The Democratization of the Retail Industry
Technology is leveling the retail playing field, giving consumers unprecedented access to product information, the companies that sell them, and the people that make them, no matter how niche or mainstream. Enablers like Facebook, Instagram and YouTube are changing consumers’ awareness of new and emerging products. Hubba's report, The Democratization of Retail: How the Power of Community and Connection is Reshaping Commerce, illustrates how the shift from a traditional and formulaic industry to one whose structure is more akin to an interconnected community creates new opportunities for companies to grow their businesses in this evolved world of commerce.
By embracing technology, independent retailers and brands — what we would call “boutique brands” — have started to proliferate and become mainstream. The consumer feedback loop caused by social media means the entrepreneur is able to both anticipate and create items that consumers are already searching for.
Traditional retailers must keep up or risk becoming extinct. While the number of packaged goods in the world has doubled in the last 10 years, brick-and-mortar retail has developed a product selection process that restricts the number of brands that they talk to. Retailers have also become very comfortable at telling consumers what they should want.
For example, Wal-Mart’s Open to Call happens once a year as a chance for new businesses to attend and pitch to the retailer's buyers. Imagine starting a business knowing that you only had the opportunity to pitch your product once a year, and that that sale was your only path to future customer sales. While the retail world’s woes don’t rest solely on Wal-Mart’s shoulders, it's emblematic for how things must change.
Today, brands have enlisted technology to help break barriers and enable them to sell without the help of retailers. Recent research from Hubba shows how the long-tail theory predicted the power of niche consumerism that's reshaping the retail industry. Our findings highlight how the power once held by the strong supply chain has shifted to marketers, the people who tell the stories. In fact, small businesses created over 2 million new jobs in 2012. Traditional retailers are losing their influence and the reigns are being taken over by independent brands and retailers.
It has never been more evident that retailers need to adapt to maintain their influence in today’s commercial landscape. When we asked about curating new products for their retail store, Michael Kanter, co-founder of Cambridge Naturals, corrected “curate” to “agonize” over new assortment. Retailers need to be empowering their merchants to be the ultimate advocate for their customers. Unique brands allow retailers to differentiate from each other and allow the consumer to feel like their shopping experience is unique. At Hubba, we’ve seen a 40 percent increase in retailers searching for products from independent brands.
To do this, retailers need to be intimately tied to influencers, brands and consumers. This means being accessible, engaging and understanding how a brand’s story aligns with the retailer’s selling proposition. Every day should be “open to call.” The shift has already started — we’ve seen a 50 percent growth in retailers reaching out to new brands on Hubba’s digital network. Stepping in and building a community of brands, influencers and retailers creates commerce that happens beyond the transactional.
If you’re a retailer, not everything is doom and gloom. In fact, making a change to set your store on the right track takes but a few small actions.
- Be part of the commerce community. Being open to innovative brands that want to work together in co-branding efforts is beneficial to both you and the community.
- Find influencers that can help guide your trend tracking. Hubba has seen a 80 percent year-over-year growth in retailers engaging influencers.
- Make product discovery a constant, consistent pillar in your merchandising strategy.
- Create moments in your process to check in with consumers to ensure you’re tracking the right trends.
The democratization of retail shifts power from traditional heavyweights to small and midsized business owners. The path to consumers will be fiercely competitive over the next two years. For brands, it means they'll be forced to define their customer and build a relationship with an audience that's increasingly fickle but significantly more powerful than they were just five to 10 years ago. They need to engage in the vibrant commerce community and embrace less traditional models and alternate channels.
The future of retail includes retailers that can change and iterate. There are more entrants, more people can do business, and there are more business connections and opportunities between independent brands and retailers than ever before. Retailers need to be a part of that story.
Phil Chang is a retail expert at Hubba, an online source for retail buyers and craft brands to share and discover product information.