The big takeaway from the Goldman Sachs Retail Conference: ‘Omnichannel’ is the new buzzword.
Last month, executives from over 20 global retail heavy hitters — Michael Kors, Starbucks, Nordstrom, Walmart, among them — descended upon New York for the Goldman Sachs 23rd Annual Global Retailing Conference. The itinerary: to discuss their current performance, and lay out their retail predictions for the rest of the fiscal year. The question on everyone’s minds: Where to find the optimism in a US retail market that’s struggling to match inflation?
The answer, it turns out, is quite simple. Retail is evolving, and we find ourselves at the dawn of an encouraging new time. To best survive the transition, however, retailers and brands must rethink, restructure, and refocus. Fortunately, there are a handful of effective things we as an industry can do to harness this new wave. Below, I’ve laid out my takeaways from the conference.
Blending online sales with brick-and-mortar is a must.
“Omnichannel” — selling through both brick-and-mortar and online — is the new buzzword. The need to invest in a proper online shopping experience, as well as a traditional store, is becoming all the more crucial. Yes, contrary to what you might think, brick-and-mortar continues to be a battle-tested, and quite profitable, option. Online sales margins continue to erode, and as new brands and products continue to saturate the e-commerce space, it remains unclear how fast the channel will continue growing.
According to the US Department of Commerce, e-commerce has only made up 8.1 percent of the total US retail revenues to date this fiscal year. It is, of course, a swiftly growing channel, with an average annual growth rate of 15 percent, compared to the 2.3 percent overall retail rate, but brands still need to ensure that it is growing at a sustainable and profitable rate. With the increased cost in shipping, continued emerging technology platforms, and the growth of online marketing and social media, it is not apparent that brands can still scale at a profitable rate by relying only on online sales without harnessing brick-and-mortar as well.
Focus on what really matters.
Product is king, and at the end of the day, it drives customer purchase. Take the original principles of luxury as an example. When Louis Vuitton, to take a prominent name, first debuted in Paris in 1854, it existed to serve the customer first. Branding was discreet, logos were hidden on the inside, and products were judged first by the quality of their materials and craftsmanship, not by their brand name. The customer expected the product to age gracefully, with the intention of passing it on to loved ones later.
It is through attention to detail and quality that brands will not only capture consumer attention, but keep it. Don’t get me wrong, marketing is critical, and without it, product will be just that, a product. But sustainable growth is only possible when the primary focus of the brand is on the product itself, not the number of Instagram likes it has.
In this same sentiment, creating and protecting brand equity is more important than ever. Take Michael Kors, for example, which recently decided to pull back on heavy discounting, and limit sales promotions to just four corporate approved discounts per year. The hope here is to elevate their brand positioning in the eyes of consumers, and continue their impressive growth rate of $1.2 billion in 2012, to $4.7 billion in 2016. Likewise, brands must determine how to keep demand and interest high so that their customers are willing — and even eager — to pay full price.
The new power of the consumer.
Young shoppers, savvier and more knowledgeable than ever, have ushered in a bright new age in retail. They now expect unique brand experiences as part of the purchasing journey — be it from a luxury brand, or an off-price retailer. The brands that can effectively produce a quality experience across digital and in-person channels will ultimately capture the consumer attention in the heavily saturated marketplace.
To accomplish this today, brands must focus on a frictionless shopping experience between in-store and online transactions. Looking ahead, the retail experience of the future must incorporate other high-end services such as coffee shops, spas, and restaurants to complement the traditional in-person shopping experience. Companies with mixed-use, hybrid retail spaces like these will hold a considerable advantage over e-commerce-only brands.
We are at the crossroads of the retail revolution and uncharted territory lies ahead. Yet contrary to popular belief, the tools are already in our tool belt. Large brands must adapt to higher consumer expectations and emerging brands must try their hand at both existing and new commercial models, alike. It is only with the open minds, clear hearts, and a willingness to remain bullish and innovative that we can truly hit our stride and bring about the gilded age of omnichannel retail.
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Lean Luxe subscriber Aaron Luo is the co-founder and CEO of Caraa, a NYC-based luxury sports accessories company. The views reflected here are those of the author and do not necessarily reflect the views of Lean Luxe.
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