Rethinking retail: Why big brands need to act small

The recalibration of retail has flipped the script on what’s successful in the space.

In previous generations, big-box retailers could out-muscle competition, offering lower prices and more variety.

Today, ecommerce has reduced barriers to entry for generations of young adults who value uniqueness over variety, craftsmanship over commonality, and rich origin stories over American icons.

So what does the competition look like now?

Ecommerce is an equalizer

The impact of ecommerce has been widely covered. It’s eating into store market share, it’s reducing malls to rubble, and it has radically changed the mindset of consumers and what “shopping” means to them.

But ecommerce hasn’t just changed the way shopping works; it has evened out the way we produce product. Smaller brands and start-ups don’t have to worry about logistical nightmares anymore; warehousing can be agile without the need to hold onto inventory. And it’s just as easy for small brands to compete through digital marketing, email, and ecommerce as it is for some of the largest brands in the country.

Investment was once the greatest barrier to entry for big-box retail. For generations, large-scale companies relied on that barrier to keep competition low. Sears, Macy’s, J.C. Penney—they all formed a cadre that muted the competition’s voice, footprint and sales. That’s no longer true, and those brands were woefully unprepared for the result, blissful in their negligence of the customer.

The radical shift in shopping behavior isn’t a referendum on big-box retail; it’s simply shedding light on the lack of innovation, the contentedness of the status quo that they established in the first place. Where retail was once an oligarchy, those walls are now broken and the American ideal that ideas and innovation will win out has finally taken a foot-hold.

Amazon, Apple, and Tesla are winning because they still have the mindset of small companies with obsessive, revolutionary ideas that are simply better than Macy’s, Microsoft and Chevy.

Plain and simple: ideas win out.

Disruption is the only constant

Every generation has a disruption in values—why did we think Millennials and Gen Z would be any different?

The Greatest Generation, Boomers, Gen X–they’re all predicated on large, macro shifts in values, technology, culture and external global forces. Historians can talk themselves silly about how disruptive each upcoming generation was on the system. Boomers were hippies, Gen X was counterculture, and we can go back generation upon generation with the same approach.

Yet somehow, retail was shocked that Millennials—with perhaps the greatest advancement in technology ever, profound globalization, and the constant threat of terrorism in the post 9-11 era—would have a different view of the world, culture and product.

Retail is never calm. What was true ten years ago is obsolete in the next ten. Those are the only consistencies we know. Retailers were far too bullish and aggressive based on outdated data and a profound ignorance of the rumbling under their feet that could be heard had they been more attentive to their customers.

The discount wars of the past decade were fallout from that ignorance and it could have been avoided. Smaller, more agile brands heard those rumblings, they adapted and shifted quickly and are reaping the benefits.

Nothing is ever the same, change or die. Innovation doesn’t stop, it’s either moving forward or it’s falling behind. Big brands need to stay agile, take risks like they did when they were start-ups and obsessively adapt to their customers, because being big doesn’t mean you can dictate terms any longer.

Product matters, but so does the story

Throughout all of these changes, product still matters. But a product today needs to be more than just a physical item; rich experiences and stories are paramount. Increasingly the story and experience of the product does more to sell it than the product itself.

What would you say the Macy’s brand embodies? How about J.C. Penney’s origin story? Does K-Mart have what you’d call a rich history that excites consumers? Probably not.

Today there are really three models that are successful: Luxury, discount, and craft.

Luxury relies on brand identity, rich stories of product quality, and emotional connection to lifestyle.

Discount targets specific thresholds to entice customers from a purely elastic standpoint.

Craft is where things get interesting. It’s an up-and-coming class of retail that focuses on quality, origin stories, and a sense of rebellious nature to do things uniquely and serve as the antithesis of cookie-cutter, big-box retail.

In each instance, those models are wildly successful with customers right now. Luxury and craft both have rich stories that increase their perceived product value, while discount is simply an easier threshold for customers to reach.

Big brands don’t really have a place unless they can be nimble enough to re-position their offering and find an authentic way to connect with the consumer.

Amazon is the perfect example of a massive company that started small and retained that growth and innovative mindset. Even with Bezos’ empire over consumer goods, the Prime membership is venturing into areas that seem bizarre from a traditional retail perspective, but Bezos’ Amazon isn’t trying to win retail, grocery or CPG; he’s trying to own the customer.

Prime Now delivery is as customer-centric as it gets; Amazon Fresh and the recent acquisition of Whole Foods Market is another attempt to own and innovate the tasks and transactions of daily life for the customer.

Rethinking retail

Agile brands have many retailers on the run right now, but big retailers’ own stagnant behavior caused many of those issues. Now that the playing field is level with ecommerce and seamless, inexpensive logistics, it’s more important than ever for brands to go back to their roots and hone their stories in an effort to rebuild relationships with consumers.

Brands that learn how to do this and figure out how to evolve their messages with the times will come out on top.