It’s remarkable how a hot IPO can get discussion going. After a 50 percent rise in the stock price of The RealReal, the marketplace for consigned luxury items, following its June 28 public offering, there’s been a search to define what is so lucrative about this company, or e-commerce in general.
The RealReal certainly has exhibited wisdom in various aspects of its e-commerce strategy, such as understanding the role of the physical store in an omnichannel environment. However, the real story is the deeper one, more broad and more real(real): The RealReal demonstrates how retail in general is evolving to meet the needs and expectations of the future consumer.
At this stage in the evolution of e-commerce, its story isn’t so much about technology. It’s about generations. Retail always evolves to meet a current generation’s consumers where they live. For Millennial women, online and offline lives are richly intertwined.
Why Millennial Women Matter
Today, Millennial women represent retailers’ golden ticket: They control or at least influence a large majority (70–85 percent) of household spending. This is not a generational change in shopping habits — Baby Boomer and Gen X women similarly controlled spending. What’s new is that Millennials are now the biggest age cohort in the marketplace, and are still growing in size and spend, according to Pew Research.
Thus, if retailers want to maximize current and future share, they need to understand Millennial spending patterns. Millennials, who grew up in a world so different from preceding generations — a world of digital ubiquity and economic uncertainty — behave differently from their predecessors. Just as the shopping mall changed retailing in the 20th century, so too has the combination of e-commerce, social networks and crushing debt loads changed it in this century.
To understand Millennial women as consumers, retailers today need to understand their needs and expectations. Millennial women are driven by values, scarcity, a unique shopping path, and new forms of data to influence decision making. The RealReal and similar companies are making waves today because they are speaking that language.
Purchases That Reflect Values
The Millennial woman has spending aspirations — she wants her purchases to reflect her values. About 40 percent of U.S. women aged 18 to 36 actively look for brands and retailers that do good for the world, A.T. Kearney research shows.
Fifty-seven percent of Millennial women say that a brand’s values and stance on issues they care about influences their purchase decision, according to Merkle research.
Consider Reformation, the Los Angeles-based women’s clothing brand with the cheeky motto: “Being naked is the #1 most sustainable option. We’re #2.”
Reformation boldly caters to consumers who want to minimize their ecological footprint. It doesn’t just aim advertising at those customers — it builds its offering around those values. Each product on the website comes with sustainability details showing carbon dioxide savings, water savings and waste savings.
While other apparel retailers are closing doors, Reformation is expanding. On July 10, the global private equity firm Permira agreed to acquire a majority stake in Reformation with the aim of expanding both its e-commerce strategy and its retail footprint, both domestically and internationally, in both clothing and new product categories.
Browse Anywhere, Anytime Don’t Convert
Millennial women browse online, filling their shopping cart only to abandon it ultimately. Compared to previous generations, a female Millennial can pursue her shopping quest with more options at her fingertips.
Rather than taking the time to drive to a different mall, she can click to another website. Ninety-four percent spend more than an hour a day shopping online, but 60 percent hold off on making a purchase, often forgetting about items, according to a ThinkOver survey. Despite the investment in retargeting adds, many retailers find these women never convert. The problem? The options are almost overwhelming, and choice prevents action.
In such an environment, scarcity matters. Creating a treasure hunt overcomes the Millennial shopper’s inhibitions. If she believes she has found a unique deal for a brand she values, she will complete the transaction. In recent years, TJ Maxx and Ross have used the treasure hunt mentality to drive purchases — The RealReal shows how to do it online.
Retailers don’t need to think of the treasure hunt as an endpoint — it’s simply one strategy that promotes conversion. Another strategy is exemplified by Stitch Fix, which offers a curated selection of apparel, personalized through leveraging a team of stylists and delivered directly to consumers’ homes. When the box of limited items arrive, consumers already have spent money on the non-transferable stylist fee, and are incented to buy the whole box for a discount.
Her Own Path
The Millennial woman wants to shop her own path rather than traditional retail channels. She lives online, on social media — especially Facebook, Instagram, Youtube and messaging apps. Through these channels she discovers and gets inspired.
Nevertheless, bricks-and-mortar stores do play a role in her purchase decisions. For example, in apparel, 89 percent of millennial shopping habits involve a physical store, according to the 2018 Connected Consumers report by PYMNTS.com.
It’s not that the Millennial woman prefers a store or a pure online experience but that she transitions between them, blending channels to meet her immediate needs. She may shop in stores because she wants an item right away, wants to try it on, enjoys the process of browsing, or wants advice from sales associates.
This is why D2C companies such as Glossier, Everlane and Allbirds have opened physical stores: They’re catering to consumers who want that in-person experience. Furthermore, the bricks-and-mortar outlet provides the company with an opportunity to embody its brand physically and create intimate connections with its consumers.
The Millennial woman leverages data to make a decision. Her difference from previous generations is the form of that social proof: She’s more likely to turn to influencers and online ratings and reviews.
Millennial women cited online customer reviews second only to their personal experience with a brand, in a recent A.T. Kearney consumer survey of the top three factors influencing purchase decisions. They trust online customer reviews even more than recommendations from friends.
Sixty-two percent said they hae tried a brand recommended by an influencer, according to Merkle + Levo research.
Discussion of Amazon often focuses on price, selection or delivery windows, but it really shines in the availability of ratings and reviews. Those reviews are the most popular reason cited by the 97 percent of Millennials who use Amazon for at least part of their shopping, according to a CouponFollow survey. They’re also something of a self-fulfilling prophecy: as more people shop on Amazon, more people provide ratings and reviews, to the point where the collective wisdom of strangers becomes fully trustworthy.
Meanwhile, the sway of influencers among Millennial women also suggests the promise of Instagram’s recent investments in e-commerce. Instagram’s real progress came not when it gave brands the power to create shoppable posts, but when it allowed influencers to do so. It’s creating the ultimate frictionless Millennial shopping experience, taking consumers from discovery to purchase in seconds.
How to Lure Her
Amid all these changes, traditionalists may complain that the Millennial woman is difficult. Because she has different ways of expressing her values, and uses tools and decision pathways they may not be familiar with, she’s allegedly hard to market to. The truth is the reverse: She prefers a model that lets her constantly teach you what she wants. She’s easy to market to because all you have to do is listen.
The Millennial woman’s preferred model constantly learns about her from her, whether it’s the way she engaged online and in the store, or the way she willingly provides reviews. Rather than trying to guess where her head and heart might be today, you can follow the breadcrumbs she has dropped.
Another source of confusion for traditionalists is that they too often try to “solve for the Millennial woman,” as if they just need a perfect one-time way to crack this elusive nut.
Rather than solving for the Millennial woman, retailers need to be adapting their processes to the Millennial woman’s processes. She wants to be part of the conversation. She will evolve — and as Gen Z women mature and their spending increases, they will evolve even further. All of them are happy to co-evolve with retailers that continually seek to understand them through a test-and-learn approach.
Thus the task of the retailer is to shift mindsets and invest in capabilities that fit these new patterns. One change involves the outdated one-to-many marketing model — the idea that a Don Draper-like figure could create perfect solutions for wide swaths of the population, and the challenge is to find the new (female, Millennial) Don Draper.
Instead, the challenge is to find the new mindset, the people with non-Draper skills, capable of listening and drilling down into data and failing fast and relentlessly executing on new learning.
Such changes in mindsets are not easy, but the alternative we’re seeing is that traditional retailers remain on the sidelines trying to cook up a perfect solution, falling farther behind as their potential consumers continue to evolve and leave their brands in the dust.
Where E-Commerce Fits In
Although this article began with e-commerce players such as The RealReal, its lessons are more about Millennial consumers and traditional retailers in general. These lessons are especially important for e-commerce players to understand, because the shift in retail patterns also represents a gigantic shift in how to think about e-commerce.
E-commerce once was defined by its channel. Today, e-commerce retailers need to see their strengths not in terms of website design or delivery capability — channel-based features — but more in terms of satisfying and engaging customers. E-commerce retailers are, at heart, retailers.
Whatever The RealReal’s strengths in e-commerce — and again, they are considerable — what has fueled its initial success is the way it meets the needs and expectations of Millennial women, the powerful and growing consumer niche of today and tomorrow. The RealReal and its fashion tech peers can extend beyond e-commerce because they understand that any retailer’s core mission is to satisfy customers.
Tomorrow’s customers unquestionably will demand omnichannel fulfillment. E-commerce is not going away. Rather, e-commerce, like Millennial and Gen Z women, is maturing to where it becomes central to the very idea of the retail consumer.