No time for news? We’ve got you covered. Welcome to the Retail Rundown, your go-to weekly podcast where RETHINK Retail teams up with industry experts to deliver the top trending news stories in retail.

August 10, 2020: Tractor Supply Company wins big, Buzzfeed launches its Shopping platform, CVS rolls out Paypal/Venmo payments.

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Hosted by Julia Raymond

Written and produced by Gabriella Bock

Edited by Trenton Waller

 

TRANSCRIPTION

Julia Raymond:
Today, we’re joined by guests, Bob Phibbs and Tony D’Onofrio. Bob, also known as the Retail Doctor, is an internationally recognized business strategist, speaker, and brick and mortar expert. Tony is the CEO of TD Insights. He’s a respected industry futurist and recognized global top 100 retail influencer. Bob and Tony, thank you for coming back on the show.

Bob Phibbs:
Thank you.

Tony D’Onofrio:
Thank you very much. Pleasure to be with you, Julia.

Julia Raymond:
I’m happy to have you guys. And I would like to kick off with Tractor Supply. We have never talked about them on the Rundown, so a new retailer we’re looking at today. They’ve been making headlines because of their strong second-quarter sales. And for those listeners who are unfamiliar, TSC, we’ll abbreviate it to that, is a general merchandiser. They focus on lawn care, home, and hardware goods. And during the pandemic, it’s net sales grew 35% for the quarter, and comparable store sales were up approximately 30%. So, doing really well, all things considered. Notably, they launched a two store BOPIS pilot in August 2016 before they deployed that service across its fleet of 1,700 stores by the following year.

Julia Raymond:
This June Tractor Supply launched its debut mobile app, which features its loyalty program called Neighbor’s Club, and perhaps most impressively, TCS became America’s first general merchandiser to offer same-day delivery from all of its stores. The chain also increased the number of stores it plans to open this year from 10 to a whopping 80 new locations. Tony, some of our listeners might be hearing of Tractor Supply Company for the first time. What do you think differentiates them from others in the same category?

Tony D’Onofrio:
So, thank you very much, Julia, for that question. So, to me, Tractor Supply is one of those retailers that are trying things right, in terms of getting into the pandemic, so they were classified as essentials. And what happens in the essential to a non-essential phase of the pandemic, $125 billion was transferred between non-essentials to essentials in North American to 285 billion. So, there were revenue coming their way because of their classification. I think one of the other key differentiation is that they went into the pandemic better prepared than other retailers, so they had a ton of focus on innovation and digitization. They said exactly what you just talked about, buy online, pickup in stores. That was the strategy they had in place. Similarly successful at Walmart that helped them during the pandemic.

Tony D’Onofrio:
They have a really intensive focus on customer service. They typically have about 270 people that are coming in their average stores, so there’s a lot of pressure to turn those few visitors into sales. And they do a good job at it by focusing on the employee, and they actually focused on employees that they hire that have similar background to their customer base. That’s an intensive [inaudible 00:03:14] that they do. They built a digital ecosystem. They do a lot of video in terms of how to use their products. They have their own brands that are already driving a third of the revenue, so a higher margin. Each store is localized, so 15% of what they sell in their stores is localized to that specific store.

Tony D’Onofrio:
They carry 18,000 items in a store, but they’ve expanded the website that carries over 100,000 items which, as you said, they deliver a very, very fast. And funny, their loyalty program is actually off to a really strong start. They have already 10 million members. So, if I had to summarize, they were at the right place, right time in terms of the pandemic. They were prepared with digital innovation that was required to be successful, and they put intensive focus on their customers. So, that’d be my view.

Julia Raymond:
Right place, right time, and all of the amazing stats that you brought to the discussion today. Bob, what is your thoughts? Are you on the same page?

Bob Phibbs:
No, they’re doing terribly.

Julia Raymond:
Tractor Supply.

Bob Phibbs:
Of course, Tractor Supply is… I mean, they’re clearly making the rounds with PR right now. Their story is going everywhere, but also Harbor Freight and Family Farm and Home are growing rapidly. True Value was up 15% just in April. I don’t have their recent ones. But to Tony’s point, when you’re deemed you will survive and you were prepared, that’s the best definition of success, right? Preparation meets opportunity, and that’s really it. So, there’s an awful lot that they do right. I don’t have anything to say bad against them, that’s for sure. I mean, quite simply, I think they talked about their goal is to make their customer experiences legendary, and that’s great. But they also do something like a 100,000 hours of free community work, which that’s pretty amazing, as well. So, it’s an old recipe being bringing on the basics and looking for ways that you can innovate.

Bob Phibbs:
The only thing I personally, when I have been in them, I feel that the hardware segment in particular is one of those that… “What the hell are you looking for? It’s over here. Oh, great. Anything else?” And that’s fine, and the money and the margins are in the browsing. So, I’m saying this to RV dealers, to sewing retailers, to anyone… the camping supplies, anyone that’s either helping us nest in our homes or get the hell out of them. A, this isn’t going to last, because other retailers will open up, and B, are you settling for crumbs when you could have the whole feast? Are you so concerned with getting people in and out? It’s a defensive thing that opportunities for the upsell, the add-on, compare and contrast, additional services, are left in the wayside. So, high demand covers a wealth of sins. I mean, I always like to be the guy who had high increases one year, but I never wanted to be there the next because it’s a hard nut to crack consistently.

Julia Raymond:
Absolutely. And you said there’s a lot of opportunities for upsells and add-ons that they need to be aware of. When I looked at the online statement TSC put out, they said over 70% of their online traffic is from mobile. Because you both work with retailers so often, are you hearing a lot of discussion about making progress with their mobile apps? Because there’s still a lot of retailers out there where there’s a little left to be desired.

Bob Phibbs:
Well, I think you still run back to the same thing. I am not one of those guys that wants to download your damn app, and if you’re going to make me… It sounds like their loyalty is tied to the app, use the app to get the points or something, which on some ways is great, but I can’t tell you how many apps… I have an iPhone, and after a certain period of time, you start seeing the icons with a download button like, “We removed this from your phone. If you want it, you can click and we’ll put it back.”

Bob Phibbs:
And I think that’s still the goal of everyone, and unfortunately, it’s the same goal as Walmart and Amazon, is one basket that follows us everywhere. And for us to have to download an app, I think it’s the same thing that Starbucks was looking at. How do they license their technology? How does Amazon? But make no mistake, Amazon’s big goal is going to be to be your banking statement, your insurance statement, your health statement, and oh, if you bought some other stuff from us at retail, it’ll all be one statement that you’ll get once a month. That’s where they’re going. So, the more retailers consider this idea of fragmentation and we’re going to hold on to them, I’m not sure that it’s got legs as much as you might hope.

Tony D’Onofrio:
My view of that is that if you have a strong brand, you will attract a following to your app, or in the case of a Tractor Supply, they do have 10 million. If you look at Starbucks, they have multi-million. Same thing with Apple. So, it’s really the branding is tied to what happened to the app. The app itself isn’t itself magic. Because I agree with Bob, there’s way too many apps out there, and unless I have a strong loyalty and/or I get a huge benefit for me from using the app, I’m not going to download it. And if I do download it, most of the time, I’m going to forget about it.

Julia Raymond:
So, Tony, you’re saying it definitely has to do with your following and how strong your brand is really?

Tony D’Onofrio:
Correct.

Julia Raymond:
And you made an interesting note, Bob, about Amazon. Some people still say Amazon’s not a retailer. They don’t compete in that space. They’re a platform, they’re a tech company. Do you disagree with that?

Bob Phibbs:
Amazon’s a data company that happens to have warehouses. I mean, the sooner we realize this thing should have been broken up a long time ago and understand the aspirations are to find its way… There are patents that they have been going after lately and talking about healthcare. I was just thinking of a thought with Tractor Supply, so I’ll bring me back to that in a minute. But Bezos said their goal is with all the robots and they’re going to have COVID testing throughout their warehouses so that you know that not only is it free from it all the way in the distribution, but the packaging and how it gets to you, et cetera. To make that bold move is going to take them getting into the healthcare business to be able to do it on their own. And even Tractor Supply has talked about that they have set up this contact tracing for their stores, their distribution centers, and support centers so they quickly know who somebody might’ve come in contact with.

Bob Phibbs:
I think that’s really good, but quite simply, Amazon has been doing this a lot longer than most of us, than Target, than Walmart, than other people. They have so much more data, they have so many more ways to slice and dice it through their marketplace. It was brilliant when they came out with grocery because if I know what’s in the grocery cart, I know who’s sick, I know how many kids you have. I probably know their ages, I know if you’re healthy, I know if you’re not, I can guess an awful lot of things, and as I connect that to your insurance, and I understand that I can also sell you your banking and your credit card and your phones, every one of those industries should be shaking in their boots.

Julia Raymond:
Absolutely. And the level of paranoia, I think, will increase in parallel.

Tony D’Onofrio:
Yeah.

Bob Phibbs:
But will it? Right? Because you saw Bezos last week floundering on answers, and people are like, “Oh, this means a lot, doesn’t it?” It’s like, Amazon customers don’t care. It’s like, “So, I get my stuff, I press a button in two clicks, fine.” And that’s the danger that we do give over so much of this information willingly because in the short term, it seems like it’s in our best interest, but then we’re really launching Skynet.

Julia Raymond:
Right.

Tony D’Onofrio:
Yeah, to me, Amazon is really a technology platform using retail as a loss leader, to really go build an audience and other stuff, so they’re constantly… They’re spending over $15 billion a year on innovation trying to figure out that next platform to hook you with, and actually, through that process, build more on their web servers, which is really where they make most or all their money [inaudible 00:12:04] the technology [crosstalk 00:12:08] platform [inaudible 00:12:06].

Bob Phibbs:
I want to add to that. They also have 1,000 people in PR alone.

Julia Raymond:
Wow. 1,000.

Bob Phibbs:
Let that sink in. Just let that sink in.

Julia Raymond:
I didn’t know that.

Bob Phibbs:
So, you look at other brands, say, “Oh, we have a social…” Really? Really? And then look at how many lobbyists that they have, as well. I mean, it’s not a mystery how it is only getting bigger, and I think, ultimately, it does become less choice. Yes, Walmart’s made big strides, so has Target. I applaud Tractor Supply. I think they’re in the rural markets. I think so many retailers gave up on rural markets, and yet the Dollar Stores, Tractor Supply live in upstate New York. Those are pretty much mainstays. But with 2,000 locations, and they’re going to add 80 more this year, you do start wondering what is their focus? Because they do carry an awful wide range, not just hardware, but I think they got survivalist stuff, they’ve got pet stuff, they’ve got things for farm. They are becoming this general merchandise for rural America.

Tony D’Onofrio:
General store. Yeah.

Julia Raymond:
Absolutely. Well, good points, both of you, on Tractor Supply. We’re going to hop to the next topic. This is about a digital publisher. You might be able to guess who they are. They’re very distracting. They’ve been around since 2006. We’re going to talk about Buzzfeed. So, they’re expanding their e-commerce arm with new in-article capabilities. They partnered with a commerce enablement platform called Bonsai, and they’re introducing Buzzfeed Shopping. So, this is a standalone site that introduces you to new products and allows you to make purchases without leaving the site. And a spokesperson for Buzzfeed told the press that the partnership will deepen user engagement while the world’s largest independent publisher evolves its e-commerce business.

Julia Raymond:
So, in the first phase of the rollout, they’re using the natively shoppable widgets from Bonsai in editorial-style content, and this will feature products from a selection of brands, including HipDot and Bellessa Boutique. In phase two, they plan to launch a fully branded marketplace with curated products and personalized recommendations later this year. I’ll ask this to Bob. What are your first impressions of Buzzfeed expanding its e-commerce arm?

Bob Phibbs:
I think it’s pretty brilliant because they know how to do it. In fact, before we got on here, I was just trying to click around, and I did, and of course now I’m out of the right program that I need to look at it. But let’s see here. One of the things that I thought was interesting is that they’ve cracked the code of what makes us click, as it were, and so when they go through and they put these things out, “34 ways to enjoy a pool, even when you don’t have one,” and you’re like, “Oh, I’ll watch that.” So, there you go down to… There’s the rabbit hole, and it’s this pool that shoots up water from the little kiddies pool and all these certain things. And I was like, “You guys are brilliant,” because it is about the clicks. And I don’t know about you, and I am firmly on the side at brick and mortar retail, so if you didn’t know that, I think online we will talk in future about, “Yeah, there was that time everybody was online.” There’s that time everybody was faxing, but at some point, scroll and scroll and scroll is just mind numbing-

Julia Raymond:
Yeah, scroll fatigue.

Bob Phibbs:
… and I don’t see that… and the same thing, we zoom in and zone out. So, this whole idea that this is the future of humans consumption like… What is it? The Pixar film? Wall-E, when they’re all on the big ship and they’re all in their big gulp thing. Right? But I think that they have mastered it and realized that they could make money on all the sneaky ways they’ve got us to click all this stuff. And again, the winners are going to be those who can mine the data and realize they have found the way to get the rats to follow the cheese, which really is an Amazon strategy, or Walmart strategy.

Bob Phibbs:
Their strategy is, “Well, if the rat’s hungry for cheese, he can come buy it from us.” Whereas the power to this is, “I didn’t even know I wanted cheese, but now that the cheese in front of me, I’m curious. What kind of cheese did they get? Can I buy that right here?” And they’re all hyperlinked right there. And with 25% commissions they’re getting on that, they must know that they’ve got the data to back it up. So, I’m going to give Tony room to not crowd him too much.

Tony D’Onofrio:
So, I’m going to disagree a little bit with Bob there.

Bob Phibbs:
What?

Tony D’Onofrio:
I think they actually mistimed it. I think they should have been there already being, especially with the pandemic in terms of shopping. I would classify them as a new site, an edgy new site, for sure. And I’ve been there a few times, but then I got bored, actually, clicking through all these things that were wild. I think that how we consume news is changing, and can see that in terms of actually Buzzfeed is struggling with layoffs and all the different things that they’re doing to cost cut right now. And then you can see that in terms of what’s happened to newspapers and traditional news sources. That’s not where a lot of people are going to shop right now.

Tony D’Onofrio:
The native digital news space has actually not grown a lot online. So, in 2016, it was 22 million people. It’s grown 3%. It’s now 23 and a half million people. So, there’s not a lot of people going to news sites, and you compare that to an Instagram that gets 500 million people on a day in their stories, and a billion people a month on their platform. So, why do I bring up Instagram? Well, 14% of US adults actually use Instagram as a news source now. 15% get their news from Facebook. And 130 million people already shop on Instagram on a monthly basis and check out in the app.

Tony D’Onofrio:
So, I think news sites are struggling, and Buzzfeed, to me, is in that category. They’re more of a follower in terms of where the trends are going. I like more the Instagram model where it’s visual, with short bursts of video that entertain you and actually engage with that shopping, and that model seems to be more successful. So, I’m not sure exactly how Buzzfeed evolves this going forward, because after awhile, the edgy stuff gets boring.

Bob Phibbs:
I think it’s brilliant because I’m just looking at their titles. “31 cheap pieces of furniture and decor from Walmart that basically look like a million bucks,” “39 things you might want in your life if you’re a gamer,” 34 slightly fancier versions of home stuff you’re still using from college.” They know how to write. It is like amazing, and then they’re going to show it at different places. And Tony, not to disagree too much with you, but they’re going to news sites. I mean the New York Times just announced they have more money coming in from digital subscriptions than they do from print ads and that they are the choice of people. They have more subscribers in Seattle than the Seattle Times.

Bob Phibbs:
So, yeah, I just think that the difference, Tony, is I’m scrolling through my newsfeed and there’s a pool. So what? I stroll through “29 ways to enjoy water in a pool even if you don’t have one,” like, “Oh, I wonder what that is.” They’ve found the gap. See, this is where so many people miss it, that you have to have the premise of, “You don’t know that you want this, but you do.” And then, you see something that gets your attention like, “And we have the list here,” and then you’re like, “Well, how do I find out?” And that gap is where Buzzfeed mines it, and I wish I could do for my brand because it is just sprinkling pixie dust on content.

Bob Phibbs:
And the other thing I would say different, Tony, is that when you see that, it is nudging you to buy it, whereas Instagram, “Link in bio.” Give me a break. Or you can shop the picture. So what? In this case, I could shop 34 items really quick, and they would then take that and do a better job with it. So, we’re totally on the other side, Tony.

Tony D’Onofrio:
I agree. No, no, no. And [inaudible 00:21:00] to me, you first got to build the brand and build a following around the brand, and then you invite… The shopping to me is in addition to that. The edgy things, to me, got boring after a while, so I moved on.

Julia Raymond:
Well, let me throw something else in the mix while we’re on this topic, because Macy’s told our friends at Retail Dive just last week that they are opening their ambassador program to influencers and really anyone that applies, I think. And this is a program that’s been around for two years, but up until now, it’s only been available to their employees. And this is their own platform, so you can use their video storefronts platform to make your own video or photo where you’re showing a product that you purchased at Macy’s. And then, from there, push that content to your individual social sites so that followers can go straight to Macy’s and make a purchase and totally surpass the Instagram shopping merchant fees and things like that.

Tony D’Onofrio:
I think that’s a valid channel. I mean, all you got to do is look to China. China is actually taking it to the next level of live streaming. I mean, to me, I’m still not clear why live streaming has not come to the side of the world, where influencers are active salespeople digitally, and they’ve created a multi, multi-billion dollar business in terms of brands, leveraging influence to drive revenues. So, yes, that’s a good first step, but there’s a lot more that could be done with influencer and digital to actually escalate new ways to reach consumers. And China is actually leading the way in that direction.

Bob Phibbs:
Julia, did you really say that you’re bringing up Macy’s as, “Look at the great job they’re doing with influencers”? Are you going to make a video of the top you got it 90% off with super special coupon and through Macy’s, is that what you’re going to do or anyone you can imagine?

Julia Raymond:
I’m not going to do that, but what I’m getting at here is that brand placement opportunities, when they’re user-generated and influencer generated, I think that’s where you want to be, versus working with a third party to get influencers. I mean, I don’t know that Macy’s going to execute well, but if other brands were able to create their own platform in-house, that allows people to easily do this, then I think the model is good because then you’ll own the data as the brand.

Bob Phibbs:
Yeah. All right. So, here’s the thing, buzz doesn’t equal sales. This is what’s wrong with retail right now. Nobody seems to get, you’re supposed to sell the damn merchandise. Not to have people like, “Oh, We had so many hits. Oh, we’re doing this. Oh, we’re doing this.” When I went to Neiman Marcus at the… You got me now, Julia. You got me. Hudson Yards. “Oh, we’re having a champagne reception. Oh, it’s so exclusive.” And I was there as like, “Really? The store is cold and the people aren’t helping people.” So, now they’re saying they’re closing in the fall.

Julia Raymond:
And did you buy anything when you were there?

Bob Phibbs:
I did not buy anything, and I didn’t see anyone, but I’m sure everybody would say, “Oh, but you know, we can ship to home.” It’s like, “Well, you can, but you miss the point, that if I was willing to go to that place, which is way the hell away from the great stores, and you’re going to this island, that it should have been a ‘Wow, oh my God, I’ve got to have that experience again.'” And it isn’t. And so, I go back to, those of you who are listening to this, it is about converting lookers to buyers. It is not about buzz. It is Tractor Supply knows their numbers. They’re like, “Great. We’ll sell chick feed lights. We don’t care. That’s what’s going to keep our customers happy and deliver it, and we’re going to sell it. And from that, we’re going to expand.”

Bob Phibbs:
But too much of the noise goes around how, “We’ve gone digital. We’re doing curbside. We’re so innovative.” No, actually, the government made you go curbside, and curbside is a margin killer. If you don’t get the additional sales, if you don’t upsell, you are ending up adding three times the work, and retail is a game of masses, of masses of people come in, they select it, they get upsold, they do things. If it’s going to be this drive up, can you imagine a Macy’s, Tony, in the winter, that’s doing curbside in Schenectady the week before Christmas? “Oh, we have curbside. Oh, great.”

Tony D’Onofrio:
My addition to this is that I wasn’t necessarily speaking to Macy’s, I was speaking about the influencers as an additional influencer, and especially with generations that are highly digital like millennials and beyond, they spend a ton of time on their phone scanning through all this stuff. And if you look, for example, going back to Instagram, a lot of those Millennials, actually, make up those percentages of folks that buy to that platform. So [crosstalk 00:25:58].

Bob Phibbs:
Millennials don’t have any money, Tony. We just heard this, that they are afraid they will never be able to have what their parents did. So, why do we keep saying that it’s-

Tony D’Onofrio:
[crosstalk 00:26:10] are not going to live forever, and those guys are going to end up being a key part of the retail channel and-

Bob Phibbs:
I am living forever, dude. I am your worst nightmare. Go ahead, Tony.

Tony D’Onofrio:
So, in my view, the new generations are going to adopt exactly what Julia was talking about more.

Julia Raymond:
And it sounds like… Well, Bob, are you saying we should maybe leave the focus on buzz to Buzzfeed?

Bob Phibbs:
I think-

Tony D’Onofrio:
That’s a good one.

Bob Phibbs:
I’m not going to give you that. I’m going to fight you on that. I would say that… Look, here’s the issue, and I think in really strong terms, if Buzzfeed can understand it isn’t about getting clicks, it’s about getting conversions, “How are we going to make money on this?”, then they are incented, if they’re going to take 25% of the money to really do a great job to feature these products, then I do think that’s… To me, that’s not influencer, that is paid promotional, it is a matter of knowing how to leverage what they know. I don’t think Macy’s knows how to write something like that. I don’t think most of us do. And Amazon wouldn’t try to do it because, hey, that’s not our market.

Bob Phibbs:
But I can see this expanding, but again, I think the way it would expand is through Buzzfeed partnering with these other better brands and saying, “We’re having our holiday…” Can you imagine the holiday lookbook? I don’t think that Neiman Marcus is going to be the one that everybody is talking about. But it is going to be about trusted sources, and if Buzzfeed… Let’s face it, we all know the brand, and we all don’t have anything bad associated with it. It’s not like, “I’ve had a bad experience with it.” I think that’s a winner. I do.

Julia Raymond:
Good. Well, we got a little bit of differing viewpoint on that topic, and let’s hop to the next one and the last one for today, which is on payments. And this is interesting because at least in the US, we’ve had a lot of back and forth about whether or not certain companies can only accept digital payments and not accept cash. But anyways, in collaboration with PayPal Holdings, CVS Pharmacy is the first national retailer to integrate PayPal and Venmo QR code technology to its checkout. This is across it’s 8,200 standalone stores. And PayPal’s Chief Product Officer, Mark Britto, told members of the press that the essential nature of pharmacies makes CVS the perfect candidate to accelerate digital and touch-free payments. So, using the PayPal QR code, shoppers will be able to pay using store debit or credit cards, bank accounts, PayPal balance, or credit through their phones, and the same goes with Venmo QR codes.

Julia Raymond:
So, PayPal does not charge fees to the customer when using PayPal or Venmo. This is seemingly an easy way to check out an alternative to maybe Apple Pay or cash. Tony, in the past, consumer attitudes toward mobile pay or the biggest barrier to the adoption in the US, at least, and I know you’re very well-versed in China where that is not a problem, but do you think now with the greater demand for touchless, especially with COVID, that CVS rollout will set a new precedence?

Tony D’Onofrio:
Well, Julia, large lead start in China, just to give you a difference in terms of the adoption rates, to really understand how far that the US is behind. So, in China, in March 2020, 765 million people use mobile pay. That compares to the US, which in 2020 will get to 69 million, so gives you an idea of how far behind we are. And even an e-marketer project that number eventually get to 80 million. Both countries have a really high smartphone penetration rate, so that’s not the issue. And the key difference is the following. China actually skipped credit cards, so they went from cash directly to mobile pay. And credit cards are really not that much used in China, very sporadic. The problem with mobile pay in the US is that we’re hooked on our credit cards and the rewards behind them, and until that gets solved…

Tony D’Onofrio:
The CVS thing will help in terms of adoption, but to me, you got to put more meat behind the bone in terms of me just being able to pay with my PayPal account versus my credit card, especially with retailers, removing all the technology barriers with the signatures, and not doing a lot of touching. Again, I’m not one of those guys that’s rushing to sign up the mobile payment kind of thing, because the credit card actually got easier. And it really works more with strong brands like Starbucks, which has 20 plus million, and Apple, but those are very, very low penetration compared to [inaudible 00:31:30] market possibilities.

Tony D’Onofrio:
So, yeah, good move. It takes [inaudible 00:31:33] investment, which is [inaudible 00:31:34] and one of the barriers to actually get it deployed. The latest report that I just saw that came out in April, mobile pay has actually been declining since this peak of about 7% to roughly about 5% now, so it’s not a growing market. So, CVS will help jumping in, but I don’t see it longterm unless it’s tied to something else other than making it easier to pay.

Julia Raymond:
Really great points, Tony. I learned something from what you were saying about the penetration in China versus US, and the most interesting thing you pointed out is the credit card aspect, how China skipped over that, and we are all attached to our Amex points and… Well, not as much as our flight points that we get right now. But Bob, I’ve heard a lot on the news recently about maybe credit cards will be a thing of the past soon. What’s your take on payments?

Bob Phibbs:
I don’t see that the major credit card companies are going to be out of business. I mean, let’s be honest, digital payments still have a long way to go for adoption. It’s a solution still working for a problem. I don’t think anyone said, “It’s just so hard for me to take out my credit card.” I mean, I’ve never heard that. Or, “Wow, I really want the ability to access my PayPal to pay them quicker.” I think most of us are like, “Screw it, give me 30 days to float that money. I would much rather do that than take it directly out of my account.” So, I just think, yes, it’s an option, just like Opus is an option, and a lot of other things, but clearly, is it going to help me make more sales? That’s the lens I would continue to look at. Is it going to help me make more sales? Probably not.

Bob Phibbs:
I get it. Some people think that we’re never going to touch anything again in our lives. We’re never going to try on merchandise. We’re never going to go to a store. Brick and mortar is dead. Coal for Christmas. But at the end of the day, we will get through this, and we’re pretty resilient. We’re going to go back. After the Spanish Flu, we were told, “Oh, we’ll never go into stores. It’ll alter housing forever.” The next year, we were in speakeasies in Prohibition, and we just gone through a pandemic, which cost 635,000 lives. So, I just think it becomes really hard to predict the future, and I think contactless payments is, yes, an option, but make no mistake, why is Google… Why are they all offering this? Because they want the fees that MasterCard and Visa got.

Julia Raymond:
So, I have another question to throw in the mix here. We had someone on the podcast a while back, and I forgot who it was, but they said it’s absolutely ridiculous to plan a store format or redo a lot of your physical retail store because of the pandemic, because it will eventually end. What do you guys think about that?

Tony D’Onofrio:
So, in my point of view, yes, you’ve got to do whatever you need to do to take care of the safety stuff, all the pandemic protocols, you got to make sure that those are in place, but ultimately the store continues to evolve. This one I agree with Bob, the physical store is going to be an important, critical asset of a retailer, the most important asset because… So, I also agree with Bob, rushing online and just adding online or all these other services, they’re margin decliners. So, the store is an important asset, it will change and adapt in terms of how the consumer like to shop, but it’s a critical asset for the retailer going forward.

Bob Phibbs:
I would point back to Nordstrom’s New York City, and a competing publication yesterday put out this thing about how Nordstrom is failing with New York. It’s not where they thought it would be. Well, yeah, any retailer who is in business is not where they had hoped it would be, but if you want to look to the future of retail, look at what Nordstrom did at the women’s store. It is amazing. And they did redesign it for buy online, pickup in store, and all the services and all of the restaurants. Are they going to take that out in a time of COVID and run, “Oh my God, we can’t do any of this”?

Bob Phibbs:
I don’t think so, because ultimately what they’re realizing, and I think this trend that no one wants to talk about is, we had to go more alone in the last four or five months. We had to be more hermitted, more away from people, more dependent on technology, and I don’t think any of us wanted that. And we are going to want to get the hell out, and we’re going to want to go back to visit places. So, this idea, I think, that making your store into this…

Julia Raymond:
Sanitary?

Bob Phibbs:
I was just flashing on dressing rooms. “If you want to try something on, you have to put it in a box for 72 hours with a blue light, and we’re going to build that in.” It’s like, “Oh, for God’s sake, give me a break.” Realistically, the store still has to operate, and again, I go back to, if you’re going to physically say, “It matters if someone comes into our Nike store, our Converse store, our Apple store, whatever,” yes, they will have to be maintaining distance. But Apple doesn’t have to change that. They’ve always had room. What it does mean is those stores that have been jammed with merchandise, and I’m looking at you, Kohl’s and Macy’s and Penny’s, and, “Just put another four [inaudible 00:37:49], more is more, it’s better.” I think those days are gone, mainly because of the impact that there is going to be less demand for the foreseeable future, and so you will have to curate things.

Bob Phibbs:
So, I think looking at smaller formats. But this is news. I mean, Gaps, big stores, we’re all there because they got two shipments of jeans a month when they first started. They needed all that space, and they don’t. So, making them smaller, but I think if anything, we’re going to see the biggest impact is going to be in the air conditioning business when they realize they need to get more fresh air in all of these spaces. And how do they do that in a safe way? I think it’s going to be more of the things we don’t see than redesigning the things we do see in the store.

Tony D’Onofrio:
And just to add to Bob’s discussion, I mean, another example to me is Nike and what Nike has done with the house of innovation in New York, where they’re experimenting with digital, and not all those digital experiments end up in stores. The rest of the stores are focused really on that consumer and customer engagement, but they realize they need this digitization based on what the market trends aren’t telling them, and they’re using the flagship now as the place where they test new concepts that potentially get put into other stores. So, I think the physical store has got a very, very bright future ahead.

Julia Raymond:
Well, leading influencer in retail, Tony Donofrio, and the Retail Doctor, Bob Phibbs, thank you both so much for joining today’s show. It’s always a pleasure to hear your thoughts and insights on the retail industry.

Bob Phibbs:
Thanks for letting us mix it up a little bit for you on this quiet news week.

Tony D’Onofrio:
Thank you very much. I love this. Let’s do it again.