March 28, 2017 Tim Foley

Future Retail Review: Harvard Graduate School of Design

Future of Retail

Digital has been an undeniable disruptive force for retailers. What it has effectively done in a very short time is shifted the power from manufacturers, designers, and retailers to consumers. This has been very problematic for retailers who have either not recognized that fact or not adapted to address it.

A couple of weeks ago I had the opportunity to attend an event at the Harvard Graduate School of Design on the topic of Future Retail. The speakers in attendance all came at the subject from different perspectives, but offered some common themes and thoughts on how they’re approaching their businesses and where they see the industry heading.

Rajiv Lal, Senior Professor of Retailing at Harvard Business School, was quick to point out not only the problem for retailers but also the opportunity.

In his 2014 book, “Retail Revolution: Will Your Brick-and-Mortar Store Survive?,” Lal made some not so sunny predictions about retailers like Sears, J.C. Penney, and Macy’s, as well as entire categories like office supply sellers (which he argued would no longer even be a legitimate category). And while I’m sure it was tempting for Lal to gloat about how many of these things he had right, he was much happier reporting on the piece he saw himself getting wrong. He obviously no longer believes that brick and mortar retail is doomed across the board. In fact, he sees tremendous opportunity for the retailers that embrace the transformative possibilities of technology, and the notion of putting the consumer at the center of the retail experience.

He shared a couple of examples by way of video of retailers who get it. They are finding exciting ways to merge the digital and the physical and are creating experiences for customers in-store that wouldn’t have been possible without the tech, but also couldn’t be replicated shopping online.

Rebecca Minkoff Store of the Future:

Amazon Go:

Both examples are all about the consumer experience, and reducing friction wherever possible.

Rajiv Lal was certainly not the only speaker talking about the reduction of friction as a big focus for retailers. Eric Symon, VP/GM of PTC’s Retail Unit, came at the topic from a different angle. Much of what he spoke about dealt with the role of technology in changing the way retailers operate. Symon described the digital consumer today as being: Connected. Informed. Engaged. And Demanding (Spoiled). As such the pressure is on retailers to use every tool at their disposal to be as accommodating as they can.

Many of PTC’s clients are in the fashion and footwear space. Symon acknowledged the influence of fashion retailer Zara, which has completely upended the industry, particularly the pace with which they bring new product to market. It’s commonly referred to as the Zara Effect.

Where most fashion brands have a six-month time to market cycle for collections, Zara does it in about 5 weeks. They produce items in small batches, and have multiple lines in the works at different phases of production at all times. Zara’s entire identity is built on a fast-fashion model. They don’t advertise, so they are very reliant on all aspects of the consumer experience to sell the brand. The result is a brand that has raised consumer expectations for the whole fashion retail industry, and the rest of the industry racing to keep up.

Symon spoke about the convergence of the physical and the digital as where everything is headed for retail. This is true for front-line experiences for the consumer; things like being able to push relevant offers to shoppers’ smartphones in-store based on purchase behavior or showing size or style availability when scanning an item. But the behind the scenes opportunity for retailers might be even greater;­­­­­ giving real-time inventory visibility across all channels, tracking behavior trends, and adding immediate visibility to supply chain management. All those things equate to getting the right product into the hands of consumers as quickly and cost-effectively as possible, and all help set up a good consumer experience.

The final speaker of the evening has clearly and painstakingly made sure that consumer experience is at the core of everything his company does. Neil Blumenthal, Co-Founder and CEO of Warby Parker, started out by addressing the topic of retail’s reported demise, stating that retail isn’t dying, mediocre retail is dying. He followed that up very emphatically: “Mediocre retail should die.”

No one would accuse Warby Parker of being mediocre. Blumenthal shared some great anecdotes about how the company got started and about their success out of the gate.

From the inception, Warby Parker had a clear vision and mission for the company: “to offer designer eyewear at a revolutionary price, while leading the way for socially-conscious businesses.” The second part of that statement wasn’t added lightly. Giving back was always going to be a big part of what they did – the policy of donating a pair of glasses for every pair sold was there from the start.

Those pillars have never changed, but in true customer-centric fashion, everything else was seemingly open for discussion. There was a flexibility and a “test and learn” approach set in place that allowed (and still allows) the company to move and change based on what’s working best for consumers.

Blumenthal told a funny story about how the company’s first website was designed. Despite knowing the business was going to be an e-commerce business from the start, neither Blumenthal nor his partners knew how to code or build a site. They designed their first version of the site in PowerPoint, since they all knew how to use that, and since “it looked like the proportions of a (desktop) webpage.” They knew usability testing was crucial, so they would print out pages of the “site” and ask friends things like how they would navigate or which button they were likely to push. They repeated this process over and over until they were sure they had a site that people would want to, and intuitively know how to, use.

Their first “store” was run out of Blumenthal’s Brooklyn apartment. They used that as a testing opportunity as well; finding out things like what mirror size and shape worked best for trying on glasses or the optimal number of pairs to display on a single shelf. There are other key pieces to their customer-centric approach: the ability to try on five pairs at home, free shipping, and beautiful, well-appointed stores with a singular, unique aesthetic.

It has certainly paid off. When the site first launched, the company hit their annual goal in just 3 weeks, and completely sold out inventory shortly thereafter. Warby Parker is now a billion-dollar company.

Of course, most retailers don’t have the luxury of the blank slate that Warby Parker built their company on. The perspectives presented from the speakers at the event show the importance for all retailers to adopt the digital tools and mindset necessary to service an increasingly demanding clientele. But more importantly, they also point to great opportunity for the retailers willing to create more meaningful connections and experiences for their customers.

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