Best practices in strategizing, personalizing and innovating customers’ in-store experiences

Our guest is Diane Ellis, C-suite executive and consultant with over 3 decades of experience in consumer retail. Her vision to reinvent iconic brands and lead transformational change has driven success in the public, Fortune 500 and private equity companies she has led. Join us as we explore best practices for retailers in strategizing, personalizing and innovating customers’ in-store experiences.

Episode 9 of RETHINK Retail was recorded on May 24, 2019

TRANSCRIPTION

Julia Raymond:
Hi, welcome to the show. My guest today is Diane Ellis. She’s a C-suite executive with 35 years in the consumer retail business and is currently a Board Member and the CEO of DME Advisory Group. She’s held previous roles such as Brand President for Chico’s, CEO of The Limited, and President and COO of Brooks Brothers. She’s also recognized by NRF as a 2019 Power Player in Shaping Retail’s Future. Diane, will you kick us off with telling us a bit more about yourself and your industry experience?

Diane Ellis:
Sure, Julia. Happy to do so. I’ve grown up in the retail industry. As you mentioned in my bio, spent 35 years in the business starting in the department store industry, migrating my way into off price at Marmaxx during the growth years of T.J.Maxx and Marshall’s, and then going into the consulting business, actually, for the mid-point in my career for a number of years working for Management Horizons, which was a division of PricewaterhouseCoopers, doing retail consulting. And then, came back over to the industry side in the roles that you mentioned, and so I had a unique opportunity over the course of my career to become a real student of retail, both from the inside as a C-suite executive as well as on the consulting side and had the opportunity to look at best practices within a number of retailers. I’m always fascinated by innovation and how retailers adapt to changes in the environment.

Julia Raymond:
Yeah, that’s great to hear and it sounds like you are a great person to have on the show just because you’ve not only been in retail and have a bird’s eye view but you’ve also helped with the consulting side, which really speaks to your ability to own the space and know what it means to create in-store experiences, which is what I’d like to talk about today with you. To start, I would like to just throw a broad question out there. What are new ways that retailers are identifying what the customers want and need, and then personalizing their shopping journeys?

Diane Ellis:
Well, I think, Julia, it’s interesting that retail has kind of lagged behind the consumer products industry traditionally in terms of the use of customer insights, research, and customer data. What I would say is new is retailers always felt that it was kind of a cultural bias towards the fact that we had to tell the consumer what they wanted as opposed to listening to what the consumer told us were her wants, needs, and desires.

So I think the new ways are leveraging big data, leveraging the wealth of customer data that is out there in new ways to really understand better the consumer behavior and consumer psychographics, and also spending a lot of time on truly mapping out the customer journey and understanding where the friction points are in that journey and designing solutions that really help eliminate those friction points and allowing the consumer to really experience that shopping experience in a really different way. So I think the data piece and the fact that there’s time actually being spent really dissecting that journey are two of the ways that personalization and the shopping experience are changing dramatically.

Julia Raymond:
Speaking of journeys that you’re talking a lot about, what are the ways retailers are really segmenting the journeys? Is it still heavily based on demographics, Gen Z, Gen X, or is it now based on more interest?

Diane Ellis:
It depends on, again, what service or product or experience the retailer is selling, but it’s more around need state in terms of you can have the same consumer who in one need state has a very different journey and very different friction points and opportunities to add value if they’re running out to buy something in a hurry versus it’s something that’s more planful or if their shopping behavior happens to be different and they’re more of a new shopper to that brand or if they’re someone that has experience with that brand.

So I would say it’s a number of different dimensions that retailers are looking at outside what used to be the traditional demographic view, which I always say to my teams, that you can have a group of 10 people, 10 women with the same general demographic profile who, when they look at each other sitting in the audience, they couldn’t be more different in terms of what’s important to them, what motivates their shopping behavior, how they equate value and what value means to them, and what they’re looking for in experience. So demographics tell you very, very little about the shopping experience or shopping journey and what that consumer’s looking for. So I would say it’s a number of different dimensions and trying to figure out which are the right ones to look at for your particular brand or product or service is part of the challenge.

Julia Raymond:
It sounds like maybe really drilling down on what the value sets are within your target market.

Diane Ellis:
Correct, and really getting a deep understanding of your target customer and how the value equation really lays out for them and what’s important to them and really where those pain and friction points are.

Julia Raymond:
Yeah. Yeah, that makes total sense. My next question would be, there was a recent report released and it says that the definition of retail has evolved from buying economic quantities of goods and selling them to consumers to now fulfilling consumers’ desires with a service they trust in the moment. And I think it’s key that they say in the moment because it alludes to the fact that needs and wants are changing so quickly all the time. What’s your take on the new definition? Do you agree?

Diane Ellis:
Yeah, I think it’s actually a refreshing new way to think about it because the transactional definition of economic quantities of goods and selling them is really more of a transactional, tactical kind of interaction whereas the new definition really talks about trust. That really, again, is instrumental in terms of that consumer has to trust that brand or that experience because they’ve got to know that their ability to have a successful experience.

People are so time-pressed and have so many alternatives and options that trust really becomes a key factor. So do they trust you in that moment for that particular need state that they have? Have you developed that level of trust with that consumer that they feel you’re the best solution, and is there enough value in that interaction that they feel like you’re the best choice? I think it really talks about the dynamics and how they’re changing, and the definition seems to be more relevant for today’s retailer and consumer.

Julia Raymond:
That’s great insight. When you’re talking about trust, what is the most challenging obstacles retailers face when trying to build that trust or when it comes to maintaining customer engagement?

Diane Ellis:
Well, I think trust takes a long time to build and can disappear with one bad experience. Consumers’ tolerance level for missteps in the experience is pretty low, and there’s so many alternatives and options whereas in the past, your options were limited to get a certain service or product so you may put up with less consistency or less service level or other things because it wasn’t available in a ubiquitous manner. Now that you can get anything you want anytime, the question, who do I trust to do that in a way that, again, adds value or does it consistently? When you’ve got a lot of stores and a lot of sales associates and different channels, making sure that that experience that is building that trust is consistent across all those touchpoints is probably the biggest challenge to maintaining that trust and customer engagement.

Julia Raymond:
That makes total sense, and I think that driving value in that moment when they need it most is what will create loyalty. But because you talked about having so many options as a consumer, how has loyalty changed over the years? I remember learning in college about the Tide story, and Tide is such a strong brand because kids saw their moms use Tide and so they did too. But now there’s just a plethora of options out there. You can get things delivered, there’s different promotions all the time. How is that changing for brands?

Diane Ellis:
Oh, I think, again, loyalty … Most retailers or brands can’t rest on their laurels with regard to loyalty with the consumer. They’ve got to be able to understand and anticipate how that consumer’s lifestyle and needs are going to change and be ahead of the curve on that, so the consumers say, “They really get me. They understand me beyond a simple transaction. They understand me, and because they consistently demonstrate that they understand my needs and what I’m looking for, I get value from that because it’s making the experience easier so that’s how I derive loyalty,” versus, “I have a product that I can only get in one place and it generally works,” that used to be the definition for loyalty. “That was the brand and it worked and I saw my parents use it,” or, “I felt comfortable with it because I’d used it for a while.”

That loyalty has to be earned every day, every interaction with the consumer today, versus establishing loyalty once and as long as you didn’t change the product or the experience too much, you had a loyal consumer. It’s much harder, and there’s constant new entrants into the process in terms of that playing field. So you’ve got to consistently up your game and anticipate the customers’ needs and maintain that level of loyalty.

Julia Raymond:
Yeah. It’s always on, isn’t it, for retailers. There’s no break.

Diane Ellis:
Unfortunately, no.

Julia Raymond:
No. It’s just getting more competitive every day. But in years past, as we’ve touched on, stores and retail more broadly was about transactions and inventory management. Today, digital is kind of king on both those fronts. Physical stores really need to evolve into something more, and is there anything from your experience that next gen stores should keep in mind when they’re either redoing their format or they’re a new entrant to the market?

Diane Ellis:
Well, I think as you mentioned online when consumers are asked what attributes of online shopping are the most important, it’s the attribute of convenience and price actually comes out high there when they’re looking for best price because it’s easier to compare. Then, also, browsing because it’s actually easier to browse online than it is to walk around a mall. I think that dynamic is a lot of what’s challenging mall retailers, is people used to shop six to seven stores every visit. Now they’re down to two to three because they’ve done that browsing behavior.

So thinking about, again, folks like Nordstrom with their neighborhood concept and understanding what the consumer’s coming in for. They’re really not necessarily looking to you for browsing. Our latest research that I’ve seen said that it really is about, in the apparel sector, anyway, outfitting and the ability to get expertise and hands-on experience with somebody who brings more value to that interaction than they can get online or through online tools, and then fit. Fit still continues to be a reason for consumers, in the apparel space, anyway, to make a trip into the store to really understand fit, at least initially, until they get a comfort level with certain styles and their fit.

So as they’re looking at stores, I guess, again, you’re not necessarily having to meet a lot of that browsing. It’s really more about outfitting and what you’re doing to bring additional content and value-based content, meaning, again, something that makes that experience more fulfilling than what I could do on my own in other channels. And so, as they’re thinking about stores, again, I think that most stores are really built around browsing and transactions and convenience versus an immersive experience that really has richer content or richer relationships or, again, brings some additional level of personalization that they can’t receive online.

Julia Raymond:
Sure. I think it makes a lot of sense what you said about apparel being the category that really will drive people into the store just because everyone is so different in sizing that there is still that need to go in and physically try on items.

Diane Ellis:
Yeah, and that will change as technology continues to improve on fit technologies and things of that nature, but for the foreseeable short-term future, it’s still a big driver for consumers for brick and mortar experience.

Julia Raymond:
Yeah, that makes a lot of sense. I have seen, actually, a lot of the men’s outfitting specifically for suits that now they have apps that will scan your body and they’ll send you measuring tapes so you can avoid having to actually go into a tailor and just get your suit sent to you direct to your house. I think, yeah, that’s probably where we’re headed, but would you say that the big box retailers will offer that kind of service, or will that stay kind of speciality.

Diane Ellis:
I think that will stay, again, to a little bit more in the specialty space where they’re looking for that to differentiate. But an example would be, again, at Brooks Brothers that experience of having a highly-trained custom tailor fit you for a suit is a very high touch, indulgent, elevated experience when done correctly and if you want to feel pampered as a gentleman and feel like you’re being delivered an experience that’s very, very high touch and intimate, then that kind of an experience is still going to make a difference to you if that’s something that’s important. If you’re more interested in convenience than an online experience where it’s self done and if you’re pressed for time and convenience, then that’s a different driver.

Julia Raymond:
Right, right. So just speaking to the retailer sweet spot and probably target market. When you’re coming into the store, you talked about having a highly-trained tailor. That’s part of the indulgent experience that gentlemen at Brooks Brothers, for example, would come to the store for. When we’re talking about just sales associates in general, how are retailers transforming, redefining their role to shift towards the seamless, connected shopping experience that’s catered to each customer?

Diane Ellis:
Yeah, I think one of the most important things is there’s a big cultural shift that has to occur and is occurring within most omnichannel retailers where the sales associate really has to see their job as helping to drive the share of market of that brand in that particular geography regardless of channel. And that’s very different than, again, within most retail organizations everyone is incented around individual channel behavior, or was in the past incented around individual channel behavior, and now what’s the … what’s in it for me for a sales associate to facilitate engaging with you in an online experience or supporting you going to an online experience versus an in-store experience.

We’ve all seen it where a sales associate would say to a customer, “Well, if you see something you like and you don’t have your size, I can order it for you to come in here,” versus asking the consumer, “Do you want to purchase that online, or do you want to have it shipped directly to your house?” because that’s how they’re incented is based on whether it’s an in-store sale or not. So changing metrics and incentives for sales associates to really incent them around supporting and encouraging the consumer to engage with that brand regardless of channel across multiple channels is where retailers are having to rethink their pay structures, their incentive structures, all of that, in addition to, again, having to put a lot more investment in training to really have sales associates who bring something more to that experience than the consumer can do in a digital way. So the sales associate’s really a relationship manager in this new environment as opposed to someone who’s facilitating a transaction.

Julia Raymond:
Right. When you say different channels, is that something you’re seeing happening right now with sales associates being incentivized to encourage online sales?

Diane Ellis:
Yes, yes.

Julia Raymond:
Okay.

Diane Ellis:
I think they’re getting either some form of credit or bonus structures are changing where they get incented around that customer’s purchases online if they were engaging with that sales associate prior to them going online, or even with tools like Salesfloor where you’re able to have a sales associate in store be able to, again, engage with customers in the online experience as well. So they’re actually facilitating shopping in a digital format as well as in a brick-and-mortar format. So giving them credit for that and giving them sales incentives around that so that they’re able to be rewarded for that behavior is really what needs to change and what is changing in a number of retailers.

Julia Raymond:
Yeah, that’s probably a bigger undertaking than it sounds, right, to have all that technology to support those payment structures and tracking.

Diane Ellis:
Yes. Again, it’s probably, while it’s a technology challenge, it’s probably more of a cultural challenge to take down those barriers of channel functional stovepiping that are within most retailers. An example at Chico’s was we had implemented omnichannel sales leads where the digital and brick and mortar responsibilities which normally fall under different individuals in retail organizations were combined under one. Allowing individual to really facilitate removing those barriers and cross-channel behavior, to support cross-channel behavior.

Julia Raymond:
Yeah, that’s really smart and I can definitely see what you’re saying about it being a cultural shift, an organizational shift.

Diane Ellis:
Absolutely.

Julia Raymond:
Switching gears a little to in-store personalization and in-store engagement, would you say … There was a study recently, a global study of 10,000 consumers and it said that video content positively impacts over half of consumers in their shopping experience. What are your thoughts on digital signage? Do you think we’ll see a lot of investment there over the next few years?

Diane Ellis:
Well, I think you will because it, again, gives you that speed, one, to be able to change content quickly and to be able to respond to changes in conditions in stores and things like that, so you have that flexibility because it is a constraint right now in terms of your ability to either flex promotions or content, and it’s relatively high cost to print all that physical content as well. So I think it will evolve and change, and again, as you try to bring what’s working best on the digital side, when you see the amount of influencer content that really drives consumer behavior online, that same influencer content and interactive content is really going to be important to continue to bring that experience to the brick and mortar environment.

So it definitely, whether it’s video content or whether it’s content delivered by your sales associates, having the value added content delivered digitally requires a little bit less training to be able to do it and still deliver that value proposition versus training associates. But either way, the value added content, whether it’s about outfitting or inspiration or ideas or lifestyle suggestions or things of that nature that really immerse the consumer in the lifestyle of that brand, that has to be part of that experience to remain competitive. And whether we deliver it with digital means or with sales associates, it’s equally important.

Julia Raymond:
Yeah, that’s a good point. That’s a good sound bite that it is equally important for retailers to think about. When you said influencer content, are you saying influencer content that would get pushed out to potentially the digital in-store signage?

Diane Ellis:
Yes, yeah. Whether you’ve got, again, you’ve got consumer ratings or you’ve got consumer feedback content or you’ve got actual influencer content or sales associate content where many retailers, Nordstrom for one, an example, is using videos that are done by their own associates talking about the benefits and outfitting of product and things like that. So bringing that content, the consumer is looking for, again, inspiration, outfitting, ideas, lifestyle.

If they like the brand and they feel the brand’s relevant to them, they’re looking for, “Okay, what kind of recipes?” or if it’s about Memorial Day, what are some other ideas and inspiration? So bringing that experience that people get through blogs and YouTube and other components in a digital environment, bringing that into the store environment really helps to build out that lifestyle experience and persona and it is one way that digital content can really change the game.

Julia Raymond:
Do you see a lot of digital content, like when you’re talking about the lifestyles and the outfitting, it’s almost like Pinterest, right? So it’s a lot of inspiration. Do you think that retail websites will see a shift towards more of a Pinterest-style layout or different sections that give-

Diane Ellis:
They already are in terms of how to wear, shop the look, and a number of different functionalities that are there, whether it’s user-generated content or brand-generated content. Those are, in my experience at The Limited, Chico’s, were the number one clicked and number one interacted with elements of the site were shop the look and how to wear. So the consumers are consistently looking for inspiration and ideas around that and a lot of growth for both of those web businesses really came out of shop the look functionality as well as how to wear.

Julia Raymond:
Yeah, very interesting and good to hear about your direct experience at those big retailers. Which, speaking of huge retailers, I know last month Neiman Marcus opened its Hudson Yard store, its first in New York City. Fortune Magazine eloquently put it, “At the tender of 112, Neiman Marcus is a newbie again,” which I thought was kind of funny. But the store, it blows other stores out of the water a little bit. They’re really competing. It has interactive technology, I read somewhere maybe even over 60 interactive screens, a demonstration kitchen on its lower floor and even an event space on the middle floor that can hold 100 people for mini fashion talks or designers. Do you think these additions will really end up driving people to store or increasing revenue?

Diane Ellis:
I think, again, ways to give consumers a reason to come in to engage with content that they can’t get elsewhere is going to become critical. Actually, it’s kind of interesting where everything old is new again. Back in the day in department stores, there were event spaces and there were a lot of fashion shows and events and things in the store constantly, whether there would be a new theme every season where the entire department store would become springtime in Paris or apple blossoms in Japan. It was something that was kind of an immersive experience that consumers, you know, it gave them a reason to go and spend time in the store.

When you look at other innovative retailers like, for example, American Eagle, who, again, put washing machines in their store in the near NYU because they understood that was a way, the typical NYU college student, what do they spend time doing with time on their hands, is washing their clothes. So why not have them hang out in the store while they’re doing that? Or Urban Outfitters, who, again, put a pizza business in some of their locations.

So those things that give the consumer an experience draw them to come into the store and, again, begin to see the store beyond just a place to transact but a third place, meaning a community, a place where they can hang out and interact with other like minded people. It really is that sense of third place that takes the brand beyond just a kind of transactional experience, and I think for Neiman’s is the challenge is really to keep that fresh and keep that content consistently changing and new, because if it isn’t dynamic content it will get old and its attraction and draw to the community and making it that kind of third place, in essence, will not be sustained. So I think it’s a great start, but keeping that new and fresh will be the challenge.

Julia Raymond:
Right. I really like what you said about the parallels between the past retail and retail now, or future retail, how the experiences are coming back around, in a sense. Do you think that’s because humans still have the same desires to have an experience but our lifestyles have changed?

Diane Ellis:
Yeah, the lifestyles have changed but I think humans still have the desire to experience things with other like-minded people and people that they can share community with. Even as, again, digital presence continues to grow, there’s still that human need to interact and engage in the social element of shopping is still important and still something that people desire, but it has to be interesting and fun and not transactional and boring. I think that’s where the opportunity is for retailers to really become the ‘retailtainment’, in essence.

Julia Raymond:
Right. Yeah, ‘retailtainment’.

Diane Ellis:
If you’re a fan of watching Selfridges or some of the other things, it really was about entertainment, a means to really create that draw and that experience, and so I think it’s a return to that unless it’s reliant on some of the convenience and transactional and availability of inventory pieces that retailers over relied on throughout the last 10 to 20 years. I think it’s evolving back to some of those elements of the past in a new way.

Julia Raymond:
Yeah, I can totally see it and I really enjoy hearing your perspective on that. I think that’s really interesting for our listeners. Also, I really love the washing machine example that you gave. That kind of brings me to one of my last questions I want to pose today. Because I kind of imagine someone sitting in a boardroom and just throwing out that crazy idea, “Let’s put washing machines in the store,” but I’m sure they did their research and knew that they were right next to a college and that their target market matched up, etc. So how do retailers think strategically and not tactically, chasing the shiny object … We hear a lot about that … before investing in in-store experiences?

Diane Ellis:
I think, again, the pivot I see retailers making and those who are really innovative, like some of the ones I’ve mentioned, are doing those strategic changes out of deep understanding of their target consumer, versus chasing a technology that is a new shiny object or a new technology in search of a fit in the store. So it’s really, again, because many of the solutions may have a technology component or may not, but it’s driving it out of a deep understanding of your customer, of how that customer wants to interact, where you can add value and differentiation to that experience, what’s important to him or her, and that deep understanding then is where those ideas come from and the ideas, again, are meaningful to the consumer as opposed to kind of fluff.

A lot of technology that was implemented at store level was kind of whiz-bangy but it didn’t really change the consumer experience fundamentally or remove a friction point or add delight or value to that experience. It just, in some ways, made the experience more complex or complicated or frustrating. So it’s very important, I think, that it’s driven right out of a deep understanding of the consumer, and that’s where folks who are winning on that front are seeing the benefit, is letting it be consumer-led, or customer-led.

Julia Raymond:
Yeah, that makes total sense. It’s great to hear from someone like you who’s worn so many caps in the retail space over the years. I just want to thank you for being on the show today and for your time. I’ve really enjoyed our conversation.

Diane Ellis:
Thanks, Julia. I enjoyed it as well.

Julia Raymond:
Thanks, Diane.