A New Retail Ecosystem

In the past, you and I would shop for our wardrobe at a local mall by visiting department stores such as Macy’s and other retailers like bebe, The Limited, Banana Republic and such. It’s safe to say that technology has changed all of that. However, this shouldn’t be news to anyone. It’s happened before.

Let’s rewind to about a decade ago when the internet and social media completely transformed the music industry into what we know today. Up-and-coming artists who used to rely on record labels to listen to their demos for their big breaks are now getting some of their power back — all thanks to how we use technology to discover and consume music.

The same transition is happening today in the retail industry, where a whole new ecosystem is being formed, and everyone in the game — designers, makers, wholesalers, distributors and consumers alike — needs a new map.

Here are some of my predictions.

More Brands, Smaller Wholesale Quantities

Just like what we’ve seen with the music industry, technology is enabling up-and-coming designers and brands to compete directly with well-known labels for distribution.

Now that “constant discovery” is the new normal, retailers can no longer rely on buying the same SKUs from the same brands. They need to keep pace by buying lean and maximizing flexibility so products can move in and out as quickly as consumers change their minds.

Why Should We Be Excited About This?

This makes room for newer brands to be carried in larger big-box retailers, which means consumers like you and me will have a lot more variety and options to chose from. On the other end of the equation, newer and smaller brands will find a new revenue stream through wholesale distribution.

Brandboom’s customer Primitive Skateboarding is a great example of this growing trend. Even with more than 1 million followers on Instagram for all their brands combined, the founders at Primitive decided to ditch the direct-to-consumer focus and sell wholesale instead. It's been a smart decision, accounting for 75 percent to 80 percent of Primitive's total revenue since inception in 2008.

More M&As Will Happen Between Retailers

Consequently, we will continue to see some of the most iconic retailers close down more of their physical locations until they find a good balance in their omnichannel strategy.

Personally, the more interesting trend will be to see some of the large niche brands merging or being acquired — e.g., Coach’s acquisition of Kate Spade, Wal-Mart’s acquisition of ModCloth, and Nasty Gal’s sale to Boohoo.

These are all signs pointing to the changing landscape given our new discovery and shopping preferences. With so many options and choices, we’d rather spend time and money with retailers that have already done the work for us.

Keep Your Eye and Products on Instagram

Now what about the whole direct-to-consumer path? My view: it’s here to stay, but mostly through social platforms like Instagram.

With more than 90 percent of all U.S. fashion brands already on Instagram, it's only a matter of time for the social network to release a fully integrated shopping experience on its platform as an additional revenue stream.

Here's an early indicator: Last November, Instagram launched a “Shop Now” call to action, which links users straight to the retailer’s shoppable website. If Instagram introduces a shopping cart within its platform, it will instantly become one of the biggest contenders to Amazon as a destination shopping experience.

If your brand has a decent following on Instagram, double down on that investment. Instagram is the quickest way for smaller brands to reach beyond the U.S. and grow internationally. More than 80 percent of Instagram's users are outside of the U.S.

Local Boutiques in Urban Cities Will See a Comeback

A rise in urbanization and travel all point to the same outcome: growth in local experiences.

Fact: Millennials are on track to spend $1.4 trillion on travel by 2020, and 86 percent of millennial travelers say they travel to experience a new culture.

If it’s your first time in Nashville, and you're presented with a Banana Republic store located right next to a local lifestyle boutique, which one would you chose to check out? Unless I need some business casual attire that I forgot to pack for the trip, I would most likely pick the latter. Let's unpack that kind of “discovery behavior” a little.

It's difficult for e-commerce stores to successfully satisfy a customer's discovery behavior online unless they have a killer personalization and recommendation engine. However, local businesses can do this much better in the brick-and-mortar context. As a local business, your advantage is simple: you can tell a story around your locale. You can personalize based on your returning customers, and can easily merchandise according to local lifestyle, events and culture. For anyone who steps in and resonates with your story, or wants to take a piece of it back home with them, you’ll be scoring yourself a sale and, most likely, a referral.

10,000 Feet Up and Keeping Track of Your Customer

When I talk to investors and peers who play in the retail space, they rarely understand the connection between the macro landscape and the personal motivations of the evolving consumer. We’re all stuck talking about the same theories repeated in articles that are rewritten based off of one another. If we just take a step back and draw some similarities to the music industry, we’ll all gain some clarity on what and how to deliver on the new consumer needs.

For myself and my team, mapping the new retail ecosystem is a job we take seriously. We see it transforming how brands and retailers do business, and we want to be right in the center of it all.

Amy Zhou is the COO of Brandboom, a B-to-B e-commerce platform.