Global thought leader on the future of retail

Our guest is Doug Stephens, one of the world’s leading retail industry futurists and the Founder and President of Retail Prophet. His work and perspective have influenced many of the world’s best-known retailers, agencies and brands, including Walmart, Google, Home Depot, Disney, BMW, Coca Cola and Intel. Doug speaks regularly to major brands and organizations across North and South America, Europe, Asia, The Middle East and Australia. Join us as we explore the future of retail – including IoT and repetitive consumption, voice shopping, stores as media channels, and the new definition of luxury.

Episode 15 of RETHINK Retail was recorded on June 28, 2019

TRANSCRIPTION

Julia Raymond:
Hi, welcome to the show. Today, we’re speaking with one of the world’s most sought after speakers on the future of retail, our guest, Doug Stephens. Prior to founding his company, Retail Prophet, Doug spent over 20 years in the industry holding senior international roles, including the leadership of one of New York City’s most historic retail chains. He’s authored two groundbreaking books, The Retail Revival: Re-Imagining Business for the New Age of Consumerism, and Reengineering Retail: The Future of Selling in a Post-Digital World. His unique perspectives on retailing, business and consumer behavior have been featured in leading publications, including the New York Times, Bloomberg Business News, Financial Times, Wall Street Journal, and more. He’s also the nationally syndicated retail columnist for CBC Radio and sits on multiple advisory boards. Doug, welcome to the show.

Doug Stephens:
Thanks so much, Julia. It’s great to be here.

Julia Raymond:
Great. Great to have you. I’d love if you would just kick off by telling us a bit more about your background and how you evolved into this role of really global thought leader on the future of retail.

Doug Stephens:
Yeah, sure. As you mentioned in the intro, I’ve spent the better part of 20 years in corporate retail working across a number of different disciplines in both Canada and the US in a number of different capacities for retailers, manufacturers, distributors, franchise businesses as well. After 20 or so years in the retail industry, I thought, I really feel… and I had felt for a long time that there was a need for a narrative that was looking out on a longer horizon. A lot of the analysis in retail was sort of backward looking and it just seemed to me around 2008, 2009 there were just… there were so many massive changes taking place in the industry. I certainly had never seen the volume and magnitude of change that we were experiencing across demographics, economics, technology, the media landscape was blowing up.

So I really felt that there needed to be a voice in the industry that was looking out on a longer horizon and trying to contextualize these changes. So in 2009, I launched Retail Prophet that was really just aimed at creating research and writing that was contextually relevant for executives, something that they could grab onto start planning strategy around in. From the very humble, terrifying beginnings in 2009, the company grew recognition and today I do a tremendous amount of research and speaking around the world. I have a podcast of my own, a couple of books out now, The Retail Revival and Reengineering Retail: The Future of Selling in a Post-Digital World, which came out in 2017. That’s Retail Prophet in a nutshell.

Julia Raymond:
Excellent. It sounds like you started Retail Prophet at a really good time when everything was accelerating extremely fast in terms of just data usage and application when it comes to the consumer, Internet of Things, which I’d actually love to pick your brain about first because I see you’ve put out a lot of content about it and there’s just, from voice to all the other technologies retailers are using, it gets really complicated and the future might not be as clear to a lot of people. So what do you see the Internet of Things forming into over the next five years?

Doug Stephens:
Oh, yeah. It’s a good question. I see us at a place right now where… I call it the end of the beginning of e-commerce. I think that we will look back 20 years from now, maybe even in a shorter period than that, and we’ll look at companies like Amazon and Alibaba and I think it’s going to occur to us at that time that these companies and the way we shop online today was really just chapter one in what I think is going to be an extremely long runway for the online experience. Part of that, of course, is the Internet of Things. When you think about the way we shop online today, it’s very conscious, it’s very deliberate and intentional. We are still to some extent going online to shop, but I believe going forward, we are going to see the intervention of more and more technology in serving our routine replenishment needs. A surprising statistic is that about 45 to 50% of our consumption is just routine. It’s repetitive.

These are not products that require tremendous consideration on our part. Most of what we’re buying, we’re buying routinely, we’re buying the same brand and the same quantity. When you look at that portion of our spending, it would make perfect sense for more of that kind of consumption to just go over to a very replenishment based model. So yeah, I see the advent of connected appliances, even connected packaging that’s sort of monitoring the consumption of products and the level of contents within a package and triggering a reorder for approval. These things are going to become real. Just to put a point on it, recently, Walmart applied for a patent for an automated… fully automated store. But the surprising thing about the pattern is that they want to install that store in your home, directly in your house.

Julia Raymond:
Oh, okay.

Doug Stephens:
So imagine a walk-in pantry. This is as described in the patent. Imagine a walk-in pantry in your home that is fully stocked with products, food products, packaged products, and you literally walk in, take what you want, walk out, and that immediately gets charged to your Walmart account. Not only that, but according to the patent, it’s AI infused as well. So it actually becomes a bit smarter. Every time you select a product, it starts to know your needs, your preferences, your consumption levels better and it starts making recommendation. I mean, this is Walmart we’re talking about.

Julia Raymond:
Wow! Wow!

Doug Stephens:
The little company from Arkansas. So yeah. I mean, this is no longer just fanciful stuff that sits somewhere in the future. We’re on the verge of it.

Julia Raymond:
Yeah. Like you said, this is the end of the beginning of e-commerce and today is chapter one. I mean, that’s definitely a futuristic view and I imagine it’s something that could be possible. It could save on the last mile for Walmart by having regularly scheduled deliveries. Is that the thought behind it, this ties into your repetitive consumption?

Doug Stephens:
That’s exactly the model. They’re suggesting that they would just stop by your home on a regular basis and replenish the items that you’ve taken and add some additional items that they think might be of interest. But in essence, yeah, you’re… this significant chunk of your consumption would simply be managed for you. Yeah, this notion that technology begins to take a greater role in our lives, in managing these routine purchases, arguably freeing us up to do other things and hopefully be able to invest more time in the considered purchases that we need to make, the big things in our lives.

Julia Raymond:
That makes total sense. It also brings up another question because voice shopping is something that maybe is gaining some traction. I know Salesforce reports that just voice technology adoption in general by retailers is growing by 127% next year that’s… number here or there. But was voice shopping something that’s for repetitive purchase or where does that fit into the equation?

Doug Stephens:
Yeah, at the moment it is at. At the moment, if we look at the usage that’s happening on Amazon Echo for example, on the Alexa platform, it’s still not a perfect platform in terms of making a purchase that requires significant consideration or media with which you need to interact to be able to make a cogent purchase. So if I need to see a lot of data or pictures or images or video, voice is not the perfect platform obviously for that. But for replenishment purchases, “Alexa, order more paper towels,” and Alexa has this, the last order that you made for paper towels and it makes that recommendation and you say, “Yes, go ahead and do that.” It’s perfect. But going forward, I believe we’re going to move into an entirely different phase of… I’ll call it a voice interface with our technology in general. I fully believe that when we really start to combine voice technology with AI and our capability with AI becomes greater than it is today.

I think we’re very, very much in the infant stages of our development of artificial intelligence. I fully believe that each of us as consumers, we will have a virtual assistant that is with us at all times that we can just simply call out to when we need them and say, “Hey, I’ve got to get from Philadelphia to Columbus, Ohio on Friday, what’s the best flight to do that with? Oh, and by the way, where should I stay if I want to be close to this event center or whatever?” We will simply have very natural conversations with our technology. In return, that technology will become our shopper for our consumer lives much the way we navigate ourselves from point A to point B right now using GPS. I think we’re going to become as reliant on artificial intelligence powered by voice as we are on GPS today. I think it’s really going to change our consumer lives entirely.

Julia Raymond:
Totally, and I love these ideas because they’re something I could definitely see happening but aren’t necessarily here yet. We obviously have Siri, but I think we can all agree that Siri doesn’t always work as best as we wish that she did. Is this something that you see being embedded into something like our smart devices or is this a separate device?

Doug Stephens:
I see the form factor will certainly change. I don’t necessarily believe that 10 or 15 years from now we’re going to be using the same kinds of mobile devices. But I’ll give you one example. Part of the reason that I’m saying this is that two years ago, IBM Watson conspired with Soul Machines, a company out of New Zealand, to create a very lifelike, humanlike technology that was powered by AI. It was demonstrated live at a conference. In this particular demonstration, you had a gentleman who was looking to get a new credit card and was turning to this technology for advice on which credit card to buy. Over the course of about five minutes, he has this extremely natural conversation with this AI that looks remarkably human in its appearance.

Just the natural nature of this conversation back and forth was pretty jaw-dropping. This was before… you might remember Google did a demonstration of a technology that booked a hair appointment for someone. That too was jaw-dropping in how… not only how realistic it sounded, but also the fact that the person on the other end of the phone in the case of Google didn’t even know that they were talking to an AI. There is enough evidence out there to suggest that this is really happening, that we’re… this is where we’re going and it’s just a matter of time I think before each of us is walking around with this kind of technology in our back pocket.

Julia Raymond:
Yeah. I love how you put that. It’s amazing to see where actual physical robots might come into play in the future. This is an awesome segue into the next point because I was reading a New York Times article just last week and they had a piece on the rise of virtual influencers. We’ve all heard of virtual assistants. We just talked about how there’s probably going to be a virtual assistant in everyone’s pocket within the coming years. But are virtual influencers, which are just computer generated characters, something that you think will actually gain traction?

Doug Stephens:
I think it’s possible. In Reengineering Retail, I talk about a phenomenon that was happening in China with a technology called Xiaoice. It was a technology that if I’m not mistaken was being powered again by IBM technology. This being, if you want to call it that, was essentially available to Chinese internet users. They could basically just connect with Xiaoice as they called her and you could carry on conversations with her, anything, you could talk about your relationship breaking up or the new job that you just got or the fact that your parents were coming for dinner. This AI just sort of related to you, again, carried on a conversation with you, learned little bits and pieces about your life, about you as an individual and the next time you went to speak to her, she would actually talk about some of the things that she remembered from previous conversations. But the interesting thing about this was that there were literally millions upon millions of Chinese people, largely young people talking to Xiaoice on a daily basis.

Julia Raymond:
Wow. That’s surprising. I mean, it reminds me of the movie, Her, which is totally fiction.

Doug Stephens:
Exactly, yeah, very much that sort of thing. When asked why they did this, a lot of them said they felt that she was a friend, that they felt they could confide in her and that oftentimes she would give them really good advice about what to do in their life. Again, this sounds like something out of a novel, but I mean, they were there. In many ways, we’re ceasing to distinguish really between what is an AI and what is a human being. I think 10 years from now or 15 years from now, I don’t think we’re necessarily going to care if the voice on the other end of the line is being driven by technology or whether it’s human as long as we’re getting the information that we want. So, virtual influencers, yeah, I can totally see that happening.

Julia Raymond:
Well, it’s great to hear your perspective on that because the example from the New York Times was… Miquela Sousa is the character, and they call her Little Miquela and she already has over 1.6 million followers. So we know that people like to follow this type of profile, but just to think about brands creating one from scratch that really resonates with their target audience is an interesting perspective and I’d like to hear that maybe that is a possibility in the future.

Doug Stephens:
Yeah, I think it is. I think that in a weird way what this does is it puts us as humans in a position where we really have to start thinking about what we bring uniquely to the table. I think that’s particularly important in retail. We’ve seeing every year this advancement in technology where AI is getting a more sophisticated, AI is becoming a lot more robust in what it’s capable of doing, we’re seeing robotics certainly moving into the retail landscape. I think that this is forcing retailers to really ask the question, “What is it that a human being can bring to the table that these technologies cannot?” So, things like creativity, things like empathy, things like just imagination or things that certainly technology hasn’t quite mastered yet.

These are really the domains of human beings. If anything, I think we’re moving into a future where the retail landscape, yes, we’ll have a lot, an awful lot more technology in it to again handle a lot of the routine and repetitive aspects of retail work, but I also see this sort of renaissance whereby humans are going to actually command a premium for the skills that are innately human. Again, largely, it’s creativity and the ability to empathize with people, the ability to build a rapport with people is going to be really important, I think, in this future.

Julia Raymond:
Yes, I could definitely see things that are innately human, charging a premium for those. I wanted to move on to… circling back really retail specific. You’ve said lot that stores are becoming media channels in a sense and the purpose is to tell a brand story. One quote I like from a reason article you wrote, you said, “Physical retail stores are not only a powerful media channel, I’d go so far as to argue there now the most manageable, tangible, measurable media channel available to a brand.” Will you expand on your idea of a retail store being a powerful media channel?

Doug Stephens:
Sure. Right now, we’re at this place where the retail industry is pointing to what’s happening and saying it’s omnichannel. Omnichannel is this word now that’s getting kicked around an awful lot. I’m not a big fan of the word, not just because it’s being overused, but I think because it’s really misdiagnosed in what’s happening right now. What I see happening is something that’s on the one hand more complex, but on the other hand, I think it’s infinitely more optimistic and inspirational than just saying everything’s omnichannel. It’s one big experience from mobile to desktop to store back to mobile. I don’t see it that way. What I think is actually happening is, I believe that media in all its various form factors is now in the consumer’s mind becoming the “store.”

We have a reality here in North America whereby in 66% of cases where consumer recognizes they need a product, they’re not going to a store, they’re going to Amazon in 66% of cases, and they’re searching for that product on Amazon. If they know exactly what they want, that number rises to 76%. So in three quarters of all cases where consumers recognize they want something, they’re going directly to Amazon to look for it first. Now, if the primary purpose of a store was to merchandise products, convey product information and transact sales, you could make the argument that in virtually every media channel right now, I can do that, whether it’s a connected ad in a magazine, whether it’s an online store, whether it’s a mobile store, whether it’s a store on Facebook, all of these places are places now where I can merchandise vast amounts of product, I can convey tons and tons of rich product information and I can transact sales in one click.

So media is in effect beginning to fulfill all of the functions of traditional stores but doing so on a level that no physical store could ever conceivably pull off. So media is becoming the store. But on the flip side, and this is where to my mind it gets exciting, the opposite thing is happening. Stores, physical stores are becoming a really powerful media channel. I’ll explain what I mean here. If you accept the fact that media traditionally, through history has always been effect of wherever people gather in numbers. That sort of just the going in premise of effective media is that you have to appeal to an audience. So a thousand years ago, where was that audience? Well, people gathered in the center of town, they went to the market, bazaar, the agora, the plaza, whatever you wish to call it. But that’s where people got their information, that’s where they transacted commerce and where they found new products and new merchants. So it was physical space.

Then along comes the printing press and all of a sudden now we can disperse information through print media and that becomes the gathering place. It’s the daily newspaper that people are gathering around to get news and information. That’s displaced by radio, radio is displaced by television, and now we live in a world where it’s digital media. Digital is the new campfire that people are gathering around. But here’s the problem. The problem is, it’s incredibly hard now to actually reach consumers in an efficient and cost effective way through digital media. I’ll give you an example. In North America in 2018, spending on digital was up about 34%, the cost per click, if you wanted to go out on the open market and try and get clicks on your ad, that cost went up by about 30% in 2018. But here’s the punchline, clicks, actual clicks only went up by 3% against a 34% increase in spending.

We’ve clearly reached a point of significantly diminishing returns on digital spending, very difficult to get consumers, to find them in the digital space and then connect with them in a meaningful way. But here’s the thing, where are people gathering? They’re gathering in physical spaces. Again, virtually every city I travel to… I just got back from Tokyo. When you walk through Harajuku and shopping areas like Shibuya first thing in the morning, there are lineups of kids waiting to get into stores. Walk through the streets of New York, you will find lineups outside Supreme and Kith and Glossier. Go to London, you’ll see the same phenomenon taking shape. People are gathering in physical stores.

The problem is, retailers are not valuing the media effect of stores. We know that that stores have a defined media effect within a market. According to the National Retail Federation, the presence of a physical store in a market can generate e-commerce sales of anywhere between 27 and 35% lift just by having a physical store in the market. Clearly there’s a media effect, but retailers are not valuing the actual contribution of that media to their overall network sales or the value of a store. So yeah, I believe that we’re seeing a complete turning of the tables where in effect, media is becoming a store, but stores are becoming an incredibly powerful, manageable and measurable form of media in the physical world.

Julia Raymond:
I love that and I love the supporting stats that you provided. It makes me wonder, what is your opinion that maybe something like search engine marketing, which has been such a huge part of marketing and for retailers the past maybe decade or so, do you think that will see a decline?

Doug Stephens:
Yeah, I definitely do. Up until now it’s been fertile ground. As retailers have awakened to the idea that consumers are spending this inordinate amount of time online, that online is the place where they could be reached, we’ve seen this influx of brands and retailers now into the market increasing their spending disproportionately and exponentially. So yeah, the market is flooded. Moreover, I’ll just give you a quick story that I think highlights the point. I have one client that is a major beauty brand, one of the largest in the world. I was recently with them at an event and I asked their chief marketing officer, just casually, how many consumers a year go through their various branded properties in the market, their branded stores, whether it’s airport retail or a standalone retail or online.

He hazard a guess that it would be somewhere in the range of about 30 million consumers a year who go through some experience, some branded experience that the brand was providing. So I asked him, “If you were to go to a Madison Avenue advertising agency and you were to say, “Hey, we want to connect with 30 million consumers a year. But now with a 30 second Facebook ad or a YouTube pre-roll ad or a quarter page in the New York Times, we want to connect with 30 million consumers with an experience that maybe 20 minutes in duration, that’s immersive, that really allows them to understand our products and our brand and our culture and begin to feel like they’re part of that, that brand ecosystem. How much do you think that would cost?” He thought about it for a second and he looked at me and he said, “well, it would be incalculable of course. It would be astronomical. There’s no way we could even attempt that.”

He’s right, the cost would be astronomical. But here’s the thing, they’re doing it. That’s what they’re doing. Every year, 30 million consumers are going through that kind of experience. Number one, we don’t know if it’s a good experience or a bad experience, and secondly, we’re not valuing it. We’re not saying, “Okay, well, if that would cost us $50 million to go out on the open market and buy that kind of media, then why aren’t we attributing that value back to stores? Why isn’t that part of the way we evaluate the productivity of a physical location by virtue of the number of consumer impressions they deliver each year?” I think it’s an important metric that we’re completely ignoring.

Julia Raymond:
Right. Not only that, but I’ve heard that the customers that do shop multiple channels have a higher lifetime value. So those are actually the more valuable customers that you’re reaching in the stores if they’re also online shoppers.

Doug Stephens:
Absolutely. Again, I mean, the in-store experience is something that you can truly validate. If somebody watches 15 seconds of a 30 second pre-roll out on YouTube, you’re going to get charged for that as a brand. That’s an impression according to YouTube. But the question you have to ask as a marketer is, does it matter? Was it a really conscious impression? Were they just waiting for the 15 second countdown so they could hit skip? If they did, if they watched the whole damn thing, did it really even resonate with them? We don’t know. The only measure we would have is, did they click through? But when you have someone who is physically present in your retail location and you are able to not just measure the fact that they are there, that a human being is there in the space, but you’re able to gauge, how long did they stay? Who did they interact with? What did they interact with? Did it result in a purchase within the four walls of the store?

Potentially, today we can even measure, was there a downstream purchase that was a consequence of their being in the store? I think it’s not only a better opportunity for engagement, but I think that our capacity to measure the value of that interaction is much greater than what we have online as well.

Julia Raymond:
Right. It’s probably true that a lot of retailers aren’t valuing the in-store experience as much as they should or not putting enough thought into how to make it a true media channel, I would venture to say that the KPIs aren’t even identified or they’re not where they will be in a few years from now. What’s in your mind as far as new KPIs that we’re going to see with future stores?

Doug Stephens:
If things go the way I think they’re going to go and physical retail becomes increasingly leveraged as a form of media as opposed to being simply a form of distribution, I believe that the equation for working out the productivity of a store looks something like this. I think each year what you would have to look at is, what were the sales? Yes, certainly. I mean, we don’t… we’re not going to completely discount the fact that stores still sell things. So, what were the sales, A, within the four walls of the store, and B, what attributable online sales are reasonable to attribute to that location? As I mentioned, just the presence of the store actually raises online sales. So if we can credit some of that to the store or all of it in a particular market, great. Now you have the sales, but the other side of it is the physical media value of the store. How do you measure that? I believe that it’s a combination of two things.

I think first of all, as an organization, a brand has to sit down or a retailer has to sit down and say, “Okay, what is a positive in-store impression worth? We know what it costs to go out and buy a Facebook ad or to buy an ad in a magazine, but what is based on that? What would we approximate the value of a physical in-store impression with a consumer? What’s the value of that?” Whatever you determine… and I’m not suggesting these are numbers that are going to show up in the shareholder report or something that Wall Street is going to be taking into consideration, but internally I think it’s really important that you establish that value. Then your metrics start to look like you have sales on the one side, but then you have a media value whereby you say, “Okay, if the cost or the value of an impression in-store is, let’s say $5 per customer, and we know we saw 2 million customers go through our store, now all of a sudden we have a potential for an additional $10 million in value that this store is driving.”

The question is, the only question remaining is, were those impressions positive or negative? I believe that net promoter score is the best and most direct way of getting to that answer by asking consumers, is this an experience that you would recommend to others? If the answer is yes, then you know you’ve got positive $10 million in impressions. If the answer in general is no, it’s a horrible experience, I would never recommend it to anyone. Then you also know that that store is generating $10 million in negative media value. So it doesn’t really matter if their sales were $5 million, that store, in my opinion, is in the hole because they’re basically creating lousy impressions on the market.

To put it in a nutshell, I’ve been through really small stores that brands have and I’ve had remarkably great experiences. While their sales may not be astronomical, they may not be as much as some of their larger stores, their media value is very, very high. By the same token, I’ve been through flagship stores on the Champs-Elysées or Fifth Avenue that are absolute crap. Their sales may be good because of their location, but as a brand message, as a media message, they’re terrible. So if we’re just evaluating both of those stores purely on the basis of their sales, chances are we’re going to close the small store and keep that flagship open when that is exactly the wrong thing to do once you start considering media value.

Julia Raymond:
Yeah, and it’s an interesting point you brought up flagships because I was actually going to ask you about that. I’ve had some guests on the show with differing opinions around strategies related to flagships. I had one person say that you should invest in your flagship stores when it comes to rolling out new experiences and creating that media channel in-store. But then I’ve had other people say, “No, flagships are always going to do well. They’re always going to make money. They’re A stores. You need to go to the B and C stores and take them to an A.” Is the latter where you stand or do you think it doesn’t matter?

Doug Stephens:
I believe every store is a flagship store. I think if you’re a chain and you’re rolling out stores that you don’t regard as being the true unfiltered expression of your brand, if you’re rolling out stores that you feel are less than that or stores that you have to apologize for and say this is a B or a C store, I think that’s your first problem. To have a really incredible experience somewhere in SoHo, New York is great but then to say… but in other markets like Kansas City, Kansas or some place outside of Chicago, we’re just going to give people a relatively ordinary, mediocre banal experience. I think that’s crazy. Every store needs to be the… in my opinion, the full expression of the brand story. Every store needs to hire brand ambassadors that you can be proud of representing your story to the public. If all you’re doing is giving a bunch of tourists in SoHo a great experience around your brand, but everyone else in the country is getting something less than that, then that’s completely defeatist in my opinion.

Julia Raymond:
Great. Well, I love to have a third take on that kind of debate. Thank you for providing that. I definitely can see your point there. One of your most recent podcast I saw was about the future of luxury, which obviously is very distinct category in terms of retail. You actually say, “The new definition of luxury is freedom.” I thought that was a really interesting take and so I wanted you to expand a little bit on that today if you could.

Doug Stephens:
Yeah, sure. When I say, “The future of luxury is freedom,” it’s important to delineate between the West and the East. I would argue that in Asia today, the future of luxury is still very much about products. I know there’s some debate around the longterm outlook for markets like China. I know that the Chinese government is cracking down on Asian consumers, Chinese consumers traveling abroad and bringing back tons and tons of luxury goods. There is some debate around that, but I think we can argue that luxury in Asia is still very product driven. In the West, however, and when I say the West, I mean western Europe, North America, and other more developed markets around the world, I have made the argument that the nature of luxury, the definition of luxury is changing somewhat.

To appreciate this, I think we have to step back and agree that the whole premise of luxury is status, that we have traditionally bought luxury products because they are a reflection of status inherently. It didn’t matter whether it was the ring on your finger or the size of your kingdom or whatever. However we defined luxury through the ages, it was primarily about status. These were things that were arguably more rare and more exclusive. This has been products, so for baby boomers for example, we mark these milestones in our lives with various things. “I got a big promotion, so I’m going to go buy a Rolex watch, or I just got a raise and so I’m going to lease a Mercedes Benz.”

It was very much about marking these occasions in our lives with goods. In the 1990s, late ’80s, 1990s, as dual income families proliferated, it became about services. If you were really doing well, you had a nanny and a housekeeper and the grass cutter. It became about not just goods but services. Today we’re in a place where for a number of reasons, I think millennials are erring more toward experiences than products. I think they watched their parents climb the ladder, scratch and claw to get all these material goods only to have the whole thing come crashing down In 2008, 2009 through the recession, they saw their parents wind up splitting a lot of those assets as they divorced. About a third of millennials grew up in households that were afflicted by divorce and those divorces are still happening. We call it ‘grey divorce’ now. So I think to a large extent, millennials are a generation that has been very disillusioned around the true value of material goods.

For that reason, it is more about experiences. Where are they? Who are they with? What are they doing? The other reason that that’s happening is because we live in a world now where your social status is largely defined by what you show people on Instagram or any other social network. Your social currency if you will, is not just what’s parked in your garage or how much your sofa cost or what’s on your wrist, but it is literally what you’re able to do, where you’re able to go and participate in. So experiences are king. But I think moving forward, this notion of freedom is going to be particularly important. The ability to go and work abroad, to just maybe up and go to Barcelona and spend a month there and work from Barcelona, or the ability to just say, “You know what? I’m going to go off the grid for three months. I’m going to completely disconnect and decompress and have a digital detox.”

That is now becoming a luxury. It’s considered to be a luxury. This notion of being free, free from debt, free from encumbrances, free from material possessions that lock me down to a particular location, the freedom to just go and do what I want to do, when I want to do it, including disconnecting from the matrix, that’s a luxury in today’s world. I think it’s going to become even… perceived as a greater luxury as we move forward.

Julia Raymond:
As I’m hearing you take us through this concept, it sounds like we went from a society that placed high value on goods and then it changed to services, like a nanny or a maid, and then the generations now are looking more towards experiences which heavily tie in with the concept of freedom as being the cost of luxury or what luxury is. In the traditional sense, we talk about the luxury products or is this not related to luxury products, this concept?

Doug Stephens:
I think it is. Even now, we can start to see some luxury brands and luxury houses are now starting to make the turn toward experiences. LVMH for example, is now investing in hotels because I think they recognize that for Western consumers… and again, this is very much a Western phenomenon, but for Western consumers, the ball is definitely moving and it has moved toward experiences. So the luxury companies are now saying, “Look, how can we translate our brand from being about a handbag with a logo on it to becoming about more things in a consumer’s life, whether that’s a food and beverage experience or a travel experience or a hospitality experience, we’re moving toward experiences.”

What brands need to figure out now is, how can we deliver a sense of status and a sense of luxury while at the same time giving people that innate sense of freedom that we’re not tying them down to indebtedness, we’re not dictating who they are as individuals, but we’re allowing them to express themselves while at the same time, yeah, enhancing that sense of status and of personal values? I think it’s going to be a tricky thing to navigate for many brands because they have been so entrenched in this idea that we are… our brand is about a watch or a handbag or a pair of shoes, that we’re not just an idea, we’re actually a physical product. So they have to break out of that thinking.

Julia Raymond:
So luxury brands, as much as they could invest in maybe creating more branding material or more in-store experiences, it sounds like you’re saying in the future they really need to embed themselves in the luxury experiences that are attracting the new generations.

Doug Stephens:
Yeah, I think you have to… and I make the same recommendation to all brands. In fact, not just luxury brands, but a brand at its essence if it’s healthy and robust and performing well. Great brands are not just about a particular thing, they are an idea. I’ll use Apple for lack of a more widely acknowledged example. But Apple wasn’t just about a different kind of computer. It was about a totally different way of thinking about computers. It was about a totally different ethos really around the whole idea of technology. It really and truly was about thinking different and so the brand was built out of that idea. I think all brands need to explore, what’s the big idea around our brand?

It’s really the idea that we’re selling to consumers. It’s not a product or a particular category. Once you embrace this idea that your brand is an idea, it allows you to take that idea into all kinds of different experiences, into different categories and ultimately to adapt to changing consumer tastes and preferences much, much more effectively than if you’re locked into this idea that you are a particular product with a particular logo emblazoned on it. It just gives you much, much more range.

Julia Raymond:
Yeah. I love how you frame it, that a brand is an idea. Everything we’ve talked about has been so interesting and futuristic. I really think it’s going to resonate with our audience of listeners. I would love to hear more from you. I could listen to these ideas you have all day and how you think strategically about the future. So, where can our listeners go if they want to hear more from you?

Doug Stephens:
Yeah, so lots of different places. The mothership is retailprophet.com. That’s P-R-O-P-H-E-T.com. If listeners want to go there, from there you can find out about our podcast on both iTunes and Google Play, which is just called Retail Prophet. We also do a web series called The World In Store. I have the luxury of traveling around to some pretty cool places every year, and everywhere we go we look for the coolest of cool retail within those cities and we document that through this web series. Also very active blog at retailprophet.com and Retail Prophet on Twitter, LinkedIn, you name it, won’t take long to track us down.

Julia Raymond:
All the usual suspects. Well, thank you so much, Doug, for joining me today. It’s been a great conversation.

Doug Stephens:
It’s been a pleasure, Julia. Thanks for having me.

Julia Raymond:
Thanks.