Bloomingdale's launched a fashion subscription program — four pieces of clothing a month for $149, with unlimited substitutions (Urban Outfitters and Anthropologie have also recently jumped in as well). Then, it was Macy's and Banana Republic. Today there's even a third-party provider called Caastle (Clothing as a Service — get it?) that helps manage these kinds of programs for fashion retailers.
Does this mean retailers finally get it, and are embracing the subscription economy? I'm doubtful.
I often get asked about which industry will move to subscriptions next. I always have the same answer: follow the disruption. If there's a new digital entrant that's shaking up an established industry, like Uber did with the automotive industry, then that's also often a catalyst for a broader shift towards services and recurring revenue models. That's certainly what's happening right now with regards to connected car platforms.
That's also why retail has been so puzzling. The industry has seen the biggest disruption of all, thanks to certain a Seattle-based book vendor that's currently taking over the world. But they haven't done much to overcome this disruption. We've all read the headlines about zombie malls and the retail apocalypse — UBS expects that 75,000 more stores in the US will be forced to close by 2026. So when are retailers going to fight back?
Sure, there's been some innovation. We've seen companies like Rent the Runway come out of nowhere and define a new category. We've seen the arrival of monthly subscription boxes and food delivery services, though there have been some notable flame-outs in that space (their churn rates are brutal). Nordstrom even went out and bought Trunk Club. But Nordstrom stores still feel very familiar.
Retailers still seem to be stuck in the traditional model of simply shipping products, and see monthly boxes as just another channel versus part of an overall experience or relationship.
Experience is the new imperative
In order to be successful with a new generation of shoppers, and to fight these disruptive emerging players, retailers must create a unified cross channel experience, blending the offline with the online. Rather than having their e-commerce sites and retail stores operate completely independently, there needs to be a break down of barriers and a seamless integration of the entire shopping experience.
Amazon Prime, for example, was never about monthly shipments, or even free shipping. It was about offering every commercial product in your life (usually within a five mile radius) — from books to movies to groceries — in a simple and convenient way, with its platform personalizing the experience every step of the way. It was about eliminating the pain points of everyday shopping for staples.
The few retailers that really seem to get it are flipping the script — emphasizing their online experience first, then supporting it with a great omnichannel brick-and-mortar environment (just take a look at Glossier.) They're looking at foot traffic not as a means to an end, but as a potential membership acquisition tool. They're focusing on cultivating relationships via recurring business models, not maximizing a number of isolated transactions. And they're turning their stores into compelling showrooms (as opposed to tired warehouses) that complement their online experiences.
As a retail analyst Reid Greenberg said: "It isn't that retail is dead. Roughly 85-90 percent of retail takes place in brick-and-mortar locations. But bad brick-and-mortar is. These mall-type department stores are faced with many challenges because they aren't connecting with shoppers in the way they want to be connected with. Consumers already know what to expect when walking into one of these stores."
Reid hits the nail on the head. Today's Nordstrom store still feels a lot like a Nordstrom store from ten years ago. In the Subscription Economy, consumers have come to expect personalized and convenient shopping experiences that reflect their digital lives, not something they've seen in a movie from 1995.
Is the retail industry ripe for change? Yes. While I do hope it happens sooner rather than later, only time will tell if retailers can refocus their efforts on the customer, rather than old-school transactions.
I'm still waiting for retail to fight back.