Explore the history of the department store, the evolution of physical stores and why some of today’s most innovative brands are embracing the showroom concept.

Our guest is retail expert Sanford Stein. With a career that spans nearly half-a-century, Sandy’s insight into the retail industry has inspired countless thought leaders from all over the world. Sandy is also the Founder & Moderator at RETAIL SPEAK on LinkedIn, and is the author of the 2015 IBPA award winning publication “RETAIL SCHMETAIL, One Hundred Years, Two Immigrants, Three Generations, Four Hundred Projects.”

Join us as we explore the history of the department store, the evolution of physical stores and why some of today’s most innovative brands are embracing the showroom concept.

Episode 28 of RETHINK Retail was recorded on August 29, 2019

TRANSCRIPTION

Julia Raymond:
Hi, and thanks for tuning in. Today we’re kicking off another episode of RETHINK Retail with my guest Sanford Stein. Sandy is a revered retail expert and has spent over three decades providing consumer insight and trend analyses for the world’s leading retail brands. He’s the founder and moderator of RETAIL SPEAK on LinkedIn, the author of Retail Schmetail, and regular contributor at Forbes. Sandy, thanks for coming with the show.

Sanford Stein:
Well, thank you, Julia. I’m delighted to be here.

Julia Raymond:
I understand that your father and his brother were independent retailers, and that was throughout a good portion of the mid century. Can you tell us a bit more about their shops, and how your upbringing led the whole foundation for your career in retail?

Sanford Stein:
It’s fair to say that I was immersed in retailing from as long as I can remember. My father and his twin brother were in retail their entire lives. The store was kind of the center of all our activity. Unless you wanted to see Dad sleeping at home, you had to go to the store to have any kind of involvement or relationship, which was fine for us. In the middle ’50s in independent retailing, the store was kind of the whole… It was what life was about. And being in the store… There were two of them. They started out as what I refer to as accidental retailers in a store in Milwaukee, Wisconsin on the main drag downtown called Jewelry & Toy Center. It was anything but a brand. It looked like a garage sale. The remnants of the previous retailers signage and fit out were still there. These guys were selling everything from the first transistor radios to clocks that ran backwards and fake vomit.

Sanford Stein:
Suffice it to say it was not a high-quality customer experience.

Julia Raymond:
Right, not like today.

Sanford Stein:
No, no. And that supported the family for 10 years. What was particularly defining for me is the end of that undertaking and the beginning of what I refer to as the twins becoming brands and creating a defining brand in the Milwaukee area was with the launch of what was called Pill & Puff. It was a discount health and beauty aid store. They went from this sort of accidental retailing to fundamentally creating a clean-slate brand around that idea that customers might want more depth and more variety in their health and beauty aids than they would typically find in either a grocery store or a drug store. Because both of those venues were full price, they knew that if they could create a retail environment that was clean, well lit, well organized, with greater depth than the customer would find in the grocery store or the drug store, and at discount prices, that they’d have something that customers would celebrate. In fact, it was a huge hit. I was at that point in time in junior high school having had taken some drafting classes. I became the unofficial corporate store design person.

Julia Raymond:
Wow. What a title at a young age.

Sanford Stein:
Yeah. None of us knew what we were doing. But we were doing it together, and I found myself laying out stores on my drafting table in my bedroom while I was still in high school. It was an amazing experience to work with my father and uncle and do something that fundamentally defined what I would ultimately spend a career doing. I listened, and we all learned from each other and the marketplace. This was almost simultaneous with the launch of both Walmart and Target.

Julia Raymond:
Wow, okay.

Sanford Stein:
Their concept started in 1964. Walmart and Target were ’62. So, the idea that a customer might want to visit an off-price store that was elevated above the really bad discounters of the day where stores were dirty, poorly lit, and stuff was just stacked in boxes would become a defining moment in retailing in America.

Julia Raymond:
Right. This was in the 1960s. Your store in the Milwaukee area was called Pill & Puff. It sounds like you guys really took initiative to off what other stores weren’t, which sounds like the convenience aspect of having the groceries and the pharmacy and then also being discounted.

Sanford Stein:
Well, it was strictly the health and beauty aids. They understood the concept of niche. They focused in on the broadest selection of health and beauty aids in the marketplace and were the first people in the upper Midwest to do this and arguably might have been one of the first in the nation to do a pure concept that was focused on the greatest selection and the… As my father would say all of the flavors of any of the brand offerings. They would have every size, shape, and color in really simple but clean and well-appointed stores. They understood their customer on a level that is consistent with only the best retailers of the day. My dad used to say as we were trying to eat dinner at the kitchen table that if they were one thing on Tuesday and something else on Friday, how would the customer know what they were about, which was another way of saying, “Retailer know thyself and not try to be all things to all people.”

Julia Raymond:
Yeah. Which is super important. And more important, arguably, today. Right? Because the customer doesn’t always know what they want.

Sanford Stein:
Absolutely. I think that when you look at the difference between the retailers that have been very successful and those that have tried a lot of different things and lost their way, the ones that identified who their customer was and the type of offering that they knew their customer would want in an environment that was worth visiting, are the ones that still, today, are successful.

Julia Raymond:
Yeah. That makes a lot of sense because the convenience aspect is what’s been coming up a lot in conversation with guests lately just because there was a report released that for every one store that closed in the U.S. this year, five opened. And a lot of them were just the convenience-store format or category. And it seems that people are really gravitating toward that because there’s a lack of time. We see the Walgreens and Kroger partnership. They’re offering each other’s products and some just really interesting partnerships going on to just be as convenient for consumers as possible.

Sanford Stein:
Convenience, yes, but price and value are often confused. And for the longest time, and unfortunately still to this time, there are too many retailers that are chasing price and losing sight of what their customers really want and need. I think the retailers like Target, as an example, that understand what value is and that even though they might not have the absolute lowest price of everything in the store at any given time, although they might argue that they do, the overall offering, the entire aspect of what becomes customer experience, is so high and so much better. They’re differentiated on virtually every level of what happens both online and offline. The nature of the product they have, focused on private label, the experience that the customer has in the store puts them above and beyond.

Sanford Stein:
I would argue and have argued in some of the things that I’ve written, they’ve become the new department store because of all of the ways that they are operating in contrast to some of the problems that Macy’s and other of the legacy department store brands have had in trying to both chase price and ultimately race to the bottom and lose sight of what they were and what the customer wants.

Julia Raymond:
Yes. And that’s a kind of a big, bold statement just because Target is at the same time, staying true to themselves and their customers. But it seems like maybe they’re evolving in a way that some of these other legacy, true department stores are not.

Sanford Stein:
That’s a very good point. They are evolving. They’re constantly improving the offering on almost every level but still staying true to what their brand has always been about. If you or your listeners have visited their newest retail prototype, they’re taking it to yet another level with stores that are more shoppable, more focused on product categories, better sight lines, better lighting, really positioning their private-label brands in ways that really are creating an entirely unique experience that is becoming a go-to for more and more people. They are basically, in my opinion, siphoning off a lot of the customers that might have formerly been shoppers at Macy’s or some of the other regional department stores that have lost a lot of traction or are no longer with us.

Julia Raymond:
Yes. Target is doing that. If you saw recently, they announced they’re even putting in some Disney shops inside of some Targets. I think it’s only around 20 or so stores they’re starting out with. But what do you make of that? Because I looked up there was a partnership where there was Disney shops inside of the Children’s Place store years ago. And that kind of just came to a halt. It didn’t really take off.

Sanford Stein:
I think that Target has been very successful with store-within-store concepts in the areas that they have tested them. I think that with the fall of Toys “R” Us, there’s been a huge void for which both Target and Walmart have successfully taken some of the share lost with the closure of Toys “R” Us. That said, there’s still a significant amount of toy retailing that has not been yet absorbed. I think the move with Disney is a brilliant one. I think that Target and Disney together can do an amazing job that both supports the Disney brand and makes the Target customer feel like there’s a well-edited offering of Disney product that will make that square footage within the store a very high producing dollar-per-square-foot category.

Julia Raymond:
Yeah, and I love you brought up Toys “R” Us as an example of the opportunity that they might be capitalizing on in the market right now to bring people into stores and to sell more, ultimately. We’ve been talking a lot about big box stores. I did read in your book that you said, “Small is the new big.” I just wanted to know is that specifically speaking to specialty stores or family-run businesses. Or, are you saying more small format?

Sanford Stein:
I think that as we’re seeing this phenomenal and very sad fall off of brands that have done very well for the last 20, 30, 50 years, there is at the same time arguably never been a better time for a small, well-focused, niche retailer to create a product/service offering that’s clearly focused on a clear demographic and be very successful at it. I think that a lot of the digital-first or digital-native brands that have evolved in recent years have done so because they understand a segment of a marketplace and understand a core customer and build the brand around the customer, which is one of the benefits of starting online and then being able to expand in stores but have the online-offline, or as we’re referring to it today, unified commerce work in their favor.

Sanford Stein:
They think differently about scale than the retailers of the past where retailers used to think of scale as an objective in and of itself. Thereby, we end up over retailed throughout the country with too much undifferentiated product. A lot of the startups today, the niche brands, many of whom are digital-first brands, understand a void in the marketplace or rethink a process that has been age old but not questioned.

Sanford Stein:
A good example, one the many being BONOBOS and the fact that here they’ve turned everything on its ear. And their guide shops are the very beginning of a whole new evolution in retail, something that I’ve referred to as DORE, D-O-R-E, or display-only retail environments. What they’ve done has enabled them to not only carve out a niche and create a brand from scratch but recognize that by gaining that level of engagement, trust with their customer and the data that comes from knowing a lot about their customer in terms of their preferences, their fit, their style, that they are able then to build that brand that isn’t necessarily based on scale of numbers of stores that they have but on being able to provide a customer with the wherewithal of either buying online, buying in store, or a combination of the both of the two. What they’ve learned is that when they open a new guide shop in a new marketplace, it boosts their online sales of the product in that area, and the customer has the ability to do one or the other or both. And they develop a tremendous amount of brand loyalty by doing that.

Sanford Stein:
I think we’re going to see as the internet has separated shopping from buying, which is a very important point, that there are going to be more and more display-only environments that are intended not to necessarily be the place you’re going to buy the product because literally the store doesn’t need to store anymore when we have the ability that the internet has provided that’s separated the shopping from buying.

Sanford Stein:
Technology today, and data, AI, all of the wonderful new tools that we have now enable a brand to build that same kind of customer bond. We’re seeing more of these examples of display-only retail environments. As your readers may know, IKEA opened a planning studio in the Upper East Side of New York City. You can’t take anything home out of that showroom.

Julia Raymond:
Wow.

Sanford Stein:
It is not even 10% the size of a typical IKEA. But what it does is, in a very dense New York neighborhood where rents are sky high, gives the customer an opportunity to come into the store, to view vignettes of product that are on display, to engage with a highly-trained brand ambassador, and either begin to design a new kitchen or fit out their home, and order online either in assisted or in an unassisted manner, and have the product delivered and installed in their little New York Apartment. That will obviously be facilitated from a target in the area. But it demonstrates another way of fusing online and offline unified commerce and doing it in a way that is incredibly user friendly.

Sanford Stein:
Now, the thing that will become a major change related to these kinds of display-only retail environments, like Nordstrom Local is another example, is the training and the importance that the brand, or the importance that the retailer, must then give to both training and empowering and moving from the idea of a salesperson to a brand ambassador, people that are going to be paid better, are going to be getting better benefits, are going to be there not because they can’t find a better job but because that they really do love that brand, and they love being devoted to it.

Sanford Stein:
That is part and parcel of what is becoming one of the biggest changes that we’re seeing in terms of what that in-store customer experience is going to be about. The best example of that is b8ta. For your listeners that may not be familiar with it, b8ta is a new kind of a retail environment whereby the brand seeks out the newest and coolest tech products, brings them together in a showroom, and has some of the best trained brand ambassadors along with great display and technology. Every product in the b8ta store has its own little tablet computer that both demonstrates the product and enables the customer to do both assisted and unassisted information gathering on those specific products. Those products are constantly changing. b8ta becomes the agent between the upstart product design entity and the customer. So it is in a sense a showroom and in another sense almost a museum-like exhibit of the coolest stuff out there. They’re very active online and offline.

Julia Raymond:
Right. In display-only retail environments, b8ta’s kind of like that third party. They’re not actually owning the products, right?

Sanford Stein:
That’s correct. They’re not owning the products. They are in effect taking a fee for being able to display and enabling that brand to get a public display and build traction. They are in effect the third party. It’s kind of the offline-online marketplace for the coolest stuff in tech.

Julia Raymond:
Yeah. When you say tech, I think about the old problem… Retailers talk about showrooming as a problem. We had Best Buy, “We’re losing sales to Amazon. People are coming in, looking at it, getting help from the staff, and then leaving, buying it cheaper online elsewhere. So, where’s that gap being filled? Is it through the brand ambassadors? How do you get the customer through the journey all the way to the purchase, especially with tech stuff?

Sanford Stein:
Well, I think that both b8ta demonstrate that you do that by having the right combination of the right product, the right… They spend a lot of money both interviewing and training their salespeople. Ironically, Best Buy, as you mentioned, has done an amazing job in the last 18 to 24 months of refocusing on their training and on curtailing a lot of that showrooming that used to go on in Best Buy. And by reemphasizing the importance of training their sales staff and giving them both the technology and better benefits to represent the brand well, as well as having many of the store-within-store branded shops where the manufacturers are in effect subletting space and having their own brand ambassadors or well-trained Best Buy staff members on their product, this has enabled Best Buy to remain very viable, profitable, and doing one of the best jobs in unified commerce of any retailers out there. So, they-

Julia Raymond:
Yes, and it’s super impressive considering where they were just a few years back.

Sanford Stein:
It really is. They’ve done what a lot of people thought was not possible. They’ve demonstrated that by making the proper investments in their people, in the stores, online, and offline, that there is indeed a there there in the new retail for even a big box store like Best Buy. But you can’t tell the Best Buy story without talking about Geek Squad because another aspect of what Best Buy has been able to leverage is that halo effect that comes by having Geek Squad as being a trusted service advisor.

Sanford Stein:
And Best Buy is now taking that to the next level by bringing service people into the home to create the connected home for the consumer using the confidence that came out of the Geek Squad phenomenon and bringing together the newest technology that enables even a baby boomer like myself to be mindful of how a parent is doing in the home through the smart home products that Best Buy has by going into my mother or father’s home and bringing them the kinds of devices that allow them to both age in place and give us a stronger sense of confidence that they’re okay. And this is a very interesting way that Best Buy has threaded the needle and understood the nature of change and leveraged it with new product and service that shows their insight and ability to monetize changing trends.

Julia Raymond:
Yes. That seems like a huge opportunity in the market. I wonder if it’s because Best Buy does have, maybe, a level of trust with the Geek Squad and other services they had provided over the years then, say, an Amazon where they will… You could also get a service through Amazon to help set up these connected devices but not to the extent you might need for, maybe, equipping your elderly parents with a smart home.

Sanford Stein:
Yes, I think you’re absolutely right. I have a personal connection because the founder of… Now, I’m doing some shameless promoting. The founder of Geek Squad, Rob Stephens, was also one of the people that did a blurb for my book. I knew Rob from the very beginning of Geek Squad and followed him through his career. He’s an amazing man. I tell some great stories about him in my book in the early years about Geek Squad. But, yes, that was a brilliant move on Best Buy’s part to buy them and to fold that brand into theirs. It gave them a leg up at a time when they needed a differentiator that went beyond price and product.

Julia Raymond:
Totally. And it kind of plays into the trend of meeting customers where they are in their life or in their day.

Sanford Stein:
Absolutely.

Julia Raymond:
You think more stores, more retailers, across categories will be moving, maybe, to the DORE model, as you call it, the display-only retail environment.

Sanford Stein:
I think another interesting, almost serendipitous demonstration of this is the fact that, I’m sure your readers are aware that, there’s a group that bought the rights to Toys “R” Us and are going to be opening just a handful, about a dozen stores, for the holiday season. But these stores will bear absolutely no resemblance to the Toys “R” Us stores of the past. The group that’s doing it, ironically, or not surprisingly, is actually tied to b8ta. What they are doing in these new Toys “R” Us stores is they’re bringing the fun and engagement back into toy buying that Toys “R” Us kind of forgot about because the old Toys “R” Us stores were not fun places.

Sanford Stein:
b8ta in association with some funding people are creating these toy stores that are going to be really demonstrational spaces where the brands are paying to have product positioned in the store. The brand ambassadors will be demonstrating or facilitating demonstration of product, so both the kids and the parents can engage with a product. And the data, through technology, AI, machine learning, and that sort of thing, will be collected and shared with the manufacturers to help them understand what’s working and what’s not working and to truly focus on both the personal engagement, the personalization of the product, and the celebration of what that product could mean in terms of fun and learning and being a place for discovery.

Julia Raymond:
Yes, I love that.

Sanford Stein:
That’s a whole new financial metric.

Julia Raymond:
Yeah, and speaking of metrics, there’s just so many that are probably not explored that we’re going to see pop up over the next five, 10 years that have to do with in-store interaction. I mean, the past 10 years has been focused on a lot of personalization about knowing data about the consumer as a person and their habits and likes and behavior, but not how they respond to the products that are in store.

Sanford Stein:
Exactly.

Julia Raymond:
You know?

Sanford Stein:
I think that’s the beauty of what some of the newest technology, AI, AR, all provide or augment the in-store experience, and that it’s not about replacing the salesperson, but it’s about bringing the quality and level of engagement to a whole nother level by utilizing technology to improve the entire customer experience.

Julia Raymond:
Absolutely. Definitely love what they’re doing and excited to hear more and see the results of that. It sounds like it’s, maybe, a pilot that they’re doing just for this holiday season?

Sanford Stein:
Yes. I suspect that there will be more, and I think that the nature… Again talking about the Toys “R” Us example, I think the learning that’s going to come from that will inform what could happen next. I don’t imagine and nor do I suspect there ever was an intent to build hundreds of these. But what it does do is it leverages everything that has come to be in terms of technology and learning much more about the consumer and what works and what doesn’t to benefit both the brand as well as the development of other products by a company that will be successful in the marketplace.

Julia Raymond:
Totally. It’s the next era of the connected stores and connected spaces and measuring those.

Sanford Stein:
Yes, absolutely. It’s an exciting time. I think that while we’re seeing a lot of old players going away almost every day… Today it was Forever 21 filing for Chapter 11.

Julia Raymond:
Yeah, and Barneys.

Sanford Stein:
Yeah, that’s right. It’s quite-

Julia Raymond:
It’s sad.

Sanford Stein:
It is very sad, but it’s also about change and about the next chapter and what the new store will become and how we’re going to be buying, or in some cases, renting in the future because our needs are changing, and our priorities are changing. A Gen Y and Gen Z consumer that doesn’t have the same fixation about owning things that previous generations did are going to be paving the way with rental and secondhand becoming the next really big thing, which will be a major disruption to the industry but another way to actually improve income for the retailer and margins for the retailer, particularly with the secondhand market as well as the rental market.

Julia Raymond:
Totally. And it’ll be interesting to see how the partnership with thredUP between Macy’s and JCPenneys pans out.

Sanford Stein:
Yes. That’ll be interesting. I think that was a good move on both of their parts. I don’t see something like that as helping Macy’s survive in the long run. I think Macy’s has many other issues that they have to tackle. I think it’s probably a good move for thredUP and probably for Macy’s on one level. Again, I think going back to what my father said at the kitchen table, I fear Macy’s is trying to throw so much against the wall in hopes that something sticks but that there are larger systemic issues that would need to change for a truly reinvented Macy’s to be viable longterm, I fear.

Julia Raymond:
Yes, maybe not a longterm strategy, but diversification play and one of many that they’re doing. So, yeah, we’ll see how that works out. Well, Sandy, I just wanted to say thank you for being on the show. Our listeners, I’m sure, enjoyed hearing all of your stories and insights. Is there a website where they could find out more about what you do?

Sanford Stein:
Well, they certainly could check us out on RETAIL SPEAK on LinkedIn. Anybody who ever requests joining is brought in. I also have a Retail Schmetail website at retailschmetail.com. You can learn more about the book and buy one if you want. This has been a complete delight. I really enjoyed this, Julia, and look forward to getting the feedback from the podcast.

Julia Raymond:
Yes, it was great to have you on the show today.

Sanford Stein:
Thank you very much.