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The Curation Debate: Why virtual retailers are relying on relationships

Online retail is often seen as the enemy to physical selling, but these days the most valuable part of your business may not be your physical assets, but your ability to connect with your customers. Courtney Devereux picks apart this new paradigm.

By Courtney Devereux | July 6, 2017 | News

Online retail is often seen as the enemy to physical selling, but these days the most valuable part of your business may not be your physical assets, but your ability to connect with your customers. Courtney Devereux picks apart this new paradigm.

Online shopping in New Zealand was up 16 percent for January 2017 against the previous January. Figures released by research company Roy Morgan last December show the number of Kiwis shopping online rose to 49 percent of the population - or 1.8 million people - in the year ending June 2015. This had increased from 39 percent in 2011.

Retail statistics have shown that in one year from January 2016-2017, New Zealanders spent an estimated $3.8 billion through online shopping alone, a rise of 7.4 percent. However, physical retail spending only rose 4.2 percent.

It’s easy to see that stores that choose to operate solely out of bricks and mortar stores are missing out on what an online reach can accomplish. However, the benefit in going online is not just in marketing an existing offer to a larger pool of customers – innovative retailers have found ways to create offerings which are wholly original and unique to ecommerce.

Much has been written about the disruptive effect of Airbnb on the hospitality industry; Uber’s impact on taxis; and the growing dominance of Alibaba and Amazon over retail. What ties together these juggernauts is that none of them hold or sell any assets of their own. Instead of leveraging their ability to trade goods and services, these businesses are built on their ability to connect with customers.

This format isn’t limited to international giants, either. We’ve examined New Zealand examples of ecommerce retailers which base their businesses on the interface model and found two distinct flavours: curators, which create value by directing shoppers to carefully-selected goods from other retailers; and connectors, which seek to connect budget-conscious shoppers directly with back-end service providers and manufacturers.  

The curators

Curation isn’t a new concept to retail. In fact, the idea of selecting a range of options which makes sense to a particular shopper is at the core of the traditional boutique, but online retail curators have taken it a step further by providing these options without actually holding the stock themselves.

Most curation sites work through commission-based selling, like Amazon or Alibaba. They deliver value to the consumer by saving them the trouble of trawling through the internet using search engines to find items which suit their preferences or requirements. Instead, the curators present other retailers’ stock according to a clearly-signalled aesthetic and take a percentage of the goods’ price once the consumer makes their purchase. Some curators redirect customers to the other retailer’s website to complete their purchase, while others take the payment themselves and reconcile the financials at the back end.

Retail curation sites come in many shapes and forms, from clothing to homeware to hotels to holidays. With such an abundance of options available for consumers, it’s no wonder that the owners of these sites saw a gap in the marketplace to bring together the best options available.

One such visionary is Thieve.co. Thieve, an Auckland-based online site with a global outlook founded by Tim Scullin, uses an army of around 400 creatives to collect and review trendy products from consumer-focused Alibaba spinoff AliExpress, then promotes them on the site.

Scullin saw a gap in the market for an AliExpress-focused curator website after developing an interest in the site, which offers users the ability to buy direct from more than 300,000 Chinese suppliers, many of which are manufacturers. It’s deliberately aimed at a non-Chinese market, but can be confusing to navigate for Kiwi users accustomed to less overwhelming choice and greater consumer protection.

 “When you go online, there is like 100 million options, being able to find stuff you want is really difficult. Almost anything you can think of is online.” 

Scullin’s site took a mere 14 days to get up and running, including the application to AliExpress’ affiliate program for approval. It resulted in instant high demand, and has fielded over 250,000 users since its launch in 2015.

Thieve follows a basic curation policy that allows an online buyer to view products on the site but buy from the original wholesaler. However, unlike most curation stores, Thieve has its own reviewing team that holds and tests stock before they preview it on the page.

According to Scullin, the review process means Thieve only features products that are good-quality. This isn’t always true when users locate their own AliExpress goods directly on the site, he says.

“When something comes in we will manually review it to make sure there are enough orders and that there is a trust factor of the product.

“We created Thieve Swipes [A Tinder-like game which allows users to swipe right on items they like, and left on those they don’t], so once a product gets approved it gets shown to the people who go onto Swipes and we use that current as a testing site. So then the most popular stuff gets put up.”

Quality and customer service are important for curation sites, as Scullin says trust is the biggest issue online. He believes ecommerce sites take longer to gain customer trust.

“It is a lot easier to build a trust in a brand when something is tangible. Curation is a way people can bring different styles into one place. Our curation is around quality; we’re going to do the research to help find the best version.”

The ability to promote your business through a number of online streams will help profits stay healthy, even as shoppers spend less and less time on the high street.

Retail NZ runs its #ShopLocal campaign to encourage New Zealanders to buy through smaller local stores in person or online rather than send revenue offshore to foreign behemoths like AliExpress. Provincial retailers are particularly hard-hit by this trend. However, any retail store with an online presence can target the latest shopping craze: convenience.

When it comes to retailing in a small town, maintaining personal relationships with customers is key to success, but regional retailers have traditionally been slow to transfer their insights and expertise in to online channels. This is not to say the regions lack innovation: a growing number of retailers are running thriving online businesses from the regions, such as Paeroa-based lighting pureplay Mr Ralph, which passes on the savings from its cheaper leasing arrangements to customers from as far afield as Australia; and Mt Maunganui furniture company George & Willy, which now makes 60 percent of its sales overseas.

New Plymouth-based web developer Shay Starrenburg is also making waves in the regional online space. She launched curator site Shop Small in August 2016 to point customers wanting to shop online within their communities towards provincial retailers with ecommerce capabilities. For a fixed monthly cost, regional SME retailers’ websites are presented on the Shop Small platform, which acts like a directory. 

A regional curator with a twist is Shop Kaikoura. The Kaikoura-based site was launched close to Christmas last year, when local shop owners were struggling to cope with the aftermath of the 2016 November earthquake. The quake caused widespread damage to homes and businesses and chased away Kaikoura’s usually-reliable summer tourist traffic.

Shop Kaikoura was created by Ina Kinski, a Dunedin tech executive who had planned to spend the summer in Kaikoura. After the quake, she noticed local retailers were holding deep-discount sales to try to address a revenue shortfall of 60-70 percent, and saw the potential for a digital solution which could open up those retailers to the rest of New Zealand.

Shop Kaikoura strikes a different note to the other curation sites. It’s a grassroots, not-for-profit organisation that operates solely for Kaikoura and the businesses located there.

Although, like other curators, the site holds no assets itself, it features 24 small business and offers a look to inside the store and what is available for purchase.

Customers book online for a personal shopper to take them around a chosen store, by either Skype or video call, and show them what’s available to buy. After the customer has chosen what they want to purchase, the volunteer shopper will pass them over to the retailer so the transaction can be completed, and have the item delivered.

Kinski says Shop Kaikoura’s social conscience is what drives it: “This campaign is focused on local identity. The entity of a shop is its identity and a trust relationship is important.”

Kinski says the site was bust from the start, and the importance was placed on the money going back to the retailers, not to the curated site.

“I think the reason it worked so well was because it was compelling, simple and it came at the right time. People wanted to help, empathy and action are big draw cards.”

According to Kinski, “people spend more when they’re directly connected.” Which can be a learning point for other curation sites which have no personal relationship with their customers.

“People are wanting to go back to having a personal relationship with the people they buy from.”

Although Kinski is blunt about the need for change in an increasingly competitive retail environment, she acknowledges that it’s difficult for SMEs.

“For a brick and mortar suddenly needing to change its whole model to survive, on top of dealing with a natural disaster, it’s a stressful proposition,” she says. “If you had a business in Kaikoura you didn’t exactly need to be good at what you did. But suddenly good relationships are more important than good locations. Change is difficult with added stress.”

Shop Kaikoura has gained support from sponsors such as New Zealand Post and Health 2000, which is how the site can continue to operate. It is a perfect example of a curated site that features only physical stores in its trading, meaning brick and mortar stores without an existing online presence have an opportunity to grow without leaving the community.

Although the site has had a lot of recognition, it is clear that provincial towns struggle with change when it needs to happen quickly. As Kinski says: “Immediately after an earthquake isn't necessarily the right time to re-work your business model and it's rough to see people being forced to adapt.”

The connectors

Connectors’ core function – using the internet to give consumers retail experiences they’d have difficulty finding independently – is similar to that of curators, but rather than presenting a range of different retailers, they focus on depth rather than breadth, connecting savvier shoppers with deals from back-end suppliers and manufacturers while clipping the ticket on the way through. They also tend to be more value-oriented propositions than the often high-end curators, and tend to handle purchases directly.

GrabOne connects customers with the best deals available in New Zealand. The site, which has been running for almost seven years, boasts a reach of 2.9 million New Zealanders.

Alex Mackrill, marketing communications manager at GrabOne, agrees with Scullin on the importance of the trust factor.

“[It’s] down to the quality of the merchants we work with on the outset. We pretty much stand or fall by the quality of them. And really it’s just been a drive to get those always-popular, always-appealing businesses on site.”

Mackrill says after a GrabOne launched “with a bang”, the process from there was centered around market analyzing and finding the best businesses to connect consumers with.

“We look at the market, who are the big players and key industries. We have a hit list, if you’d like, of merchants we want to approach to try and feature... Often we get inbound inquiries from people that want to work with us. But when we approach business we like to assess their needs.”

GrabOne customers have bought over 12 million deals since the site’s launch and have a savings estimate of 500 million from the deals sold since 2010.

Like any retailer, online or physical, customer service is an important part of the framework that dictates if a site is a quality and trustworthy. GrabOne remains one of the only deal-based sites with its own in-house customer service team. 

“When people buy something from GrabOne although we act as an agent, they’ve bought from the site, therefore, we act as the first port of call should there be any inquiries or something goes wrong,” says Mackrill. “We can responsibly make sure we’re looking after the customers.”

Container Door is another example of a connector model. It cuts out all middlemen between the manufacturer and the consumer, operating a lean drop-shipping service which sells furniture, home accessories and other big-ticket items.

Drop-shipping is when a site sells a product, then purchases the item from a manufacturer and has it shipped directly to the customer. In this reversal of the usual retail procedure, the merchant orders only one review item, and never sees or handles the stock they sell to customers.

Container Door was launched in 2015 and has 51,000 registered users in New Zealand. The site, owned by Ben Nathan, works through connecting customers to the original source. Nathan will buy and review items requested by customers before promoting the deal on Container Door.

Each container shipped by Container Door must have a certain amount of orders within it, otherwise, it isn’t ordered in. Customers are not billed until the container has enough orders and is stocked to make the journey over.

The only downside for customers is the wait time, with products taking anywhere between 20 to 60 days to manufacture. Container Door fully guarantees products until they either get picked up by the customer or get delivered to their door.

So far the site has shipped over 662 containers and has over 103 connected suppliers. By cutting out costs of wholesalers and retailers that often come with import fees and paperwork fees, the connecting site offers consumers significant savings.

The phrases ‘express shipping, ‘easy returns’ and ‘flat rate fees’ are some used by online stores to ensure that customers are drawn to their site. A common goal for these type of retailers is to be the ‘go-to’ site for any specific item

Blurring the edges

New Zealand owned and run website Onceit is an example of brand curating without restrictions, but is also somewhere between a curator and a connector. The website itself promotes a cool 500+ designer brands, both domestic and international. The clothing, accessories, beauty and homeware site gets 20,000+ orders per month.

Onceit was launched in May 2010, the same year as GrabOne. It now has 400,000 members registered. Customers must register before browsing – in the site’s early days, its memberships were invite-only. Onceit works through featuring designer brands on the site then passing the sales on through to consumers. It now features some high-street labels alongside its core exclusive brands.

Director Jay Goodey says even though Onceit has over 10,000 sales and counting now, the site was slow to get off the ground, with almost every brand he approached saying no. 

“Places were nervous about putting out their products online, it was quite visible, but eventually we just started getting people saying yes. We started with about three campaigns a week - when we launched we only had about six [designer brands affiliated with Onceit].”

The mega curation site that is now Onceit is proof that a full-fledged curation site takes time to get going. Now boasting over 400 suppliers, the website is working to be the ‘go-to’ for international and domestic sales. 

Like most curation sites, Onceit aims to offer exciting products that appeal to their target audience, whether that appeal is based on brand, price or product range. The site works through a commission-based structure.

“We make a margin on what we sell,” says Goodey. “In the cases where we don’t purchase the stock outright, we can work on a much leaner margin than retail.”

Onceit did at one point stock its own-brand items, but Goodey says customers proved to be more attracted to the label-brand items it sold alongside them.

“We have dabbled in a few different production areas. Currently, we are seeing some good success in getting on-trend products fast at sharp prices. However, in some cases, we build out a brand story and branding for certain ranges where we repeat.”

Unlike pure curators, Onceit does hold stock, but only if the investment is financially worth it - some brands can’t make consignment sales work. Buying out of season overseas usually ends up creating a larger profit margin for Onceit. The company doesn’t count its onsite stock as a large part of its revenue percentage, but says last year, non-consignment stock accounted for around 40 percent of Onceit’s sales.

Goodey says the company will continue to hold its own stock, and is working on the proper split between stock-holding and consignment sales.

“About one year ago, we made the conscious effort to start investing in stock and are still figuring out the sweet spot for the split in terms of own inventory versus a marketplace model. The both have pros and cons but I think the main benefit of including both is the increased range you can achieve without as much capital outlay.”

As these online marketplaces grow, so must their suppliers: “If we’re offering something unique that a consumer couldn’t get, and was offering them that platform to get it on a local, hopefully, trusted, brand then they’re more likely to buy through us.”

“We used to deal exclusively with New Zealand products, whether that be New Zealand suppliers, disrupters or brands. But now it’s about 60/40, 60 percent comes from New Zealand and the rest is offshore,” says Goodey.

The importance of supporting New Zealand brands isn’t lost on Goodey, who says although Onceit now works through different suppliers, the core principals stay the same. Even though customer service and a connection is an important factor for the site, which also employs its own customer support team, Goodey acknowledges that when it comes to the customers, the type of platform they’re using is the last thing on their mind.

“From a supplier perspective, we are a connector, we have a market that they can’t otherwise access. From a customer perspective, I don’t think they look at us and think we are a marketplace, they look for products that excite them.”

Like other curation sites, it is the customer service part that is often looked past, but Onceit comes stocked with its own consumer guarantees separate to the manufacturer.

“Particularly if you’re taking people’s money, [it’s important to provide] confidence that they are going to receive their product in the said time. For us, we do our own logistics. In a consignment model, it’s difficult but If you can do it right and do it confidently, that’s how you retain customers.”

What can traditional retailers learn from curators and connectors?

It is easy to have a preconceived perception about what online shopping does to physical retailers, but through curation and connector sites, online and bricks and mortar can coexist in many different mutually-beneficial configurations. The key to getting the balance right within a single company, according to Goodey, is offering more than just the efficiency that online shopping provides.

“I think that [retailers] just have to have a really strong market position. If they don’t corner a particular part of the market, then I think those companies potentially won’t be able to add as much value as a [pureplay] online store.”

At a time when almost any item can be considered a commodity online, it can be difficult for a traditional retailer to stand out on the web. However, with chaos comes opportunity - the ongoing incursion of the internet into retail spaces is an opportunity for stores to restructure their model and solidify their identity as a retailer.

Thieve founder Tim Scullin’s advice for physical retailers adapting to online is to stick with what they’re good at: creating an experience for customers who enter the shop and in turn gaining the trust that can be hard to achieve for pureplays.

“If you have a product, if you have a brand, then you’re participating. It’s easier to build a brand when it’s something tangible. There is a lot more value in personal experience. Online places will take a longer time to earn your trust, whereas if you go to a physical store, all the factors are there straight away and you can make your own opinion.”

Alex Mackrill says Grabone, along with other connector sites, “present a way for a business to fulfill their needs.” He agrees that no matter how much online shopping may appear to flourish and grow, there will always be a need for local retail businesses.

The way for brick and mortar stores to fully grow as the market does is, basically, to ‘get amongst it’. A single stand-alone store will find it increasingly difficult to target its whole customer base if it doesn’t have an online presence in some way.

Curators and connectors are not responsible for a fall in brick and mortar sales, but rather, they’ve taken an existing opportunity for brands to set themselves up in a virtual marketplace and still make a profit. 

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