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Death of Retail: Part III: The Future of Retail

Part Three: The Future of Retail


This is Part Three of a Three Part Series Discussing The Death of Retail. It is a transcript of a conversation between Neeraj Kulkarni, James Li, Mike Lichter and Dave Donars. The conversation was recorded on June 2nd, 2020. This final segment discusses the of e-commerce, digital integrations and customer centrality. We look at examples from CVS, and, of course, Bass Pro Shop


Cast:

Neeraj Kulkarni is a brilliant problem solver and has worked with some of the largest companies in the world. He is President and Chief Data Scientist of CIEK Solutions, an analytics consulting firm. Ciek uses a collaborative analytics practice to help brands solve their most complex issues.


James Li is a media analyst and data-driven story teller with a strong background in omni-channel growth marketing, Mar-Tech product development and campaign performance analysis. He is also the Co-host of Peak Money, a new weekly podcast he created with Dave Donars.


Mike Lichter is an incredible strategist who embraces both his analytical and creative gifts. Mike is driven to help make the world a wee bit better. Mike is also the Co-Founder of the consultancy Freehand Circle with Dave Donars.


Dave Donars background is in product development, marketing strategy and data science. Along with James Li he is the co-host of the new podcast Peak Money. Dave is also Co-Founder of the consultancy Freehand Circle with Mike Lichter.

Dave Donars: So lets move to the future of retail. Mike you had some really interesting thoughts on what's next.


Mike Lichter: I kind of see the future of retail in three distinct tiers. First is the big-box behemoths where you get everything. People will continue to need to make runs to Walmart or Target. That's kind of in the middle and it is not going anywhere. Above and below that experience I kind of see it separating. Like everything in society, retail will become even more stratified.

So at the high end you have Destination Retail. The Relaxation Destination--where it's this big complex that whole families go to, and as we previously mentioned, employees are better trained, they're paid more, it's more personalized. Experiential Destinations bring more of the fun and relaxation to shopping for people who really enjoy shopping as entertainment--with amenities like on-site childcare that we discussed earlier.

On the opposite end we have local. The other thing I've been thinking about is retail strictly as a service. More of a community embedded concept. So local stores are online but banded together by municipality or neighborhood with a very responsive same-day very delivery model. The hyper-local future is a more powerful personal experience then either Amazon or even your local Walmart currently provide. I see it almost like a co-op model. Those near-immediate deliveries can be augmented by autonomous vehicles or drones. Hyper-local customers will have access to up to the moment inventory, which is a way of incentivizing purchase without the use of personal data.

Maybe as part of the co-op model members pay a monthly fee to be a part of their neighborhood or municipality hub. In urban environments co-ops are a great way to know your neighbors and be part of the community. And then, of course, if the post office goes belly up and the mail system is privatized (which does not seem so far fetched anymore) the cost of delivery for people in their neighborhood hub will not go up. While the hyper-local model is viable for all areas of the country, something like this will be especially attractive to rural places. For example--remote areas which pay extra for Amazon delivery.


Dave Donars: Retail as an experiential destination is its own topic because it is so rich. Mike you and I have talked a lot about what the future really holds and it is incredible. I'm gonna go back to my favorite retailer in the country: Bass Pro Shop (BPS). BPS does an amazing job, they position themselves as not just product experts but pillars of their communities. Families can bring their pets inside Bass Pro Shops, in fact, they hold animal adoption events inside the stores. They have ranges for target practice and gun training. I mean, my goodness, people pay to stay at hotel located inside one of their stores. I cannot think of another retailer on the planet-- no matter how high-end or luxury--that gives a comparable experience. That is top shelf retail.


James Li: I also want to say that the Bass Pro Shop is such an extreme example.


Dave Donars: Bass Pro Shop is like the Tom Brady of retail. No other retailer does anything remotely close. That's why they're number one.


James Li: Tom Brady. Ugh. Listen I don't want to go into how Tom Brady is not number one but all right...


Dave Donars: I'm just saying from the year 2000 to the 2020 they are the dominant retailer.


(Laughter)


Dave Donars: I truly believe they are built for a good long run in the future.


James Li: Think about what Bass Pro Shop (BPS) has to do to get this accomplished. They bought an old pyramid-shaped arena in Memphis then retrofitted it to be a retail store. BPS also built a restaurant, a hotel and an indoor lake they actually stock with fish. Did you say there are crocodiles in it? Essentially, it's a zoo you can shop inside of. To have that expectation for any brick and mortar retail store is, I think, too much.

There has to be someplace between the behemoth that is Bass Pro Shops and the crappy mom and pop hardware store. There has to be something in the middle. The undefined middle is where retail needs to be. What is the future of this middle retail? Because the model as it is right now just fails consumer needs. To survive, retailers in the middle need to radically rethink their approach.


Dave Donars: Mike started to lay out a better future with retail as a service: those interconnected community co-ops storefronts with a shared inventory ERP system being its own flexible supply chain. Neeraj and I have talked about consumers needing X, Y and Z tonight but they do not want to go to an out-of-the-way big box retailer on the way home.

However you could place an order on your phone and stop off at a local co-op store on my way home. That local store has a few hours to fulfill your order, and if they were connected to a large enough supply system it is no problem. I envision this something a little bit similar to the Amazon Now model with its four hour fulfillment four hour model. But you've got to have flexible supply chains at tremendous scale.

Imagine a truly customer-centric fulfillment system, not just a product pusher. Customers place their needs into the system, rather than just specific products. For example; a consumer could input a general need for, I don’t know, toilet bowl cleaner. She does not care about a specific brand. Anything available on-time, within this price range from these basket of products is fine. She just needs to pick-up a toilet bowl cleaner from the hyper-local co-op store and go home.

Retail as a Service is the next logical step in the Walmart-Amazon evolution we spoke about at the beginning of our discussion. Simply because it is so convenient the systems scale would further consolidate the supply chain beyond what Walmart and Amazon have already accomplished. And that could be a real threat to certain types of brands and the overall concept of brand loyalty. Shifting the focus from specified purchases to fulfilling customer needs could decimate brands. This brand-shift has already begun with virtual assistants at home. People say to their speaker, “Alexa I need batteries.” They don’t specify the type, and Amazon sends them batteries without price comparison or brand recognition. Regardless these augmentations give brick and mortar retailers a chance to survive.

Neeraj, do you have any thoughts?


Neeraj Kulkarni: No, I think you covered it all. Mike definitely pointed to some good examples. Personalization is something all retailers are grappling with right now as they look into their data on customer habits; psychographics, attitudes, social data and so forth.

A lot of the examples we gave today are very futuristic, but looking to the next 12 to 15 months, what are the short-term next steps towards the future? Well all of the remaining retailers which have not embraced digitization are trying to develop apps which understand individual buying preferences.

So as soon as consumers go inside a brick and mortar retail store, they see certain recommendations show up on the app based on previous buying history. These help consumers believe retailers understand their preferences and are trying to provide value & convenience. Things you may not have bought in the last 30 days, 60 days or 90 days, there would be reminders by email or some kind of notification provided in the app, which again reminds consumers of the brand and shows the nearest store location. Again, convenience and giving the power to the consumer to either go to the store or buy it online and get it delivered at home. Those are some of the highly personalized retail shopping experiences that retailers are trying to do in the short-term. Obviously, as more and more retailers get digitized and consumers get used to these kinds of online shopping habits, we'll see that evolve and grow.

As we get into this personalized retail world I think it is going to be interesting. You know, what kind of privacy laws and data rules are going to follow--that can be a separate topic in itself. But that's what traditional retailers are trying to do using the amount of data they have today. They're trying to customize and personalize the experience in the next 12 to 15 months.


James Li: Yeah, for sure. That is a good point regarding data because you're right. To do any of this, it needs to be powered by data. And currently, we're entering into a lot of restrictions on data: look at CCPA and GDPR. All these regulations essentially make the collection and housing of data far tighter. So in some ways, is what you are proposing possible? And for how much longer? Is it possible to be more intelligent about sort of retail with less interaction with the consumer? While at the same time, having data capabilities slowly atrophy and devolve?


Neeraj Kulkarni: Retailers persuade customers to get those loyalty cards through discounts and those cards have all their purchase information. For example, a CVS card stores every single purchase that you ever made at their stores. The card then provides you recommendations for promotions and discounts on specific items in the store. So I think consumers like that convenience, as long as they understand that it's going to be used to benefit their experience by personalizing their shopping habits and product recommendations.

So, as long as there is a quid pro quo, consumers are happy to provide certain kinds of information. There is a balance brands need to have with their customers. If they just try to get all kinds of data without providing a better more convenient shopping experience, then we have a challenge. Forget the part about data privacy. Those retailers aren't going to survive because they're never going to personalize and make the shopping experience better.


Dave Donars: That's really good Neeraj. Thank you. Does anybody have any final thoughts?


Mike Lichter: I think that's a good place to close. I enjoyed listening to all of you. So even if no one else ever hears this it was really beneficial for me.

See Part I and Part II

--Freehand Circle

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