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SXSW

Why the New Crop of E-commerce Brands Should Really Scare Traditional Retailers

Data and social media are changing the game

Can legacy brands survive with online players? Getty Images

Even as pundits swear that bricks-and-mortar shopping isn't dead, anyone who works at a traditional retailer may have been sweating a little while listening to a South by Southwest Interactive panel about the future of retail.

On Saturday, speakers from MIT's Center of Digital Business, Clique Media Group and The Bailey Group talked about how upstart brands like Casper, Dollar Shave Club, Bonobos and Warby Parker are shaking up traditional merchants that are notoriously slow to embrace technology. For legacy names like Macy's and Sears, the e-commerce boon has required pouring major resources into building slick websites and mobile sites. E-Commerce companies, on the other hand, are building digital-first brands from scratch using data, social media and web tools.

"It sucks to be an incumbent if you're in retail," said Michael Schrage, research fellow for the MIT Center of Digital Business. "If you use phrases like e-commerce consistently, it's a sign that someone should short your stock. Retail is being transformed into shopping, and how people want to shop is completely and utterly out of your control."

One of the major reasons upstart brands have been successful is because they come at the industry with a unique perspective, said Katherine Power, Clique Media Group's CEO and cofounder.

"A lot of these direct-to-consumer retail brands are not well-known names, but they come in with a very distinct look, feel, voice, tone," she explained. "Consumers really react to that. It's possible for big, giant retailers to do that as well, but I think that's something that's often overlooked."

Power said that differentiating a brand relies on crunching data to figure out what people look at and buy online. For example, Clique Media Group (CMG) recently partnered with Target to create a clothing-and-accessory line based on stats from social media and the Web.

"We refer sales to hundreds of retailers, so we're looking at what sells at what point in the year, what materials, what silhouettes, we're looking at search queries," said Power, whose company entails in-house retail brands like Who What Wear, MyDomaine, Byrdie and Obsessee.

Even a simple social post can give marketers insight into their shoppers.

"I'll go on Instagram and create a video and say [to fans,] 'What are you missing in your closet? What do you need?' I take that data, as well as everything else we get from the actual transactions that we watch, and we use that to put products into the collection," Power said.

Other digital brands are building bricks-and-mortar stores that are designed with unusually specific details, said Christopher Tate, CEO of The Bailey Group, who is soon opening the first store for e-commerce brand Bailey 44.

"We partnered up with a local florist who is going to have a new flower shop in the space, we have local food curators inside—we want to create an experience for that brand that can't really be replicated online," Tate said.

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