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July 6, 2020: Consumers hesitate on non-essentials, Fit:Match brings virtual fitting rooms to U.S. malls, Walgreens tests small-format.

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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 guest Scott Robertson and Ricardo Belmar. Scott is the director of Squeeze, a management consulting firm, where he helps C suite executives bridge the gap between strategy design and execution. Ricardo is the senior director of Global Enterprise Marketing at Infovista and a retail influencer with 20 years of industry experience focusing on digital transformation. Ricardo, Scott, thank you both for joining today.

Scott Robertson:
Thank you.

Ricardo Belmar:
Thank you. Happy to be here.

Julia Raymond:
And before we dive in, Scott, I know you have extensive experience with retailers. Would you mind mentioning just real quick some of the brands that you worked on the exec teams for?

Scott Robertson:
Yeah, I guess probably the two that your listeners will be most familiar with are probably Super Dry the power company and Plot Shoes, but also I’ve done lots of works with companies like Marks and Spencer’s in the UK, done some work with JC Penney in the past. So quite a broad range, but predominantly in the apparel market.

Julia Raymond:
Wonderful. So great experience there to pull from as we go over some of the topics today. The first one we’ll dive into is a little bit more on consumer behavior with the pandemic. So although many countries around the world lifted their lockdown measures, the majority of consumers are reportedly not ready to return to the status quo. So there was a June, 2020 survey put out by Mackenzie on consumer optimism, and they found that as income is declining global consumers are not spending on discretionary categories. And this has the exception of South Korea and China, which are big markets. So there is a quite big exception there.

Julia Raymond:
But subsequently, retailers in Europe and the Americas are really feeling the impact of the decline in non-essential purchasing in the UK. We see luxury British department store Harrods announced plans to cut up to 672 jobs because of the coronavirus. And in the US recent findings from a Shopkick report found that 68% of Americans have yet to visit non-essential stores. Ricardo, as our advisor, I’ll pass this your way first. Is there a way retailers should be responding to consumers’ resistance or hesitance to spend on non-essentials? What are some smart moves?

Ricardo Belmar:
Thanks, Julian. I guess I would start by saying that if there was ever a time for retailers to really up their salesmanship game in store this is going to be it. This is a situation where you look at the McKinsey data, sales aren’t going to just magically return based on the consumer sentiment that’s out there, at least not in the next few months. Even though stores are reopening shoppers are really going out with more intent. They’re not exactly going into stores because they feel like spending an afternoon wandering around to see what strikes their fancy. They’re really going out with a desire to say, I know I need to buy this. I’m going to go to this store. I’m going to go buy it. And I’m going to go. And I always say, that’s not what retailers want.

Ricardo Belmar:
One of the things that retailers are seeing here is that if they’ve normally expected to focus on things like conversion rates, they’re going to be a little skewed now because it may look like those conversion rates are going to be much better given the traffic that they’re going to have and the intent that shoppers have coming in. But really what they’re going to focus on is what can they do before the consumer comes to their store to increase that level of intent for what it is they want? So while stores were closed retailers really focused on communication. And then hopefully the better ones focused on not just an increase in communication, but a change in the sort of communication they had with their customers. Maybe a little more educational, maybe a bit more comforting, but something to keep them engaged.

Ricardo Belmar:
One of the things I’m finding retailers I’ve been talking to is that the need for that communication is actually not going to go down as the stores open. It may change a little, but you’re going to have to rely on that level of communication to really entice customers to want to buy these nonessential things. And it’s not a situation where research would expect they can discount their way out of the problem. Heavy discounting, I’m sure we’re going to see some of that, but I don’t think that’s going to be the answer.

Ricardo Belmar:
Retailers are going to have to rely on things like increasing the training on store associates on how they’re going to go about selling. And in fact, I would even argue even the best sales associates that retailers had that were used to engaging a customer a certain way they’re going to run into more customers now who, although they’ll be I’m sure pleased to be acknowledged, that you know they’re in the store, usual offer of help and everything that you’d expect to get, but there may be some hesitation now on customers who don’t want as much of that personal interaction as before, but maybe they want it in a different way.

Ricardo Belmar:
So your sales staff are going to have to learn different ways to encourage people to want other things. If you have a shopper that comes in intending to buy one particular item, but you as the sales associate know there are a couple of other things that you’ve seen other people buy with it that you might suggest or recommend, you’re going to need to find ways to encourage that behavior to even look at those things now while the customer’s in the store. And that’s not necessarily going to be the same approach that you would have taken before the pandemic started.

Ricardo Belmar:
And it’s not going to be easy. It’s going to be tough for different segments. We’ve already seen evidence of this with apparel retailers. We saw Macy’s just the other day announced their quarterly results. Apparel has been pretty hard hit from this. There are certainly cases you can make for why people are saying, well, I don’t need that apparel that I used to need going into this next season if I’m just working from home all the time. So that’s going to be something that retailers have to think of different ways to highlight why these products are useful to their customers. Why should they want to buy them? It’s not enough to just say I’ll give you 50% off because, like I said, this is not a situation where they want to discount their way out of it.

Ricardo Belmar:
Hopefully with these retailers, while their stores were closed, they worked on ways to improve their fulfillment. They enabled new easier means to allow for buying online and pick up in-store. They probably implemented, if possible, some form of curbside pickup or improve their other delivery capabilities. All those things are still going to be important. And they’re still going to be things that you want to keep reminding customers of as they communicate and outreach to them. I think you will see that, as we all know that online commerce increased dramatically during this period, I think consumers are still going to rely on that digital factor, even if not to make the final purchase but still to do a lot of research.

Ricardo Belmar:
So when those have consumers with a lot of intent and desire to buy, rather than shop, you have to come up with ways to remind them what those other products can do for them. And I think that’s going to be the key piece. It’s that type of communication they’re going to have to do and how you are in-store associates are going to have to act a little differently to really encourage more purchasing behavior once you do get them in the store. But trying to get them in the store again is really going to come down to that communication capability.

Julia Raymond:
Sure, absolutely. And Ricardo, you hit on so many things, all great. You said they have to up their salesmanship. Consumers are shopping with more intent so the focus should be on conversion online and in-store. When they’re reopening they need to focus on their fulfillment and communication and showing customers, hey, this is the value you’re getting. We can’t discount our way out of this. Scott, do you agree with Ricardo that retailers can’t rely on discounting?

Scott Robertson:
I think so. Yeah. I think in the short term where companies have got a lot of very fashionable products so that they got to get rid of, there will be some discounting, but it’s a very short term solution. I think companies will need to make sure that, first and foremost, they provide a safe shopping environment to entice customers back in. I know in the UK where non-essential shopping only really reopened about two weeks ago because people are still very hesitant to shop. The footfall is still down about 53% versus last year. So providing that safe environment, convincing customers that it’s okay to go shopping I think is one of the key aspects.

Scott Robertson:
I think to echo Ricardo’s points, making it easier for them to buy from them. So getting into store, moving around store, improving the checkout process. Customers want to be in and out. If they’ve got things that they want to buy, they don’t want to be hanging around at the moment. They need to place signposting of things that they want to purchase.

Scott Robertson:
I think the other thing for brands as well as they move forward, as well as that kind of service proposition, is just trying to understand all of those friction points that are going to prevent customers from purchasing. Even if that’s online, it’s how do you help people find the products quicker online? How do you make the checkout process quicker? How do you give them more delivery options? How do you remove those barriers to purchases? I think that’s particularly key on those non-essentials items. Essential items, people will find a way to buy them because they have to. Non-essential items, you’ve got to make it easier for them. So, yeah, I think the communication aspect in terms of communicating, safety, it’s a safe environment, communicating how to find things, how to do things, why the experience is better than it was before, I think is key for people.

Julia Raymond:
Great point, Scott. You said footfall is still down at least 50% in the UK, and understanding and reducing these friction points in store and around safety is really important. I would note before we started recording we chit-chatted a little bit about some recent news that Lululemon, the Canadian athletic apparel company, purchased the company Mirror for or 500 million. And this is a tech startup that sells mirrors that are enabled with speakers and a camera and it live streams your fitness classes to you. This partnership is really interesting because I think that it’s a good example of a retailer anticipating change in the longterm. Are there any other examples you guys can think of, or are there changes that you foresee staying for the longer term from the pandemic?

Ricardo Belmar:
I actually think that was a really great example. Kudos to Lululemon for seeing where things are going. Where I mentioned earlier, apparel is really hard hit as a segment. If we were to think about gyms in general, they’re probably going to suffer quite a bit from this process. I think Lululemon is pretty wise to see a trend here and open up what I almost view as another channel for them, because I can see their ability to leverage that Mirror as a way to promote even their own products in a sense. So I think it’s a good natural fit.

Ricardo Belmar:
Some other interesting ones I’ve noted… I mean, even if I don’t stay within the confines of nonessential retailers, even Target who has remained open, has come out and said that they recognize they need to really increase their game on the grocery side. So for example, they’ve seen a lot of success from their drive up curbside delivery, but now they’ve announced that they’re adding more and more grocery items that are going to be eligible for that pickup service. And that’s something I think they see as a trend as well that they needed to adapt to.

Julia Raymond:
Mm-hmm (affirmative). That’s an excellent example. And just out of curiosity, have either of you used any curbside services in the past couple of months?

Ricardo Belmar:
I’ve used quite a few.

Julia Raymond:
Quite a few.

Scott Robertson:
I haven’t, but my parents have, so they’re shielding because they’re over 70 and they’ve definitely used the curbside pickup. Just jump in your car, someone comes and sticks it in the trunk of your car and you’re off.

Julia Raymond:
That’s perfect. That’s wonderful. I had a really great experience. So it’s pretty impressive, at least with Target recently, that’s the only one I’ve done so far. I haven’t tried out some of the other big boxes.

Scott Robertson:
I think now’s probably quite a pivotal point for a lot of retailers in terms of making big, bold strategic moves. So you’ve got companies like Lululemon buying Mirror, that’s going to set them up for the future. A lot of other retailers are doing small things, but all that’s doing is probably… They’re going to start falling behind those other retailers who do the big, bold strategic moves. So I think for a lot of companies there’s more risk in standing still than there is in making big, bold, strategic moves. I’d encourage anybody to think out five years what’s going to be happening and start to make those big moves now because they’ll just fall behind if they don’t.

Julia Raymond:
Absolutely. Well, we talked a little bit about virtual fitness, I guess, with Mirror. The next segment today we’re talking about virtual fitting rooms.

Julia Raymond:
But first I wanted to tell our listeners a little bit more about VTEX. VTEX is the first and only global fully integrated end to end commerce solution with native marketplace and OMS capabilities. VTEX helps companies in retail, manufacturing, wholesale groceries, consumer packaged goods, and other verticals to sell more, operate more efficiently, scale seamlessly and deliver remarkable customer experience. Find out more about what VTEX can do for your business at www.VTEX.com.

Julia Raymond:
As apparel stores keep the fitting rooms closed during the pandemic one company is offering in-store shoppers a virtual solution. It’s called Fit Match. So it’s a 3D AI-powered apparel shopping match platform. And they teamed with Brookfield Properties here stateside. So they’re bringing virtual fitting room kiosks to malls across the US. The technology works. The kiosk collects a user’s biometric data with a ten-second body scan. So you get in, the kiosk scans you, and it collects over a dozen measurements. And those are been synced with the retailer’s inventory to basically show you which items would provide the best fit.

Julia Raymond:
And each user gets a fit ID so you can personalize this over time and then get fitted again as your body changes, cue the quarantine 15. But anyway, this was huge news just the other week. And during a January episode we actually had their CEO and founder, Haniff Brown, on the show and he told listeners the biometric data it collects can in turn help retailers actually target people based on their fit. And my first question I’ll pass to you, Scott. With almost half of millennials and 71% of boomers saying they do not feel comfortable trying on clothing in dressing rooms, do you think virtual fitting kiosks will take off or is this technology not advanced enough yet?

Scott Robertson:
I guess it’s part of a wider set of innovations in terms of digital twins. Whether that is you’re going to virtual fitting kiosk and it scans you, or whether there’s things like True Fit where you put in information about the brands and your sizes and so on. I definitely think it’s going to be really important in the future. I think particularly as we move more towards e-commerce understanding what products are going to fit you, I think is really important for brands both to reduce the amount of products they host out and reduce the amount of returns that they get. Even though to the design process of understanding actually what shape and size are my customers and designing to those body shapes and sizes.

Scott Robertson:
I think at the moment, there’s probably a lot of different solutions out there that do similar types of things. I think there will be a convergence at some point in the future where there’s a degree of standardization. So this is a great solution, but it’s only if lots of brands adopt it then it gets to a tipping point, but then it becomes consistent. You look at Nike, last year they created a footwear measuring device, an app. From my time at Clark’s there was another footwear measuring device that was installed. You’d measure your feet and collect that information. So yeah, I think it’s definitely the future, but I think there’s an element of standardization that needs to happen to make sure that actually you can use your digital twin, your avatar, your personal measurements across any brands that you shop.

Julia Raymond:
Really great point, Scott, about the convergence and the tipping point that it needs to have scale in order to provide that for customers. Ricardo, what are your thoughts on technology like this?

Ricardo Belmar:
I agree with Scott. I think that there’s definitely some opportunity here for this kind of technology. I would even argue that even without the pandemic situation that we’re in and any consumer desire to not have to try on clothing or retailers that need to keep the fitting rooms closed, I think there was already a place for this. If anything, maybe this accelerates the adoption of it because I think one of the key points Scott made, and I agree with, is the need for a standardization element and the need for there to be widespread adoption.

Ricardo Belmar:
So for this to really make sense for consumers you need to know that if I do this and if I create this digital ID with Fit Match or anyone else that does something similar, I got to know that many of the brands that I would normally shop at are going to somehow leverage this. I have to know that this idea is going to be meaningful and tangible in a way when I go to the next apparel store that I want to shop with. So I think that’s going to be the critical piece for this going forward. But I do think that it’s a good time for it. I think there’s definitely an opportunity .and I would expect there to be some success in this and some good adoption.

Julia Raymond:
And I’ve seen some well-executed examples as a consumer. Sephora’s app has an option where you can put in your information about your skin tone, complexity, things like that, and it will match you with other users who have selected similar options and give you their reviews on products that you’re looking at. But there was a little issue of scale. I remember when I did put in the information it only showed two reviews for a lot of the products where it matched. So I think we definitely have a hurdle to climb there in terms of consumers’ adoption of tools like this. Do you guys think that there’s a potential for consumers to be concerned about giving their biometric data to retailers?

Scott Robertson:
I think so, yeah. Your personal information, be that your name, your address, social security number, credit card details, all of these things are part of your digital identity. And I think retailers have to treat all of those things with the same amount of care that they do. You only have to look at the news over the last few years of hackers going in and pulling that data. People need to feel comfortable that it’s going to be treated with a degree of care because it’s that personal data.

Scott Robertson:
I think the other thing is understanding companies that sell that data and where they send it on to. You can tell a lot about somebody’s health, for example, from their body measurements. So if you’ve got companies sending that on to health insurance companies, medical insurance companies, there are ways of people leveraging that data to do things that you don’t necessarily want them to, or you need to give explicit consent for them. So yeah, it definitely needs to be treated with a lot of care and transparency as well.

Ricardo Belmar:
I think that transparency is the key part as it really comes down to trust for the consumer. Do I trust the brand that’s holding this data? Do I trust that they’re A, telling me what they are going to do with the data, as well as telling me what they’re not going to do with it? I think both elements are important to build that trust piece. And I think for many consumers, I think we’ve all seen the study after study on the sentiment around different demographic groups. Am I more willing to do this? I think I’ve seen Fit Match, mostly expects of gen Z is probably their ideal target market and more open to the idea. And I mean less so with older generations.

Ricardo Belmar:
I think a big part of that comes down to what brands like Apple have famously said in the past when they say that you are not our products, that you and your data belong to you, it’s not ours to play with. And that’s what gives their brand a high degree of trust with their customers. And I think it’s the same here. Retailers need to consider if you’re going to use this technology, don’t just rely on Fit Match, for example, to be the one telling customers what’s going to be done with the data and what’s not going to be done with it.

Ricardo Belmar:
You as the retailer need to come on top of that. Even if you’re just repeating the same thing, you need to deliver the information and communicate to customers this is what we’re going to do with it, this is how it’s going to benefit you, the customer, for why you should be willing to let us have this data. And this is what we’re not going to do with it. I think if that’s all stated clearly not in any way kept from you. For the customers, I think that goes a long way to build that trust level.

Scott Robertson:
Yeah, I think that last point is key. Customers will give you the data if you can show the value that they’re going to get from it.

Ricardo Belmar:
Exactly.

Julia Raymond:
Before we dive into our next segment, let’s hear some good news. Netflix said last week that it would move up to 100 million or 2% of its cash holdings to financial institutions that focus on black communities. Amazon is showing appreciation to its employees for working during the coronavirus pandemic by paying its full-time workers a special one time “thank you” bonus of $500. And Gap is looking to revive its image with the help of superstar Kanye West. The retailer struck a tenure deal with West for a Yeezy Gap apparel line.

Julia Raymond:
Well said. And I think that’s a good segue into our last topic of today, which is about Walgreens and the real estate at the corner of happy and healthy is shrinking as part of a new pilot. Walgreen’s opened over 30 small format pharmacies. These stores feature a smaller selection of health and wellness items such as thermometers, first aid products, over the counter medications and snacks. Walgreens group vice president of pharmacy operations, Rina Shah, told members of the press that pharmacists will play a central role in these small-format stores, and that personalized care will ultimately lead to better health outcomes. Walgreens is the latest retailer to expand its healthcare focus. Walmart, for example, has opened four clinics that offer primary care and dental services.

Julia Raymond:
Ricardo, I’ll pass this back to you first. What can patients get from a retailer based healthcare system versus a traditional healthcare center? What are they able to provide?

Ricardo Belmar:
So I think from the customer’s point of view, much like what we were just talking about, this comes down to what the perceived value is. And I think there are a couple of elements for customers coming to a retailer for any kind of health and wellness type of facility. There’s a perception of convenience because it’s close by. Your expectation is that this location is going to be much closer than any traditional healthcare provider I would use as a customer, so there’s that convenience factor.

Ricardo Belmar:
As we all know, even before this year convenience really has become king when it comes to anything related to retail, and I think that’s a big part of the opportunity that retailers like Walgreens and Walmart are seeing in this space, that they can introduce an element of convenience that’s going to make them as a brand more valuable to the customer, because this is something that’s pretty critical and core to everyone. Wellness, health in general, preventive health has really been trending higher and higher. After all of these events with COVID-19, I would expect these trends to continue increasing, certainly not fading away. And I think Walgreens is recognizing that and seeing that this is something they can provide.

Ricardo Belmar:
I find it interesting they’re viewing this as a smaller location. I think it’s safe to say these days small is the new black, so to speak. It’s a paraphrase from the apparel world for retailers that being bigger is not always better. Smaller seems to equate to more and more convenience for facilitating your ability to be closer to that customer. There’s the value piece that I think consumers will get. And at the end of the day what I do see most of the services being provided here, most of the types of care we’re looking at, what I would call more of the low-level areas of healthcare, so things that are perhaps a little easier to diagnose, a little easier to treat.

Ricardo Belmar:
So we’re really talking about things that I, as the patient, if I go to the Walgreens to get what I need for what’s potentially a relatively minor condition I’ve not only save time from having to go to a doctor’s office, I’m getting in my mind the equivalent treatment. So I’ve saved time, I’ve gotten high-quality care, and so, therefore, the value is high. And most likely as a customer I’m going to perceive the cost as lower because most people generally, and obviously this is going to vary by country, but certainly in the US would perceive healthcare as being expensive. And we perceive a place like a Walgreens or a Walmart as being value-oriented and low cost. And I think that also plays to their favor here.

Julia Raymond:
Great points, especially about the convenience factor.

Scott Robertson:
Yeah, I think I would echo that. I think particularly the point you made on this larger trend towards preventative health care and that being much cheaper and more effective to actually put in place than reactive healthcare. Because if you need an operation that’s an expensive procedure. If you get diagnosed with something before it becomes a big issue it’s much easier to deal with. And I think going back to the previous point on things like biometrics, digital twins, the rise of the quantified self, things like iWatch, Fitbit, these are all things that can help to highlight where you’ve got potential issues. And there you can go to a pharmacist to find out if it is more serious then they may direct you on to your doctor or a physician or so on. I think there’s definitely this opportunity to move more towards preventative health care and wellness that I think this brings into place.

Scott Robertson:
The bit I’m probably surprised at a little bit is that we’re going to go just… Not necessarily that they’re going to a smaller format, but I think that’s probably an interim step to actually becoming more online in the longer term. So again, during the pandemic, there’s been a massive rise in things like telemedicine. A lot of this data is there. And by putting small stores in it, it might resolve a need for something closer to the consumer at the moment, but it’s not necessarily the most cost-effective way from a strategic point of view longterm. So I can see it being in place for a few years, but I think longterm they’ll towards online healthcare.

Julia Raymond:
Mm-hmm (affirmative). So I really liked Ricardo’s point about convenience when it comes to Walgreens opening these smaller format pharmacies and offering healthcare options. And then Scott, I loved what you said about the quantified self and the trend towards telemedicine, because that relates back to what Ricardo was saying about the trust we have in certain brands. And I know as an Apple watch user, it tracks so much of your personal data. When you’re awake, when you’re working out, what your heart rate is throughout the day. It’s really quite crazy to think about. Do you guys foresee that in the future everything we do will be tracked for us to optimize our own lives in a way?

Scott Robertson:
I think so. There are other services as well, which allow you to personalize your wellness. So in the UK, there’s a company called Strive. What they do is they’ll post you a blood testing kit, you then take your own blood, send that back. And then they’ll basically look to see if there are any deficiencies and send you personalized supplements. So all the data is out there. And I think that will really help people to personalize what they’re doing and, again, enhance this digital identity.

Scott Robertson:
So it’s not just your bank details, your height, your sex, your date of birth. It’s actually a whole load of other stuff. So yeah, I think this is a long term megatrend that a lot of companies are seeing. You look at the amount of money that Apple and Google are investing in healthcare and the data-driven by healthcare. And yeah, it’ll be a big business. So where Walgreens is starting to invest in this, if they’re starting to collect this data, I think that will put them in a good position longer term to be able to leverage that from a retail perspective.

Ricardo Belmar:
Yeah, I have to agree. I think we’re definitely trending to that position where there’s just more and more of this kind of data. I think Julian, you’re right. I mean, if you really think about just how much information as something relatively deceptively simple, let’s say, as your Apple watch is collecting on you. But again, I think it just brings to the forefront, again, the level of where you put your trust in. So in an Apple ecosystem, the trust comes from knowing that the data is still localized to you so that nobody is pulling in unless you’re allowing them to, and that’s the model of new Apple will push and then continue to promote. And of course, they’re, I’m sure, working a few things every now and then to their competitors who aren’t necessarily as altruistic as that in defining what’s happening with your data.

Ricardo Belmar:
I love Scott’s example of that one service with the blood test for you to collect even more information that you can leverage for wellness. And I see more and more brands headed in that direction. Another example that comes to my mind, even during the pandemic, places like The Vitamin Shoppe I think had been relatively thriving because of the nature of what of their product. It’s not just vitamins, but it’s other supplements that are designed to promote wellness and general wellbeing. People have gotten a much stronger interest in that. It really only makes sense if you’re personalizing this. I think everyone’s going to come to the conclusion that I’m different from the two of you, we’re all different from the next three people that we meet, so why would I instinctively think that I’m going to need to buy exactly the same thing for health enrollment as the person next to me?

Ricardo Belmar:
So the idea of being able to tailor these things with whatever kind of brand you’re interacting with and doing this outside of a healthcare provider environment, I think just becomes more appealing to people because it allows them to feel that they’re really managing it and are really on top of things. And then when you combine this with products, whether it’s an Apple watch or other thing like that that helps you collect and maintain and analyze this data, it’s just a snowballing effect. All of these things keep building and building on each other and we’re just going to see more and more of it, I think.

Scott Robertson:
Yeah. I think medical centers, hospitals, they’re in the business of treating people once they’ve become ill. So it’s unlikely that they will have, or want to innovate and drive the front end of preventative care. So that’s where you get retailers and the tech giants coming in to fill that gap and fill that need and take up the opportunity.

Julia Raymond:
Mm-hmm (affirmative). Absolutely. Well, it was great having you on the show, Scott Robertson and Ricardo Belmar. Thank you so much for sharing your expertise today. And I hope to have you on again in the future.

Scott Robertson:
Thanks, Julian.

Ricardo Belmar:
Thank you.