The past decade has been a steady drumbeat of retail’s imminent demise as brick-and-mortar Goliaths were outwitted and outpaced by such digitally-native upstarts like Bonobos and Everlane. Capitalizing on e-commerce’s growing piece of the retail pie, superior digital marketing and compelling prices through the elimination of the middle-man, the Davids of new retail managed to tell a compelling story of disruptive innovation. By comparison, traditional retailers like Macys and J Crew looked stale and outdated.
These digitally-native brands have since made their first forays into the physical world with brick and mortar stores with Everlane’s store opening in the heart of downtown Manhattan being the most recent. The incentives for doing so are clear: new channels for revenue growth, a new source of customer engagement and the potential for higher profitability.
Yet, by taking the battle to the physical world, these digitally-native startups risk giving up the advantage of novelty. In migrating offline, these brands must now confront the same challenges regarding inventory management and retail operations as incumbent retailers.
A hard look at the offerings of these digitally-native brands also reveal a significant lag in product innovation. What exactly is the difference between a Bonobos sportshirt and a Brooks Brothers’s equivalent when both are priced similarly? Everlane’s Soho store might be beautifully appointed but its merchandise bears an uncanny resemblance to the Gap’s time-tested assortment of premium denim and everyday basics.
For all their innovation to the distribution model, these Davids have revealed their weakness in product development – and established retailers would do well to take advantage of it. Nordstrom has already co-opted many of these digitally-native brands by offering them in-store even as it aggressively expands its online presence. By exhaustively searching the world for exclusive brands and new ideas – its inclusion of the Ring Jacket, a cult Japanese sportcoat brand, in the new Manhattan menswear store is an example – the company also serves as a model for how traditional retailers can compete with upstarts.
Excellence in retail comprises many parts. Incumbent retailers have clearly taken note and are learning the lessons of new retail. As they come of age, digitally-native brands must stay vigilant – lest they make the same mistakes as their predecessors.