A recession is part of the normal business cycle, and we will get through this one, just like all of the others. But things will be different in the next business cycle, and the change will represent an opportunity for companies that can understand it and address it.
This recession has been particularly hard for independent retailers, with many going out of business over the last 8 months and many more business failures expected this year. However, people aren’t going to stop buying clothes, and they are not going to lose interest in fashion. The retail apparel market will return, and when it does, there will be a new set of retailers to replace those who went out of business. When the next recovery comes, I think the new retailers will be very different from the ones who didn’t survive the recession.
These newer retailers will be younger and more Internet savvy, and they are going to drive changes in the rest of the industry. What are these new independent retailers going to be like? Many of them will be from Generation Y, born starting from 1978 on, and will share many of these characteristics:
- They will have grown up with computers and the Internet.
- They will be very tech savvy, especially compared to the outgoing retailers.
- They will be more demanding and more likely to expect instant gratification.
- They will be more likely to question the way things have always been done and more willing to challenge the status quo.
- They will expect to buy for their stores the same way they buy for themselves: online.
- They will expect manufacturers to be flexible in adapting to their business needs and will be willing to drop manufacturers that do not meet their expectations.
- They will be more connected to their market niches, using a wide variety of technologies to spot trends.
The changes that the post-recession independent retailers will be driving are not new or novel; they are changes that are already happening. The difference is that in the next business cycle these changes will accelerate.
These changes should be both expected and welcome because they are the same changes that are happening in the people who are buying apparel. By adapting to the new independent retailers, vendors and line reps will also be adapting to the new consumers.
They Will Be Internet Savvy
The new retailers will expect a larger percentage of their businesses to run on the Internet, and they will favor business partners who are also Internet-proficient.
The Internet generation goes to the Web first to find new information"information that is only on paper does not exist for them. They don’t use the Yellow Pages, and they don’t buy printed business directories. So, if they need a line rep, they are more likely to turn to FindFashionRep.com than a paper directory. Fax machines are far less convenient than e-mail and the Web, and they will prefer not to work with vendors who expect orders to be faxed to them.
These retailers will ask all of their vendors a very sensible question:
If I can buy clothes for myself online, why can’t I buy clothes for my store online?
Vendors who are not comfortable working with retailers online will be at a significant disadvantage compared to those who can work online.
They Will Expect Vendors to Be Flexible
Generation Y is used to things happening on demand"they want fast service, last-minute changes, and immediate feedback. They will order a book today and expect it to arrive tomorrow, and they will expect the same kind of turnaround from their business partners. The expectation may not be reasonable, but they will expect it anyway, and they will prefer to work with the business partners who deliver immediacy.
This generation did not create just-in-time business, but since it has been a common experience for them, they will consider it a baseline business practice.
They Are Connected
The new independent retailers are more connected to their markets than past retailers because of a variety of social media that let them have an enormous (although superficial) social network. They can communicate with thousands of people through blogs, forums, Twitter, e-mail, and social networking websites. These retailers have nearly instant awareness of the trends emerging worldwide, allowing them to anticipate changes in local buying habits.
This hyperconnectivity has also made them more aware of marketing, demographics, and media. Where previous generations studied marketing and are slowly warming up to new media, the new retailers have lived it and have a fundamental understanding of how media influences people and how people influence media. Because of this, they know when a vendor “gets it” and has crafted an appeal to the right markets. They will expect their vendors to be more than just manufacturers; they will want them to be their marketing partners, particularly with online marketing.
Change Is Opportunity
The changing character of retailers is a significant opportunity and will create new sets of winners and losers among apparel vendors, line reps, and retailers’ other business partners. Partners who want to succeed in the next recovery can start with a simple practice: seek out their youngest retailers and ask them what they expect and what they need. They will be happy to talk about their needs, although they might suggest you follow them on Twitter or post to their Facebook walls.
{ 2 comments… read them below or add one }
I love the idea of the “independent retailer” during the recession. Instead of panicking its important for retailers to understand the opportunities of a recession. Recently I read about watchchoice.com, a website that gathered luxury watch retailers and consumers in one place to ensure that retailers were reaching their customers and that consumers were finding bargains… the result was an amazing social shopping community where nearly invisible retailers were able to reach new customers, keep an eye on the competition, and improve thier customer relationships. It’s about being smart and stepping out of the box to find those opportunities that make sense.
Great article!
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Eric Busboom Reply:
December 31st, 2008 at 3:29 pm
The social shopping community is definitely a future trend for retailers, and I like offline retailers to benefit from that as much as online retailers. ( 90% of sales are still offline! ) I think the important thing for physical retailers to understand is that the social aspects of local business are nothing new " the rules for social marketing are as old as humanity itself " but the technology is new, and the socializing is moving online. Physical retailers could definitely learn something from sites like http://watchchoice.com
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Some good points Eric. I’d also like to bring your attention to some posts from F-I
Hangtags, domain names and competing with your customers:
http://tinyurl.com/9co36a
A bit OT but related in that internet retailing lowers the costs of entry and how this can impact people just getting started -both in retailing and wholesaling (two sides of the same coin): How eBay can kill you (parts one and two)
http://tinyurl.com/92m6eb
http://tinyurl.com/9yvg34
Summary: equilibrium in the market will depend on both parties being internet savvy. Perhaps this crisis will clear out some deadwood on both sides of the equation but some will retain position with a formidable presence.
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Eric Busboom Reply:
December 31st, 2008 at 3:29 pm
Kathleen,
Thanks for the links. Taken together, the articles on your site speak to the conflict that I’ve also been hearing from both sides, although I look at those sides more as the retailers and the brand owners. I’d like to see a strong notion that the retailers are the "owners" of the customer experience while the brand owners " manufacturers, license owners , etc " use the Internet to manage the brand rather than selling directly to the consumer. Of course, the industry is too complex for that model to be true every where " as Miracle’s article on Ebay illustrates " but it is a good guide for branded apparel that is sold through independent retailers.
So, I certainly agree that "equilibrium in the market will depend on both parties being internet savvy," in fact that’s the reason for Clarinova’s existence.
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