News & Views

Opinion / When is disruption just normalisation?

by Contagious Contributor
Fara Darvill, marketing communications at Conran Design Group, argues that as a number of online disruptors are now moving into the traditional physical space, retail is establishing a new normal

 

Retail has faced significant challenges in the past decade with rapid advances in technology, innovation and experiential strategies (the pop-up phenomenon). Technology has powered the democratisation of retail by allowing anyone to set out their stall, as it were. Online was thought to sound the death knell for physical shops but in reality they have survived by embracing the benefits it can provide in facilitating more effective routes to customer engagement. It has become another way to window shop and compare price and product features, creating a better informed and more fulfilling retail experience.

Then came the disruptive start-ups, challenging the big retail players through innovation and serving underserved niches. Going beyond the online extension of a retail brand: they embrace social media activity and appeal to ‘digital natives’ who shop in a fundamentally different way to previous generations. However, as a number of online disruptors are now moving into the traditional physical space, it raises the obvious question; when does disruption really just become normalisation?

Digital disruption

We would suggest that digital disruption is the modern start-up strategy rather than a long-term business model. This new model offers a market entry point; digital draws in customers and in-store grows the customer base. The evidence is seen with disruptive ‘heroes’ like Missguided, BooHoo, Made.com and Birchbox, all of which have opened bricks and mortar shops in the past five years. Even Amazon, the original ‘challenger’ opened up a shop in 2016 and following its success is now planning to open a further 400 bookshop across the US. This is a significant shift in strategy and business model and is reflective of similar trends in some areas of the UK retail landscape: in the UK, e-book sales have fallen by 17% to £204m and printed book sales have risen by 8% to almost £3bn (the Publishing Association May 2017), as people look for a book buying ‘experience’ again. While opening physical outlets is a viable ‘risk’ for commercial goliaths like Amazon, why, in a time when we are seeing so many high street stalwarts closing shops, are we seeing the other players opening them? Considering the commercial and operational pressures (staffing, stocking etc.) in running a physical store compared to an online one, what is the broad shifting paradigm making these brands take this leap?

The boldest challengers appear to go deeper than just online, with fluid e- and m-commerce strategies. A favourite with Gen Y and Z consumers, these new businesses have a potential edge over other e-tailers and retailers and the ability to be ahead of the game by creating more immersive and connected experiences for customers. It appears that it is the desire to continually extend these experiences that is the catalyst for new physical outlets.


Who’s disrupting what exactly?

In 2010 Made.com launched as a pure play online retailer into the UK furniture market, its proposition challenged the idea that a retailer needed a physical presence at all. Then just two years after launch the company deviated from its ‘who needs a shop’ strategy to open six showrooms. The brand claimed this to be part of the customer experience program; where digital and physical combine to inform a fully rounded retail experience. Five years down the line the retail estate continues to grow with global expansion.



The much-heralded brand disruptor Birchbox (beauty boxes with sample size beauty products) has also gone physical. Having gained cult status inspiring fans to post ‘box opening’ tutorials on YouTube, the subscription service’s business model sparked a host of ‘me too’ copycats. In an interview, the founder said that the move to a shop is to fuel growth and, interestingly, to be seen as a ‘retailer’. Does this mean a retailer has to have a bricks and mortar space to be credible? Birchbox seem to be suggesting so.

This action by Birchbox is not an isolated move by an online brand, so what can we learn? Start-ups allow new brands to test the water with low barriers to entry and without substantial overheads, but being a disruptor is not enough in the long term for some products to sustain growth. 

Examples of start-up success stories continue to emerge but the road is strewn with failure. For every Uber or Airbnb there are countless never-to-be-known near misses. But perhaps in the interest of fairness it is better to say that only some products (clothing or soft furnishings for example) feel the need for or benefit of having a physical store. The disruptive phenomenon that is Dollar Shave Club didn’t need a shop to grow its brand. It grew and grabbed market share exponentially over four years and prompted a buy out by Unilever in a move to protect its own share and stop any other competitive takeover. The ‘If can’t beat ‘em, buy ‘em strategy.

So where does this leave the customer…or does the customer leave?

Brands like the idea of being disruptive, it’s differentiating and distinctive. Customers like the idea of being part of the disruption, buying in to something unique and being part of a new movement. Start-ups often cut through the noise and clutter of competing brands with strong messaging that resonates with customers in a distinctive and meaningful way. There is however a risk for the disrupters. Those consumers who bought into their proposition and who then see it change, sometimes fundamentally, have to make a decision whether to stay with it or move on to the next innovate thing. Brands hope their customers will transition with them to the new business model, if the experience is right they probably will but achieving mass-market acceptance can trigger the start of a new era of challenge.

The truth may not be disruptive…

The reality is that whilst there are many start-ups, few are actually industry- or game-changing. Terms of disruption are perhaps too easily bestowed on any new businesses that have good ideas rather than truly original ones. And the disruption approach, including online strategies, is often simply part of a marketing strategy that transitions into a more traditional bricks and mortar presence.

A second observation is that it often doesn’t matter how disruptive you are in the digital sphere, a good proportion of people are fickle and no matter how compelling the proposition is, people want to see, touch and physically interact with certain products before they buy.

A 2016 report by PwC (The new retail ecosystem) suggested that the retail store of the past may well be dead.

They are probably right. A new retail formula continues to evolve and it is the role of the shop that has changed; it facilitates the vision of the customers’ lifestyle, it builds the dream and creates an immersive brand experience.