After spending a week in New York on the ground talking to retailers, start-ups, and industry observers, it’s evident to me that the maturity of traditional retail is creating the conditions for some exceptional new customer experiences – and new business models to match. And most disruptive retailers are not just start-ups or direct-to-consumer brands. In fact, some established retailers – which have experienced slow growth, increased competition or near-Chapter 11 and chosen to bet on change – are courageously creating their future.
To quote Restoration Hardware’s CEO Gary Friedman: “If we’re going to go out we may as well do it in style.” This mantra truly talks to the courage we’re seeing in the five retailers below – they’re not afraid to disrupt.
Credo Beauty: Credo beauty was started in San Francisco by ex-Estée Lauder and Victoria’s Secret president Shashi Batra. This is a business, with eight stores, living the disruption ethos. They are a multi-brand beauty retailer acting as a “health editor” ensuring they don’t stock any brands that have nasties in them. This is all built on the premise that your skin is your biggest organ, and therefore what you put on it matters a lot.
We were lucky enough to chat to their CEO, Annie Jackson, last year in San Francisco, and she described how they have to work closely with the brands they stock in order to ensure they remain true to their mission: “From a conscious standpoint, we want to know who was that person who created the brand, what do they stand for, why did they create it, what’s their story… So every single one of the brands in Credo has a founder that we work very closely with.”
Major beauty retailers have reacted to this trend with small sections dedicated to “toxic-free products” though the irony of this isn’t lost on us. Credo is a brand that teaches the importance of believing what your customer believes – and being transparent on a journey such as this.
Nordstrom: It feels like Nordstrom is the accepted answer when someone asked you which mass retailer is doing well (what they’re actually asking is which mass traditional retailer is doing well – Amazon is rarely an acceptable answer).
I digress, Nordstrom and in particular their Men’s Store in NYC is a great example of why this 118-year-old retailer continues to be revered. Firstly they have a strong “technological advantage” – service. They do service consistently better than any other department store I have been to.
This is a thread that runs through this businesses culture, and it starts with its history. Before it was a department store, it was a shoe store. So the notion of “kneeling before the customer” is the cornerstone of their culture. When you get down to it, their product is parity to Saks down the road or Bergdorf’s; yet, having someone be able to not just serve you but help you navigate the collection based on your body type etc is what service is actually about.
We made friends with one staff member at the store who had spent most of his life working for Giorgio Armani prior to joining. Just think about that as a career transition and the level of know-how he has in suits that’s now within the company. In fact talking to him, something struck me about this business and US retail as a whole – it’s a career, and yet we, in Australia, often treat it (due to a lot of different factors) as a job.
Where the Nordstrom business has invested to maintain edge is in technology that supports service. From reserve online and try in-store, through to an app called Style Boards, where a sales associate can pull looks for their customer and share it with them to them buy at a later date. This investment is very focused on ensuring their technological advantage continues to be just that. This is a brand that teaches the importance of focus and investment in that one area of differentiation.
Restoration Hardware: Hands down my favourite retailer experience. This is not a business that is giving the customer what they want (aka throw it into research and then do it), this is a business that is giving their customer what they aspire to… and probably didn’t even know they needed. Their stores remind me of the power of emotion over the rational. For those of you who have read Daniel Kahneman’s seminal work Thinking, Fast and Slow, you know that emotion always gazumps the rational mind. Case in point with this retailer, there are no price tags, no POS showing discounts in this store, no focus on just one product. Instead you fall in love with the room you are in, then you look at the price and then, in most people’s case, they justify it to themselves.
We spent time with the store team at their new Meatpacking District location, discussing the brand’s future. As a background, this business used to sell hardware and knick-knacks for houses that were going to be “restored” – under this model the business nearly went into administration.
In 2001, when Friedman (who was ex-Williams Sonoma) joined the business, it was making a net loss of US$18.5 million. Move forward to now and they are a US$2.44 billion business growing at 15 per cent year over year… without using an overt promotional calendar. In order to switch discounts off, they invested in their CRM program and made it a US$100 flat fee per year to get 25 per cent off full price merchandise and 20 per cent off sale merchandise. This is a brilliant way to rethink the promo drug.
This particular store in NYC, a lavish 90,000sqf flagship, will pay back in two years. So yes, this is a furniture business that decided not to sell another lounge, but dared to be different and reap the reward of this move.
Outdoor Voices: Currently only a small-ish retailer in comparison to the others on this list, Outdoor Voices is an athleisure brand that’s more about recreation than yoga or exercise.
For those of you who are unfamiliar with the brand, it was started in 2013, and in five short years now has nine stores (with lots more to come in the next three years) and the iconic Mickey Drexler – of J Crew and The Gap fame – on their board.
Creator Taylor Haney has cleverly managed to find a niche in the cluttered athletics market by focusing on recreation not performance like all her competitors. This is a brand built on the hashtag #doingthings – you know, because doing things is better than not doing things?
One of the key insights that stuck out from chatting with their head of retail was that this is a business that challenges everything you know to be true of traditional retail. We all know that the rules of retail are changing, but to hear it from the horse’s mouth, so to speak, just reinforces the fact that we have to be open to unlearning what has been true for so long – that includes what a store is meant to look like, how much branding it needs and the role of VM. This business is due to grow to 50 stores in the next three years, so stay tuned for when they move outside of the US.
Showfields: It calls itself “the most interesting store in the world” – a very big claim. Launched late last year, this is the department store of the future. It is acting as a retail platform for direct-to-consumer brands that currently don’t have a physical presence. Following me? It’s as if a department store only had concessions, gave brands the creative freedom to do with the space what they like, and the only brands in-store were ones that had not gone physical yet. All of a sudden we’re talking about a store that is entirely about discovery.
For those of you familiar with B8ta this is that business model – but taking it to the next level. Currently with one store on the Lower East Side, when we visited they had nine brands, including pure-play bedding business Boll and Branch, Function of Beauty, Frank Body and more. They are due to expand this store to four levels. This is a business I would keep my eye on, either for acquisition potential or simply how to rethink traditional retail concepts with a way more modern spin.
There were plenty more disruptive retailers we visited over our week in NYC, these five are our pick of the pack. Some of them represent the old guard innovating in order to maintain their leadership; while others are exploiting gaps lefts by traditional retailers in particular categories.
It goes to show that any and all categories are ripe for taking – particularly when there is currently low innovation (parity in offer); however, it takes a particular company culture and courage in leadership to act on these conditions.
Pippa Kulmar is the co-director of RetailOasis, a business consultancy dedicated to creating the future of retail.