Traditional retail is dead. Long gone is the need for physical store fronts, savant fashion designers, and seasonal collections. The retail landscape is changing at a rapid pace as traditional brick and mortar stores and designer-led brands lose ground to digitally native brands and fast fashion companies such as Zara and H&M. As Millennials continue to grow as a portion of discretionary spending, the generation’s demands for speed, convenience, and customization will serve as key determinants of the winners and losers of the industry2.
Betabrand, an online clothing retailer, has completely upended the traditional definition of ‘product development’. The linchpin of strategy is “open innovation”, which allows the company to test the marketability of designs prior to production10. Through a combination of in-house creations and designs submitted by individuals via an online platform, Betabrand seeks to rapidly and accurately address evolving consumer apparel and accessory demands10. Open innovation gives Betabrand a key competitive advantage in the highly saturated retail industry and management’s ability to capitalize on this innovation in product development will be key to the company’s future success.
Source: Betabrand 
Crowdsourcing innovation allows Betabrand to eliminate many of the greatest risks and costs associated with traditional retail brands. Obsolete inventory is a major pain point for traditional retailers as SKUs that do not sell well don’t turn on the physical or virtual shelves and companies are forced to adopt deep discounting or write-off unsalable inventory6. Betabrand seeks to reduce the quantity of obsolete inventory by soliciting consumer feedback on product designs prior to the production of physical goods. In doing so, Betabrand can immediately scrap designs that do not gain traction with consumers, confidently produce fashion forward product designs that traditional retailers would shy away from for risk of low market adoption, and play into Millennials’ desire for customization in the production process1,9. Rapid consumer feedback also drives Betabrand’s fast production cycle from idea generation to distribution, allowing the company to compete in a market of condensing production timelines led by fast fashion brands such as Zara5. Lastly, the company’s sourcing of designs from individuals around the world greatly expands the funnel of products ideas and places the company much closer to consumers on the buying journey.
Betabrand management is focused on open innovation as it is the foundation of the company’s business model. In the short-term, the company is building out the product portfolio beyond apparel and enhancing user participation. The business model is only as strong as the feedback loop Betabrand receives from designers and customers; therefore, a focus on keeping individuals engaged via the platform is critical for proper functioning. The company is refining the their 3D virtual product renderings to give consumers the most accurate perspective on the proposed product and increase the accuracy of received feedback7. Betabrand is also actively condensing production cycles to deliver product as rapid speed of response to the market is becoming “table stakes” in the retail industry7. Over the long term, Betabrand is focused on increasing lifetime value of customers through driving repeat business of both purchasers and feedback contributors and building a strong online “community” 8. As consumer preferences change, the company must continuously produce items to entice individuals to return to the platform.
Management must continue to refine how they combine this open innovation platform with the advantages of traditional retailers and technology companies entering the retail space. Betabrand currently operates one brick and mortar store and must develop a robust plan for scaling in an industry in which digital brands struggle to scale to the size of traditional retailers3. Physical stores may reduce the speed with which Betabrand can bring a product to market and may minimize the elimination of obsolete inventory, two significant advantages of the digital open innovation platform; therefore, management must devote significant attention to the cadence and method by which they continue to expand. In addition, in an increasingly crowded space with large players such as Amazon generating vast amounts of consumer data to drive production decisions, Betabrand must continue to strengthen their consumer-driven platform to source and evaluate ideas and address target users through their channels of choice (e.g., social media). Management must focus on building a community in which consumers are enticed to remain loyal and establish unique perspectives on design to continue to differentiate themselves from other retailers’ predictive algorithms.
The retail industry is ripe for innovative companies to steal share from traditional designer-led, slow to market brands. Can Betabrand’s open innovation platform scale and strengthen to compete against powerful data-driven producers such as Amazon as well as fast fashion giants such as Zara? What barriers, if any, exist for others to adopt the same crowdsourcing model and how can Betabrand garner loyalty among a generation known for its brand promiscuity4?
 Apparel Magazine. (2018). Betabrand Takes Crowdfunding to the Max. [online] Available at: https://apparelmag.com/betabrand-takes-crowdfunding-max.
 Boston Consulting Group (2012). The Millennial Consumer: Debunking Stereotypes. [online] Available at: https://www.bcg.com/documents/file103894.pdf.
 Dennis, S. (2018). Pure-Play E-commerce’s Scaling Woes Continue. [online] Forbes. Available at: https://www.forbes.com/sites/stevendennis/2018/11/09/pure-play-e-commerces-scaling-woes-continue/#3f3540f156fa.
 McKinsey & Company. (2018). The new battleground for marketing-led growth. [online] Available at: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-new-battleground-for-marketing-led-growth.
Predicting Consumer Tastes with Big Data at Gap. (2018). Harvard Business School.
 Recer, H. (2018). Op-Ed | The Cost of Dead Inventory: Retail’s Dirty Little Secret. [online] The Business of Fashion. Available at: https://www.businessoffashion.com/articles/opinion/the-cost-of-dead-inventory-retails-dirty-little-secret.
 Retail Dive. (2018). Betabrand uses 3D tech to take designs to fruition in 5 days. [online] Available at: https://www.retaildive.com/news/betabrand-uses-3d-tech-to-take-designs-to-fruition-in-5-days/518676/.
 Sailthru.com. (2018). [online] Available at: https://www.sailthru.com/wp-content/uploads/2016/06/BetabrandCustomerSuccess.pdf?x11401.
 UNC Kenan-Flagler. (2018). Crowdsourcing startup gives fashion industry a new look. [online] Available at: https://www.kenan-flagler.unc.edu/news/2017/01/Chris%20Lindland.
 www.betabrand.com. (2018). Betabrand | Crowdfunded Clothing | A Global Community Of Collaborators. [online] Available at: https://www.betabrand.com/.