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Retail Customers Setting Trends in Age of E-commerce

Posted by Binh Nguyen on

Department stores and big retail chains once dictated the clothes Americans wore and the products they used simply by stocking those goods on their shelves. That influence is fading away to nothing in a world of infinite options offered by e-commerce competitors.

If department stores still ruled retail, shoppers would buy the black wool coats and plain cotton sweaters they showcase by the dozens. The sheer scale of large retailers and their aversion to merchandise risk demands more homogeneous inventories aimed at the middle of the road.

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On the Internet, e-commerce companies offer mind-boggling variety — from a million different styles of shoes on a single site to a custom white-gold engagement ring designed to resemble the “Star Wars” character R2D2. In the age of e-tail, shoppers are increasingly becoming America’s tastemakers with the choices they make collectively online.

“One challenge with traditional retailers is the idea that if the customer doesn’t know what they want, the stores are going to decide and curate for them,” said Niraj Shah, the chief executive of Wayfair, which sells more than 7 million home decor and furniture products online.

“Philosophically, we don’t assume that we know what the customer wants. We think the biggest benefit to the customer is a huge selection and the ability to buy anything they want,” Shah said.

Holiday-season sales at department stores have declined 21 percent in the last decade. Retail analysts and academics say companies can blame their own merchandising models for much of the sales slide.

Rajiv Lal, a senior professor of retailing at Harvard Business School, said shoppers often complain that stores look the same, and it’s often true. As a retailer grows to hundreds of locations, the pool of vendors capable of producing merchandise on such a large scale shrinks. The result is that many department stores end up buying from the same vendors.

Retailers tend to be afraid to take chances on new products and instead follow along with what other stores are offering to minimize risk, said Marshal Cohen, a retail analyst with the NPD Group of New York. Inventory is limited by floor space, and retailers are more likely to stock products in colors and fabrics that sell well, such as black jackets and brown boots, instead of bright yellows or patterns that are less mainstream. But that strategy isn’t working out as well today.

“The consumer is dramatically smarter with a greater ability to search and have more tools at their fingerprints than before,” Cohen said. “Now they can go online and shop the world.”

For example, the Brookline company UsTrendy hosts more than 20,000 fashion designers and boutiques from 100 countries in its online marketplace. The e-commerce site’s sales reached $5 million in 2013, up more than 300 percent from the previous year, founder and chief executive Sam Sisakhti said. Internet Retailer, an e-commerce publication, also listed UsTrendy.com among the fastest growing online retail sites last year.

Sisakhti started the company after realizing how difficult it is for budding fashion designers to make a living. He targets women between the ages of 16 to 29, an age group that is comfortable buying online and often seeks unique products with a backstory.

“When you’re shopping on the site, you’re supporting independent fashion designers,” he said. “You’re not just giving your money to a company that is mass-producing merchandise overseas.”

Another local company, Shoebuy.com, offers about a million different shoes, including more than 100 variations of the popular Ugg boots. Last year, sales climbed 10 percent to about $315 million compared with 2012, according to Internet Retailer.

Sean Scales, senior vice president of merchandising at Shoebuy, said the company can offer a much wider variety of products because it isn’t limited to goods it can put on display. He says the website also has more buying flexibility and can experiment with small batches of new styles or brands.

“It allows us to test things out and quickly react,” Scales said. “We can load up if things are working well or we can stop carrying it.”

Other companies, such as CustomMade, connect consumers directly with more than 22,000 “makers” who will build products upon request. The Cambridge company was founded in 2009 and has since raised about $30 million in funding.

“There is something unique about what our customers are trying to accomplish,” said Seth Rosen, president and co-founder. “They either want a special gift for somebody or a place in their home that’s inherently difficult to furnish.”

The products range from a $3,500 8-foot custom wood dining table with steel legs, to the R2D2 ring made of sapphire and diamonds for the fiance of a New Jersey graphic designer, tattoo artist, and self-proclaimed geek.

“Stores are boring the consumer to death,” said Cohen, the retail analyst. “They’ve removed all options to find something new and exciting. Online has a huge advantage and has become even more prevailing.”

Source: The Boston Globe

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