In part two, find out which retailers are leading and fostering innovation in their retail operations, what functions retailers should own internally instead of outsourcing, and some of the key challenges of omnichannel retail—especially in today’s climate.
I want to come back to something that Mauricio you were talking about which was, and Rian mentioned this as well was that until recently a lot of retailers or any direct-to-consumer brand was very slow to adopt innovation or to recognize the need to innovate. And if I think about trends in the industry recently, a lot of big, big retailers seem to be launching innovations more on the backs of acquisitions they’ve made as opposed to kind of developing internally.
QUESTION: IN YOUR MIND, WHO REALLY STANDS OUT AS A LEADING INNOVATIVE RETAILER AND ARE THERE PEOPLE WHO REALLY HAVE DONE A GOOD JOB AT SUCCESSFULLY CREATING OR FOSTERING THIS INNOVATIVE CULTURE INTERNALLY OR IS THAT REALLY A LOT OF REAL INNOVATION THAT IS HAPPENING IN THE STARTUP COMMUNITY?
The retailer that I was most impressed by when we were trying to push our technology, to sell our technology, was Sephora. They are amazing and I’m not a customer of theirs, but the way they handle their processing is just impressive. They really know their customers and they really know their customer journey.
And what I found is that a lot of the retailers try to slap technology into their experiences. “Oh, VR (virtual reality) okay, let’s do VR. AR (augmented reality) oh, let’s do AR. Oh, you know what, let’s do this thing. Put it on the website to see how it works.” But, they don’t work from the customer experience to the technology as a means of enabling all that. It’s more them trying to see what works because they’re late to the game and that’s a big problem.
So, to answer your question, Sephora was one of the retailers that we actually kind of replicated and loved the stuff that they did. And, of course, I see it not because they bought us, but Nordstrom they’re doing a lot of stuff because they are a customer-centric company and they understand the impact of the customer journey—the customer experience. So, retailers are trying to put the technology around the customer experience, not the customer experience around the technology, which I think is one of the issues that we’ve seen in a lot of other companies.
“Retailers are trying to put the technology around the customer experience, not the customer experience around the technology, which I think is one of the issues that we’ve seen in a lot of other companies.”
I would say Walmart, too. Walmart is doing a lot of really innovative things. They’re doing it more from the acquisition side by acquiring a lot of small technologies. They’re coming in and trying to innovate online.
The company that I think is doing it well in the fashion space, at least that’s doing it in-house, is Calvin Klein. They brought on a new CMO, Marie Gulin-Merle, who came from L’Oreal and she designed the whole L’Oreal ID programs where you can try on make-up on their website.
Keep an eye on Calvin Klein In the next six months, you’ll see some pretty cool things coming out online with their brand and also Tommy Hilfiger and just trying to bring everything onto one site. They actually have their own innovation department called “Innovation Next” which they’re constantly trying to solve for different problems across brick-and-mortar and eCommerce.
QUESTION: ARE THERE SPECIFIC ASPECTS OF RETAIL OPERATIONS THAT YOU THINK ARE CRITICAL FOR RETAILERS TO OWN INTERNALLY—THAT, FOR WHATEVER COMPETITIVE OR STRATEGIC REASONS, IT DOESN’T MAKE SENSE TO USE AN OUTSIDE PARTNER OR OUTSOURCE THAT ASPECT OF THEIR OPERATIONS?
The truth is that being a retailer is very hard today. That’s what we’ve learned. And I think there is a big pressure coming from Amazon because they’re disrupting everything and people within the retail space know it, but they don’t have the resources. So, there are two kinds of paths that retailers are taking, either you’re a technology company or you either are a brand company and you are kind of an expert on one of those because being a leading company in both is called Amazon.
“…there are two kinds of paths that retailers are taking, either you’re a technology company or you either are a brand company…”
You either develop an experience and a brand around it, and then you can charge a premium for it, or you actually become a technology company. An example of that is Wayfair. For example, very successfully, they have carved out a category, and they do it really well. They compete head-to-head with Amazon, but when you go to Wayfair you go to buy stuff for your house because you don’t want to go over 10,000 Chinese products, each of them with 1500 reviews, which you know are fake.
Owning certain parts of the operation is key. We used to work with a lot of jewelry companies and for jewelry, the clientele is very, very important because a lot of jewelry buyers are repeat buyers. One of the things that we tried to own within that space was the clientele piece and it was very difficult because they have developed all the systems that are very specific to jewelry, and a lot of the business was based on that. Those operations were tough to outsource.
I would add to Maricio’s response that I think the reality is that for retailers, more and more of it is about having the technology to develop and curate the customer experience that you need and it’s just flat-out hard. In some cases it’s impossible to be able to attract the talent and to have enough scale to build your own platform. So, I think that’s just a reality with probably one notable exception in this country (Amazon).
“The reality is that for retailers, more and more of it is about having the technology to develop and curate the customer experience.”
So, what can you do? I think most importantly is to own and focus on a deep understanding of Who is my target customer and what do they care about and how am I going to differentiate what I offer to that customer? It sounds a little bit like platitude, but now more than ever I think that’s the critical ingredient.
And then, I like the phrase used, which I won’t get exactly right, “Surround the customer with the right technology, don’t do the reverse.” And so, you will have to buy technology or partner with technology companies and develop muscle for how to do that well and I think those are key ingredients.
The last point I’ll say though is critical to success is the data. That is something that you can and should own as much as possible and be very, very thoughtful about what that means. What data is mine, what data is not mine, and how can I make sure that I don’t have leaks in my stream of data in terms of what my customers choose to buy, don’t buy, what they shop for, but data by customer and data by product so that I can continue to refine and hone my understanding of what they want.
And so that’s important to this question also in the sense that when I choose to partner with a technology provider, any data that’s generated from that, where is that going to go? Is that going to still be my data as the retailer? That’s a pretty important criteria.
QUESTION: SO THE ANSWER TO THIS MAY REALLY DEPEND ON WHETHER WE’RE TALKING ABOUT PURE-PLAY ECOMMERCE VERSUS IN-STORE VERSUS SOME INTERNET OR RETAIL MODEL, BUT WHAT DO YOU SEE AS ONE OF THE KEYS, IF NOT THE MOST IMPORTANT CHALLENGES, FACING RETAILERS TODAY AND WHO’S TAKING A LEAD ON SOLVING THAT?
I’ll answer that and play off of the last answer a little bit with the data. The one thing that I think a lot of retailers are having a really hard time with is truly understanding who their customer is. They get a lot of these market reports saying, “Your customer is a woman. She’s 35 to 42 and this is how much she likes to spend.” But really understanding more intimate data about the customer, retailers have no idea.
They’re creating in the blind, they’re marketing in the blind, they’re trying to sell in the blind. Anytime you can create a company that produces this data and to go back to what Mauricio was saying about the problem with attribution when you’re using technology on an eCommerce site, especially retailers’ eCommerce sites, is huge.
When you’re creating these companies understand that anytime you’re trying to sell your product, they’re always going to say something like, “Well, how do we know that your product is the one that made them get to yes? How do we know that your product drove that conversion?” You have to understand how your data is being put into these different silos and you’re solving that problem and attribution that says, “It was my product that put them over the edge to get to yes.”
So, back to the data of understanding your customer is, “What data do you have in your business that makes it unique? What data do you have on this business as customers that makes you unique? For FitCode is that we now know not only what size she’s buying, we know exactly what your customer’s body shape is and we know how all of your products match your customers. We know your customer base better than you do.
And so, we can now go back to these brands and say, “You’ve designed entire lines based off of one woman’s body type, the fit model, when this is how your customer base actually breaks down, 30% looks like this, 20% looks like this.” And so, anytime you can use that data to really inform brands to make business decisions, I think that’s where the key is these days, all the data.
That’s true and I would add something, the data is important but also stores are important. The stores are a very important piece of commerce, even if you guys don’t shop in the stores, they’re still about 90% or something like that of retail sales are being made through the store. So, it’s pretty important. One of the key challenges that retailers have is the rationalization of the real estate because real estate is expensive, you know, it consumes light, carpets, cash registers, all that stuff.
But, whoever finds the right model to rationalize not only the footprint that they have because it’s going to be reduced and that’s part of the strategy that the retailer needs, the retailer that owns stores needs to take into account. That footprint has to be reduced because it’s a reality. There is a shift in consumer behavior.
However, how they do it and what new models are born out of that rationalization, I think it’s what’s going to keep those retailers in the lead. Even Amazon is trying to find a place to do it physically. They haven’t figured it out and on the other side the companies that have the stores they’ve figured it out for hundreds of years but the model is changing. So, now they need to rethink that model.
QUESTION: SO, TALK A LITTLE BIT MORE SPECIFICALLY ABOUT STORES AND ECOMMERCE—THE VARIOUS CHANNELS IN WHICH WE CAN ACTUALLY HAVE A CUSTOMER RELATIONSHIP. HOW DO YOUR COMPANIES IN A TECHNOLOGY OR SERVICE, HOW DO THOSE APPLY ACROSS THE VARIOUS CHANNELS IF THERE IS A DIFFERENCE IN APPLICATION WORKING WITH AN ECOMMERCE, A CLIENT OR A CLIENT THAT’S PREDOMINANTLY STORE BASED?
Yeah. So, what I find fascinating is in our company we kind of serve two customer segments. One is the Fortune 1000—very, very large retailers and CPGs and for them, we are one of the tools in their toolkit. We’re a complementary kind of solution to existing warehousing fulfillment operations area.
The other segment is the digitally native high-growth eCommerce companies that start out selling pretty much always online, whether it’s first through a marketplace or through their own website, then you expand to the other one, and then things if really start going well—it’s almost ironic in a way—you start thinking, how can I get into some brick-and-mortar retail distribution?
One of our clients is Casper, they do mattresses, they started purely selling online. As they started to build their brand, guess what, Target was super interested in wanting to carry cool products that a millennial Target customer likes. So now, Casper is saying, “Oh, I’ve got to now distribute product to Target stores. How do I do that?”
So, for each of those segments, you have the more mature companies trying to figure out how to come online, and the startups figuring out how to go from online to marketplace to brick-and-mortar. They both end up with this omnichannel challenge which creates tons of complexities. It also comes back to starting from the perspective of your target customer and understand how and where they want to interact with your brand and purchase your product. Then, having to build an experience that can serve those segments equally as well. For example, walking to a showcase store like a Casper pop up in a Nordstrom, which is a super cool innovation that both Nordstrom and the brands that they work with are doing, and then customers may end buying that product online. Facilitating that experience is fundamentally driven by your understanding of the customer and the data. The design—in our case, fulfillment solutions—is the seemingly mundane stuff in the background but it maps to that customer promise that you’ve set.
For our technology, a problem that we were solving was to reconcile the two channels, the off-line and the online channel. I know it’s changing but we still see companies today that treat online and offline as two different channels—they’re completely different, they have two different VPs running the channels and there is a lot of channel conflict.
In some cases, you might find that you go to a retailer, you ask for something and you ask, “Oh, can I buy it online?” And the salesperson is going to say, “No. It’s out of stock.” Okay. In reality, they could hate the website because they don’t get compensated. The salesperson is trying to sell you something in the store but if I send you to the website, I don’t even know that you’re buying.
That’s exactly the problem we solved—combining those two channels. We provided the website to the sales associate as a selling tool and we closed the loop with the attribution. We could tell them in which store the sale was actually generated, probably not done within the store, but most of the sales that the sales associates did using BevyUp happened between one or two days after the person left the store.
And there’s tracking. There is data on what products the salesperson did sell in the store. We captured the information of the customers that was visiting the location. All-around, it is a solution that merges both channels. It wasn’t perfect, of course. There was still a lot of work to do, but it helped a lot. And it helped in the sense that the attribution was real and people were making money. So, that was the application that we used as an instrument for customers that we had.
The most important thing here is that everything has to be onmichannel these days. Things cannot exist in silos. You can’t have a really good customer experience in store and then not have a good online experience. Everything has to talk. You have to understand who your customer is, you have to follow him or her wherever they go, meet the customer where they are, and just understand that retail is still a connection. Fashion is highly personal and it’s emotional for consumers.
Brick-and-mortar [shopping] is an emotional thing for people. They go in and it’s inspirational. They want to touch. They want to feel fabrics. They want to have this great experience, but they want the ease and an Amazon-like experience of an eCommerce site too. How do you understand your customer well enough to please them in store, provide this beautiful in-store experience, and then also give them the ease of buying successfully online? You must have that really good omnichannel relationship with who your customer is.
Missed Part One? Watch it here >>