The blurring of physical and digital commerce

Our guest is Carl Boutet, retail strategist and board advisor with over 25 years of hands-on retail experience. He is the founder of Studio Rx and Executive Director of Retail Strategy Data & Insights for CloudRaker. Join us as we explore Carl’s experiences and insights into retail innovation and connected experiences.

Episode 7 of RETHINK Retail was recorded on May 17, 2019

TRANSCRIPTION

Julia Raymond:
Hi, today we’re kicking off another episode of RETHINK Retail with my guest, Carl Boutet. He’s a well-known retail strategist and board advisor with over 25 years of hands on retail experience. He is the founder of Studio Rx and Executive Director of Retail Strategy Data & Insights for CloudRaker. He’s responsible for advising senior retailers and tech companies alike and he’s cultivated expertise in this space from his work at wholesale powerhouse, Costco to owning and operating his own retail chain with 65 locations to strategy consulting for a group of 800 independent retailers. He advises for Retail School of Management at McGill University and multiple retail innovation labs. Carl, will you first kick us off by describing a bit more about yourself and what you do.

Carl Boutet:
Well, you did a pretty good job there. I mean, yes, I think the first comment people usually get from what I do quote unquote is just the diversity of different things I’m involved with. So I do sit on several advisories, usually the common denominator being around retail or commercial innovation. But what I get more excited about is really the hands on, the operational stuff. The fact that, you know, you mentioned the years I did in my retail chain that I built out with Costco here, up here in Canada. So when I speak about retail, that comes from a place of appreciation for just how messy and complex, you know, the operations can be. So it’s not just purely strategic.

Julia Raymond:
That makes total sense. And a little bit more about you owning and operating your, your own retail chain. How did that start? Just curious.

Carl Boutet:
Yeah, I tell you you’re of a few people like to actually ask that. It’s, so it started very opportunistically through a friend of mine who, this is in the early days of what we called then cell phones, which today it almost sounds like…so think back mid nineties, there is, you know, cell phones are starting to get a bit of traction in the market. A friend of mine who’s in that business space already and is one of the first franchisers or a group here that was partners with AT&T at one point said, you know, I had this meeting with the people in Costco. They would be interested in opening up these, you know, finding a way to sell this. They’re just not set up to do it because you have to actually, at the time we actually even had to program the phones ourselves, it wasn’t even over the air.

So they, they’re really good at selling hot dog buns off pallets and they can sell a lot of them. And they’re actually, their demographic is really, you know, this is actually quite interesting. It’s not, it’s a high end customer. It’s not, it’s not, you know, a bargain basement sort of thing, it’s a good demographic for this category. They’re very excited about it. They just don’t know how to go about it. So they tested a couple of different things, but what they realize is the best was to have a dedicated group internally. They weren’t, it wasn’t something they were looking to develop themselves. They preferred the partner. And we were actually the first ones to have external staff inside of Costco. And they had never done that before. So it was a store. I, you know, what we call today store in store, which back then we didn’t really have a name for it.

We started with one, you know, here in Montreal and we built it out nationally. So when from coast to coast and now there’s over a hundred. Yeah. The group that took over from us in the mid two thousands, but yeah. So it was really ramping up and understanding the operations and working, doing the merchandising. And, I mean it was if anything really a staffing exercise, but it was still exciting, this sort of grow and put all the pieces in place and obviously Costco was driving the traffic. So I didn’t, that wasn’t something I had to worry too much about. And coming from the marketing field who was interesting not to have to worry about that, but it gave me an appreciation for a focus on lean and mean operations and that’s what makes them so successful.

Julia Raymond:
Yeah. I bet. Yeah, that sounds, that sounds like a big undertaking and definitely a lot of insights. I’m sure that came from that whole experience. And it’s funny you say store in store cause I mean now it’s such a huge concept and it’s, it’s blowing up, you know?

Carl Boutet:
Yes. I mean we, we were doing this like we were the first then working on a bunch of things because of that, because we were the first to be national in the category from coast to coast. It was very fragmented at that time. Even like Radio Shack and Best Buy were in the category. You know, this is how far…it looks now. Back then it didn’t feel like anything that special but now we will kind of go back and see what we’re doing to like, hey that was pretty, that was pretty innovative. So I think the most important lesson apart from the operations and something I like to speak to a lot and I know we’ll get to that shortly is also the cultural side and what kind of culture you set and the environment that you create and even though one side of somebody else’s environment, like Costco and we had to play by their rules. We still had our own, you know, we are able to set up our own specific way of, you know, of staffing and making sure that we were living up to our commitment to them.

Julia Raymond:
It makes total sense. And you know, the best assets are your people as they say. But the one thing I know you have a lot of insight on is connected experiences. It’s obviously a hot topic in the space right now. And so I want to dive in just and ask you about why, why the change is happening. What type of investments do you see retailers putting the most money in? Because we see more and more restructuring, not only their business model but also down to the physical locations to better accommodate blending of physical and digital. What is your take on this?

Carl Boutet:
Yeah, so I think, you know, we were, cause we see more of the front end of stores, we focus sort of on the digital and, and those that kind of pops out at our eyes and our ears and you know, that catches our intention. But I would, I suspect overall, I pretty much know, that more of that investment is actually in the back end, what’s happening in terms of supply chain stuff and getting like Amazon’s pushing, you know, people to, to you know, really get their fulfillment game up to a new level. So a lot of that connectivity right now is more around how can we get the product quicker into the customer sense. That said, I mean, yes, there is still a lot happening on the front end and that’s mostly around personalization, which we were just really at day one on. I mean, we’re just really starting to figure that out and we got a lot of work to do to get that right. But that’s, you know, where’s the ROI, the ROI really is more on the backend unfortunately. Well, unfortunately, but it’s the reality, it’s, you know, it’s, it’s not as, as attractive as some of this stuff you’d see walking the show floor is and the flashing lights. But it’s, it’s where a lot of the more effective work gets done.

Julia Raymond:
Yeah. The not, not so sexy side of business.

Carl Boutet:
Right. Which is interesting because I’m actually speaking at the end of the month at this supply chain conference which I very rarely do, I mean, it’s usually more the marketing side and you know, you come to realize more and more is those two worlds. I mean, you’re going to hear me say the word blurring a lot. A lot of blurring which makes everything a little more complex. But there is this real sort of blurring of backend and frontend and, and what the store is actually meant to be or, or any, you know, you put that, put the word store in quotes, you know, and say, what is this space going to be and how’s it going to fulfill my promise to the customer and then how’s technology going to facilitate that, you know, in a greater context.

Julia Raymond:
That makes total sense. So supply chain is where the focus is. It’s funny, I actually had heard something that Amazon is offering like $10,000 to unhappy employees to start their own personal delivery company on behalf of Amazon.

Carl Boutet:
Yup. Yeah. I don’t think it’s necessarily unhappy employees. Maybe that’s, you can read between the lines. That’s probably what have you, and those that were looking to change for change in their careers. They were, yeah. Well, what they’re doing is they’re, they’re extending a line of credit. There were the possibility of having a line of credit of $10,000 to help these employees. And I think eventually they’ll know they’ll go beyond that. They’ll go external, but right now they’re still keeping it in house. I think they already have six years. So that have taken a lot that they piloted in the last year, including one that I was reading and thinking your area actually Florida that has like already 60 employees.

Yeah. And is ramped up like, you know, there’s some pretty impressive numbers in a short period of time. Not that we’re heard a promote Amazon and what they’re doing, but the fact that yes, it’s sort of indicative of the ‘out of the box’ thinking they’re doing and the 10,000, really what it does is that it’s a line of credit that goes towards them being able to afford their first van so they can go around and enter these branded vans. You just can’t go out and buy when van that you want. It has to be through them too. So there’s some terms and conditions, but yeah so it speaks to sort of your back end thing. And this is not technology. This is very low. Low tech is just kind of common sense trying to use, you know, the assets that they have, which are, you know, their people.

Julia Raymond:
Yeah. And that makes total sense. And not to bring up Amazon cause that’s a whole other discussion. But I just saw that and thought it was interesting and I’m sure other retailers are, are scrambling to figure out, right.

Carl Boutet:
Well, yeah. Well a lot of other retailers have been doing this for a long time too and let’s not forget, remember, remember Walmart tested this last year where they were paying employees after work to bring what they were trying to test I think in New Jersey. A project where the, they had a piece of software that would figure out where people, where their employees lived and where, if there was, if there was packages to deliver on their route home and would and would ask him like, ‘Hey, do you want to make an extra, you know, $40 after work?’ You know, somebody who’s making probably, you know, minimum wage is not, probably not going to consider that, could you drop off a couple of these packages that we’ve rooted that we know is pretty much, you know, on your way home. And, but that didn’t exactly work out. So they did, they tested it and I don’t think it went any further, but that’s, it’s not just Amazon that’s out there trying new things. And, and I know a lot of independent business, retail owners who do this on a daily basis who bring deliveries to their clients on their way home too, so. Then just when Amazon does it, it always sounds smarter than everybody else.

Julia Raymond:
I know they have all the media captured. But back to like connected experiences, in-store digital, what are some examples that come to mind where they’ve been really successful and why do you think that is?

Carl Boutet:
Yes to the one I keep bringing it up, but it’s a bit unfair because people say, well, they have so much budget to do whatever they want, but I don’t think it’s necessarily a budget thing. I think it’s a mindset thing and important to remember whenever we talk about these large retailers, it’s actually harder for them in a lot of ways to get things done just because of the bureaucracy and then, and, you know, they’re big, they’re big boats to push around. But Nike I think is doing some really interesting work around connecting, you know, the digital, the physical back to this blurring notion, but how they’re merchandising their stores, how they’re, they’re incentivizing their app users, you know, within their concepts like Melrose or their new innovation factories, you know, where they’re adding value for those customers that are engaged at a deeper level with them. So I think that’s, I think that’s really neat.

Julia Raymond:
And can you tell us a little bit more about the actual store experience? I know they have a lot of different levels of engagement that they offer to customers, but how has that sort of segmented when you’re in the experience?

Carl Boutet:
I can only speak to the one in New York. I haven’t been to Melrose. Melrose, I’ve seen a lot of pictures. I think what made Melrose more interesting was the fact that even how the location was chosen in LA for this based on the app user data and then how they would actually see what sports were the most practice in that area to help them decide what their, what their merchandising looked like. So that I thought was really innovative. Now the New York store is more around the levels and experiences are more on categories, with the lower level being all around personalization. So that’s, that’s really interesting how they can, you know, how you can create your own shoe very quickly and, you know, really customize it to a degree that, you know, even a short time ago would have been really hard for us to imagine. And now they’re opening more and more of those stores.

And, and what’s interesting about these big innovation stores as, you know, they can take elements of that store out in and reproduce it at smaller scale in less, you know, in smaller markets. So they don’t necessarily need to run the whole thing everywhere. So, you know, they have in Shanghai or New York, these really over the top stores, but then they can bring a store like to Orlando or Montreal that has elements of that that are inspired. The other parts of it are in run interaction, you know, trying to recreate environments where you could actually test the products, digital environments, physical environments, and then just always be changing. I mean, you know, these stores are typically almost, you know, re-merchandised almost every week now because they’re running on data and trying to really sort of like their websites, you know, and to try to do this constant A/B testing and figuring out what works best where and when.

Julia Raymond:
Yeah. And that obviously brings its own set of challenges, but hopefully a bigger upside.

Carl Boutet:
Yeah. And that’s why you start off by saying I have a deep appreciation for the messiness of retail. I mean the operational for, for somebody, you know, in the head office to say, ‘okay, well it’s easy’. You just gotta, you know, put this there and put that there and we’ll move this, this, this week and that next week. And it’s great to say it, to do it is a whole other thing, you know, and build incentives around it that they actually get the people that want to do it. So it’s, it’s, it’s, you know, it’s a lot more complicated than just coming up with the idea. So I like, I, I’m, that’s why I’m very favorable to organizations that can, you know, large organizations that can move quickly is, is very impressive. And still to this day, I consider that a big competitive advantage for the smaller guys to be able to replicate that even though they don’t have the budget to do it as over the top as a Nike as they can have the mindset and they execute on it at much shorter cycles.

Julia Raymond:
Yeah. And we are, we are seeing it more with, with the big retailers that do have the budget but obviously scale like you mentioned is an issue and, and some other things. So we’ve a lot of respect for them. But have you seen any, I mean large or small that have tried to implement a successful connected experience and just kind of failed or one that’s not doing as hot as the others?

Carl Boutet:
Yeah, I don’t, I don’t think any of them are real failures if they learn from them. But there’s, there’s more failures than there are wins. So I’m looking, I don’t, I don’t want to single anybody out. I don’t think there’s much to gain from doing it, but I think you’ll see a lot of retailers testing, you know, concepts out and trying smart mirrors and and, and beacons and different sort of ways of creating some wild times more about creating buzz than an actual value. But you know, and then there’s nothing wrong with that. If it gets you and keeps bringing customers in and has them excited for that period of time then it’s all good.

Julia Raymond:
So maybe more of them are a little bit like the Shiny Object Syndrome where the technology is not up to speed.

Carl Boutet:
Well technology, it’s either the technology’s not quite there yet, which again is fine because hats off to the retailers that have the courage to take those out and try them and fail. And a lot of, especially the larger ones really don’t like that. I mean that’s part of the cultural challenge in our industry is as there’s very little tolerance for failure. So if they go out and put that smart mirror up and, and you know, that afternoon a child comes by and spills juice on it and things fried. And then whoever put the mirror up gets blamed for how, why’d you even think this was gonna work? And it gets tossed out to the back and you never see it again. I mean, that’s, you know, that’s tough, but you know, there’s a lesson in there. With that lesson, just keep juice away from mirrors. But it’s, it’s, it’s, you know, it’s, it’s this constant sort of always moving in and they just, you know, substantial costs tied to all this too. So I can appreciate that retailers really want to measure before they do that. And, and so you start, you’re seeing more and more lab concepts or store concepts where they, they’re, they’re, they’re, they’re built to test these things out. So that’s, that’s also, I think, you know, a trend we’re gonna see more and more of,

Julia Raymond:
Yeah, that makes sense. Not necessarily a pop up or a concept store, but an actual like innovation lab.

Carl Boutet:
I mean they all are, right? So you’re right. The innovation labs have been around for a while in different ways more often though they were just more for merchandising, testing out merchandising concepts. But now, yes, the retail, so Walmart announced their IRL, last month or a couple of weeks ago. So I mean, you know, that’s an example of, of a, of a large scale one that’s doing, you know, massive, you know, doing massive technological and testing. I don’t know if it’s innovation. I encourage people, there’s a piece of mind, I don’t know if you’re familiar with Chris Walton’s work, but Chris was a lab person. He actually was running target’s store of the future before and wrote a piece in Forbes about challenging that, that narrative that these are actually innovation labs. They think they’re iterative, they’re not innovation. And he has a point, but that’s, there’s nothing, he also makes the point, there’s nothing wrong with that.

And they don’t all have to be these, you know, science fiction spaces. If they’re incremental improvements, that’s, you know, we need that too. The innovation labs, the real ones, which I’m involved with when, and that’s upcoming. And when I say real one, use in quotes. But it’s the ones where you can really take the longer bets and the longer horizons. And, and with, with them and the work I’m doing here, uh, the opportunity for retailers to be in a space that doesn’t expose them too much risk and allows them to have like the academics around people that can really spend the time, you know, and, and, and again, in longer term and longer cycles because one thing we can’t forget about retail, especially the ones that are publicly listed, I mean, the pressure on the short term is so strong that to take long term bets right now is really difficult.

Walmart’s, you know, trying to lead the way there and, and, and Nordstrom’s and couple of others, but it’s, it’s really, really, you know, it’s tough. So, there’s more a notion of fast following now. So let somebody else sort of prove it out and then we’ll just copy it as quickly as we can. Cause they, you know, we’ll let them take the risk on it more than us, but that’s, you know, that’s not working as well as it used to. And especially as we look at markets like China where they’re really pulling ahead of us then hey all you almost get to a stage where following is just as you know, is even more difficult.

Julia Raymond:
Yeah, it is. Especially to compete against them. I mean I was, I was talking with someone on the show the other day who said that they already have, you know, same-day delivery for tons of retailers and then they have like 30 minute grocery delivery in some areas.

Carl Boutet:
Yeah, I had some associates that were in Shanghai not too long ago and the story that was going around was the 15-minute apple. How you can get an apple in 15 minutes anywhere in Shanghai.

Julia Raymond:
Is that true?

Carl Boutet:
Like I wasn’t there to test it, but that was what they were going around saying. They basically could, they could, you know, they had this sort within 15 minutes you can have an apple. Now if you can pay $10 for your apple then it’s up to you. But I mean it can be done right. So yeah, at a price, but probably a subsidized one, probably even at $10 I’d suspect they’re losing money on the apple.

But anyways, I don’t even know if it’s $10. I’m just saying it’s, you know, I don’t know what the costs were exactly, but it’s more this notion of like, ‘God, how, what is this going to work? When is this, this race, what I called this race to zero, going to end.’ And then when, you know, Amazon launches one-day delivery, Walmart the next day basically throws their hat in the ring in there. And I feel for all the other ones that are just kind of shaking head going guys, we’re like, we’re struggling with like, you know, three-day delivery or depending on what market you’re in, if you’re in Canada and the demographics and the geography is different and you’re like that, you know, how do you know four or five-day delivery is some in some areas is tough. And now you’re saying, you know, we’ve got to live up to one-day delivery and we’re, you know, breaking even at best as it is.

Like how, where do we get these, where do we find these, these efficiencies, what can we do, what can we squeeze harder to try to absorb that cost? And, and it, you know, is it the vendor, is it the customer? Where’s that money gonna come from? It’s, it’s, that’s good going back to my operational roots and my concerns around it, it’s like shaking my head and I, I want to do some work around the business models. I think there’s, there’s a lot to go in there too. But when you brought that up in your question and seeing how the business models are changing, I think, I don’t think we talk about that enough cause I mean that’s really what’s causing a lot of this. The legacy retailers are having to play by very different rules and that rule mainly is that their investors expect them to make a profit and their access to capital is more expensive than, than you know, some of these others obviously including Amazon, but even a lot of these D-to-C, these direct to consumer plays that were so excited about that, you know, God knows of they’ll ever turn a profit, you know, until they get acquired and then it becomes somebody else’s problem to see if they can make money with it.

Julia Raymond:
Exactly. And that’s a really interesting perspective. I think a lot of people don’t, don’t give enough credit to.

Carl Boutet:
Yeah. I mean and I don’t blame the entrepreneurs that are doing it. I think, you know, I think you’re smart. I mean, it seems to be the same playbook as well. I think it’s the same venture capital money that’s coming in. I think they have sort of the same recipe and they, and they know how to, you know, they can smell a good formula that’s going to grow the top line and say, just put people behind it that are going to do that. And without very little concern for the bottom line. And it’s, it’s, you know, it’s fascinating to watch it go. We become fans and we, we buy our Allbirds and run around with our Away luggage and sleep on our Caspers. But if none of those companies are making any money, then there’s, there’s a flawed, there’s a flaw somewhere in that. And so that’s, that’s my, that’s my concern.

Julia Raymond:
Well, that brings up a good point. I’m going to just going to jump here, um, down a few questions because I just heard that Wayfair is opening its first full service physical store this fall, after, you know, opening a series of popups in the past and then last year with it’s 20,000 square foot outlet store, do you think that their physical store is going to be successful or what should they be focusing on to, to make that a success?

Carl Boutet:
So this, this old proverb, alright, I’ll say Chinese, cause most old proverbs are Chinese. ‘Best time to plant a tree is, you know, 10 years ago, the second best time is now’. So I think Wayfair sort of it, they should apply to that tree 10 years ago. I think they, they, they’re coming very late to this. And I know that, uh, there’s some good work around their evaluation being done. We should talk about customer lifetime value a bit later, but because it plays into this, but they had to, they have to, I mean, no brand, no brand can live in a purely digital or physical world. Hmm. That’s interesting. It’s just not, it just doesn’t work. The economics don’t work on either side. I mean, you need acquisition, you need influence. And people focus too much on e-commerce. It’s not e-commerce. As Scott Galloway put it many years ago, ‘e-influence’.

I mean it’s, it’s my digital investments don’t, I can’t, I can’t justify my digital investments purely by my e-commerce transactional numbers. I gotta recognize that probably three quarters to 90% of the people that walk into my store have been to my website first. So that’s the way I got to think about it. Not so much that 10% of my business is online. But if it’s all online, then my acquisition costs don’t scale. I mean, that’s, that has really been the big revelation that Wayfair, I guess, held off so long to want to, to, to believe in. Warby Parker picked up on it five years ago. Even Casper, you know, three years ago. There’s still not more profitable by, by the way, but at least I suspect you’re trending in a better direction in the work because the idea was all e-commerce.

You know, the, the fact that you don’t have these stores, you’re going to save all this operational money, you know, you’re going to scale. So your acquisition costs are gonna go down because you’re going to just get much more efficient in your digital. And what you realize is sort of the opposite was happening is that the acquisition costs are going up, you know, your paper clicks. And these categories that were costs were just astounding. And then lo and behold, when he did a pop up in a market or you did something, you know, that will created a bit of buzz physically because you did something that people felt like they wanted to connect with and go and see and wanting to do. Well, their organic search went up in their acquisition costs went down. So it’s, it’s, it’s not, you know, this is not by accident.

I mean, so now they’re, I mean, if, if Wayfair says we’re opening a store this fall or not, they’re not doing it because they feel like they would need, they’re excited about getting into physical retail. I mean, it’s blasting you want to do, but they’re being forced into it. And in my humble opinion, I think, you know, there are options that, I have gone on record. I mean their options are, are, are more and more limited where their future holds. And you know, I think they’re just now trying to catch up to that, but they should have done that a long time ago.

Julia Raymond:
Yeah, that makes sense. And I mean, I say see there’s a lot of competition going on in the furniture space specifically anyway, especially with players like Target and their private labels that they roll out. So I think they’re really feeling the pressure. Plus the one thing people don’t about enough is just how much of online items are returned.

Carl Boutet:
Yeah. And that’s the dirty secret, right? I mean, that’s, that’s also so I, I focused or you know, I was focusing on the acquisition costs, piece of, of why ecommerce isn’t sustainable. But probably more so is the returns. I mean, the statistics we keep hearing are the averages around 30% in some categories like fashion categories where sizing fit. They’re more important than you could go up to 50% chance that, I can’t remember. I’m trying to remember which there’s somebody that actually the people rarely released what their returns are, but somebody released when and they were showing 20%, which were like, well, that’s actually good when people were appalled, ‘oh my God, how is this company going to stay alive if they have a 20% return online’, that’s actually below average.

Julia Raymond:
Meanwhile, they’re proud of that number. That’s why they released it.

Carl Boutet:
Yeah, maybe that’s why I got. They didn’t promote it. Just somebody went through the report and found it. So, so yeah, that’s, that’s a really like, you know, I’ve heard metrics where even use some of the unit, the unit economics is like each package that goes out is losing money, you know, and that’s really what it comes down to. That’s what these businesses are doing. Each, each bed in a box that’s going out is you know, basically $20 in the hole, which not sustainable until a year unless you’re, you’re gonna IPO your way out or get acquired more like, and then, then again it becomes somebody else’s, it becomes your investor’s problem, not yours.

Julia Raymond:
Right. Well, what’s your perspective on these e-commerce first retailers that we, we know and love and we see so many of them. What, how should they approach opening the, the first physical store, do you think they should test with a pop up first? Is that like kind of the standard gateway now to opening a physical store?

Carl Boutet:
Yeah, because it’s a bunch of things. I mean, pretty unique. It’s a very different skillset. So you need to have the talent, you know, internally to t to even start approaching these. So pop up or at least gives you some little more flexibility. I’m probably, this school aligns more with their way of thinking, with their digital way of thinking where things are more iterative and shorter terms. So, you know, it’s, that’s part of the playbook so far. Everybody who’s gotten into physical started with some sort of, some form of pop up. You know, the next step to go and really start building out actual operations and you know, it’s, it’s, you got to build up that muscle. It’s not a, it’s not given to digital retailers. Advantage they have is their mindset. How they, how they approach things, how they measure everything and iterate. I mean, that’s, that’s their advantage.

Again, to this day, most of them still aren’t profitable, but I just some that I would, you know, I have, I have more confidence in that are going to get there. But it’s, it’s, and they have the patients that are up there, you know, their venture capital investors. But, yes, there’s, so the gateway is, tends to be, you know, smaller popup, medium pop up, larger pop up, for a store in Soho, second store. You know or say Hudson Yards maybe, although that’s an expensive rent there, but you know, and then, and then you sort of go from, go from there.

Julia Raymond:
Well, and again, you brought up a good point about it being so relying on the people who are actually implementing the, as you know, short term store fronts. Do you think that these are the places where they should also test the, you know, bringing in some digital experiences?

Carl Boutet:
Yeah, absolutely. And it all comes together. I mean, you can’t, you know, anybody who’s doing anything right now has to be testing all these experiences and maybe you can, it doesn’t happen separately. I mean it’s got, it’s, it’s built in and it’s not easy. It’s, it’s, and that’s another, you know, another thing and pushing hard on when they talk about the blurring of digital and physical is, is this notion of these things have to happen in and they can happen separately. They gotta occur, you know, they gotta be thought of all as one. I mean they can be saying, ‘okay, well you designed the digital experience, I’ll design the physical experience and let’s meet in like next month and see where we’re at’. It doesn’t work, right? I mean, and, and I, and that sounds kind of funny when I say it that way and almost stupid, but in a lot of ways that’s still the way it’s happening. And, and, and it’s more complicated and making it sound really simple. Like two people working away, isn’t it? There’s a bunch of teams. I mean, you got people working on loss prevention, you’ve got people, you know, working on, on shelving and wayfinding, and all these thing all have to come together. And it’s, it can sound simple, but it’s pretty complicated.

Julia Raymond:
So is this something where retailers, have you seen them doing like accelerators in house or is it more like work with third parties who come in and help them develop these experiences?

Carl Boutet:
A bit of both. I mean, I think the acceleration is, it happens more from their people. Like, so if they’re, if they’re, if they’re executive and that’s, and that’s another trend right now and that I’m seeing talking with executives it’s creating a sense of urgency that to accelerate some of these adoptions and saying ‘listen guys, you know, we can’t wait around till next, you know, next year we know the fast follower thing might not made it be in our approach in the past, but now we need, we need to get out ahead of this’. So that’s, so that’s, that’s one part. So I mean, I don’t know if you’re referring to accelerator is more in the traditional sense like what Target has and testing startups and things like that. But, I, it’s, no, I think it’s a, I think the third party piece is very important because, and there’s an openness to that.

I mean read, you know, retailers five, 10 years ago would be like, ‘no, no, we’ve got this, we’re all good. You know, I’ve got to tell in house I hired that digital guy is apparently really good at doing these ecommerce websites. So He’s, you know, we’re fine’. And then realize, okay, the skill set is a lot broader than that. And then we do probably need to bring in some external experts to help us navigate this because it’s moving so quickly that even their best, you know, and there’s a fascinating little series that came out from Doug Mcmillan shared, the CEO Walmart, where like these three or four interviews he did with the former head of Walmart global. You know, being with Walmart for like 30 years. Clearly somebody very accomplished, and I’m sorry, I’m forgetting his name right now but pretty easy to find.

And the, and I thought it was fascinating, when he said, ‘okay…’ You know, he seemed interested in technology and all he said, ‘step away from the business and you’ve got, you’ve got free reign to go out and understand everything it is. You can understand our own with this. All this artificial intelligence talking about is me, you guys help us decipher this’. So they literally pulled him out of the business unit and just said, you know, you go around, the world is yours. You figure out where it’s going on, how it’s going on and report back. Wow. So that’s, that’s kind of major, you know, and, and I think you need, you need sort of initiatives like that. And then he went around and met with the leading academics in the space and this is what he was sharing these capsules and sort of really kind of, I think, you know, got a really good feel, but you wouldn’t see ones had been able to do that if he was in his day to day job running, you know, Walmart’s international operations.

I mean that was just when you know, when to have the bandwidth for it. Totally. So to say, okay, now you got to just step out. Now most organizations don’t have that luxury. So what, what do they need to do? Well they need to find the people you know, that are doing this on their behalf and say, okay, you’re out there. This is your job really. You know, you’re specialized in, you know, can you report to us, you know, can you tell us about this? Or what is it, what is it that you’re working on that we should know about? And I’m seeing much more and more openness to that. You know, there’s still some defensiveness to, cause, you know, there’s no lack of solution providers in our industry. So, most retailers still walk around this trade show floors with their badges turned around cause it didn’t, you’re tired of being jumped on as soon as somebody sees the word Target or Lowe’s on a badge and say, oh here’s my, here’s my next client. So they’re still, they’re still sort of low key, but they’re more open than than they were for sure.

Julia Raymond:
Yeah. And I know what you’re talking about, I actually saw that happen at NRF. So there’s a sea…hundreds of booths.

Carl Boutet:
Yeah. Listen, I’m not making this stuff up. I mean, I’m trying to give the truth. You’re nice enough to have me on. I mean I try to give you and try to keep it as real as possible.

Julia Raymond:
Yeah, of course. And I really appreciate that. And just jumping real quick back to the business models. I just want to ask. Circular business models have been on the rise for awhile, rental subscription, retail resale, re-commerce. Do you think these are going to continue increasing, you know, into the years ahead or is this kind of a trend we’re seeing due to the economy? What’s your take?

Carl Boutet:
So there’s sort of two things happening. So there, so there is, there is this, this conscious capitalism side of it, which I think is really important. And so concepts that are coming from a place of purpose that want to do better and be more and more sensitive to the environmental impacts. And you know, see around circular economy and sustainability. And so, you know, reuse and, and so the, we’re seeing more and those are great. Like where you, you know, green bag and all these other ones are real. Anyways, I forget just, you know, everyday there’s a new one coming out. But, but I think we’re also a big piece of this and it’s, this is more of a discipline is more behind the scenes or not, you might not be as obvious is let go back to your 30% return on e-commerce average.

Where does that stock go? It ends up more and more in these sort of these, these third party retail, you know, independent retailers that are now specializing in reselling returns, which is a fascinating business. You think about it. And it’s not new. It’s just that it now, because as e-commerce grows 15% a year, guess what grows also 15% a year returns? So there’s more and more of this inventory out there that retailer’s reverse logistics on it are really messy. An d so you’re seeing more and more of these companies specializing in taking back. These returns are going to the large, this is more a big box thing, right? So going, negotiating deals with the big box guys, say, listen, we’ll take your returns for, you know, x amount of cents on the dollar and no questions asked and then we’ll make, we’ll make you, we’ll make this our problem.

And obviously the big box retailers have agreements with their suppliers to help absorb the costs of doing part of this. So you’re seeing these stores more and more opening up, you know, and I know that the retailers try to control so that their brands aren’t used, so they don’t like seeing Amazon returns sold here, but I’m seeing some of those actually shine up and I’m just saying, well, I guess the Amazon hasn’t seen that, that, that sign up yet because there’ll be getting a cease and desist pretty quickly. But, um, you’ve not used the word Amazon, but that’s, you’re going to see more and more of these and even, you know, things like TJX, whereas who are selling, we specialize in selling overstocks and, and, and these, you know, end of lots and all that. Well that’s kind of play into that, too.

Julia Raymond:
Yeah, I could, I could totally see that happening. And that’s really interesting because I don’t often think about it that way that these resale or direct to consumer, you know subscription box companies are potentially just, you know, using product that the big box received as returns.

Carl Boutet:
So yeah, I’m not, I’m not saying essentially direct to consumer. I don’t know if that maybe there is. I mean I’m sure some of the others might try it. I’m just saying these are more like opportunistic regional players right now that are out there and making deals with you know, three, four warehouses or return centers or whatever and saying ‘we’ll just…’ ‘Cause that stuff goes somewhere and hopefully it doesn’t go into online shopping, you know that’s the very, very last place we want to find it. So if somebody is going out there and, and you know, you know, being smart about how they’re buying the stock and being able to pass along some savings to a consumer who is more and more, yeah, it’s more and more pulled, polarized. We know that the retail concepts that are working right now are either serving the very high end or the lower, you know, the low-mid to the low-end, like the, you know, the Dollar Generals and all that. So everybody’s looking for a deal, so you know, buying returns is probably a good way to just save some money.

Julia Raymond:
Yeah. And that’s, you know, that’s obviously a hot topic too is just corporate social responsibility. We just ran a survey on that actually just to kind of gauge the sentiment, but obviously it varies so greatly, especially just, you know, across regions and demographics.

Carl Boutet:
No, it’s a very variable. I mean, did at the school at McGill, our retail management school, our launch event last fall was all around that and it was really interesting. And we had a, we did a case competition with RILA, which is the U.S. based, you know, large retail. And we had students from around the world, we had schools from Ghana and India and everybody show up, kind of show up and pitch ideas around how to make it more sustainable. And it goes from how do you make a better a clothes hanger, you know, that that doesn’t get, you know, doesn’t use a, doesn’t use plastics for instance, to our, you know, ideas around batteries and all. It was really, really interesting. So yes, your, to your point there, the retailers are more and more focused on it. I mean, are they really executing on it? We can read that kid that’s up for debate, but I think that the path and what they’re trying to accomplish while still balancing out the needs of their investors and other stakeholders. But it’s, it’s clearly on their radar.

Julia Raymond:
Yeah, I would say so. I would agree. And I know we’re getting close to the top of the hour. I wanted to ask. I want to close out with just this question. To get your take on a quote I heard recently which said, “in a couple of years from now there won’t be any more debate about whether digital is taking from traditional stores because the two will be one in the same”. And so from your perspective, how close do you think we are too physical and digital retail spaces being indistinguishable?

Carl Boutet:
Cool. It sounds like a quote I gave cause it really, really sums up nicely with the way I think about it. And, and, and when we get into these debates around, well when you know, where do you think you e-commerce is going to be 10 years from now in terms of percentage of market or are hearing some people saying 2033 it’ll be a parody or be like 50/50. I hope by 2033 we’re not even going to care about the difference. The only person that’s going to care is the person in the logistic side, that’s having to ship out, you know, the product and understanding where it needs to go. And when, you know, for everything else, it needs to be just all part of the same. And, and as we live in this augmented, environment more and more, we’re digital and there’s just going to be a digital layer.

Pretty much everywhere we go that’s going to add information or context or opportunity on everything we see and do, that’s when we’re gonna really not, we’re going to have a lot of trouble seeing the difference between the two worlds. And, and that’s going to be as much in the physical, commercial spaces as they’ll be in our homes and be in places where we work. It’s, it’s all, it’s, that’s one of the things I say is, you know, as, as for the past 50 years now, we would be much more, surprised by the lack of light in a room. Like we walk into a room and there’s no electricity we’re like, ‘well, that’s odd’. Like, there should be electricity in this room because every room had electricity. I think, you know, we’re going to be going more and more towards that, where we’re going.

Carl Boutet:
If we walk into a space that doesn’t have a digital layer on top of it and we’re going to be like, ‘oh, that’s weird. Why isn’t there a digital layer here? Why isn’t there more information popping up at me about this thing? Or why am I not seeing more context around that? Or where am I not seeing another way to engage with this?’ And that’s where I won’t get a little scientific science fictiony here, but that’s, I think, really where we’re going and we’re already seeing some of that, you know, with some applications that are, you know, we’re using on a day to day basis.

Julia Raymond:
Yeah. And I, I love that analogy. I love that sound bite because I think that’s a good way to visualize kind of the future and how it’s going to feel.

Carl Boutet:
Yeah. And then we did, I mean, since NRF this year, we’ve been sharing this report. Kantar did a story of 2030 report and we shared for the first time as David Marcott’s team produced it at Kantar and, and we shared it and he was nice enough to invite me up on stage and comment on it there. And since then I’ve had a couple of other opportunities to share and that, that piece of it where I talk about the absence is going to be more felt than the presence of visual, is, anyway I don’t think we’ll call it digital. I think just, you know, do we call, you know, ‘oh look, there’s light in this room’, you know, like, no. Right? So, so the report I think kind of gets that, that endures a good video that goes along with it as well to sort of put that all into context.

Julia Raymond:
Oh, great. I love that. So yeah, I’m gonna, I’m gonna take that as an action item. Go check it out.

Carl, thank you so much for being on the show today. You had some excellent insights. You brought some great examples and I think I really just enjoyed our conversation. It was really, really good. So I’d love to keep in touch and I hope you have a great time at your C2 Montreal event.

Carl Boutet:
Hey, well, thank you. Likewise, keep in touch and I really enjoyed the conversation and hopefully we can, uh, make this a recurring thing in the future. Thanks, Julia.

Julia Raymond:
Thanks, Carl. Have a good rest of your day.

Carl Boutet:
You too.