In the past, most of us would shop at local malls, visiting big department stores and smaller, more niche retailers alike. But technology continues to change our shopping habits, right before our eyes.
Today, there is a major transition in the retail industry. A whole new ecosystem is being formed, and everyone in the game—entrepreneurs, manufacturers, wholesalers, distributors, retailers and consumers—needs a new map.
These are some of my predictions for what's next in retail—and how anyone building a retail business can stay ahead.
1. Cut costs—and find your distribution channels.
As we watch major retail brands file for bankruptcy and close physical stores, it's hard to resist the temptation to rely on e-commerce as a key distribution channel. What you might not know is when you decide to embark on the e-commerce path, you are essentially entering into a competition with retail giants. These stores have multimillion-dollar marketing budgets to spend on advertising alone, which makes it almost impossible for you to win. So while it might take only a few seconds to create an online storefront, it requires an army of resources and large amount of investments to be discovered by consumers online.
The smarter way to stay ahead is to consider placing your products in larger retailers who already have the marketing budget and resources to compete online and offline. By doing indirect sales and wholesale, you are unlocking a key distribution channel that can generate a large amount of your total revenue. More importantly, this tactic can help eliminate five major costs that a traditional direct-to-consumer path would incur:
- Ad budget (Google ads, Facebook ads, SEO, etc.)
- Fulfillment and operational costs
- Customer service overhead expenses
- Five-to-10-year lease agreements for physical retail storefronts
- E-commerce storefront technology and maintenance costs
By choosing to partner with a bigger online retailer, you could amass significant savings that can be used on building a brand story and a strong following with consumers. This all adds up to attract more reputable retailers looking to do business with you. It's often a win-win.
2. Go viral, locally.
The rise in urbanization amongst millennials creates another opportunity for retail: growth in local experiences.
Why is this important? Because it's extremely difficult for e-commerce players to successfully satisfy a customer's discovery behavior online without a killer personalization and recommendation engine.
On the contrary, this becomes a clear advantage for businesses operating locally. It is much easier to satisfy a customer's urge to experience a brand, to browse and sample in a brick-and-mortar context. Additionally, you can tell a story around your locale, and personalize your products and services based on your returning customers and their local lifestyles, events and culture.
This has already become a popular way for brands to reach consumers. In New York, empty retail lots are rapidly replaced by marketplaces like Artists and Fleas featuring local and niche merchants. In the same urban space, pop-up retail experiences are also popular.
3. Keep your eyes—and products—on Instagram.
One channel I believe you should always set aside resources and budget for is Instagram.
With a huge amount of U.S. retail brands already on Instagram, it is only a matter of time for Instagram to release a fully integrated shopping experience on their platform as an additional revenue stream. (Here's an early indicator. Last November, Instagram launched a “Shop Now" CTA, which links users straight to the retailer's shoppable website.)
If you are a brand with a decent following on Instagram, you should double down on that investment. With more than 80 percent of Instagram's users located outside of the States, according to an Instagram blog post, the platform also could become the most effective way for smaller brands to reach beyond and grow internationally.
No matter which of these tactics you decide to try, remember that they all share one goal: To give back the power you need to focus your time and money on building a brand that your customers love.