Scan the landscape, Mr. Singer says, and you’ll find some Goliaths not only following suit, but creating their own communication style, making them competitive and even a step ahead of the smaller, more nimble upstarts they’re supposed to be trailing.
“Gucci applied the tenets of digital-native brands to their business, and look what it’s done for their sales, their business – they jumped by something like 60 percent year-on-year.” Mr. Singer also highlights Gucci’s recent stances on social issues, and its creation of a “shadow committee” of Millennials, a group of under-30 employees who speak directly to Marco Bizzarri, Gucci’s CEO.
Another brand Mr. Singer mentions is the 160-year-old department store chain Macy’s. He praised the company’s recent acquisition of Story, a small retail company that “blends magazine storytelling with shopping,” as Mr. Singer describes it, as well as Macy’s investment in b8ta, another experimental retail business. “These could rub off on employees and customers in so many positive ways,” Mr. Singer says. “They’ve also done things like allow 200 associates to monetize themselves online – so if an associate posts a link to a Macy’s item, and then their followers use that link to buy a product, the associate receives a commission. I commend Macy’s for it – it’s trying something different, being open to change, experimenting.”
But the tutelage is two-way. While Goliaths learn how to use content to drive commerce and change the way customers experience their products, Davids are realizing the value of the brick-and-mortar stores they were predicted to make obsolete.
“Digital-first companies are realizing that rent and SEO [search engine optimization] are the same thing – they help you acquire customers,” Mr. Singer says. “So these companies have woken up to the idea that the cost of acquisition (CAC) isn’t limited to marketing on Facebook or Google; it can also be embodied in rent. The catchphrase right now is ‘rent is the new CAC.’ But of course rent has been the CAC for millennia. Not everyone wants to shop online – people do go shopping. Imagine that? We’re social animals.”
True to their digital roots, the Davids have used data to improve this old-school practice. “They cross-correlate where their customers live, where they work, along with a host of other data points, so they have a more targeted idea of where to put their stores. And they’re also taking shorter leases – the 10-year lease is nowhere near as prevalent as it used to be.”
Predictions about the future of retail often focus on the battle between online-only and brick-and-mortar, or apps versus storefronts. But perhaps this is the wrong lens through which to look at the future – tomorrow’s retail success stories will be defined by the best of both.
Mr. Singer predicts that a brand’s ability to converse and connect, to have opinions and take stances, to be seen as cool, trustworthy and transparent, to create content that people actually care about – these will determine a brand’s fate with Millennials and the next generation of consumers. And these qualities can rest within Davids or Goliaths.
But are Millennials really that different of a consumer than their parents or grandparents were? Does retail really need to adjust, as it never has before, to win the respect and business of this new generation?
“People have said to me, ‘Look at the ’60s and ’70s; they were the “Millennials” of that generation.’ Well, yes, but they couldn’t communicate to each other the way Millennials can today. They couldn’t be heard at scale, or start a movement, the way that someone with a voice can today.
“That’s why teenage students from Parkland, Florida, whose classmates were shot and murdered, capture global attention: because they have a megaphone unlike any other generation in history; companies of all shapes and sizes need to take note if they want to be relevant and resonant.
“Earlier this year, we interviewed Gucci CEO Marco Bizzarri at the Traub Lecture at the Harvard Business School. He was asked if Gucci’s million-dollar donation in support of the Florida students who marched for gun control was a marketing ploy. And his response was a firm ‘No.’ Bizzarri said that he explained the donation across the company, and to his customers, by saying: First, Gucci had lost two members of their staff in the Orlando shooting a year-and-a-half ago, so the issue was personal to their immediate and larger Gucci family. And second, if he, Bizzarri, is trying to teach young people in the company to speak up to power, what better symbol of standing up to power to support than children standing up to the American government?
“An audience member asked as a follow-up: ‘So going forward, does that mean that companies should take a stand?’ And his response was, ‘Well, who else is?’”
Blake Sonnenshein is a Partner in Brunswick’s New York office, specializing in both the consumer and private equity sectors.