You need a great idea, an audience to serve, an amazing product to sell. You need an authentic and ideally, unique experience, and the ability to connect it all with technology. And somehow you have to do this quickly, at scale, and with the tools that will last longer than the next iteration, typically released the month after you made the investment. Above all, you need leadership and a talent pool to lead.
The elephant in the room for all retail is Jeff Bezos. His name is incanted continuously as the brand to beat. Or work around. Or just plain knock off. Bezos set the bar pretty high for the next gen of e-commerce entrepreneurs by playing at a massive scale without any real pressure to make boatloads of profit. How is a new kid on the block going to compete with that? And how are the software engineers going to compete with Amazon’s back-office systems and software products that e-commerce start-ups need to support their businesses? But there is no doubt about it, Amazon lives up to its namesake and casts a huge shadow over the rest of the industry.
The solution? You play in a different arena. We found three visionaries at Shoptalk that are reengineering and reimaging retail, and who are actually making some money.
Steven Lowy, co-chief executive officer of Westfield whose father co-founded the company, has a plan. It requires mall retailers to collaborate and share data to provide an exceptional customer experience that ensures that stores and malls remain relevant and solvent. Westfield has $30 billion in assets and builds in major cities focusing on industry capitals of the world: finance, entertainment, tech, and fashion. Lowry’s vision of the smart, connected mall is in now the works. Westfield has invested $10.5 billon in development projects for the sociable and searchable mall of the future.
The vision? Seamless entry into express parking with a personal greeting on your mobile, virtually recognized by your license plate. Customers all have personal tagged IDs, connecting them to every retailer’s deals, new merchandise arrivals, and event alerts, guiding them thorough the mall via blue dot mapping. The mobile is a remote control for the shopping experience. You can preorder food, check inventories and pick up saved items on your online wish list in store on a whim. All of this is made possible by complex data analytics management, which is not your typical real estate development business skillset.
Lowy explains, Bespoke, Westfield’s idea lab, has over 70 retail tech companies operating in an innovation lab to test new ideas and speed them to market. He adds, “We also have an accelerator program with a whole range of major brands that are co-sponsoring it with us to fast track the connection between retail and technology . . . and retail and real estate infrastructure, because it is way behind right now and it needs to speed up.” He adds, “For physical real estate to continue to be relevant it must adapt, and the adaption has to occur in a key way: the malls have to be critically exciting places. Everything you buy today you can buy on your phone and have it delivered, sometimes, the same day. Our energy has to shift to make the searchable mall a reality by working together, sharing data.” So Westfield serves as the platform (think aggregator) of many retailers to share their data to make a frictionless shopping experience for customers. He believes that retail has to change because it’s not adapting to new technology, but it also isn’t getting the product mix right. “The largest specialty retailers on the planet today are all from overseas. Inditex that is Zara; H&M and Uniqlo out of Japan, none of them are American.” Lowy’s idea of the connected experience is through convergence with non-traditional partners and interactive events and activations that can be beamed to other malls through the Westfield cloud, which serves as the connective tissue among properties. Could be singularity is in the works?
Uri Minkoff and his sister Rebecca have a big idea. Uri is chief executive officer of Rebecca Minkoff and together they intend to be the first movers in disrupting the fashion industry. For starters, Rececca Minkoff launched from scratch in 2005. Today it is the largest global brand in fashion designed by a female millennial designer. It fuses high tech with high touch to create unique experiences for customers. Minkoff says, “There is a fundamental change of behavior driven by social platforms in this age of experience; it’s really driven by the photograph and the video.” He continues that the brand “connects directly with customers online and jumps onto every social platform as a first mover to become a super peer in this peer-to-peer network.” Through calculated use of user-generated content and imagery, they claim they have the best-in-class website.
Minkoff has applied the principles of peer-to-peer networking from his past computing world career to disintermediate the fashion media, disrupting buyers and style leaders who dictated the rules of fashion when the Minkoffs started. Uri Minkoff’s mantra is to “Make everything we do about the customer and . . . disrupt this world from within. We’ll be the Trojan horse from within fashion.” He adds, “The biggest problem is not what to buy, but what to wear.” Their mission is to give customers confidence. “The concept is the one to many in this peer-to-peer world, and so the social currency of today is not necessarily the product, it’s the experience that you put out there on the social platform. That’s how you find your next job, find your next mate.”
They decided to mimic the strengths of online and apply them to brick-and-mortar. Customers can have a frictionless experience as soon as they walk in the door. The Minkoffs also look at all the human elements that could prevent a sale, and use the store as a living lab to help overcome those hurdles. They have reframed what a store is, as Minkoff explains, “Our store is an important community center. We have a group of evangelists, bloggers, influencers, and partners who come do something in the space that they then extend out virally which increases our online visibility.”
And when customers arrive, the atmosphere is no-pressure. There is a palpable presence of Rebecca in the store, making the designer accessible to customers. Minkoff explains, “We want to let the customer own the fitting room.” The lighting in each fitting room is designed to match the situation and end-use scenario.” He adds, “It has a video screen; tap it and order a drink and peruse the look book. Rebecca shows up virtually to make personal recommendations. Then order your size and color and it is sent to the dressing room for you. You can digitally record what you are trying on to share with friends and family. All items have RFID tags, so when you’re done, all e-commerce imagery pops up to show what your ordered. You can click on each image to see what goes with it. You can then click and ask the associate to bring it to you, and you never have to leave. You own the whole store from within the fitting room. By creating this unique experience, 35 to 40 percent of the customers ask for more merchandise. We sell three times more apparel in stores with this technology.”
It doesn’t end there. The Minkoffs eliminated checkout lines where customers typically wait in line and insecurity and judgment sets in. He says everyone else in line sizes up your selections, creating high anxiety about the choices you made.
They disrupted Fashion Week forever. They shifted the runway show tradition from showing lines months ahead of the season to “see now, buy now, wear now.” And on top of that, they invited customers, not only the elitist fashion press, to attend the shows. As a result, they had a 200% increase in sales at retail.
When they opened the LA store, they created an entertainment hub. They hosted everything from hot yoga classes to hip hop in the dark in an empty space in the back of the store. Minkoff said what happened was surreal. They created sense of FOMO (fear of missing out) for the customers who weren’t in the class. So they tweeted, instagrammed and snapchatted, and the in-store sales increased, as did e-commerce. They partnered with Smashbox for a makeup experiential festival and customers generated 19 million Instagram impressions over a 24-hour period.
They noticed a stagnant space for leather goods, so they took advantage of the Apple cultural moment and created wearable tech goods. They showed them on the runway and sold out.
They filmed the runway show with an Intel drone, bridging Silicon Valley and fashion.
Minkoff predicts that the laptop will be our portal to retail. Virtual reality and augmented reality will make it possible to virtually attend an event and be part of the community of friends and influencers, all in the front row. He also predicts body scanning and 3D printing for ultimate customization. He states, “Tech is a big part of our brand experience. Most tech is created by Caucasian men. Females are underserved in technology. Why aren’t they creating tools for themselves? Rebecca is an Intel ambassador to promote STEM (Science, Technology, Engineering, Math) to young women and keep them in school. There can be careers in tech and the arts, creating new tools for women by women.”
Andy Dunn, chief executive officer of Bonobos, had a product. He innovated with pants that actually fit men and then built a digitally native vertical brand. Being a visionary isn’t always easy; Dunn says, “Pioneers get the arrows, settlers get the gold.” He wants to build an enduring asset and feels responsibility to the movement—that is as a pioneer in the e-commerce entrepreneurial space. He has raised $120 million, and Nordstrom’s five percent investment is helping with cash flow to fuel the business.
Dunn started in 2007 on the Internet, which at the time was not an e-commerce venue. He had the breakthrough idea as a pioneer to use online as the primary engine for storytelling, transacting, and communicating with customers better. He spent four years building Bonobos into a lifestyle brand, doubling the business every year. Dunn says being an innovator “requires conviction to either disrupt yourself or to be a new entrant, and you have to recognize this is going to be a multi-year process.” He adds, “In 2007 people thought I was out of my mind to start a brand on the Internet, now this is more or less how every brand gets started.”
He realized, however, that “e-commerce only brands are never going to make money, we need to expand the channels and we invented what I think is the store of the future what I call the Guideshop. We see third-party e-commerce failures, because, let’s face it, there is not enough margin in the category to compete with the big grizzly bear Amazon.”
Dunn believes that by owning the brand and developing a digitally native approach, stores can be reimagined as all about a great experience and how you can build the vertical brands of the future. But he would like to change the idea of a store from a verb, where you store inventory, to some other form of speech, but he hasn’t figured it out yet. But whatever it’s called, he says it is a place of experiences.
Dunn explains, “Everything I had been told about instant gratification is not necessarily true. Our showroom store model is for the customer to try it on and then we ship them the product.” He currently operates 21 Guideshops, for fit, service, and fun. He has discovered that only five percent want the product right away, but the conversion rate is the same for that customer as the other 95 percent. His goal is to have 40 stores by 2017. His decisions are ruled by data read by young guys at the top of their game, they us the data to discern how the store works locally. Dunn states he can maintain a higher profit per square foot without housing the inventory. The Lincoln Park 800-square-foot store does between $2.5 and $3 million, and it’s “cranking that productivity because it sells a full assortment with the highest level of customer service.” He says he can’t scale to $1 billion in sales as a premium mass brand without brick-and-mortar. He says customers often a drive the innovation in his business. “Bonobos has a relentless sense of focus.” They run experiments in store and online to solve customers’ problems..
By reading the data, he believes he can go deeper and deeper into America. “There’s a cannibalization online for the first 12 to 18 months after we open a new store, then the local market starts to really take off.” He envisions having 80 to 100 stores one day. He adds, “I’m of the mind that one brand is enough for one company,” resisting becoming a conglomerate of other brands.
Dunn says Brooks Brothers and Ralph Lauren are the only brands in last 200 years that made it to $1 billion in sales in the premium men’s space. He says the chance to make it into that cohort is an opportunity that comes along every century. He says we will spend the next 100 years organizing around the smart phone.
Dunn can get philosophical, “From a spiritual standpoint, I look at the evolution of mankind starting with the pant. We reinvented the fit of your clothes. Then we reinvented how to show clothes in store. Now we’re reinventing how you think about a physical retail experience.”
We have exalted and eaten crow over Ron Johnson’s misadventure at J. C. Penney. And he did as well at Shoptalk, taking responsibility for his debacle in his totally believable, low-key Minnesota manner. JCP notwithstanding, Johnson has bold ideas. Some might say he is a one trick pony with the Genius Bar, now part of everyone’s vernacular. But his current application of the concept, more broadly defined by him as personal commerce, makes a lot of sense. I mean who wouldn’t want some personable, helpful, well-trained expert show up on your doorstep, or at Starbucks, or at the gym—your choice—and help you set up your latest electronic device or tech toy? That’s Johnson’s latest vision at Enjoy, and what he calls “personal commerce.” You buy it at retail or online, make an appointment, and voila. The jury is out on the financial model, but it seems pretty likely that this is a no-brainer.