2017 set a record for the number of store closures in the U.S., topping out at almost 7,000 with more closing this year. Yet, new retailers are entering the ring, despite most companies being fearful of what Amazon could do to their industries and business models. From online specialized retailers to brick and mortar-only locations, new companies are braving the competitive retail world, targeting niches to define a unique space to call their own.
These new niche retailers generally follow three different business models that are achieving a level of success… for now.
1. Direct business models that optimize the 4 P’s. New online grocery retailers are gaining interest and share with better-for-you positionings and the offering of lower prices.
- For example, Grove Collaborative features home and personal care products that are good for you and sold at lower prices than you’d find elsewhere. Now that the company has built an audience, it’s expanded with its own product lines, as well as co-branded lines, like the one featured in our cover photo from the magazine Real Simple.
- Thrive Market brings the Club membership model online and specializes in offering healthier products at lower prices (25-50 percent off retail), or in their words selling “wholesome products at wholesale products.” Not only that, they also provide free memberships to low income families, making healthy food more accessible to all.
- Brandless brings the Everlane business model and ethos to the grocery channel, cutting out the middleman and being transparent about pricing. Their mission, “Better stuff, fewer dollars. It’s that simple.”
These direct business models offer a better experience across all of the 4 P’s.
- Price: The product strategies and revenue models (e.g., consolidated buying, private label products, membership fee) allow them to offer better value that’s competitive to Amazon.
- Product: The companies stand for a set of standards, just like Whole Foods has in the past, with the intent of building trust in the end product. Smart given the niche positioning targeted towards wellness consumers who seek transparency and want to feel confident and good about their purchases.
- Place: They consolidate the buying of certain types of goods to make it easy and convenient to shop. Of course, they ship it to you direct, also offering free shipping like Amazon through varying models.
- Promotion: The companies seek to align with consumers’ values to make it easier for shoppers to make a choice. That’s better for the company and the consumer—less need to continuously promote and less interruption, respectively. It’s a more friendly way to “sell,” if you will. It’s as if the company and consumer can come to an understanding, “Let’s just agree that we have common values.”
2. Offer a unique, curated assortment, complemented with relevant content. Good examples of this model are online retailers that focus on artisan goods curated from a particular country or from around the globe—sourcing, selecting, and presenting products in a way that Amazon can’t easily replicate. Artemest celebrates fine artisans in Italy, curating high-end finds and helping to keep these time-honored traditions alive. Bombinate is a U.K. men’s lifestyle retailer focused on curating quality, artisan-crafted goods primarily from Europe. Similarly, Citizenry sources its exclusive home goods products from artisans around the globe, doing so with a social good bent as it sources local materials and gives 10 percent of proceeds to the artisans. All of these companies complement their products with content and stories unique to their positioning and that celebrate their artisans.
3. Create an experience around a differentiated theme. These differentiated experiences can be brought to life in brick and mortar storefronts or online. For example, Eataly celebrates Italian goods and culture and China Live in San Francisco does the same with its eating establishments complemented with a marketplace. Clean Market in New York City offers a similar type of curation but around the niche of health and wellness. The market offers not just products, but also services from IV Drips to Cryotherapy and a café and tonic bar. Simone’s Market in New Orleans celebrates food from local purveyors and sells prepared, fresh foods with a desire to build a close relationship with its community.
There are many examples in the online space of such targeted, rich experiences:
- Food52 is a celebration of food and cooking.
- Glossier created a consumer-driven, community building, and content-centric beauty brand spawned from its blog, Into the Gloss.
- Huckberry is an adventure-inspired men’s lifestyle retailer.
- Boon Supply makes it easy to do good through one’s purchases, giving 50 percent of each sale to a cause.
- Farm to Table curates artisanal food products, celebrating transparency.
- Goop gives you a touch of Gwyneth Paltrow’s lifestyle and access to curated, quality content and goods endorsed by their team.
The Industry Forecast: Retail isn’t dying. It’s just evolving. And e-commerce, while the driver of growth, isn’t taking over all purchases. In fact, McKinsey forecasted that 80 percent of purchases in 2020 will still be purchased in brick and mortar retailers (that percentage of online vs. offline sales can vary by category, of course). Certainly, retailers have to consider how they can differentiate and win vs. the giant, Amazon. But upstarts stand a chance if they can carve out a niche, build meaning with an audience, and deliver value.