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February 17th, 2017

Here Are Two Companies That Set An Example For The Future Of Retail

Part of the "The Crossroads Of Ecommerce" Series
written by

“I wouldn’t just go out there and do some demographic research and look at some real estate.”

If your dream is to start a retail business and sell stuff for a living, how would you start? Would you find a nice little corner on Main Street or in the local mall to set up shop?

In 2017, the answer is probably no.

“Building a new store today, the whole model is different,” said Robin Copland, vice president for retail, Americas, at ThoughtWorks. “I wouldn’t just go out there and do some demographic research and look at some real estate and look at where to plop down a store. You don’t need to. It is not cost effective to do that.”

The hottest new retailers share some common traits. They tend to go after a single specialty market, have flexible on demand (“virtual”) inventory, are primarily based in digital and ecommerce sales, offer customized and personalized products and communicate with their customers like they are having a conversation. These new kinds of retailers don’t find it necessary to be present in the big retail environments and employ selective feature stores in population centers to showcase their wares or perform specific duties.

See also: How To Understand The Biggest Problems For Retailers In 2017

In sum: new retailers provide unique, flexible experiences that are a struggle for bigger brands.

Retail App Testing Learn the unique challenges and opportunities with launching winning retail apps Get It Now

“My opinion is that it is moving to a specialty market,” said Copland. “It is going specialized. Because at the end of the day, the big box retailers cannot create that unique experience across all of the categories that they carry. So someone will come in and undercut them. And we are going to see that across categories.”

Traditional retailers have something akin to Amazon Anxiety Syndrome. Retailers know that they need to have comprehensive ecommerce packages, more agile backend systems and better delivery and inventory logistics. But they are still tethered to a world where the vast majority of their sales are done in store. The need to cut back on infrastructure and overhead is imperative, but the only way to really do that is to close stores, which means lost jobs and lost revenue.

Two retailers embody this new model of retail: Indochino and Shoes Of Prey.

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Shoes Of Prey: Custom Designed Shoes Around The World

Imagine your perfect shoes for any occasion. Are they the three inch black leather heels with, maybe, a red racing stripe down the sides? Or perhaps casual, fur-lined purple flats that you always wanted for lazy Saturday mornings.

Or, perhaps, this one:

I don’t know what it is called, but it looks pretty cool.

Shoes Of Prey is a company that allows women to design custom-made shoes through its website. The shoes are assembled at workshops around the world and sent to the customer. Shoppers can make their own shoes or choose from any of the more than six million designs that other customers have already built.

“There is a baseline set of shoes,” said Linda Kirkpatrick, executive vice president of merchants and acceptance at Mastercard. “You are allowed to add a color, add a feature, add a texture. No two pairs of shoes are the same. Highly important for a consumer. If they are going to buy something from a retailer, they want it to be completely different.”

Why is Shoes Of Prey a great example of the future of retail? It checks all the boxes of what traditional retailers would love to become.

Flexible inventory management: Shoes Of Prey keeps templates of its shoes that can be customized on demand. This creates a robust “virtual inventory” where the raw materials are turned into finished products on demand without the need to warehouse any specific designs that may or may not be in style next season.

Digital first: Shoes Of Prey is an ecommerce property first and foremost. Design, customization, personalization, ordering, payment and fulfillment all takes place through its website.

Strategical partnerships: Shoes Of Prey has made some significant partnerships on its time, such as bringing its 3D Design software to prestigious retailers like Nordstrom.

Community driven: As you can imagine, a brand that is based on creativity has a fairly robust community of customers. Shoes Of Prey has more than 240,000 likes on Facebook, 11,000 Twitter followers and 37,000 followers on Instagram.

Shoes Of Prey cofounder Jodie Fox on stage at NRF with Linda Kirkpatrick and Drew Green.

Shoes Of Prey’s inventory is probably its strongest asset. Unlike larger retailers, Shoes Of Prey doesn’t need to make bets on specific designs that may or may not sell. This means that Shoes Of Prey will never have to send back boxes of unsold product to a warehouse. Every product sold is (theoretically) exactly what the customer wants. Inventory channel management is streamlined by default.

Editor’s note: The original version of this article stated that Shoes Of Prey has fulfillment centers in the U.S. and Europe. This is currently not the case. We apologize for the error.

Indochino: Menswear, Tailored Just For You

In recent years I have decided that it is time to be an adult. No more ill-fitting jeans or slip on shoes as a matter of course. My version of sprucing up my wardrobe has been to … begin shopping at Banana Republic. While this approach has no doubt increased my style quotient, Banana Republic is by no means truly unique or original.

I visited a local tailor shop over the last year to get fitted for some clothes for a wedding. The whole experience turned me on to the fact that I can make my own style by custom ordering it.

See also: Mastercard’s Advice To Retailers: Personalize, Customize, Digitize And Socialize

And while I appreciate the experience of going to a tailor to get custom fit and personalized clothes, the process can be burdensome. The back and forth with the tailor for the wedding took several visits and about four months to complete.

Enter: Indochino.

Indochino makes made-to-measure suits for men. If you know your suit measurements, you can just order custom jackets, blazers, shirts, vests and pants straight from the website or mobile app. If you want a more personalized touch, Indochino has showcase stores in Toronto, Vancouver, New York, San Francisco, Philadelphia, Beverly Hills and Boston where you can go in and get a fitting and a style consultation. Once Indochino has your measurements, you can order online any time.

While Indochino does not have the same type of custom inventory of Shoes Of Prey, the on-demand nature of its business does lead to the same type of virtual inventory.

Indochino CEO Drew Green at NRF.

From a future of retail perspective, Indochino has a couple of strategic advantages:

True multi-channel: Indochino has a light physical presence with its showcase stores. The company’s primary business is online and mobile which allows it to be flexible with logistics and fulfillment.

Personalized and customized: Bring your own measurements and create your own style, fitted directly for you. The customer experience is directly in the shopper’s hands.

Indochino’s success is almost the inverse of the path that traditional retailers have taken. The brand started as a digital-first entity and gradually began opening stores to showcase its wears. Indochino plans to have 150 global storefronts by 2020.

Both Indochino and Shoes Of Prey represent the future of retail for the reasons that ThoughtWorks’ Copland outlined above: niche specialties, flexible inventory, the ability to scale digitally while also serving the physical needs of the consumer to create unique, personalized experiences.

It is impossible to change the practices of the retail industry overnight, but these startups have created a path for smart entrepreneurs to follow.

Did you know? Applause has experience working with the biggest brands in retail and ecommerce to create high quality experiences for customers. See what Applause can do for ecommerce and retail companies here.