Innovators challenge tired retail models

MICHAEL BAKER
Last updated 16:36 20/02/2013

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Each year, Fast Company, a business media company founded by two former Harvard Business Review editors, puts out its list of the world's 50 most innovative companies.

The 2013 list includes four retailers in the Top 10 - Nike at number 1, Amazon at number 2, Fab at number 5 and Target (the US retailer, no relation to Australia's Target) at number 10. Other retailers pepper the remaining 40 places in the Top 50.

The prominence of retailers in a list of cutting-edge innovators is no coincidence.

Technology is turning the sector upside down. And for traditional retailers there is an ominous message from this list - very few of the retailers that appear on it are mainstream. This suggests that despite significant investments in technology over the past couple of years, the major retailers on our main streets and in our shopping centres are still playing catch-up.

Indeed, the gap between the innovation leaders and followers could be widening.

Nike's top ranking on the Fast Company list was secured through the release of two products, the FuelBand electronic bracelet and the Flyknit Racer running shoe.

The FuelBand monitors the wearer's physical activity and converts it to a points score that can be compared with the scores of other FuelBand wearers, even when they don't play the same sports.

The Flyknit Racer re-engineers the running shoe. The fabric is new and lighter, and the production process reinvented.

Amazon achieved the No 2 ranking for logistical advances that have enabled it to offer same-day and next-day delivery service for merchandise purchased on its site.

Fab moved into No 5 spot by evolving its member-based flash sales site into a series of online boutiques for design-rich merchandise, expanding its membership to more than 10 million in the process.

Target is the only conventional retailer in the group, and therefore a significant one. It made the top echelon of innovators by introducing a new urban-based version of its suburban discount superstore, called CityTarget, which has opened in Chicago, Los Angeles and Seattle. The new store prototype has an edited and reorganised assortment targeting the specific needs of urban dwellers and business travellers. It also offers free wi-fi and mobile checkout.

Apple (No 13 in the rankings) and a collection of small players including Nasty Gal (a growing e-tailer of women's clothing with a distinct "point of view") and ModCloth (an e-tailer that works with independent designers), bundled together at number 19, all underscore the vibrancy of non-traditional retail models.

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Collectively,  Nike, Amazon and Apple have done fabulously in these areas.

However, there is one more thing that is just as important but easy to overlook. It's the value that a retailer can add as a curator of products. In the case of Target, this enables it to make more efficient use of its physical store floorspace and drive higher sales per square metre.

In the case of Nasty Gal and ModCloth, being curators of fashion helps them to define and express their unique attitudes, which enables them to connect at an emotional level with customers.

This constitutes a direct attack on the old department store "house of brands" model, which purports to be all things to everyone, but seems, increasingly, to disguise a lack of curatorial flair.

The Fast Company list makes for an interesting read. You can agree or disagree with the rankings, but it provides some powerful inspiration to those who want to challenge established business models and make the world a better place.

- Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.com

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