Retail’s New Business Models

Source: HBR blog, Jan 2012

Private Sales

Private sales spark demand by creating perceptions of urgency and scarcity; they work because the perceptions are real. That drives some seriously intense emotional engagement with the site.

Access over Purchase

But Hyman doesn’t wax eloquent about renting fashion — the basic activity of her business. She speaks passionately about helping her customers experience emotionally charged “Cinderella Moments.” In our social media immersed and over-exposed lives, fractional ownership has its advantages.

Who would want to be seen in the same outfit twice by friends? If you buy a dress, you run a risk: someone posts snaps of you in your fancy garb on Facebook, and the images accelerate the obsolescence of your “look.” Maybe ’tis better to borrow than to buy, especially at 90 percent below retail.

Ultra-Specialization

Ultra-specialist sites unlock latent demand.  … sites like Zulily are all about focus, focus, focus, which enables the brands to connect emotionally with shoppers.

Extreme Service

Gamification of Shopping

Behind such “reinvention” of retail, several themes rise to the fore.

  • Curation is increasingly critical to success. Making everything available — à la Amazon and iTunes — is a game very few can, or should, play.
  • Gone is the age of “feature, function, selection and price.” Now, e-retail is fueled by emotional connections between sites and users.
  • The Web isn’t dead (as Wired Magazine proclaimed a year ago), but it has become just one of many touch points — with tablet apps moving to the fore.
  • Realizing the advantages of curation and emotion (served on the right device) depends critically on having in-depth knowledge of site users. As Doug Mack says, this is a strategy that only those who have built-in know-how about Big Data, Social Media, and the Cloud can exploit.

All of which begs the question: Won’t every retailer who isn’t thinking along these lines find themselves significantly threatened or, worse, simply swept aside?

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