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  • The Future of Retailing

    What's the future of retailing? Which retail brands will prosper and which will fall by the wayside as technology makes consumers more and more mobile and increasingly demanding of instant gratification at the best possible price?

    According to a panel of retail experts confronting these questions at a presentation Dec. 15 at the Fashion Institute of Technology in New York City, the future will consist of the smartest retailers giving consumers fast and easy access to their brands and their products from wherever a consumer happens to be at any given moment -- at work, at home, in transit, dining out, at entertainment events, hanging out with friends, even shopping in a competitor's store. It's happening right now, the panel pointed out, as Cyber Monday demonstrated, with e-commerce sales in one day, and for the first time, exceeding $1 billion.

    The panel, which consisted of Matt Kaness, executive director of business development and strategy for Philadelphia-based Urban Outfitters; Dara Fleisher, vice president of business development for Montreal, Ca.-based Beyondtherack.com, an online shopping club; Edward Foy Jr., co-founder and CEO of Secaucus, N.J.-based eFashionSolutions; and Gilbert Harrison, chairman of New York City-based Financo, Inc., unanimously agreed that e-commerce sales in the years ahead will continue to go "up, up, up" as Harrison put it. And, they agreed, a nice slice of that growth will be driven by the applications in smartphones that give consumers the ability to shop around for the best prices on the items they want to buy and then order them either through their devices or by going to the store with the best deal.

    Urban Outfitters, a specialty chain that has brick and mortar stores as well as an e-commerce site, says Kaness, has adopted an "agnostic" view of the channels that consumers can choose to shop in.

    "As a retailer," he says, "we think about the brands we sell as having a customer in mind and a concept about their lifestyles and aspirations. We couple that with the products consumers want to buy and how they want to buy them and from where they want to buy. So that means we view channels in an agnostic way. Because just as those customers change, we too have to change.

    "That, in turn, changes how we engage our customers, how we communicate with them and how we sell them. For example, we have moved away from optimizing density in our catalog pages to doing more branding. We have created different formats in our brick and mortar stores. Not to mention the technology we deploy online and across the web.

    "I think, for us, if a customer tells us she doesn't want to shop in our stores anymore, we'll still have stores, but we'll also go in the direction the customer tells us she wants us to go so she can continue to experience our brand."

    Kaness added that currently about 20 percent of Urban Outfitters' retail sales are "direct to consumer. We don't break it down any further then that but I will say that direct sales were just 10 percent of total retail less than five years ago. Clearly, most of that increased commerce is coming through our dot-com. From our brand perspective, therefore, we have to think about how customers spend their time. It's the same strategy as we'd use to decide where to put a store for our customers. You have to get your product out where the customer is circulating.

    "So, just as our percent of retail sales went in five years from 10 to 20 percent being generated through our direct-to-consumer channel, we expect that to continue to grow."

    Fleisher stressed that in today's technologically sophisticated marketplace, the power has shifted from the retailer to the consumer, especially consumers equipped with smartphones.

    There is "a need," she says, for retailers "to bridge the gap" and use a multi-channel strategy to give shoppers "the opportunity to shop whenever they want to shop immediately. Retailers don't want to miss out because that's where we are headed."

    Harrison noted that just as consumer shopping patterns are changing, so the media that retailers use to advertise will have to change. "I think the biggest change is that we won't see huge growth in the retail stores but we are going to see a total shift in the way retailers advertise. Look just at what social networking has done, whether it's Facebook or YouTube or any other. It's incredible the way you can reach your customers totally differently than spending millions of dollars on print or television. That's the biggest change that I think we're going to see in the next five years."

    Foy, whose company, eFashionSolutions, manages online operations for a variety of fashion lines such as Karen Millen and BabyPhat, says that in the future, apparel sales "will continue to grow online. That's the truth. Online electronic sales are at 50 percent of total sales. Apparel is at 11 percent. So that's the benchmark. Stores won't go away but successful retailers will be the ones who have the apps (applications) that get a consumer from the web and into a store. And when they're in a store, retailers will have to find a way to make the shopping experience very personal as opposed to just buying through a phone."

    Harrison pointed out that when Best Buy encourages shoppers to buy online, but to go into a store to pick up their merchandise, they are effectively using both channels to support each other. "They are hoping that not only will the consumer pick up the product in the store, but that they will also pick up two or three other things while they're there. That's the way you are going to keep bricks and mortar profitable."

    With more and more people these days looking for the best deals, says Fleisher, "people on the go in a store are using their mobile phones and price checking apps to scan the bar codes of products they plan to buy and then finding the retailer with the best deal. That's helping to drive customers from online to brick and mortar stores." In summing up what trends may emerge in the future, Foy noted that, for apparel retailers, it will "all be about execution. Consumers will still spend money in stores, but the retailer's share will be based on how they execute technology and how they relate to customers."

    Harrison added that everything will depend on "how you execute merchandise and how you get to consumers."

    Fleisher stressed that for apparel retailers on the web, the challenge will be how to create "a luxury experience online. They will depend on content and not just design." She also predicts that apparel sites will need to provide "an interactive experience with videos and fashion shows to make it more exciting for the consumer who is expecting more and more things."

    Google gets into the game

    The recent announcement on Dec. 15 that Google was introducing a unique retail/fashion web site, Boutiques.com, elicited a number of comments from the panel about its potential impact on the retail/fashion scene. In its official blog, Google describes boutiques.com as "a personalized shopping experience that lets consumers "find and discover fashion goods by creating their own curated boutique or through a collection of boutiques curated by taste-makers -- celebrities, stylists, designers and fashion bloggers."

    Boutiques uses computer vision and machine learning technology to visually analyze a customer's taste and match it to items they might like.

    Google partnered with taste-makers to curate 10-50 "great items they loved" and simultaneously to teach the web site "their style and taste." These taste-makers achieved this, the Google reported in its blog, "by telling us what colors, patterns, brands and silhouettes they loved and they hated.

    They took a visual quiz that taught the site to understand their style genre: Classic, Boho, Edgy, etc. Our machine learning algorithms use this information to enable the online customer to shop all the inventory in the style of that taste-maker, on top of the 50 items they've hand-curated."

    Boutiques also lets consumers build their own personalized boutiques and get recommendations of products that match their tastes. The site offers a variety of features to search and discover merchandise including advanced search filters that can filter by genre, silhouette, pattern, color families and sizes.

    In his comments on this latest development in online retail fashion trends, Harrison said he expects this development will have "a tremendous impact on retail fashion because of the reach Google has. Google has billions of users."

    Kaness stressed that Google's entrance into this space "only reinforces the importance of having exclusive and differentiated products and concepts. Online, as a retailer, you can't hide. You have to be honest and give consumers reasons to visit you. You also have to know whether you are a brand or an online service. Don't try to be both. Pick one and do it really well."

    A successful Cyber Monday

    Last November, Cyber Monday's sales reached $1.028 billion, up 16 percent versus year ago, according to Reston, Va.-based comScore, a leader in measuring the digital world.

    Cyber Monday 2010, reported comScore, represented the heaviest online spending day in history and the first to surpass the billion-dollar threshold. In comparison, Black Friday retail sales increased 9 percent to $648 million.

    For the holiday season from Nov. 1 through Nov. 29, comScore reported, $13.55 billion had been spent online, marking a 13-percent increase versus the corresponding period last year.

    ComScore also reported that Cyber Monday's 16-percent growth in sales versus a year ago was driven primarily by an increase in average spending per buyer (up 12 percent to $114) while the number of buyers on Cyber Monday grew by 4 percent to 9 million. The average spending per transaction grew 10 percent to $60.05, while the total number of transactions increased 6 percent to 17.1 million.

    Nearly half of dollars spent online at U.S. web sites originated from work computers (48.9 percent), representing a decline of 3.8 percentage points from last year. Buying from home comprised the majority of the remaining share (45.4 percent) while buying at U.S. web sites from international locations accounted for 5.8 percent of sales.

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