Share the Week - December 8, 2017

Jonathan Gardner

A weekly wrap-up of valuable insights from the world of visual content, social media, and influencer marketing.

The Online Retail Riches

It’s well-established that retail is facing a great many challenges, even while simultaneously booking record holiday sales numbers. While we’ve spent much time on this topic, a bright, shining light has been focused on the fortunes of non-traditional ecommerce players. As our colleague, Thomas Burg, wrote recently, startup brands are rewriting the script for retail marketing: “The upstart brands (think of Everlane, Outside Voices or M.Gemi), are not constrained by history and are less reliant on traditional marketing channels like paid media. While still laser focused on brand building, they find more efficient ways to accomplish it. They have a built in tilt toward using data-driven insights on how a younger, more plugged-in audience navigates the discover-to-buy process, what type of content they’re motivated by and what type of influencers they respond to. At ShareIQ, we see that most of these brands are highly engaged in leveraging the power of earned media through smart marketing programs on platforms that can be critical purchase drivers, like Pinterest and Instagram.”

Luxury retail is a hot spot of particular note, with Elizabeth Paton writing in The New York Timesthis week about the upside for luxury e-tail, particularly industry heavy hitters like Moda Operandi, Farfetch and Yoox Net-a-Porter. The trio are in a pitched battle to differentiate offerings in a marketplace where goods have become a commodity and luxury buyers are not ashamed to shop around for the best price.

As with traditional brick-and-mortar retailers, luxury ecommerce players are rolling out the bells and whistles to try and make their platforms stand out to jaded just-in-time shoppers who can have anything brought to them nearly instantaneously these days.

As Paton writes, Yoox Net-a-Porter introduced “You Try, We Wait”: a same-day try-on-and-wait premium delivery service with at-home shopping consultations. Six days later, Farfetch started a “store-to-door service” in 90 minutes with Gucci in 10 cities worldwide. Then Farfetch revealed a suite of technologies based on responding to consumers in the “Store of the Future.”

Yoox Net-a-Porter promptly responded with “Next Era”: a partnership with brands that debuted with Valentino giving customers access to Valentino products wherever they are, and however they want them.

All this customer catering seems well worth it, as the Times reports that online luxury sales jumped by 24 percent in 2017, according to a recent study by the consulting firm Bain & Co., with the authors estimating that online sales of personal luxury goods will make up 25 percent of the market by 2025. Little wonder that during the past year barely a month went by without Yoox Net-a-Porter or Farfetch unveiling a snazzy new strategy or service in a thinly veiled bid to outmaneuver the other.

With the simultaneous commodification of luxury shopping and race by ecommerce platforms to outdo each other with service offerings, where does this leave the luxury brands themselves?

As Burg wrote, traditional brands have invested a ton of money on awareness and brand building, only to realize that they’re not positioned for how people discover brands and buy products today. Companies make basic errors with their social media strategy, like not adding shoppable links to their posts or learning from the example of a lot of the challenger, indie, direct-to-consumer brands. The upstarts are often “shoppable-first,” with brand discovery and purchase leading everything they do in marketing. A lot of traditional brands -- especially in mid-range and luxury categories -- are way behind in thinking about how millennial consumers actually want to interact with and purchase from brands.

Most upscale brands invest heavily in paid search, which leads to unintended consequences when they end up not sending traffic to their sites but rather to resale or discount sites, outbid on AdWords and out-priced on Google Shopping. In a lot of cases, high-end brands don’t actually “own” their keywords across every channel they need to be in. Search for any luxury brand and you’re going to find dozens of places to buy it.

Limber Lululemon Outpaces Competitors

In the mood to hear about another shaky industry sector? It appears the sports clothing market isn’t doing so hot, though you wouldn’t think that the case judging by the yoga-panted legions thronging the byways of Brooklyn on the weekends. Top retail columnist, Sarah Halzack of Bloomberg, reports that you don't have to look too hard these days for signs trouble is brewingin the athletic apparel business.  

Dick's Sporting Goods Inc. is cranking up the discounts to lure shoppers back to its struggling stores. Nike Inc. is scrambling to offer more innovative products and reduce its dependence on "mediocre" retailers. The stock prices of Under Armour Inc., Foot Locker Inc., and Finish Line Inc. have been slammed this year, each tumbling precipitously in response to disappointing sales.

One of the keys to success for the brand seems to be an effective, efficient marketing strategy, focused more on earned and owned media than on pricey endorsements and paid media campaigns.

We’ve talked before about how sports apparel brands are differentiating themselves on social media, using smart engagement programs to build followings and get products discovered on Pinterest and Instagram.

According to Halzack,  Lululemon is apparently sitting out of an expensive marketing arms race seen elsewhere in the sector. Simeon Siegel, a retail analyst at Nomura Instinet, found in a 2016 analysis that Nike, Adidas AG and Under Armour each maintain rather hefty marketing budgets, spending 10 to 11 percent of total sales. By comparison, Siegel found the non-athletic companies he covered tend to spend about 3.5 percent of annual sales on marketing.

We don't know exactly where Lululemon falls on this spectrum, but we do know the company relies largely on local "brand ambassadors" -- yoga teachers, personal trainers, spin instructors and the like -- to spread the word about its goods. Even when it launched its first-ever global advertising campaign earlier this year, it was more about creating a mood than celebrity tie-ins. It's safe to assume this approach is cheaper than endorsements from high-wattage stars such as Lebron James, Steph Curry or Misty Copeland.

Rather than plowing cash into copycat marketing schemes that aren't a good fit for its brand, Lululemon has addressed its most urgent needs -- supply chain improvements and product innovation.

Lululemon has been working on everything from reducing its dependence on air freight to developing items such as the Enlite bra, which comes with a $98 price tag and has been flying off shelves. Such efforts have gone a long way toward protecting its profitability. In the latest quarter, gross profit was $322 million, up 16 percent from the same period last year.

Meanwhile, when you look at the widespread distress in the athletic apparel business, you see how much these companies feed into each other's troubles. Nike's product misses, for example, give shoppers less incentive to buy something when they visit a Foot Locker. Under Armour selling its product at Kohl's Corp. stores might have pulled some foot traffic away from Dick's. Finish Line and Foot Locker both have stores in lackluster malls, meaning they don't consistently provide a great selling environment for Nike's wares. It's going to be messy to unravel such a tangle of problems.

The Best of the Rest

Business of Fashion - Will the Digitally Native Brand Building Playbook Produce Results?

Advertising Week 360 - Are We in a Golden or Gilded Age of Influence?

Adweek - Will Instagram Users Embrace a Stand-Alone Messaging App?

Forbes - How Do You Survive In Retail Today?

GeekWire - Born on the cloud but behind the times: How Pinterest doubled down on containers and Kubernetes

It’s well-established that retail is facing a great many challenges, even while simultaneously booking record holiday sales numbers.
Jonathan Gardner

Jonathan is vice president of marketing for ShareIQ, based in New York City.