Originating from customs of trade dating back thousands of years, retail is one of humankind’s oldest forms of exchange. From barter systems to the first open-air markets, from modern department stores to online marketplaces. Throughout history, retail has reflected back the changing fortunes and desires of its all too human interlocutors. Today, it is a trillion-dollar industry, its reach and impact enveloping the globe, stretching from the village souks of Marrakech to the glass and steel behemoths of downtown Manhattan.
With this in mind, several Claros and myself sat down to discuss the innovations and shifts currently underway in this ever-changing sector. We examined an industry that is more than ever being hit by enthusiastic startups and evolving consumer mindsets. We began by funneling our desk research and discussions into provocative hypotheses, calling on our personal networks of experts to challenge and redirect our thinking. In short, we discovered that the retail industry is ripe for innovation. Read on to find out why:
1. Brands need to embrace their intangible values, then sell on them.
In the past decade, there has been a significant rise in Apparel and Goods (A&G) startups with the common value proposition of delivering their products or services direct-to-consumer, bypassing traditional channels and complex routes. With ecommerce making digital shop-rent virtually free and social media asserting itself as an alternative sales platform, it has never been easier to set up an A&G brand.
However, the ease of this does come at a cost. The flood of available products and services has increased pressure on distribution channels, and brands are going to more extreme lengths to stand out from the crowd.
The difference between a $6 Zara tee versus a $600 Vetements tee, is essentially a matter of its perceived value and has next to no reflection on its cost of production. In a hyper-opinionated society where a consumer’s circle of trust is narrowing, individuals desire products that are either “good enough” without being overly concerned by brand, or else they covet a brand whose values they share. Brands need to consider these values throughout the entire development cycle, within their company organisation and at every touchpoint with the customer – not just as a marketing afterthought.
2. Retail’s current problems are points to diversify on
During our research, nothing came up more alarmingly than the fear of the end of physical retail. In a traditional retail environment, concerns over how to increase sales/square footage are valid and important considerations. In an age however, where digital and physical worlds coexist, these parameters no longer carry the same weight as they once did.
Physical retail may be more relevant and crucial to a brand’s success than ever before, offering the consumer a differentiated experience. Pivoting their position from a point of sale, to point of experience, may allow retailers to evaluate their performance more accurately and more effectively than allowed by the humble, timeworn KPIs.
3. In order to personalise, brands must know their customers
Every consumer has their own definition of what convenience, access and a personalised experience should include. More and more, these expectations are becoming ‘hygiene’ factors for how consumers interact with brands. The retail industry then, faces a paradox, how do they cater to the trend of personalisation but in a way that is scalable?
Consumer research is not a new concept to brands, in fact it is very old. However, the majority of this research tends to be derived from more quantitative methodologies such as surveys and questionnaires focusing acutely on socio-demographics. Changing mindsets and turning relevant stakeholders on to the value of an ethnographic approach, requires us to demonstrate the value of a human-centred methodology that takes seriously human needs and wants. If retail is to navigate the disruptive shifts ahead, more than ever they must rethink their tools and methods for obtaining contextual research that best serve the interests not only of the customer, but the retail experience as a whole.
In conclusion, innovation does not have to be radical. Fashion houses and FMCGs are often considered daring and out of the box. The influencers of the pack often push people out of their comfort zone and respond to political or social extremes. For a sector that is innately creative and challenging, innovations within, can and should be simple.
Long term projections are sometimes hard to accept in a fast-paced market. Hyper-technologised solutions are often attention-grabbing, developed through a buzz or a concept that is rarely grounded in the desires or needs of people. These are not examples of true innovation, in many cases adding neither value nor revenue to a brand. Innovation simply put, is small, humble, and begins with its most important attribute: its people. When we can better understand people, we can better understand the world that is yet to come.