The story of retail in this day and age can likely be told in two stocks: Amazon (AMZN) and Wal-Mart (WMT). In Wal-Mart, you have the old guard, a big-box store retailer with thousands of physical locations. In Amazon, you have the future, a streamlined online retailer building its own ecosystem that embeds itself in consumers’ lives.
When you compare revenue and profits, Wal-Mart is still crushing the upstart Amazon. In Q3 of 2015, Wal-Mart booked $3.3 billion in net income on $117.4 billion in revenue while Amazon managed a mere $79 million in profits on $25.4 billion in sales. And yet, Amazon is currently valued at a little short of $280 billion, a full 40% higher than Wal-Mart
This is all to say that retail is in a state of flux. How else can you explain a company manageing to hit a valuation 40% higher than a competitor in the same industry despite having less than a quarter the revenue? Investors are making a powerful statement with this: the broad strokes of the future are clear. The current discrepancies in sales are temporary, and Amazon’s rise to the position Wal-Mart once held, and maybe even beyond, is likely inevitable.
Who Will Be the Lyft to Amazon’s Uber?
However, once you get past Amazon, who will be leading this charge? Amazon is clearly the model for mass-scale online retail, but having reached the heights it already has, its efforts seem to be more focused on scaling operations up rather than innovating them or creating new consumer experienced.
Meanwhile, a new wave of changes appear to be giving a number of innovative emerging growth companies their own chance to mold a picture of the future of retail. What does the new sharing economy mean to the future of home delivery? Can apps like Lyft and Uber be leveraged into including transporting goods as well as people? What about drones and driverless cars?
And are we completely ready to abandon brick and mortar store locations? The success of the Apple Store (AAPL) despite a tech-savvy base of customers who frequently rely on shopping online would point towards the reality that the in-store consumer experience can be engineered in a way that means a physical store location can be more than a financial liability.
There are, in fact, plenty of emerging-growth retail companies that are forging a bold new path, one that’s building on the initial push towards something new, and running farther than their predecessors could have previously imagined.
The Storefront Serves the Needs of Seasonal Businesses
Some of this innovation is focused on actual physical store locations, which continue to be an interesting issue. Certainly, Amazon is demonstrating how they may not be necessary, or could even just fail to be cost-effective. However, there’s also plenty of evidence that, as much as our culture may be pivoting away from physical stores, these locations should still serve a purpose in the long term.
One interesting solution comes from The Storefront, a San Francisco-based company that’s bringing the sharing economy to the storefront. Storefront connects property owners with retailers to do short-term rentals of physical store space. Given the seasonal nature of many different sorts of products, it’s an idea that could have some real legs. Now, companies can strategically find space to open a storefront just during the times of year when they can anticipate a lot of foot traffic, potentially bolstering online sales and marketing their products without having to keep a store open year-round. Operating in three markets (New York, Los Angeles, and San Francisco), it raised $7.3 million from Spark Capital in 2014 and can currently boast more than 1,000 merchants and more than $40 million in sales.
Bonobos Discovered Outside the Amazon
Another innovative approach to retail can be found in men’s apparel company Bonobos. Founded in 2006, the company’s focus is on tailoring clothing to its customers. Its first line of pants was widely popular and only available online, giving consumers a chance to get pants that fit. However, it’s the more recent developments that should have people standing up and taking notice.
For starters, the company’s approach to online commerce includes its “ninjas,” customer service representatives who are intent on getting customers the help they need. Bonobos encourages their Ninjas to take their time, communicate with customers, and ensure that the process results in people being happy with their new clothes. It’s a way of bringing some elements of the in-store experience online.
Bonobos, though, is also bringing the online experience in store. It started opening its “guideshops” last year, and they represent a new approach to retail. The stores don’t actually sell clothes directly, allowing consumers to try on clothes based on their measurements and get one-on-one attention from sales associates before they order their clothes for home delivery. Stores won’t need to deal with inventory and constant deliveries, but they can still provide customers with an in-store experience.
When In-store Meets Online
Keeping one foot in the online space with the other in-store appears more and more to be a key factor towards building a future in retail. However, not every brand or store is going to come to the table with some sort of innovative approach to sales itself. Some may just have solid products or stores and only care about maximizing sales. That’s where services like the Montreal-based LightSpeed start to come into play.
LightSpeed is point-of-sale software for retailers and restaurants (another area where the fight between online and in person is playing out with gusto) that leverages the presence of smart phones to enhance the shopping experience. LightSpeed can streamline checkout, help manage inventory, and even let customers order items online from the store itself.
The service is helping to erase the wall between brick-and-mortar and online platforms, allowing businesses that may have developed the two independently to sync them and create an omni-channel solution that maximizes sales across the board.
Amazon Welcomes you to the Sharing Economy Jungle
The rise of Amazon has been one of the most notable business stories of the last decade, prompting the slow death of a network of box stores that was decades in the making. However, it’s also just the first step into a new world for retailers everywhere. Retail companies should continue to innovate and change things, merging the sharing economy with online retail and new in-store experiences to reshape the nature of commerce at its very core.
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