Is this the future of luxury travel? It’s nice to think.
As a travel enthusiast, I for one am looking forward to a redefined travel experience and a future that takes all the hassle out of travel – and in this talk, I caught a glimpse of it. Exciting stuff.