Lessons from five leading retailers: The risk-takers and the innovators

Bloomingdale's

Amazon’s user-operated “grab and go” supermarket might have captured shopper’s interest when it was unveiled in December, but according to PricewaterhouseCooper’s 2016 Total Retail report, customers aren’t only after quality products—they want a sophisticated service experience too.

While some brands might have previously thought of shop assistants as low-skilled or transient workers, shoppers now have zero tolerance for a seller’s lack of knowledge. The most common answer to PwC’s survey question, “What would improve your shopping experience?”, was “More knowledgeable staff”, with 40% of survey respondents saying that was the most important thing to them.

As traditional retailers try to predict their customers’ next whims, analysts are noticing a handful of key priorities for modern shoppers: immediacy, consistency, imagination and convenience. The internet might have increased the number of options, but customers are skilled at curating their own preferences and sticking with a few brands. And as high-profile company collapses take centre stage, everyone is grappling with how to plan ahead.

Here are five global retailers that are getting ahead of these skills in the pursuit of growth – and what your SME stands to learn from them.

Tesla: The power of anticipation

Tesla’s marquee product is a driverless vehicle that isn’t even on the roads yet, but retail experts have told SmartCompany the company deserves praise for the way it plays with customer expectations.

The brand draws on its millions of social media followers to advertise its showroom spaces when they photograph their visits and share pictures of the spectacle. The company even established “mobile design studios” last month, taking its Model X on the road to advertise the product to US cities where the company doesn’t have a home base.

In Australia, shiny showrooms at big shopping centres like Chadstone allow families to engage with the dream of owning a cutting edge vehicle in the same trip that they might buy shoes or electronics.

Retail Oasis strategist Pippa Kulmar says businesses shouldn’t underestimate the power of Tesla’s brand positioning, because it shows a new understanding of the shopper’s need for excitement—and even redefines the concept of a “retailer”.

“They’ve really disrupted car dealer retail [models],” she told SmartCompany.

“I went to a showroom for Tesla in New York in the Chelsea gallery area, and I think that [location choice] is about knowing who your customer is.”

Kulmar says Tesla understands its unique customer base, and has moved to place its product directly where those shoppers go, whether it’s in an art gallery foyer or a high-end shopping centre. While other technology giants may have kept their design consistent over the years, the excitement factor is still there in these showrooms, and the message is clear about the power of technology to create spectacles.

“I think Apple stores now have a lack of innovation at this point, for example – but you look at Tesla and you see it,” Kulmar says.

Warby Parker: Convenience and style

We’re at a stage where the zeitgeist is very much about the fact that a majority of us—not everyone, but a lot—have everything they could possibly need,” Kulmar says. This means the retail challenge becomes how to make your product easy to understand and easy to obtain.

The phenomenal growth of the subscription business model, which one Internet Retailer analyst put at growing 3000% since 2013, is a key trend on this front, with products from coffee to razors showing up on doorsteps each month as if by magic. This type of retailing is more difficult for traditional retailers, that have to find the balance between drawing people into stores and fulfilling people’s expectation of convenience, explain retail analysts.

US eyewear retailer Warby Parker is one operation that has capitalised on both channels, running boutique-style stores while also offering a home-delivery try-on service for shoppers wanting new glasses frames; customers can place an order without having to interrupt their schedules.

“It’s all about one-to-one models for glasses retail,” says Kulmar.

Trying out my new frames! #warbyhometryon #warbyparker

A photo posted by @simplymidwest on

Warby Parker has been frequently praised for its approach to both highly curated stores and a straightforward at-home delivery model, though the business is still in its early stages. It was valued at $US1.2 billion ($1.6 billion) when it completed its last round of funding, according to Motley Fool, but there’s still a long way to go; Warby Parker reportedly increased revenue from $US35 million in 2013 to $US100 million in 2015, but the business remains on the road towards profitability, according to reports.

Patagonia, REI and social enterprise vs. fast fashion 

The rise of fast fashion retailers in Australia has been blamed for the demise of iconic brands like Pumpkin Patch this year, but backlash against disposable brands might give brands that champion social enterprise even more space to breathe.

Over the past few months businesses have told SmartCompany about the growing networks of profitable businesses that place social good at the centre of their business models. In the global adventure-wear space, the leaders are dropping big dollars to show commitment to a cause.

In November, activist adventure-wear brand Patagonia told customers it would be donating 100% of its Black Friday sales takings to grassroots environmental causes, a figure that was slated for $US2 million but turned out to be $US10 million. Management were keen to highlight not just the scale of the donation, but what it did for their database of customers.

“Along with many loyal customers, the initiative attracted thousands who have never purchased anything from Patagonia before,” the company said in a statement.

Meanwhile, another brand in the outdoor wear space, REI, took the opposite approach to Black Friday by shutting its doors on Thanksgiving in the US. Instead, it pleaded with staff and customers to stay home and spend time with their social circles instead of spending money.

The hiking wear business, which is a retail cooperative that charges members a $US20 lifetime membership, booked $US2.4 billion in revenue in 2015 and redistributes profit to its members and outdoor non-profits.

Kulmar says the apparent success of brands like this lies in an increased customer focus on authenticity, as brands craft an alternative to fast fashion retailers.

“I think that whole move is no longer about the progressive customer and the ultimate greenie,” she says.

“I think the future of retail has got to be around sustainability and conscious capital, and having an authentic story.”

However, Dr Gary Mortimer, a retail expert at QUT Business School, says businesses should keep in mind exactly why discount and fast fashion retailers like Uniqlo have succeeded, especially in the Australian market: they make it easy to find products that customers want.

“[For example], Uniqlo is very like the H&M model – they are fast fashion, casual, and not necessarily on-trend,” he says.

Understanding that shoppers are on the lookout for basic products that fit their lifestyle and climate,is still going to be an important strategy going forward, Mortimer says.

“It’s clothing that fits and suits the average shopper. [Brands like Uniqlo] are great for basics and I think the Australian shopper does have casual clothing as part of the psyche.”

Bloomingdale’s: Imagination and curation

Retail department stores have been bashed around over the past five years, and high-end retailers like Bloomingdale’s in the US are throwing all they can at consumers to get them in store. This fact presents a partnership opportunity that some local businesses are cashing in on.

Bloomingdales, owned by Macy’s, has long been praised for its integration of fashion and technology. It was one of the first stores to use “smart fitting rooms”; it forms partnerships with artists to bring installations into its boutique stores; and it even offers itself up to be booked as a venue for professional events like lunches and VIP shopping days. The Macy’s juggernaut has been facing tough retail conditions, but that’s only increasing the drive of retailers like Bloomingdale’s to frame shopping as an event.

Australian fashion brand Mon Purse recently partnered with Bloomingdale’s to bring its bag design technology into stores.

Founder Lana Hopkins can see the excitement generated by an in-store experience is incredibly valuable. The Mon Purse technology lets customers build their own leather bags via its design platform—and the spark that this engagement gives shoppers is undeniable.

In an era where so much retail is matched directly to a customer’s desires, the idea of designing a bag inspires many shoppers, Hopkins says.

“You know when you walk into a store and you smell genuine leather and you create your own bag and it’s exciting … You know you’re getting the real deal – and retailers also know that,” she told SmartCompany.

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