In 2018, specialty retail was under assault. This year, it’s taking up arms.
Specialty retailers have improved fulfillment speed dramatically. Consider, a fifth of brands now offer free two-day shipping, and the number of brands offering next-day shipping has doubled. Recognizing that mobile accounts for 55 percent of online traffic, on average, in this sector, brands have more than tripled investment in mobile. The eighth annual Gartner Digital IQ Index: Specialty Retail U.S. 2019 report benchmarks the digital performance of 103 brands spanning apparel, beauty, home and gift, and watches and jewelry categories. Here’s how specialty retailers are keeping digital top of mind:
Embracing New Discovery Pathways
Instagram is shifting away from grid posts to Stories and video content, while prioritizing shopability. Instagram is the social platform of choice, with brands on average posting almost 10 Stories each over the course of July 2019. Swipe Up is the most utilized feature native to Instagram Stories, allowing brands to direct followers to specific mobile pages. Almost half of all Swipe Ups on Instagram Stories lead directly to a product page, while 22 percent link to a category page, solidifying Instagram’s role as a crucial mobile commerce discovery pathway.
Brands continue to pursue easing the online checkout process — especially on mobile. Across the top specialty retail brands, traffic to mobile checkout pages increased 12 percent year-over-year. Integrating expedited mobile payment options increased accordingly, with 86 percent of brands now offering at least one option. E-commerce is getting even more accessible through buy now, pay later alternative financing options, which have been adopted by nearly a fifth of specialty retail brands. Retailers like Abercrombie & Fitch (and its Hollister and abercrombie kids brands), Banana Republic, Levi’s, and Urban Outfitters all offer the payment option, with American Eagle Outfitters announcing its plan to offer it soon.
Learning From Category Disruptors
As consumer preferences shift toward conscious transparency, traffic to Zara, Topshop and Forever 21’s sites dropped considerably. While these fast-fashion brands once exemplified the ability to respond quickly to consumer demands, a new class of disruptive brands has raised the bar for digital sophistication. While many have yet to become household names, site traffic to digital upstarts like Interior Define, Everlane and M.Gemi increased faster than the majority of traditional specialty retail brands in 2019.
Disruptors continue to implement innovative and category-specific merchandising, like “How It Sits” video content (Interior Define), imagery on models of different sizes with accompanying dimensions (Everlane), and incentivized text-for-fit consultation (M.Gemi). Relative to legacy specialty retailers, disruptors overinvest in fulfillment benefits and take a more creative approach to customer service. Lacking large customer service teams, disruptors enable self-service capabilities (e.g., agent-powered live chat and searchable FAQs) to connect consumers with the answers to their questions.
Assessing the Role of the Store
In 2019, over 7,500 retail locations are slated for closure as retailers continue to suffer from declining in-store traffic and rising rents.
Specialty retailers must continually iterate the approach to brand stores. Brands with larger store footprints — like Pier 1 Imports, American Eagle Outfitters or Foot Locker — prioritize pushing online consumers toward store locations with features that increase foot traffic. Two-thirds of brands with over 250 stores offer in-store pickup. Over half of those brands now geo-locate consumers on their sites to provide current inventory at the closest store. In-store pickup maximizes customer value: an estimated third of in-store pickup customers also buy additional products.
J.Crew-owned brand Madewell is testament to the power of stores. Madewell announced 10 new store openings just this year. Madewell’s strategy is simple yet effective: design stores to be experiential, community-driven and hyperlocal, and bring each location’s uniqueness to life through social media. Madewell opened a denim-themed store in Nashville, Tennessee in March 2019. The location features a highly Instagram-able mural wall created by local high school students. It further distinguishes itself by offering in-store embroidery and hosting local artisan pop-ups. Madewell’s method is tried and tested. The brand saw a 22 percent increase in same-store sales alone in the fourth quarter of 2018, which bodes well for its plan to open more creative retail concepts in the future.
Squeezed between disruptive upstarts on one end and endless-selection large-format retailers on the other, specialty retail brands must utilize digital to stay relevant in the increasingly competitive retail landscape. Take an incremental approach to new feature rollouts and leverage data to align search strategies with consumer behavior. Ensure stores work cohesively with digital properties, focusing on supporting weaknesses in online shopping — experiencing products up close, easing fulfillment difficulties, and engaging with local customer communities.
Supriya Jain is a principal at Gartner, a leading research and advisory company.
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