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The New Billion Dollar Retail Democracy

Eric Rosenbaum, CNBC.com
Monday, 13 May 2013 | 3:08 PM ET
Dana Hoff | Getty Images

Imagine a world in which Donnie and Marie Osmond and 50 Cent are sharing retail square footage.

Imagine a retail company whose annual report is an info graphic that includes as much information on its employees' eating habits as its financial metrics.

Picture another company that is not even in the retail business but now has its users monitored as a major retail customer statistic.

How about a venture where two glamorous women want you to be able to wear the same dresses as Oscar nominees? Or a retail empire that has sold 100 million products, mostly made with a crafter's tool kit?

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The reality is that you don't have to imagine any of this. The design of a new retail sector paradigm is underway and is reflected in the stories of the five retail companies on CNBC's inaugural Disruptor 50 list: Etsy, Pinterest, Rent the Runway, Shopify, and Warby Parker. These are the five companies behind the quirky factoids, but we found that they have much in common in the way they are going about disrupting the status quo in retail business.

Communities are being built on the Internet. Sharing is becoming as important to retail success as it is to the basic nature of communication between friend, family, and colleague in the age of social media. Retail is invoking the rhetoric of democratization, doing away with the high barriers to entry of the legacy bricks-and-mortar world and even at the luxury end of the marketplace, specifically.

CNBC's Retail Disruptors Revealed
CNBC's Julia Boorstin reveals which top five retailers are best positioned to change the global marketplace. And, Dave Giloba, Warby Parker co-CEO, explains how his eyeglass company is revolutionizing the way consumers buy eyewear.

The sheer volume of retail being conducted online is staggering. Yesterday's artisans selling at the local flea market are now attracting millions of shoppers with a click (14 million in the case of Etsy). Etsy neared $900 million in sales in 2012. Shopify expects to hit the $8 billion mark in gross merchandise by 2015 (it expects $1.5 billion in 2013). Rent the Runway is adding 100,000 members a month and has reached the 3 million member mark since its launch in 2009.

Leading the communities trend are Etsy and Pinterest. Etsy has 900,000 active sellers. Pinterest, the social site for the "pinning" and sharing of images is now among the 50 top websites in the U.S., with 15 percent of the U.S. adult internet audience pinning away, and critical to retailers, an audience that has five times as many women as men. Even those who can afford expensive square footage can't ignore the retail revolution. It's Shopify that is making a community of Budweiser, Tesla Motors, the Beastie Boys, Kobe Bryant, Pebble, 50 Cent and Donnie and Marie Osmond, as sellers buying into its idea that the costly square foot needs to be supplemented, if not eliminated.

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In the words of Shopify's chief platform officer, Harley Finkelstein (did you even know the position of chief platform officer existed?), "Although Shopify is primarily a software company in the online retail space, our real objective is to democratize retail…Ten years ago if an entrepreneur wanted to sell a product to a customer it would have required retail space, payroll, inventory, leasehold improvements and employees, whereas today for $29 anyone in the world can sell a product to a global audience with Shopify."

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That democratization is seen clearly in the models of Warby Parker and Rent the Runway, disruptors aiming at a luxury market that has been out of reach for almost all but the consumer elite. It's the age of Occupy the Luxury Market! With the 99 percent now able to afford stylish eyewear once controlled by an overpriced, under-threatened small cadre of eyeglass makers charging more than $300 to look good and see straight. Warby Parker isn't just making designer eyewear available starting at $95, but giving away more than 250,000 pairs of eyewear to people in need. Meanwhile, you now can wear what the latest Hollywood starlet wore to the Oscars, thanks to the "Netflix of design," Rent the Runway, which has put high-end retailers like Saks and Nordstrom on notice. Yet let's make no mistake: luxury is still luxury. Warby Parker sells $3,659 per square foot in its New York City HQ showroom, even while giving away 250,000 pairs of glasses.

Chad Dickerson, Etsy CEO said it well when he defined disruption like this: ""Lasting disruptions come from people-powered businesses, marketplaces and communities, and the technologies that connect us."

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Warby Parker took its name from two characters in a newly found Jack Kerouac journal. The beat giant once said, ""Great things are not accomplished by those who yield to trends and fads and popular opinion." It's clear from the success represented in the inaugural CNBC Disruptor retail rack that the trends behind these companies are here to stay, and likely to continue to disrupt for decades.

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