How Retail has Changed
There was a time, in the early 80’s, when there was a clearer division between high-end retailers and retailers for the masses. Stores like Barney’s cultivated young designers carrying small capsules of their designs. The big-box retailers like Macy’s carried mass manufactured goods that were created by designers but designers who understood who to cater to that customer. Gap zeroed in on their customer who came to them for basics. It was a very different place. It all worked until it didn’t.
Right now we are seeing something very similar to the shift in retail that happened in the early 2000’s. Big box retailers, like the department stores under the Federated umbrella, tried to go upscale and lost their core customer to the rise of single chains such as the stores under the Gap umbrella or Zara who spots trends and capitalizes on them. They corrected themselves. Each of them figured out their niche, a large niche but still a niche.
And then the internet came and a new generation grew with different spending habits. The management of the large companies didn’t see it coming. I refer to this as “golden handcuffs”. When things are working, it is hard to make those changes until they start to affect the bottom line for a few years and then it is like turning around a cruise ship. Millennials consume differently. The biggest consumers are still the baby boomers but the products in the stores are geared towards the youth.
Millennials have grown up in a time of rapid change. They really don’t like the burden of owning too much, they are happy to share and spend their capital on experiences. Their needs are different and although the majority of purchases are still happening in the brick and mortar world, they prefer e-commerce. Walking into a store must be an instagrammable moment, an experience.
I believe the next shift, that we are beginning to witness now, is the rise of young designers and smaller brands that will connect directly with their customer. Because of technology, manufacturing for a few products costs are no different than manufacturing thousands, and it can be done quickly, aka fast fashion. Brands like Noah, who drop a new product every week has built a loyal audience. They know who their customer is. They will never be a billion dollar brand but a profitable 20 million dollar brand (or maybe more) as they reach out their customer around the globe which will become easier and easier as cryptocurrencies rise.
The big brands such as J. Crew, the Gap and more are in need of a massive change and a serious look into the future as well as the mindset of Department Stores that expect brands to pay to play. It will take time but the future is now. Millennials want to be individuals and that does not fair well for mass-manufacturing of fashion. Where will the next billion dollars brands be for institutional investors? I don’t believe it will be in clothing brands unless they understand how to do what small brands are doing at scale and that is a very different way of doing business.
Comments (Archived):
This topic interests me greatly.Wrote this recently and it agrees wth some of what you say.http://arnoldwaldstein.com/…I wonder if there are platforms for JIT manufacturing for brands like Allbirds or Away to make it easier for them to get manufacturing overseas?
Sourceeasy is helping companies to manufacture overseas without having to have that group in-house. There are platforms beginning to be developed overseas to make the process a bit more seamless for new brands pulling out of the gate.
Thanks for the info.Was approached by a company to sit as an advisor in this segment so researching.
.The issue with overseas everything is the shipping cost and the shipping time.I routinely buy a drug from a Canadian company which sources an Australian outlet to supply it. The drug is made by the exact same manufacturer as in the US. The US drug is often made in this same manufacturing facility.The Canada-Australian drug costs 22% of its US cost.It takes 15 business days to reach the US.The Canada Drug Company does not provide package tracking. It is infuriating when it is not possible to know where the package is.One adapts by getting one’s doctor to authorize refills 3 months in advance. My doctor is a peach on this.Still, it’s a pain in the ass.Second anecdote. I am doing some remodeling and using Italian stone which is fabricated in China. I am able to buy it for about 25% of the exact same product — stone is a good thing to use as a comparison as it is all unique — in the US.The pricing edge is diminished by the shipping. The Chinese do have package tracking and they crate their stuff incredibly. Takes fifteen minutes to uncrate it when it arrives.The process is out there right now.JLMwww.themusingsofthebigredca…
If you haven’t read the book by Nike founder you should.Great story about cash flow and overseas manufacturing.
Shoe Dog!!
Thanks-packing and doing this and forgot. I loved that book.
What is unfortunate is that the higher prices that we pay in the US are what is allowing the companies to sell at lower costs the same drugs (when not generic) elsewhere.
Met a woman who is rebuilding an older brand. You might remember them: http://www.famolare1969.com/ I wonder if older brands could make a comeback with millennials.
You can always rebuild an old brand of the audience is there and it is brought into this time period
This is exactly what I wrote about here:https://medium.com/@utekkar…And here:https://medium.com/@utekkar…
This shift is really interesting. If find myself shopping and more and more niche, online, direct to consumer brands like MGemi, (or more mission driven like Naja.) The department stores are floundering to differentiate themselves and old reliables like JCrew can’t survive without a 40% off sale every two weeks. Will be interesting to see what happens to companies like Bonobos who are getting scooped up by the more big box retailers.
Off topic but when I see your name I think of this Sofia Papastamelos that owns this greek restaurant in Margate NJ:http://www.sofiaofmargate.com/http://www.atlanticcityweek…
Haha that is my family’s restaurant. The other Sofia is my aunt 🙂
No way! I was just there Sat night! Great place. Your aunt lives in the same town (rather not mention here) that we live in. We actually drive all the way down just for dinner.
How nice! Glad you love it and hope to catch you there sometime when I am back down the shore!
Funny, too, that the only luxury brand that millennials routinely identify and covet is Apple.
When Henri Bendel was on West 57th Street it was THE place to shop for innovative fashion. They were the first store to carry MAC Cosmetics. Noah sells plaid flannel running shorts for $228.00. They talk a good talk but don’t walk the walk. In the early 90’s when I lived on Mulberry Street a store like Noah wouldn’t have existed. Yes, I know, it’s the end of the world as we know it…but I don’t feel fine. Creativity is lost.