Can you feel it? The retail pendulum is moving and physical retail is far from dead. It is facing a moment in history where new innovations, companies, and models are born. The retail shift is picking up pace and direct to consumer only brands are about to be rocked. Don’t believe us? Here are some signs to support our argument:
Pure-Play Online Brands Opening Stores
Retailers are starting to come to the conclusion that they can’t and don’t want to compete with online players, and why would they? Online consumers search for the lowest price and to top it off a lot of direct to consumer brands growth is stunted due to rising customer acquisition costs and consumers expectations for free shipping. The model might well implode on itself and partly why Amazon, Casper, Warby Parker, etc. are opening locations. Not because they wanted to, but because they had to in order to grow and improve profitability in the future.
When a lot of these brands that were online only start looking at brick and mortar because they’ve already experimented and see failure in their future, why then do a lot of brands now seek the direct to consumer model? Perhaps it is the envy of the grass being greener on the other side?
The online business model is only successful when it comes down to price. Do you want to sell your goods for the lowest price, always seeking your next consumer, and compete directly with Amazon private label brands or overseas companies with really low barriers to entry?
Retailers Investing in Their Stores
Retailers have been blind and fixated on “how it used to be” and “how it always has worked before”. They are realizing they cannot win with price in physical retail simply because the business model is more expensive. Period.
Rather than cutting costs to compete with online sales, which is a losing proposition, they are starting to invest in the right things again. This includes in-store technologies and the people within the stores to creating superior consumer experiences and connectivity to move beyond the transaction and into what we call Retail 3.0, the retail renaissance.
Online sales have been a distraction for brick & mortar retailers leading to a race to the bottom rather than creating additional value and competing differently in store. When retailers change their model/mindset they will be the place where consumers connect with others creating a sense of community and belonging. Brands would be begging to be back in their stores again as they cannot recreate this digitally/remotely.
What Brands Can do to Prepare?
It’s all about relationships. Brands need to curate relationships with these next generation retailers and support them to stay top of mind keeping your spot in store secure. The pendulum is switching and if you don’t have a game plan to drive business strategy and sculpt this shift you will lose to those that do.
