The primary function of retail used to be access/distribution. In the vast majority of cases consumers had to visit high street shops to get products and manufacturers went through physical retail to reach customers.
One of the big promises of the web is that brands/manufacturers will form direct relationships with consumers. They can build their own showrooms and take orders direct over the web capturing the retail margin for themselves. So far it’s mainly startup manufacturers that have gone this route – Bonobos and Warby Parker are famous examples from the US and LostMy.Name and Spoke from our portfolio are blazing a similar trail over here. Established brands are now moving slowly in this direction – but they need new capabilities and have to worry about conflict with the retail partners that drive the vast majority of their sales. Most established brands that now sell direct still only have a fraction of their product range available on their own sites and pricing is often above what can be found in retail.
So retail’s raison d’etre is losing relevance.
But consumers are faced with a new problem – too much choice. The web makes all the products in the world available, and a wealth of research has shown that whilst we say we want choice, too much of it makes us less happy and results in fewer purchases. This is the Paradox of Choice.
The new opportunity for retail, therefore, is to solve the paradox of choice. Give consumers access to all the inventory there is and then help them to a decision. At it’s heart new retail will be about personalisation and recommendation, making smart use of data and artificial intelligence to guide people to purchase decisions. Conversational interfaces will be an important secondary part of the mix as each of us will effectively have to programme the services we use and very few of us have the patience to learn syntax and commands for new apps.
These new retailers will sit between brands/manufacturers and consumers. They will handle less stock, have fewer staff and take less margin than traditional retail, but they could/should be much more profitable. Thread, Stylect and Top10 are good examples of these ‘new retailers’ that we’ve invested in.