Explore diversification, the digital rethinking of physical retail, and how convenience is choice

Our guest is Carol Spieckerman, retail speaker, strategist and trainer. As President of Spieckerman Retail, Carol guides a wide array of clients through workshops, presentations and business development trainings across the globe. Join us as we explore her ‘Retail Trajectories’ - including diversification, the digital rethinking of physical retail, and how convenience and choice have become synonymous in retail today.

Episode
12
of RETHINK Retail was recorded on
May 11, 2019
TRANSCRIPTION

Julia Raymond:

Hi, and welcome to the show. Today our guest is retail strategist Carol Spieckerman. She's president of Spieckerman Retail, a strategic retail consulting, training and speaking firm, helping a variety of clients from brand marketers and agencies, to solution providers and tech companies. Carol, will you describe a bit more about yourself and what you do?

Carol Spieckerman:

Yeah, it's great to be with you Julia. I'll be happy to. Well, I help a crazy diverse group of retail stakeholders, including retailers and brand marketers, tech companies, agencies, and others, relevantly position the great stuff that they already do. That's sort of the baseline first step, and then from there I help them navigate retail from now to next, making those next stage decisions. But the cornerstone of my work, and really what underpins everything that I do are my retail trajectories, and these are things that I'm constantly creating, and tracking, and mapping across all kinds of categories, and borders, and business models, and touchpoints. So the trajectories create a common language that points to clear calls to action for all of those diverse retail stakeholders that are now part of this big retail ecosystem. They sort of apply to everyone, regardless of where they sit in retail and at what stage their business is.

Julia Raymond:

Great, and how many trajectories are on your list? It seemed like there were a good amount.

Carol Spieckerman:

Well, at any given time, I'm tracking 30 or 40 trajectories and I sort of curate them for various speaking engagements, for what's relevant to specific clients, and a lot of them have withstand the test of time and I continue to talk about some and how they've evolved, that I identified 10 years ago and then others are much more recent.

Julia Raymond:

Great, yeah, I like the way it kind of breaks it down and it's easy to mind map sort of the different areas that are important for retailers today. So one of the ones that definitely stuck out is your trajectory 'diversify or die'. You say that growth depends on diversification into new business models, categories and channels. Just really broad, how are retailers accomplishing this?

Carol Spieckerman:

Well, the difference is, and the focus on diversification is talking about the new ways that retailers and those as part of the retail ecosystem are driving growth. Before it used to be all about opening more stores, that was pretty much the go-to option, but now there's a sort of a tidal wave of diversification that is primarily business model and format diversification, and it sort of cascades from one thing to the next and everything is sort of connected. So an example of that is looking at how retailers have built up their digital platforms. Well now they're looking at the investments that they've made in those platforms and they're taking a page from Amazon and saying, "Hey, let's open our own third-party marketplaces." A completely new business model, and inviting third-party sellers onto those marketplaces. But this is a way for retailers to sort of recoup the investments that they've made in their digital platforms, but kind of back to that cascading effect, it also allows them to diversify even further into new categories, and through these third-party sellers, they can achieve that practically overnight, they can do it without carrying additional inventory or overtaxing their supply chains.

So it's a really attractive diversification strategy but they're also diversifying into services and solutions. They're becoming health care providers. They're creating their own in-house ad agencies, they're becoming media companies, and content providers. They're even hooking up with one another to the point to where they're selling their private brands to their competitors. So one of the fundamental principles that again, sort of underpins everything that I talk about, is just a simple fact. Retailers are no longer just places that sell stuff, they're quickly evolving into looking and operating a lot more like those lean mean technology platforms that they've been modeling their businesses after, that they've been partnering with and increasingly even acquiring. So going forward, it's about building up their platforms through diversification and then forging platform partnerships beyond that to monetize those platforms and also to fill in any gaps.

Julia Raymond:

Great, that makes a lot of sense. So instead of opening stores, you said kind of changing business model, thinking about diversifying the format through media, through partnerships. When you talk about third-party marketplaces, do you have any examples that come to mind of retailers that are doing well with that new business model?

Carol Spieckerman:

Well, retailers aren't necessarily breaking out those figures, but.

Julia Raymond:

Right.

Carol Spieckerman:

And I would say it's kind of in early stages. Walmart has a very highly developed marketplace. They were one of the first ones to really go headfirst into that model. Target has jumped on board, and you've got ... What's interesting is it's becoming a really attractive proposition for some of these category killers, because you look at Staples for example, they really are relying on this third-party marketplace model, but because they're, a lot of these category killers are looking at these ones that have gone out of business, and they're saying, "Wow, it's really dangerous these days to be a category killer." Because any time Amazon decides to attack one of those categories, you're in trouble. So these third-party marketplaces are a way for these retailers to diversify into new categories to sort of mitigate that terror of category killing. So now, I mean, you can go on Staples.com and order Clinique makeup. So it's kind of gotten to that point.

Julia Raymond:

Right, that's surprising. Yeah, I see what you're saying. Okay, so Walmart, maybe the big players are leading the way, but we might see that in even smaller categories or apparel retailers.

Carol Spieckerman:

Yeah, again, just a great diversification strategy, and once retailers have built up those digital platforms, thrown all those resources at them, the next step is to say, "Well, how do we monetize this?" And one of the seemingly easiest ways, although there are lots of pitfalls, it's a complex model and it's not to be taken lightly, is to say, "Well, let's just welcome third-party sellers onto our marketplace." And a lot of retailers are seeing it essentially as just passive income.

Julia Raymond:

Yeah, and when we talk about all these investments, especially in digital, we hear a lot about physical and digital spaces becoming indistinguishable. So as retailers are diversifying in your one trajectory, the next trajectory you talk about is the store is still the core. How do they blend those physical and digital spaces?

Carol Spieckerman:

Well, that really is the new frontier, but what's interesting is as much attention as digital has been getting, brick-and-mortar has actually never been more relevant, but for different reasons than in the past. I think so much of the excitement actually and so much of the innovation is going to be in the brick-and-mortar space, because going back to what we just talked about, after years of retailers just throwing resources to built up their digital platforms, frankly some of their stores were getting kind of musty and outdated, and really not nearly as exciting to shop as shopping online. So retailers are now swinging their attention back to their stores, they're sprucing them up, they're doing remodels, and then they're starting to think about ways that they can leverage those stores as a way to even synergize and enhance their digital businesses. It makes a lot of sense because stores are billboards for retailer's brands, and they're also, retailers are realizing, a really big part of their convenience proposition. Just when we thought that Amazon had redefined convenience as being digital. Well, it turns out not every shopper in every occasion, or in every category or any time of day even thinks that digital is always the answer or always the most convenient.

So stores are becoming a real convenience opportunity for retailers or part of the overall convenience mix. They're also becoming a facilitation point for buy online, pick up in store, and they really are going to be ground zero for a lot of that innovation I was talking about. Augmented reality, virtual reality, dynamic pricing. A lot of that stuff is going to start coming to life in stores. So I call it the digital rethinking of physical retail, and I think that's going to be where it start and that's going to be where it all starts blurring, is actually coming from the stores rather than from digital to the stores.

Julia Raymond:

Right, and it sounds kind of like they're playing catch-up a little bit from what you said in general, focusing more on digital the past five or so years, and now refocusing on the physical store.

Carol Spieckerman:

Yeah, absolutely, well put. The catch-up initially was oh my gosh, we have to catch-up in the digital space, here comes Amazon, but now they're saying, "Wait, we've been neglecting our stores." But also they're seeing that opportunity, for about five minutes a lot of retailers were panicked thinking that their stores were liabilities, and now they're looking at their stores and saying, "Wait a minute, this is really key to our overall digital strategy." And stores accomplish, in a way are a gateway to digital for retailers that do it right.

Julia Raymond:

Mm-hmm, totally. The next trajectory, I know I'm moving a little quick, but it's because this one really is very similar to the store, is still the core trajectory, and we might call it its crazy cousin like your 'flagship fly' trajectory. I really like how you named that one, and it's interesting because I think this one is somewhat polarizing, because here you say, "Although the focus is largely on small formats, there is a new wave of flagship stores, and all are the gateway to digital." So I wanted to see what you meant by that, because some people say they shouldn't focus as much on the flagships.

Carol Spieckerman:

Yeah, well, I like to talk about flagships because again, they've never been more relevant but for different reasons than in the past, and again, small formats have rightfully been getting a lot of attention, they make sense for a lot of retailers, but flagship stores drive awareness, and retailers can selectively use these flagship stores to create a banner presence in a major market, and then continue that relationship once the hook is set in the digital space.

I mean, you look at a retailer like Uniqlo out of Japan. What's been really key to their U.S. expansion strategy, they didn't say, "Okay, let's start creating a bunch of little Uniqlos and put them in strip centers around the U.S." Instead, they stuck with that flagship model, those huge Uniqlo stores that just drive incredible brand awareness and just stuffed to the gills with product, and then once again, they've driven that awareness. Once those shoppers and in many cases travelers, and tourists, and people from other countries go back to their home base, they can continue that relationship with Uniqlo online. It can be sort of a hub-and-spoke strategy to use these flagships. But you look at brands like Nike for example going back to that business model diversification. Nike has announced that they're going to become much more discriminating with their wholesale relationships, selling to retailers. But what are they doing to complement that strategy? They're opening up these big, impressive, experiential bells and whistles, spare no expense, flagship locations, but the big takeaway too is that these flagships for companies like Nike are really important because they're like giant laboratories that are just teeming with experiments.

So for multi-model companies like Nike, they can take the insights that they get from those experiments and then they can deconstruct them and then parlay them to their other business models, including possibly their wholesale business. So flagships accomplish a lot for retailers, but again, very different from what they were in the past.

Julia Raymond:

Yeah, and it sounds like there's a few different, obviously context is key in a lot of discussions we have. So like Uniqlo, for them penetrating the market by having a large presence in major cities in the U.S. makes total sense, and that was a really smart strategic move as you said, and then Nike building up their brand awareness in big cities makes sense because they're also their innovation hubs and they get a lot of maybe coverage in the media.

Carol Spieckerman:

Yeah, they absolutely drive lots of buzz, and of course with social media, the shoppers and consumers become part of the marketing strategy as they share stories, and share the experiences that they're having in those stores.

Julia Raymond:

I just like to pull in recent news, and I know this one might be a weird example just because of their past publicity, but for Abercrombie & Fitch just a few days ago, they were announcing closing three of their flagship stores, and the CEO was saying that the customer today just isn't responding to our flagships. What's kind of your take on that, because I think it contradicts, but again it's the context?

Carol Spieckerman:

Well, Abercrombie on the surface it could seem that they're running counter to the trajectory, but when you look a little closer, I mean so far they're only closing three flagship stores, I believe. There's I think the Hollister store, which is a brand spin-off in New York City, and then the Abercrombie flagships in Japan and Milan. So, so far it's actually a pretty conservative pruning, especially considering, you could say that Abercrombie perhaps went too far with the flagship strategy, but I think it would be a really big mistake for them to abandon flagships all together, and I actually don't think that's what they're planning on doing, because going back to that brand awareness, brand awareness is so important for Abercrombie & Fitch, and particularly at a time when you look at Amazon, just creating piles of private brands, particularly in apparel practically overnight to a degree that no other retailer has ever attempted, that brand awareness is the bit differentiator for Abercrombie & Fitch, and flagships drive that awareness. But on the other side of the coin, they are going to be focusing on smaller formats as well, and that makes a lot of sense too because those smaller format stores, they've got the data now, they can drive greater productivity out of those stores at less cost. They can again, sort of that digital transformation, those can serve as a gateway in a facilitation point for their digital business.

So what I see happening, the real story with Abercrombie is that they're actually doing away with their sort of middling performing medium sized stores, the ones that they've always had, and they're paring those down into smaller formats, and I'm betting and hoping that they're going to continue to complement that strategy with a selective flagship presence, and I think that will be striking that perfect balance.

Julia Raymond:

Yeah, and do you think that we'll see that happen with a number of brands, especially for apparel?

Carol Spieckerman:

Well, it makes sense for a lot of established brands. I think again, to have that sort of hub-and-spoke model to where they have the flagships, the flagship locations, and when they open other locations, that they are those really nimble, highly efficient small formats that are yes, connected to their digital business, and there's the interactivity and the synergy between those stores and the digital side of the house, and then augmenting that of course with e-commerce, and yes, perhaps even selective presence on other retailers and other e-commerce platforms. That's not out of the questions for some of these brands that have built up a lot of brand equity and they have their own branded product. Sometimes it makes sense to actually be on other retailers' marketplaces to drive scale.

Julia Raymond:

Right, for scale that makes sense. We're talking a lot about brand. Obviously you're saying that the flagships really impact the brand and that's very important for all of the innovations that some of these retailers are planning, but when we talk about digitally native brands, which are a hot topic, the UNTUCKits, the Aways, the Allbirds. A lot of them can't afford to open their physical locations at first, and there's a lot of advantages from being digital first. So what questions should they be asking to determine whether or not to open physical stores, and also where to place flagships?

Carol Spieckerman:

Well, it's a big consideration, but it's interesting, these digitally native brands go in with a lot of advantages because they have that robust data from the digital space that goes way beyond just your traditional brick-and-mortar point of sale data. So they know a lot more about their customers than retailers that would start just from the ground up with a brick-and-mortar strategy.

So they technically, from the day they hang a shingle, their assortments are already optimized, do ?they know their target customer and they probably already built up some brand equity and some brand loyalty. But when it comes to opening the stores, I mean, I break it down into what I call the three Ms, in terms of consideration sets, and that's mixed media and message. So the questions to ask, is to think about the mix. What role will stores play in the overall mix in terms of how those stores will drive afinity and awareness in ways that they are not accomplishing in the digital space? How are they looking at how those stores complement their digital presence, their existing digital presence? Then in terms of media, I've been saying for a while that every retailer is a media company, but that's actually even more true for these digitally native brands because they're digital natives, they're content, very content aware companies and very media aware companies.

So I was thinking about how those stores are going to integrate with their overall media strategy and how the stores will actually be medium to deliver that third component which is the message, but again, digitally native brands are not being as cautions about opening stores perhaps as traditional retailers because they do go in with these advantages and they can have highly productive stores right from the moment that they open them. The big question becomes how many and whether it should be, to your opening point, should it be a temporary presence or should they go for permanent locations.

Julia Raymond:

Yeah, like one example, I know Wayfair is now opening their first retail store I think in August, and that's another example but that's a little bit different because they offer larger items. It's not just sunglasses or makeup, right? So what's your take on that move specifically?

Carol Spieckerman:

Well, in Wayfair's case, it remains to be seen if they're going to make it, it used to be that when retailers opened a store, it was a signal. It was okay, there's going to be more to come, and in fact retailers usually put out press releases, and they would say, "Okay, we're going to open this many by this date, this many by that date." And you would have these roll out plans into looking three and five years down the road. Well these days they're kind of playing it a little bit closer to the vest and every time they open a store, it doesn't necessarily mean there's going to be another one. In Wayfair's case, it remains to be seen because that store is actually, my understanding is it's going to be a little bit more like a warehouse store, not a traditional Wayfair branded small format or typical retail store. So it could be Wayfair testing the water for future locations, or it could be just a single location and they don't go any further with it. Again, that would've been an anomaly not that long ago, but these days plenty of brands are saying, "You know what? One, two stores, we're good."

Julia Raymond:

Yeah, I think Wayfair might be an interesting example, and I think that you're right, we might see them just open and test out with that one store, not expand, versus Warby Parker expanding very rapidly and making a lot of statements about how many stores they're opening and getting a lot of that public hype.

Carol Spieckerman:

Yeah.

Julia Raymond:

As you could say.

Carol Spieckerman:

Yeah, and to your point, I mean, the Wayfair story was largely people sort of seeking it out and digging it up. It wasn't like Wayfair was going, "Hey, we're in the retail business." It was definitely a little bit of a stealthy play, that got uncovered and then publicized.

Julia Raymond:

Mm-hmm. I could definitely see that just because of how it played out. So I want to circle back a little bit. You talked about moving into more convenience as far as retailer strategy goes earlier, and one of your trajectories is 'kill with convenience', in which you say that convenience is redefined and the standards have been expanded. When retailers want to kill it with convenience, price can be secondary and they can't afford to force customers into options that only make sense for the retailer. What are examples of this, or what do you mean by forcing customers into options?

Carol Spieckerman:

Well you know, it wasn't that long ago that some retailers, Gap and some others sort of trotted out one or two options, and they said, "Okay, this is what we're going to steer our customers into doing." They're going to have one option, it's going to be buy online and pick up in store, and it's going to look like this, or some retailers were saying, "We're going to do this one other thing but it's going to cost them." And now retailers have quickly realized that any time that they curtail choice, they really are playing with fire. I mean if for no other reason a handful of big retailers are offering so many convenience options these days, and on top of that, what retailers have realized is that different customers define convenience differently. They used to try to sort of pigeonhole particular customers, and create these personas around them and say, "Okay, this is how that customer likes to shop." Well not only is that no longer the case, but the same customer can define convenience differently depending on the category they're shopping, the occasion, or even the time of day.

So retailers have realized that they can't be heavy-handed with that. They have to throw lots of options out there in order to keep these shoppers playing on their platforms. So it's really sort of an all of the above situation, where you've got home delivery, buy online pick up in store, pick it up in the parking lot, kiosks, and robotic product delivery mechanisms in the front of the store and so on, but what I found really interesting kind of going back to Walmart, because you know they really are on the cutting edge of a lot of this stuff. Here's Walmart, a company that has probably some of the most robust data in all of retail. So they know which options their customers are using the most, and they also of course know which ones are more profitable for Walmart. But what are they doing? Instead of looking at that and saying, "Okay, we're going to parse it, narrow it down to this and we're only going to offer these couple of things that are profitable for us and that our customers like well enough, and we're going to scrap all these other stuff that's kind of noisy and difficult to execute."

No, instead Walmart is continuing to create all these new options, and it seems like they're doing that every month, or announcing something new, some new convenience capability that may or may not gain traction with shoppers, but they're doing that because they want customers to keep playing on their platform. And again, when you're a retailer that big that's as diversified as they are, that means that when you have those convenience options, and those customers stay with you, then you have an opportunity yes, to sell more products, but also to introduce them to your services and solutions, and again, to just kind of keep them playing on your platform. So retailers have realized that at the end of the day, if they do it right, it's much better to offer that choice and also too, knowing that recent data has backed up the fact that having convenience is actually more important than having a low price for many shoppers and in many occasions. So a lot of times they'll look the other way or say, "You know what? I don't need to save a few cents or a buck here or a buck there if it's more convenient."

So it can actually be better for retailers bottom lines to just offer these myriad options than to try again to sort of be heavy handed about it and coerce them to try one or two, and again, possibly risk them jumping off onto another retailer's platform.

Julia Raymond:

So could you almost say that convenience can be defined by options, that that really is the meaning of offering convenience?

Carol Spieckerman:

Well, I actually say that all the time, that convenience and choice have become synonymous in retail.

Julia Raymond:

Okay, that's a good soundbite, that makes total sense. You're saying a blanket approach maybe is better when you're offering convenience, especially when it comes to maybe something like shipping options or delivery options. Do you think it's better to just implement all at once, does it depend on the retailer? Because I think of Target coming to mind, I know that they had some hiccups when they did their buy online pick up in store program roll out. So I'm just wondering how would retailers approach that if they haven't already.

Carol Spieckerman:

Well, you can't really say that anybody would be capable of doing it all at once because it's constantly evolving. They continue to gain new capabilities, and one of my other trajectories that is really so pervasive in retail right now, and I don't think talked about enough, is what I call buy, build, or bridge. This is retailers' biggest question with every decision that they make. Should we build it internally? Should we partner with someone else to accomplish it, build those bridges, or should we rely on an outright acquisition in order to own this capability but get it fast. So convenience really plays into that because retailers like Target, what did they do? They went and made an investment in Shipt, because they've been humbled in the past and realized hey, we cannot create everything that we need to have internally, and sometimes we're going to have to step out of the Target system and we're going to have to make acquisitions or we're going to have to partner with others in order to get this done.

So that plays a role in this too, is a lot of times we just assume 'oh, retailers own all own of these solutions', well no, not all of them, but they have to decide when it makes sense to move faster, and in some cases go outside of the organization in order to make things happen, and convenience is where a lot of that is coming to life, and where a lot of those decisions become really important as this third-party companies become really attractive for acquisition or partnership to help retailers really kill with convenience.

Julia Raymond:

I like how you tied in that trajectory because it makes a lot of sense, but they will have to consider buying, building, or bridging if they're going to cover all their bases. Thank you Carol for joining the show, and also where can people go if they want to hear more about the other trajectories on your list?

Carol Spieckerman:

They can go to my website at spieckermanretail.com. It's not phonetically spelled, it's S-P-I-E-C-K-E-R-M-A-N. You can find me on Twitter @retailxpert, which is retail-X-P-E-R-T. Those probably are the two best ways. Of course I'm on LinkedIn and all of the other platforms as well, and I do have a page of my current trajectories on my website, and I'm constantly updating that, and of course if you look at my calendar in my speaking engagements, all of my presentations are centered around curating these trajectories.

Julia Raymond:

Perfect. Well thank you so much Carol. I enjoyed having you on the show today.

Carol Spieckerman:

It was an absolute pleasure Julia, and have a great day.

Julia Raymond:

You too, thanks.

Carol Spieckerman:

Bye bye.

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