Shoptalk: Digital Natives Are Driving Retail’s Future
Spend enough time around the big retail show Shoptalk, which wrapped up this week, and you can’t help but get a look into the heart of digitally native retailers.
The breed of ecommerce companies, born in the digital age with digital consumers in mind, grabbed a lot of attention at the annual conference. Throughout the week, in bits and pieces, in various sessions, a view into the purpose and mindset of the budding category emerged.
While the definition of digital native is evolving, they are companies that launch as web-only retailers with an abiding belief that superior technology can be a differentiator. They often engender a high-level of loyalty by projecting authenticity and turning to a poweful use of social media. They act like startups: moving fast, iterating and quickly reconsidering failed initiatives. They do not run on conventional thinking.
Aaron Sanandres, CEO and co-founder of apparel retailer UNTUCKit, offered a glimpse of the digital-first retailer mindset as he relayed his company’s startup story in a session called, “The C-Suite on the Future of Marketing.”
“When we launched in 2011, we did it off a friends-and-family raise of $150,000,” he said. “We’re all about a continuous process of channel identification — testing. We love to test.”
All of which can lead to unconventional paths to success. With barely any marketing budget, the company took an unorthodox approach to advertising.
“If you look at Facebook at the time, it was crowded,” Sanandres said. “Our first marketing foray wasn’t Facebook or Instagram or Google Display or targeting. It was radio. And we learned that radio is one of the cheapest CPMs (cost per thousand impressions) you have out there.”
Cutting edge meets old school
From there, UNTUCKit moved into airline magazines and television spots — promoting their cutting-edge clothing company through old-school channels.
Being digitally native is about being unconventional, fluid and agile — and sometimes it’s about being ready to let go of control a little and move to the next level.
In fact, a chat featuring Marc Lore, the CEO of the U.S. operations of Walmart.com, and Andy Dunn, the founder of Bonobos and now senior vice president of consumer brands for Walmart, illustrated the fluid nature of life for a digitally native retailer.
It turns out that digital native brands are a big part of the big future that Walmart and its Jet.com operation have in mind. Lore told Jason Del Ray, Recode’s senior commerce editor, that Walmart’s acquisition spree — including Bonobos, Allswell, ModCloth and Moosejaw — has been absolutely deliberate.
Lore said the purchases were about buying specialty retailers “that can help us get the fundamentals right on both Walmart and Jet.” And he used an interesting word in explaining the value of the acquired brands — “content.”
Content, not products. Content as in, “great content,” in the form of pictures and descriptions. It’s an interesting look into the mindset of the digital native retailer and their digitally native customers.
“That is really about trying to create a portfolio of these brands that give us proprietary content, a reason for these millennials to come shop inside the Walmart ecosystem,” Lore explained.
But why buy digital natives? Walmart is the world’s biggest retailer. It has annual sales of $500 billion and $6.8 billion in cash on hand. Why not simply use its vast resources to create brands with great content?
Lore had one good reason — speed. Retail is in a well-documented age of disruption. Some old guard retailers are failing. New players, like the ones Walmart bought, are popping up. Building brands and changing internal mindsets takes time.
“It would just take too long,” Lore said. The specialty retailers, he explained, had been at their work for years and they’d “created thousands of relationships.”
Which got at another reason Walmart didn’t try to build their remodeled image, one Lore didn’t state overtly: Maybe Walmart couldn’t just build it. Maybe nobody can simply create digital native magic.
Digitally native retailers build strong bonds
One common characteristics of digitally native retailers is the emotional bond they create with their customers. Sure, some of it is solid marketing and an exceptional product, but some of it is hard to pin down.
The specialty shops that Walmart bought and others like them are the survivors. Other companies had tried, and they didn’t click with consumers. Those that survived did connect — and now Walmart is looking to create that same kind of bond with consumers.
In particular, Lore and Dunn explained, Walmart would work on that connection through its Jet.com brand, a retailer that has already won over busy urban millennials who are relatively well off.
“I see, just by looking at the sheer numbers, that our brand Jet.com is really resonating with these higher-income millennials,” Lore said.
Bonobos, ModCloth, Allswell, Moosejaw and perhaps some players to be named later, can both ride and accelerate that momentum. And all of them will ultimately be rolled into the Jet.com brand, Dunn said.
“As Jet evolves, we feel like the digital native brands will even make Jet a more attractive property,” he said.
And it’s apparent that Walmart isn’t finished buying the kinds of retailers than can help it polish the Jet brand in the eyes of urban millennials. Lore said it takes a critical mass of brands to build a larger millennial-appealing brand for consumers in cities like New York, Chicago and San Francisco.
“At some point there is a tipping point,” Lore said. “Having a handful of brands is not enough. We’re not quite sure today where that tipping point is. We’ve just got a few strokes on the canvass right now.”
Digitally native partners give traditional retailers a boost
In some ways, the buying spree is another characteristic of the digital-native era in retail. Just as some of the digital natives have done from the beginning, some traditional retailers are retooling their organizations with outside help — technology companies that handle non-core operations like personalization, order management, fulfillment, customer support and the like.
In fact, Walmart’s 2016 purchase of Jet.com fits into that category. At the time of the purchase, much was made of how the Jet team would help Walmart accelerate its growing online business, as it pushed to compete more fiercely with Amazon.
And as Walmart builds its future with acquisitions of digital natives, one prediction seems relatively safe: It’s nowhere near finished yet.
“We’re looking and talking to more companies now than we ever have,” Lore told the Shoptalk crowd. “We’re definitely in an acquisition mode.”
So, stay tuned. It seems the digitally native retailer story is just getting warmed up.
Photos by Mike Cassidy
Contact Mike Cassidy at email@example.com; follow him on Twitter at @mikecassidy.