Is there anything special about specialty retail?

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Mar 25, 2019
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John Bajorek, EVP, Strategic Growth & Innovation, WD Partners

Through a special arrangement, what follows is an excerpt of an article from WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.

While the department store channel garners much of the negative retail press these days, specialty stores generally earned poor marks in our annual consumer study, “The Good, The Bad & The Ugly.”

WD Partners invited more than 4,000 consumers to share their opinions on 100 of the top brands. A rating system signaled if a brand is “Good” (gets them and holds a meaningful place in their life), “Bad” (not for them, but can see why others might like them) or “Ugly” (doesn’t care if this brand disappears tomorrow).

Specialty retail represented a few of the top, but most of the ugliest brands of 2018. Breaking down niche specialty segments: consumer electronics, personal care and crafts were bright spots, even as specialty retail brands represented the wide majority of poor performers in 2018. Jewelry led the charge, closely followed by specialty apparel — both of which were presumed to be high performers going into 2018.

Source: WD Partners

While it may be true that specialty retailers are uniquely positioned to offer in-depth brand expertise and customer service in their particular verticals. They’ve too often played it safe.

Granted, other changes have hurt specialty, but the category isn’t doing enough to make up for lost ground. It might have once seemed normal to spend an entire afternoon to go to ten different stores in search of the perfect polka-dot shirt. That’s an absurd proposition for many shoppers today, who would rather spend ten minutes searching online for what they want.

Product, ironically, is also not the fix, even if specialty retailers keep obsessing over getting the right product mix or riding the latest fashion wave. You can get any product any time when you’re anywhere, so it’s almost impossible to be exclusive today.

Digital Natives (18-29) and Digital Immigrants (46 and older) still crave and want the social experience of a physical store. And no one is better positioned to pull off experiential retail and showroom stores than specialty brands. Most, however, aren’t embracing store innovations, from mobile apps to gathering spaces and showroom stores. It’s time for specialty to innovate before it’s too late. Specialty retail, of all categories measured, has the furthest to go.

DISCUSSION QUESTIONS: Have specialty retailers been affected any more or less by online disruption than other retail verticals? Do specialty retailers generally have any advantages in adapting to the related changes in consumer behavior?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The specialty category of retailers will be the big winners in go-forward physical retailing, but the names on the doors will likely continue to change."
"When I think through the list of specialty retailers that I would give an “ugly” to, many of the boring mall stores come to mind."
"Being a former specialty retailer, it pains me to say that specialty, in general, are the laggards of the retail world right now. Where’s the innovation?"

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19 Comments on "Is there anything special about specialty retail?"


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Mark Ryski
BrainTrust

All retailers have been impacted by online — including specialty retailers. By definition, specialty retailers are not trying to be all things to all people, so their focus is an advantage. However, all retailers still face the same challenges, regardless of category – they must offer products shoppers want and deliver a store experience that satisfies customers.

Paula Rosenblum
BrainTrust
I think there’s a fundamental error in the purpose of specialty stores in the article. This statement: “It might have once seemed normal to spend an entire afternoon to go to ten different stores in search of the perfect polka-dot shirt. That’s an absurd proposition for many shoppers today, who would rather spend ten minutes searching online for what they want.” is not what specialty stores are all about. Specialty stores are meant to have narrow and deep assortments designed for a particular lifestyle. So if all you’re looking for is a “polka dot shirt” a specialty store is not for you. If you’re looking for a shirt to wear on Casual Friday that can also be worn to a bar after work and that suits your taste and lifestyle, a specialty store is for you. Chico’s, at its peak, was exactly that. A place where women of a certain age and size could find some interesting options for their work and play lives. Most specialty store woes we’ve seen over the past couple of… Read more »
Kenneth Leung
BrainTrust

I agree. If you are going to a boutique you are looking for something special in a category that inspires you in some way. At the end of the day, all the mobile tech and digital displays don’t help if the merchandise in the store isn’t correct. I think sometimes we forget that in retail, the ultimate customer experience isn’t information about the product you know, but to find something that delights you to buy.

Ricardo Belmar
BrainTrust
This study tells us there is no safe segment in retail that’s endearing itself in shoppers’ hearts – all are equally demonstrating some high-performance outliers while the majority are still failing to gain relevance in shoppers’ lives. Specialty retailers have one advantage – and that’s in their brand. Department stores are losing ground because shoppers would rather go directly to the brand’s own store to buy a product if possible than to visit a department store. Shoppers feel they get more value this way and something more unique. However, the article is right – too many specialty retailers have been complacent and failed to enhance their in-store experience from fear of spending too much money too quickly. Time waits for no one, however, and specialty retailers need to ramp up now or they won’t be around to reap the benefits later. Unlike dept stores, their store footprint lends itself to more rapid deployment of new digital experiences and they should have more agility in their organization to deliver on this, but only if they act… Read more »
Charles Dimov
Guest

Specialty retail is no more or less immune to disruptions from online, omnichannel selling, or other innovations than any other retail vertical. They do have an opportunity, as specialty retailers are often thought to have closer relations with their customer base. However, if specialty retail does not innovate and evolve with the times, then it too risks being left behind. For the good of the industry, we don’t want any sectors or retailers to be left behind.

Bethany Allee
BrainTrust

Specialty retailers have been affected more by online disruption for two reasons. On the positive side of things, they’ve adapted their businesses more thoroughly than other retail verticals. The first segment of retail that diversified their business was specialty retail. The first segment of retail to offer click-and-collect functionality to integrate online and brick-and-mortar shopping was specialty retail. Because of their focus, they’re able to evolve faster to accommodate online disruption. On the negative side of things, they now have vast competition where there was minimal competition before.

Jeff Sward
BrainTrust

Product is not the fix — really? At the end of the day, after the store renovations, after the mobile apps, after the gathering spaces and after the showrooming … money finally changes hands based on product. AND the quality of the experience along the path to purchase. But if the product isn’t right, then all the backflips along the path to purchase are for naught. Seems to me obsessing over the right product is the right thing to do. PLUS getting path to purchase right. Path to purchase is now trickier than finding a parking spot at the mall.

Brandon Rael
BrainTrust

The challenge with specialty retail has been to remain relevant, trendy, interesting and up to the challenge of a changing marketplace. Specialty retail fundamentally is the best space to drive experiential retail, however it could quickly go south. As history has proven, once dominant specialty retailers such as Borders Book Shop, RadioShack, Circuit City, and others didn’t last too long once they lost touch with the changing customer preferences, and marketplace shifts.

With that said, specialty retail represents fertile ground for retailers, digital native brands and direct-to-consumer models. The key success factor is to keep the experience interesting. Digital native brands such as Casper, Warby Parker, Bonobos, Away, and others are focusing on the experiential side while driving new product innovations. We should expect the DTC specialty retail trend to continue with Nike’s House of Innovation and others whose store locations not only serve as a place to connect and to sell to customers but also drive new and interesting experiences.

Mike Osorio
BrainTrust
The title “specialty” retail is the hint behind my answer, which is “it depends”. The nature of specialty retail is specializing in a particular product category and bringing to it, in the best cases, a point of view that is relevant to a significant population of consumers. As Paula states, the most important aspect of success is for the specialty retailer to sell what people want. Let’s make that a given for the purpose of this discussion. Then connecting effectively to the consumer creates relative success. And that’s where online disruption impacts specialty retail. The key to harnessing digital disruption is understanding what the customer naturally does, or wants to do, and then investing in digital solutions to ease that activity. Click and collect, shoppable Instagram posts by influencers, seamless shopping between online and in-store, and live chat are a few of the more positive online interventions which if leveraged by specialty retailers prove positive. And when not embraced, tend to prove negative. My view is that the specialty category of retailers will be the… Read more »
Neil Saunders
BrainTrust

Too few specialty retailers have adapted to the challenges of the digital era. Many think their USP still lies in stocking loads of stuff – something that was true 20 years ago but is no longer valid in an online world where consumers have extensive choice at their fingertips.

In reality, the USP is now in curating and editing a range that is relevant and novel and selling this in an engaging and stimulating environment with strong customer service. Some retailers like REI get this, which is why they do so well. Sadly, many do not.

Jeff Sward
BrainTrust

USP … unique selling position … therein lies the answer. How many specialty stores are truly unique? How many have a brand promise that gives them any kind of moat? How many have a USP that makes them the go-to store? Good example in REI. Urban Outfitters and Anthropologie? Yep. Gap? Nope. Best Buy and Apple? Yep. Abercrombie? They did, and blew it.

Lee Kent
BrainTrust

When I think through the list of specialty retailers that I would give an “ugly” to, many of the boring mall stores come to mind. The ones that have over-stuffed store windows, look messy inside, and where the help could care less you are in the store. So in answer to the question of whether specialty has been affected any more or less, I would say that all store retailers face much of the same. Make it interesting, make the experience delightful, easy, special and they will come. Above all, have a passion for your brand and let it show. And that’s my 2 cents.

Robin Mallory
Guest
8 months 14 days ago

How key this is: “Above all, have a passion for your brand and let it show.” How often can you walk into a store and store help is so knowledgeable about the brand and USPs, that he/she can pair those to what you are looking for at that instance? All I seem to hear is “50% sale rack is against the back wall.” That without saying a word. Next time I will blatantly ask, “What about my body language said I was bargain shopping?” In fact the opposite is true, as a petite size, it would be near impossible to find my size on the leftovers rack.

Bob Phibbs
BrainTrust

While I agree with the premise, I don’t agree with the prescription “innovations, from mobile apps to gathering spaces and showroom stores.” The only thing a brick-and-mortar retailer has going for it is its people. Fix the people, fix the customer experience. Ignore it and you end up burning through hedge fund money chasing the latest technology. Fix the people, fix the experience.

Jasmine Glasheen
BrainTrust

In a world where customers can have everything at once, specialty retailers are struggling to create an experience worth the trip (and the investment in full-price merchandise).

It’s more difficult for specialty retailers to get customers to download an app to engage with their brand through mobile than it is for, say… a department store with more comprehensive offerings. Because of this, specialty retailers need to focus on social media imagery and outreach to connect with new age consumers in meaningful ways.

Lee Peterson
BrainTrust

Being a former specialty retailer, it pains me to say that specialty, in general, are the laggards of the retail world right now. Where’s the innovation? Why are they still relying on the next delivery to save themselves ala 1990? Why are there rotating leadership attendants? Why did you not knock off Bonobos? The list goes on and on while meantime, AMZN creates a new private clothing label every week.

Sad to say, but unless something happens pretty quick (and the closing anchor situation doesn’t help at all), this is a category that’s ripe to go either A) all on line MUCH smaller or B) to the Third Wave newcomers, who seem to get it.

Phil Rubin
BrainTrust
8 months 14 days ago

I struggle to generalize about the differences between speciality retailers and broader line merchants when it comes to the “disruption” that has (rightly) impacted the industry. In our experience as well as our research, there are broadline merchants that do very well and there are those that fail and the speciality categories are quite the same. If anything, the specialty retailers have an advantage in that they are focused, or by definition, specialized.

The real issue in terms of the degree to which their business is disrupted or disrupting comes down to how focused on customers they are and how this translates into their brand relevance and customer experience.

Show me a retailer in any category that is focused on customers and I’d bet they are doing pretty well, regardless of who and what they are up against.

Patricia Vekich Waldron
Staff

Every retailer has been upended by online, and are struggling to keep up. What specialty retailers can do is to understand their customer and deliver irresistible products to help them stand out.

Christopher P. Ramey
BrainTrust

Too many specialty retailers are laggards when it comes to anything technology or consumer behavior driven. They tend to be product focused rather than consumer centric. They are often oblivious to the online disruption or evolution of marketing technology. They don’t know about the customer who never walks in their door.

They see only what’s immediately in front of them from their knowledge of what’s behind them.

Mom & pop shops with limited costs of business will do fine. But specialty chains without their ear to the ground are going to get run over by the train approaching from the other direction.

wpDiscuz
Braintrust
"The specialty category of retailers will be the big winners in go-forward physical retailing, but the names on the doors will likely continue to change."
"When I think through the list of specialty retailers that I would give an “ugly” to, many of the boring mall stores come to mind."
"Being a former specialty retailer, it pains me to say that specialty, in general, are the laggards of the retail world right now. Where’s the innovation?"

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