14 minute read
We Have to Move Boldly into the Fog of a New Era
Doug Stephens: “We Have to Move Boldly into the Fog of a New Era”
He calls himself “The Retail Prophet”. And it goes without saying that prophets are very welcome in times like these. Canadian Doug Stephens is a speaker and bestselling author. His extensive experience gained in leading retail positions has taught him that it makes no sense to not address uncomfortable truths. The transformation the sector is currently undergoing is so fundamental that Doug Stephens recently claimed that one needs to let the old retail trade die before embracing the new retail world. Interview: Martina Müllner-Seybold. Photos: The Retail Prophet
Let’s start with a huge
question. How can the retail trade do better?
That certainly is a huge question. Certainly, retail can do better. Some retailers are doing better, some even tremendously well. Some, however, have huge difficulties and issues. The first and most important realisation is to understand that we have, in a short period of time, moved out of one era of retail and moved into an entirely different era of retail. If we step back 25 years, the entire premise of retail economy was based on the idea of scarcity. It was based on the idea that consumers fundamentally lacked access to brands, they lacked access to distribution of products, and they lacked access to information.
In that world, the conditions were perfect for any retailer to come along and say: “I have this product that you don’t currently have in your market and I am opening two stores and now we are the local experts in this category.” That was an easy thing to do. But now we have moved to a place where the consumers have infinite access to brands, products, trends, and information about those products. In that world, the retailer really no longer holds the balance of power.
Consumers now believe that the only store that really matters is the one in the palm of their hand - in the form of their smartphone. That’s the biggest and most convenient store on earth. With that in mind, retailers have to ask themselves: How do I reinvent my value? If a product alone is no longer good enough, and if service is no longer good enough in and by itself, then what is the next step? What do I need to create that is differentiating, that is valuable, and that will be memorable for customers? In my opinion, the next level is experience. Even if you sell the same things that someone else sells, engineering unique and differentiated experiences, and delivering that to customers, can set you apart…
In an article you stated that to save the retail trade we need to let it die first. Is this really your belief?
Or does such a statement merely sell itself well?
It’s truly my belief. You find leaders within the retail industry who are grasping and desperately trying to cling to anything that they can feel comfortable with from the old era of retail. For example: This year in
North America, the retail economy has picked up a little bit. More consumers are visiting stores again and so what you find is the retail industry as a whole saying: “OK great, it looks like all our problems are over.
Consumers are coming back to stores, everything is okay. Everything is fine as long as we keep doing what we are doing.” That’s the kind of thinking that we have to get beyond. We have to recognise that all the conditions that brought us to where we are today have unravelled. Population and economic growth in the post-war era, the explosion of consumerism, the huge wave of baby boomers - that’s simply not there anymore. And the trend toward online buying behaviour is abundantly clear. We have to leave that past behind and move boldly into the fog of this new era. Until we let go of the past, it is very difficult to embrace the future. The era that we are moving into looks nothing like the old era, so until we let the old era die, we can never move successfully into the new one.
That’s a good explanation. And how do you think retailers who experienced this golden era can change their mindsets? How does a retail company make this change possible?
I think it’s challenging and it’s something that most companies fall victim to. It’s a concept that is referred to as organisational imprinting. The era in which your company experiences its greatest success can often form its view of the world, in some cases for decades or even centuries. So, Walmart for example: the absolute pinnacle for Walmart was really in the 1980s and 1990s. Consequently, for a long time, Walmart had a sort of frozen view of the world and continued to invest into large super-centres. They continued to invest in brick-and-mortar instead of online retail and they continued to offer the same level of customer experience. Eventually it became very clear to Walmart, that if they continued down that path, it would lead to extinction. So, it’s certainly a challenge. The interesting thing is that we as people, as individuals, are really no different than organisations. We all try and replicate what made us successful.
You believe that we will see a re-engineering of the retail industry’s economic model. How will retailers of the future earn their money?
We are going to see a number of different things happening. First of all, we are seeing more and more brands selling directly to the consumer. Brands and retailers have traditionally had a relationship that was adversarial. Retailers were tough on pricing, only to promote those products and blow them out of their stores on a discount. Brands have, in many cases, seen their brand damaged. So, they are getting increasingly to the point where they say: “Look, we now live in a world where we can have a direct relationship with consumers and users, so we should foster that. We should take the ownership of our brand back”. Secondly, we are going to see the emergence of new retail models that look more like a media model. Retailers will represent brands and they will design and curate experiences around the brand’s products. They won’t be paid for selling these products, but rather they will be paid a media or placement fee by the brand directly. One example of this is Story in New York – a store that acts like a magazine for brands. We are starting to warm to the idea that physical retail is actually the most powerful media channel and the most powerful media experience a consumer can have.
Given that upwards of 80 percent of all retail transactions are influenced to some degree by
digital elements: Does it even make sense to invest so much money in stationary retail? Would many brands be better advised to spend the money on an even better digital experience?
Brands are really starting to re-think their old distribution plans. It’s becoming increasingly apparent that the retail world as we see it today was built for a different time. Our retail industry was built for a time when you wanted as many stores populating a market as possible. Even if it meant having mediocre stores, covering a market was most important. Now retailers are re-thinking that. What they should be doing is closing many of the mediocre stores and focusing on key markets strategically important to their brand, as well as developing next-level store concepts that are memorable, exciting, and that consumers will gravitate towards. Beyond that, we can rely on digital. Once someone has had a phenomenal experience in one of your premier stores, they can order from you online once you’ve formed that relationship with them. It won’t be about the quantity of retail stores, it will be more about the quality of those stores.
In your books you always mention that repeatability is crucial when it comes to retail. Can you expand on that?
When I was researching the book, I spoke to various CEOs of companies that are widely regarded as being purveyors of great experiences. Many of them said it’s a matter of a brand’s ability to repeat excellence. Simply designing a great experience is not enough. When I was talking to them about how they run their stores, it sounded to me less like it was a retail operation, and more like a stage production. They talked about it like a Cirque du Soleil performance, not merely opening the doors to a Walmart.
How can a retailer measure if he provides this repeatability?
When measuring consumer experience in a given space, it is important that brands obtain a complete 360-degree view of that experience. Some of that is technology, making sure that you understand where consumers are going within the space. How many of those customers are repeat customers versus unique customers? It’s very similar to how we collect performance data of websites. How long on average are people staying in the space? What are they engaging with versus what they aren’t engaging with. Alternately, you have to get to know the feelings and sentiments of your audience. The last measurement - and probably the most important - is the net-promoter score. At the end of the day, you want to know if the experience someone had in your store was something they would recommend to friends and family. And if the answer to that is anything but yes, you still have work to do.
Most retailers know so much more about their customers than they are taking advantage of. Based on my order history, Amazon knows I own a dog. A stationary retailer, however, knows the name of my dog and how it’s doing. Why are so few taking advantage of this knowledge?
I agree. I think part of it is that we’ve gone through a long period of mass thinking. From the 1950s to the 1990s, consumers ceased to be individuals. As marketers, we were talking about markets, segments, sub-markets, profiles, and demographics. We
approached those mass markets with mass mailings, mass advertising, and mass media to sell mass products, because we believed that most people wanted the same things. Before WW2, retail was much more personal. You could walk into a store and people might know you by name. They may know your children, where you work. You may go to church with those people on Sundays. There was a familiarity and that familiarity was built into the selling process. People would know your tastes and your preferences. They were happy to order things that were specifically for you. So many of the merchants that are struggling today were founded in the era of mass marketing. They’re training taught them: “I just need to advertise a bit more.” But now we are coming back to a place where technology is allowing us to know who each of our customers are, some particulars about those people, and what their tastes or preferences are. How they are unique from other customers. And we can now deal with people on a one-to-one basis again. I think to many retailers that not only feels kind of foreign, but even somewhat uncomfortable. A lot of retailers are concerned about invading their consumers’ privacy. They may be able to capture the information, but they are afraid to use it.
What’s your advice?
I believe privacy is like a currency for consumers. And nobody wants to have currency stolen from them. We all feel violated when that happens. But on the other hand, we don’t mind spending currency with people that we trust, where we feel we are getting a good exchange of value.
E-commerce giants like Amazon prove this point. We give loads of information to Google or Amazon because both of them offer a much better experience if we provide this information. And the same would be true for any stationary retailer.
Exactly and that’s precisely my advice to retailers. When they ask me what data they should be collecting and how, my answer is to think about it a different way. The question is not what data should you collect and how, but what distinguished and differentiated value are you prepared to deliver to the consumer? And in order to do that, what data do you need? That is the question.
Let’s stick with Amazon. Your thesis that even Amazon might fail one day came as a relief for many retailers. You claimed that this could happen ten years from now, but how many retailers will Amazon put to the sword in that time. What’s your estimate?
Many. I wouldn’t even have an estimate. It will be many, because it’s not actually Amazon killing them, but the new baseline of expectation that Amazon has created. What Amazon has effectively done is re-written the rules. It has completely changed consumer
expectations for retail. Things like one-click ordering, free one or two-day shipping, and the sheer range of the assortment. I think that what Amazon is killing is the old-world expectation of consumers. Amazon is completely re-wiring consumers’ brains. What I am interested in frankly is what industries Amazon actually kills. Outside the retail sphere…
When will governments start addressing the monopoly Amazon is creating? Whenever much smaller companies merge, it has to be approved by national or EU competition authorities - something that does not seem to apply to Amazon.
I think that’s going to change. Whether it’s Europe that makes the first move against Amazon or whether it’s the United States, the growing sentiment is that Amazon is approaching a point where it will reach what one must regard as almost monopolistic behaviour - not only by virtue of its size. Jeff Bezos himself acknowledges the fact that we have to have faith in our governments, that we have to have faith in these large institutions that we depend on. So, he recognises that there’s a need for oversight. That doesn’t suggest that Amazon may not fight that, but I think it’s inevitable that at some point Amazon will be broken into smaller pieces.
Regardless of Amazon, what does it all mean for retail employees? You said that they are changing from clerks to brand ambassadors. What do you think the future will bring for retail employees?
Many of the operational tasks in retail are moving to technology. And the flipside of that is that the demands of consumers are now greater than they ever have been. 47 percent of consumers suggest they feel that they often know more about the product they are buying than the person who’s working in the store. And 67 percent feel that the information that they are getting from sales associates in the store isn’t accurate or even true. In the world of smartphones, there’s new expectations on the part of consumers. They expect that the person they are dealing with won’t just be well-trained and friendly to deal with, but also an expert at what they are selling. And this is a bit of a conundrum for retailers, because retailers have suppressed the wages of retail workers for decades. They’ve been trying, wherever possible, to disintermediate employees with technologies. To say it frankly, people in retail have started to act more like robots. I think we are looking at a new era, in which working in retail is something that people can actually do with pride again. They could feel that they are truly trained experts, are well-paid, have a sense of self-esteem, and can speak to their customers with a sense of rapport. That’s basically the way it was fifty years ago. A lot of people who worked in retail put their kids through school, bought cars and houses, and were perceived as respectable professionals doing their job. We went away from that and now we have to return to it. Certainly, employees are something that is key. What retailers need to do is to make a fundamental brand decision. Either they want to execute the customer experience through people and benefit from the dynamic nature of people, or they don’t. If not, they can rely almost solely on technology and equip consumers with the technology they need to have a great experience in our stores without the benefit of the people. But you can’t have it both ways. You have to decide. And if you are going on the side of human beings, you need to make sure that those people working in your stores are delighted to be there, that they feel cared for, that they feel properly trained and equipped to do their jobs, and that they are given an opportunity to make their customers happy. If you can provide this, you will have a transformational experience in your store.
Thank you for the interview.
“The Retail Revival” and “Reengineering Retail” are the titles of Doug Stephens’ manifestos for the future of retail.
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