We start to see new year sales forecasts and we can determine which brands will be retail winners. Although some “winners”, are easy to predict, there will be a twist in 2020. Retail winners in 2020 will be direct to consumer (D-to C) brands. Many of these brands are new to most consumers.
Although there has been a lot of media attention about the “retail apocalypse”, D-to-C brands have not been deterred. They’re opening new stores to expand their customer base and promote their unique brands. These companies are winning because of their high-quality brands, superior products, and customer-focused mentalities. The company’s omnichannel approach allows them to stand out from other retail categories and attract shoppers online and offline. A recent study found that D-to C shoppers, also known by “Disruptor Brand customers,” account for 48 percent of all U.S. consumers.
We’ve seen traditional retail 1.0 stores close, and we’ve seen a shift towards D-to-C brands that are looking to expand their customer base by opening physical stores. For example, Hudson Yards in New York City. The “Floor of Discovery” is a floor that houses digitally native and experiential brands. It includes brands such as M.Gemi and Mack Weldon.
What are the winning D-to C brands doing differently in their physical stores to help them grow their business and increase their customer base? Here are some things:
- Customer experience centered: Retail brands that win are laser-focused upon customer experience. Online and in-store shopping are now options for consumers. Retail stores that win must offer a personalized, seamless, and enjoyable experience.
- Memorable experiences Stores should make shoppers feel something. This will not only drive conversion, but also build loyalty and community. Customers can touch, feel, and try on products in winning stores. They also get their questions answered by knowledgeable store associates.
- Attenuating risk: Retail’s future, particularly for D-to-C new brands, will be largely based on the creation of stores that are more efficient and have less long-term liabilities. The winning stores today are smaller and more efficient than ever before. They also invest less in expensive luxury items like a chandelier and instead focus on building brands with assets such as a digital screen.
- Data-driven: Stores and brands need to continue to use first-party data, often e-commerce data, to make better decisions about store locations, product assortments, and marketing. The data from the store should also be used to optimize and launch new experiments, much like a tech or software company.
- Partner, tools, and platforms for Leveraging: Winning D to C brands keep their eyes on what’s important: creating differentiated products, being innovative, and building long-term relationships. All this is coupled with a well-planned supply chain. These brands realize that they don’t have the experience to manage physical stores. They use platforms similar in design and operation to Shopify for their ecommerce storefronts. Third-party partners are a way for brands to continue to put their resources, time and money into their business and brand.
The key to driving growth is physical stores. Brands are realizing that physical stores are essential to their ability to grow and attract new customers while minimizing acquisition costs. To win, brands that are newer must view brick-and mortar differently than those who have been in retail 1.0 for a long time. Retail must be viewed as a data-driven, efficient growth channel that focuses on the customer experience.
Casper, Away and UNTUCKit are just a few of the great brands doing this well. They also continue to open new shops. More brands will be able to offer these kinds of memorable and immersive experiences as more people shop at these stores. I believe this is why I believe new D-to C brands that you haven’t heard of will be the retail winners for 2020.
U.S. Retail Sales Rise 3.4% this Holiday Season
Mastercard SpendingPulse reports that holiday retail sales increased by 3.4 percent (excluding automobile) in the holiday season. Online sales grew 18.8 percent over the same period. Mastercard SpendingPulse offers insight into retail spending trends across all payment types including check and cash. This holiday season, 14.6 percent of total retail sales was attributed to e-commerce (Nov. 1-Dec. 24). These are other important findings from the report.
- Total Apparel posted a 1 percent increase year-over-year. The category also experienced stronger-than-expected e-commerce growth, up 17 percent compared to 2018.
- The jewelry sector saw a 1.8 percent increase in total retail sales and 8.8 percent growth online.
- Overall sales at department stores fell 1.8 percent. However, online sales rose 6.9%, highlighting the importance of omnichannel offerings.
- The increase in electronics and appliances was 4.6 percent. However, the growth in home furnishings and furnishings was 1.3 percent.
Total Retail’s Consider: These holiday sales figures are not surprising, but they are welcomed. This year, consumers made more holiday purchases online than ever before thanks to e-commerce. What does this all mean for 2020? Retailers should keep going on the same path as they are now: creating seamless shopping experiences for customers across all channels. This is especially important given the rapid growth of ecommerce (and mobile) and no indication of slowing down. This means that data, systems, processes, and people must be synced to make it easier for cross-channel shoppers.