The New Retail Culture of Innovation - With Tom Litchford and Jeff Roster

Welcome to the Retail Rundown, your go-to weekly podcast where RETHINK Retail teams up with industry experts to discuss the news and trends defining the world of retail.

In this episode, host Jeff Roster is joined by Tom Litchford, Global Head of Retail at Amazon Web Services. Together they explore the current state of retail and the critical role of cloud technology, understanding the post-pandemic shopper, and the new retail culture of innovation.

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Hosted by Julia Raymond Hare
Written and produced by Gabriella Bock
Edited by Trenton Waller
Social media by Madison Freeland

 

 

TRANSCRIPTION

Jeff Roster:
Hello, Retail Rundown listeners. I’m Jeff Roster your host for this week’s episode. Today is Monday, June 21st and the start of the National Retail Federation’s Retail Convergence week. The RETHINK Retail team will be attending dozens of sessions throughout the week, including a few featuring today’s guest.

Jeff Roster:
Joining us today is Tom Litchford Global Head of Retail at Amazon Web Services.

Jeff Roster:
Prior to joining AWS in 2017, he had led National Retail Federation’s technology communities and its cybersecurity program. And prior to NRF, Tom served in various roles with notable technology firms, including Microsoft and NCR. Thanks for joining the show today, Tom.

Tom Litchford:
Hey, thank you, Jeff. Great to hear your voice.

Jeff Roster:
So interesting Tom, history has shown us that crisis inspires innovation. And if this week’s NRF lineup is any indicator, the spirit of retail innovation is alive and well, despite the challenges put in place by the COVID-19 pandemic. But before we dive into innovation, I’d like to first discuss where you are now. So Tom, let’s kick it off by sharing your outlook on the current state of retail.

Tom Litchford:
Sure. I actually a great question, with the pandemic, Jeff, everybody was expecting the classic knee jerk reaction, let’s cut costs, everything’s slowing down, but frankly, I’ve seen no slow down in cloud adoption. And I think retailers, realize well number one, that can help them obviously control costs, but I won’t dive into that. But at the same time, I think it just really exposed stuff we knew all along, whether that was from a customer experience perspective or some of the supply chain problems that we saw. And I think, honestly, I think retailers actually discovered through this pandemic that they actually could be agile. We don’t need to be so risk-averse, we can go try things. We can figure out how to serve our customers better.

Tom Litchford:
With that, when you look at the pandemic itself and just kind of throughout history before that, what we’ve really seen is consumer habits are thrown out the window. So, now every retailer now has a chance to go after all those customers again, because I don’t have necessarily that loyalty to those stores anymore because frankly they were closed. Other than the grocery stores or things that were deemed as necessary, but this massive shift to online and all the capabilities that consumers discovered in terms of convenience and getting things delivered to their houses, that maybe they haven’t tried that before. It’s just been incredible.

Tom Litchford:
Hopefully this kind of renewed energy around, we really can respond to what our customers are asking us to do.

Jeff Roster:
So that’s a really interesting point, Tom. You know, I’ve had to try to forecast IT spend for the last 20 plus years, and I’ve always worried about how we’re going to pay for innovation. Ever since budget spike, and I guess maybe the secret sauce is cloud, because if I can take 50%, which, what Gartner used to think 50% of all IT spend was pure infrastructure. If I can take a chunk of that 50% and take that out, I can pop that up in innovation. So I’m curious, you kind of pass over that pretty quickly, but maybe unpack that, where is this spend for innovation going to come from? Or where you see it coming from? Because, you’re talking to all the right folks. So unpack that, where does this need to go?

Tom Litchford:
Great question. I think a couple of things, Jeff, again with our history, keep in mind, you and I grew up in retail that IT was an expense. And so you’re always looking at those budgets. I think the retail winners out there, are now really more focused on technology is actually their strategic enabler. So it’s not necessarily where is that spend going to come from? I think the boards and the executives now see the need to invest in technology. But then to your point, the cloud is beautiful from a couple of standpoints. Number one is, as customers retire these data centers and move these enterprise apps into the cloud, we’re seeing anywhere from 30 to 50% cost savings.

Tom Litchford:
Then as I take these monolithic applications, that they’ve deployed over the past few decades and start breaking them in to a more modern architecture, basically based on a microservices architecture and then run them in what we call a serverless environment, as well, getting rid of that old IT principle that you have to throw a relational data model at everything. And instead, you use what we call a purpose-built database on top of the 30 to 50% savings, just moving to the cloud. Once you start decomposing and re-architecting, these, we see another 30 to 50% savings.

Jeff Roster:
So if you could have [inaudible 00:06:24] the IT spend going forward forecast, I mean at best, I haven’t seen what IHL is doing lately, but I’m assuming that it’s maybe growing 5, 6, 7%. Do you think we can fundamentally transform this industry all to you know what 2, 3, 4 million retail players, without doubling or tripling IT spend or say taking up the next six, seven years just by cloud savings alone.

Tom Litchford:
Like you, I haven’t seen the latest spend numbers, although I think I did see toward the end of last year where Gartner’s projection was that spend was going to start recovering, because to some expense some IT expenses did slow down a little bit last year, but yeah, I don’t know… Again, keep in mind in retail, a lot of times some of that innovation is not actually expensed to IT. It’s expensed out to the stores or your digital teams and things like that. So it’s probably not a good analogy to just say my IT spend here is illustrative of my agility in my strategic thinking in terms of where I’m making my technology investments. Does that make sense?

Jeff Roster:
Yeah, it does. We’re kind of thinking out the next six months or so. Where do you see us going? What do you expect to see?

Tom Litchford:
Yeah, well, again, I think you’re still seeing… Obviously retailers are responding, what this post-pandemic might look like. A lot of the things, keep in mind this massive shift online. And again, at times last year you saw retailers up a 100%, 200%, whatever. I think the last time I looked Jeff that was now kind of settling down around the 60 to 65% range, which is still significant compared to the past several years where it was kind of stuck in the low teens. So, a couple of things in terms of where they need to be going is again, watching what those consumers are doing online and what is that experience going to look like online?

Tom Litchford:
You know again, I don’t know that I coined this term. I might’ve read it somewhere, but one thing I talked to my customers about now is, throughout my career customers or retailers have always had their “flagship stores”, and now I’m arguing with them, your flagship store, is really your digital properties, and you’ve got to make that website pop and… So you’re starting to see more and more investment in things like that. For example, just the incredible and rapid adoption of Livestream commerce, I think the last number I saw coming out of the Eastern part of the world was somewhere around 60 billion-plus in revenue already being driven from live stream commerce and just how rapidly that’s coming to the Western world, we’re seeing more and more getting rid of these 2D type websites, where I’m just doing product search and getting a price back and really starting getting into virtual stores in 3D and things like that.

Tom Litchford:
When you look at some of the forward-leaning retailers, like Ralph Lauren already has their Manhattan and their Beverly Hills flagship stores virtualized through a company called Obsessed which is an AWS customer. Perfect Corp, I don’t know if you’re familiar with them, is doing lots of workarounds, this Livestream commerce and virtual type work for stores. And, I even saw the other day, Burberry launched their 3D work. Now you can kind of start playing in a 3D environment with the product versus the static, 2D pictures.

Jeff Roster:
You know, I couldn’t spell Livestream in about, what about six, seven months ago. Then I got into a couple of Clubhouse rooms and bumped into that. And since then actually digging into that, I cannot believe how big that’s going to be. And it’s not even going to be, it’s already big and you’re 100%, right.

Jeff Roster:
Anybody wanting to understand livestreaming, just have to look to Asia. And they’re far, [inaudible 00:10:59], but it’s coming here and it has to come here. And when I look at that, Tom, I really worry about retailers that choose to pass on that, because I think that is a fundamentally transformative technology, which is not hard to do, but it requires an appetite to do.

Tom Litchford:
Well I guess, it’s all about that customer experience. I mean, if you want to continue to provide just product search and what your price is, great. Again, I think the winning retailers are the ones out there, figuring out how do they better connect with that customer and better interact with that customer and, using these technologies coming, Jeff.

Tom Litchford:
Like you said, you were surprised at just how fast these things are being adopted, now. And I think that’s really what the cloud is allowing, because I mean you know as well as I know, just a few short years ago, it might take 8, 9, 10 months to procure hardware and software, just to try an idea. And with cloud technologies, you can be testing things within an hour.

Tom Litchford:
When you look at the key emerging technologies that you should be focused on, it’s all-around computer vision, it’s all-around voice and IOT and robotics. I used to always say, AR, VR was lagging, but man, this pandemic really saw AR, VR pop. And by the way, when I mentioned those technologies, I’m not just talking about customer-facing stuff. Sometimes when we talk to our customers is always that shiny object syndrome, where, you know what’s the cool thing I can do in front of my customers, and really behind the scenes, there are so many things you can be fixing using IOT and robotics and voice and computer vision to get more efficient in how you run your business, that impacts that customer experience on the front end.

Jeff Roster:
When you’re talking to your customers, and Tom, do you get into tier two and tier three, tier-one being greater than a billion, tier 2, 999 to 250 million. What level… How large, or how small of a retailer do you get down to?

Tom Litchford:
We actually… Great question in terms of just, kind of internal org, I’m more of the enterprise… Working more with the enterprise customers, but I do have a colleague and a peer that goes after, what we would call the SMB space. Again in terms of retail, we cover the gamut of anybody that’s in the retail business. Frankly, what we think is our differentiator that we bring to the market because, the fact that AWS is the technology that’s powering that retailer called Amazon, whether that’s amazon.com or the physical properties that they own.

Tom Litchford:
All the learnings that I get from that, I offer out to all of my customers. For example, the contact center and how amazon.com does all of its interactions through call centers is a service called Amazon Connect that all of our customers can use, which proved extremely valuable in the pandemic. When our customers were seeing their call centers overwhelmed. Literally, for example, at Morrison’s in the UK, we stood up Amazon Connect in less than two days and had them augmenting all their agents with their store people and their corporate people, while at the same time, developing a bot that would reach out to their vulnerable customers and try to engage with them, get their shopping list and make sure they were signed up for home shopping.

Tom Litchford:
And there’s just service after service like that. Amazon personalized is that recommendation engine you see on com, fraud detector, how we detect fraud on the web all the way to AWS is the brains behind Alexa. And, then how we work with sister business units in terms of helping them solve their business challenges such as how Amazon has eliminated checkout lines with technology applied into it’s go stores or Amazon fresh stores.

Jeff Roster:
So interesting. Just kind of listening to what you just said, AR, VR, voice call center, computer vision, livestreaming. This is all cutting edge technology, when you’re talking to your customers, obviously don’t give any names, but… How are we on the innovation aspect of culture? Because the biggest worry I had in retail, literally from the day I started at Gartner was this idea that, we couldn’t innovate because we’re retail because we’re slow, we’re methodical whatever. I think obviously you’re working for literally the single greatest innovator probably the world’s ever seen. So you’ve got that bias for innovation, but when you look at your customer, what’s the state of innovation in retail today?

Tom Litchford:
I think it’s classic with any industry the way… You use the term, we’re slow, we’re methodical. I would actually use the term risk-averse, you know again just… You know as well as I know when I grew up in this industry, if I had made a mistake early in my career, I would have been fired. And, today we’ve got to get away from that risk-averse mentality and get to this mentality where we’re constantly experimenting.

Tom Litchford:
And again, the cloud just makes that so easy to do, and changing that culture, I think it’s tough, but more and more retailers are starting again to realize that it takes that culture in order to have the agility to respond to what your customers are asking for. One of the things here that we’re constantly driving with our customers is, don’t be thinking about technology for technology’s sake, be thinking about what that business challenge is and how you can take care of your customers better and work backward from that. And we’ll go figure out the technology and how to solve that problem. And if the technology doesn’t exist, then there’s probably no better place than working with AWS to innovate and try to make that happen.

Jeff Roster:
Who’s driving innovation in retail now, is it business units? Is IT? Do you think, because in the old days IT was definitely undervalued politically in the organization. You think that’s changed now, leveled out?

Tom Litchford:
Yeah, I think… Well, again, more and more companies are starting to view IT as [inaudible 00:17:52], or technology as strategic. Not as an expense to their business. I think, it’s a mix, again, depending on the retailer you’re talking about, more companies are starting to bring in or hire what they call the CDO or chief digital officer and create innovation teams and things like that. But they are closely attached to the hip and obviously working with the IT folks, because there’s still some of that foundational stuff, you can’t just ignore, like governance and security and things like that.

Jeff Roster:
Interesting. Going out for the next three years, let’s say two years, what do retailers have to know, what do tier-one retailers have to know? What do they have to be? That they’re not working on today? What do they actually have to crush?

Tom Litchford:
I think, again, it’s not necessarily… I don’t even know that we know, things are moving so fast. But, if I could coach my customers, I would come back and talk to them about, look, the most important thing by far is to not be so focused on what your competition is doing, but listen, more carefully to what your customers are asking you for. And then, make sure that you have the ability to unleash those builders, to go do what those customers are asking for. And then back to where… And you’ve heard me say it multiple times, just in our short chat here, you’ve got to be constantly iterating and experimenting and evolving to meet that customer experience.

Tom Litchford:
If you’re not doing those three things, I think that’s the only way any of us who are building businesses right now have a chance to build a business that stands the test of time. So, if you’re not focused on that, then, I don’t know. I think you’re going to be struggling going forward. And, then, of course, not to be salesy Jeff, but I would offer up the platform that gives those builders, the ability to evolve customer experiences and experiment and innovate on behalf of those customers. There’s no better place like AWS to do that.

Jeff Roster:
There you go. I’m assuming, you’re a big fan of voice. And, I’m getting interested in voice more and more. What do retailers have to understand about the opportunities in, I don’t know, what are we calling it, conversational commerce or voice. What are your thinking there?

Tom Litchford:
Voice, again, it’s one of the five top technology that I mentioned a little while ago. I think there are two things and we always get into the conversation because you say voice, your mind immediately goes to Alexa. And of course, Alexa, I think is important because there’s… I actually lost track, I bet there are over 200 million of those devices out there now. And, you’ve got to look at those types of things as channels. And, again, I hate to use that word channel because we want to be agnostic.

Jeff Roster:
I like the term channel, Tom it’s true. We have to understand these… They have to work together. They have to be iterated

Tom Litchford:
That’s the key. You can’t silo it. You have to have them all. But I like the way Steve Dennis says it, they have to be harmonized.

Jeff Roster:
I can Live with that. Unified, harmonized. Because, I think we’ve even had this debate. Ah, no, you’ve never been there, the [inaudible 00:21:23] word guy, but man, you have to understand these channels. They have to harmonize, but, I know when people would come to me at Garner and they’d asked for an omnichannel forecast and I’d laugh and say, I don’t know what that means. And then immediately get into pieces of technology about, e-comm or physical store or whatnot. So yeah, they harmonized, which I think is probably the battle of 2022 going forward.

Tom Litchford:
Back to that, it’s like the channel, like I said, you got to think of Alexa as a channel that you should be reaching out to your customers on and I’ll kind of leave it at that. But then again, remember with AWS being the brains behind that, we’re seeing lots of really neat ideas around how to use… Not just voice commerce. I mentioned that bot that would reach out to Morrison’s customers that they felt were at risk because of the pandemic and get them all signed up for home delivery.

Tom Litchford:
But then, also behind the scenes is using voice to get more proficient at your business. And there’s just example after example of customers that, we’re working with, again just understand how the business is working and not have to pull out a binder and start reading something. Just have a natural voice interface for that.

Jeff Roster:
So Tom, curious is when do you start traveling again? I mean, this is the big question that I keep getting asked is, when are we all going back to physical stores? January 2022 you in New York?

Tom Litchford:
Oh, absolutely. In fact internally here AWS has its re-invent conference at the end of the year always, of course, last year it was virtual. So this year, that’s going to be live again, maybe because of a safety environment, it’s not going to be as big as it has been in the past. But, I think that’s coming back. I know even your old Gardner company, their conference in October, I think it’s going to be live again. We were already, from an AWS perspective, we’re already traveling again, but it’s at a customer’s request. So if a customer wants us onsite, we will come in, we will be onsite. Of course, we’re cognizant of our employees too, in terms of if they’re not comfortable yet. And of course, we’re not asking them to travel until they do get comfortable, but it’s starting to pick up now as we speak.

Jeff Roster:
So let me ask you the last question and feel free to punt, if you want. Every retailer I talk to, has picked out one e-tailor that they have to be able to battle against. And that one has Amazon, AWS is Amazon Web Services. What would you tell the industry, how to work with AWS and is that a concern, now that AWS is part of Amazon holistically?

Tom Litchford:
Great question. Frankly, my team works with thousands of retailers around the world and even using Gardner again, Gartner recognizes that we’re the preferred provider in retail by far. I think the last report I saw was somewhere around 83%, but with that again, what I would tell our customers again, it’s back to those, be focused on your customers, make sure you have the right tools to go after and build what those customers are asking you to build.

Tom Litchford:
Again, when you look at the primary providers of cloud services, who is driving the most innovation and that literally is the differentiation that we bring to the market. We have been on the forefront of… Just from a pure technology perspective, driving microservices and serverless architectures. We’ve been on the forefront on developing all the capabilities to be able to run massive SAP environments in the cloud.

Tom Litchford:
And then just from a retail-specific side, we basically, eliminated checkout lines with AWS technology now. Like I said, working with the voice or how we do fraud detection, all of those type things I learned from building services for Amazon’s retail business, who is a customer of mine, just like any other retailer, we package those up and provide them to all of our customers. So again, I personally think if you’re going to innovate on behalf of your customer, then AWS is the place to be.

Jeff Roster:
Okay. Very good. Well, I sure look forward to seeing you in sunny, New York City, January 2022, definitely see you online for the next five or six months. Is there any place that our listeners should look for information at AWS? I know you have some blogs, anything else, any other areas that we should look?

Tom Litchford:
Yeah. The first stop probably is just the web, aws.amazon.com/retail and then from there that should get you to the information you need. Or like, I always say I’m open to anybody. Just reach out to me directly, and I would love to talk to you.

Jeff Roster:
Well, there you go retail, you heard it straight from Tom. Tom, thanks so much for all your insights as usual and carry on.

Tom Litchford:
All right. Again, Jeff good to hear your voice look forward to seeing you in January.

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