The past decade has been one of seismic upheaval for retail. The industry emerged from the Great Recession only to face the rising tide of e-commerce and, more specifically, Amazon, fresh competition from direct-to-consumer brands and a new generation of consumers with preferences that often didn’t align with the old ways of doing business.
Amid the panic over the “retail apocalypse,” however, companies have been forced to adapt to stay afloat, leading to new technologies, processes and business models that have changed the way we shop for the better. Below, we look back on five such innovations.
At the turn of the decade, e-commerce accounted for about 4% of total U.S. retail sales, according to Census Bureau data; today, that share exceeds 11% — a difference of hundreds of billions of dollars. Retailers need to reach shoppers across multiple channels in order to survive, and the most successful among them have created seamless customer experiences across brick-and-mortar, desktop, mobile, phone, apps and social channels. Nike’s six-story New York City flagship, for instance, is designed to integrate with the brand’s family of apps, which today boast more than 170 million users, with instant checkout stations, digital pick-up lockers and a Speed Shop where the inventory is determined by local data.
According to a 2017 Harvard Business Review study, omnichannel shoppers are bigger spenders than their single-channel peers, dropping an average of 10% more online and 4% more in-store, a number that increased with every additional app, digital tool and shopping channel they used.
Watch on FN
“Buy online, pick up in store” (BOPIS) isn’t just a retail buzzword — it’s a key defense that chain stores like Walmart and Target have been able to raise against Amazon. Target has invested billions in recent years modernizing its fleet of more than 1,800 stores so that customers can easily place an order online and pick it up curbside or in-store, or else have it shipped to them from the store that same day. The cost savings for the retailer have been major: Executives have noted on earnings calls that shipping an order from an existing store can save 40% of what it would cost to get that order from a distribution center to a customer’s door; if the customer comes and picks it up, the savings reach 90%.
Click-and-collect shopping also gives consumers the opportunity to buy additional items when they come in to retrieve their online orders — something 85% of BOPIS shoppers report doing, according to a recent CommerceHub survey.
Today, the question “Cash or credit?” is an anachronism: Consumers expect options like PayPal, Apple Pay, Amazon Pay and even bitcoin, as well as a growing number of “buy now, pay later” services such as Afterpay, Klarna, Affirm and Sezzle. Klarna, the oldest of the bunch, launched in 2005, but it only expanded to the U.S. last year. Since then, it has turbocharged its growth, adding 16 million new consumers globally, including 6 million in the U.S. In November, Afterpay, whose retail partners include DSW, Urban Outfitters and Steve Madden, reported a record $688 million in underlying sales. Like most of its competitors, it caters largely to millennial and Gen Z consumers, many of whom either don’t have or don’t want to use credit cards for online purchases.
Free, Fast Shipping
Amazon led the way with free two-day shipping with no minimum purchase for Prime members since 2005, but as the program has grown to more than 100 million paid subscribers and Amazon upped the ante to one-day shipping, competitors have been compelled to keep up. Now, consumers are so conditioned to expect free shipping that, according to a recent study by the e-commerce platform BigCommerce, 77% of online shoppers surveyed reported abandoning a purchase due to unsatisfactory shipping options, while 58% said they’d stopped shopping with a retailer due to a negative shipping experience. These expectations are costly for online retailers, but particularly so for smaller businesses that can’t negotiate the kind of shipping discounts that their much larger peers can. Free returns only add to the expense.
Resale and Rental Services
Ten years ago, online resale was still dominated by one major player — eBay — while the rest of the industry consisted largely of offline consignment chains and local secondhand stores. Today, according to the online resale marketplace ThredUp in partnership with retail analytics firm GlobalData, the secondhand apparel market is worth $24 billion and it is expected to grow to $51 billion by 2023. ThredUp was founded in 2009, and in the decade since then, companies including Poshmark, The RealReal, Tradesy, StockX, Stadium Goods, GOAT Group, Mercari and Rebag have all entered the space, in some cases reaching unicorn valuations in a matter of years.
Rental services, too, have proliferated since Rent the Runway was launched in 2009. In recent years, the concept has reached the mainstream, with retailers including Bloomingdale’s, American Eagle, Express and Urban Outfitters parent URBN all launching subscription rental programs. This August, rental startup Le Tote turned heads with its $100 million acquisition of the nearly 200-year-old department store chain Lord & Taylor, a move the industry is sure to be watching closely in 2020.