by Andy Heddle, Group Channel Director, VML
ShopTalk, which even in its second year, has come to be seen, as one of the major events in the digital retail calendar, bills itself as providing “The new blueprint for retail and ecommerce”. In fact, if there is any lesson to be drawn from three days of keynotes, breakouts and networking there is no single blueprint any more. But a number of new ones are emerging quickly and in so doing they are revitalizing an industry.
Fear and Hope in Las Vegas
In the absence of a single blueprint, there is a lot of hope, plenty of hype…and from the more established retailers and brands at least more than a modicum of fear. Whichever emotion you were feeling as you travelled to Vegas, it was probably an even more vocal traveling companion on your way home.
Established retailers like Kohl’s and Target are increasingly finding themselves caught in the diminishing and uncertain middle between fast moving and focused digitally native start-ups and the scaled dominance of Walmart and Amazon.
The CEO’s of both used the opportunity provided by their mainstage appearances to double down on their Omni-channel narrative and explain the enduring value of their real estate footprints in a digital, mobile first world. (Both mentioned their x% of Americans live within x minutes of one of our stores as validation.)
In their eyes the new retail reality points to hyper-localization of inventory and format, with a growing estate of smaller format stores that more closely reflect the communities they serve. Each store thus becomes a hub to serve shoppers whether they choose to visit the store in person or have purchases delivered to their homes within hours.
Brian Cornell CEO of Target encapsulated this view thus, "Think of a Target store of the future as being a hyper local, shoppable distribution center.”
In a very candid interview, Kevin Mansell, Kohl’s CEO when asked about possible store closures stated, “Having a bigger physical presence is a much better strategy than having less,” going on to say that a focus on improving the productivity of its stores was the main thrust of its technology investments as well as making incremental improvements to its app in support of its most loyal customers.
However, he sounded less than convinced, saying “success for us is probably going to come by becoming and amazing Omni-channel retailer and connecting the online experience with the physical experience we can provide”. He went on to note that Kohl’s would continue to try and shrink its store formats to lower costs and reflect new customer expectations, even if the actual footprint itself didn’t contract.
As Mansell noted “We have a lot of stores so I am not going to deny the fact that this is kind of the hand that we have to play…” (Emphasis mine).
Necessity and strategy are two different things and it remains to be seen if these “contract to win” tactics will coalesce into a blueprint that will do anything more than stem the decline in sales for both.
Customer Focus x Conviction + Long term Focus = A Blueprint
Also on the main stage Marc Lore, head of ecommerce at Walmart/Jet and Peter Faricy VP of marketplaces at Amazon set out their missions to bring customers an endless assortment of product in a form most convenient to them. While 85% of Americans may live within 15 miles of a Kohl’s, 100% of them share a pocket with their smartphone and this defines the strategy of the market’s two most dominant players.
Lore has an unashamedly digital strategy using ecommerce “acqui-hires” (Moosejaw, Shoebuy, Modcloth, Hayneedle) to create long tails in key categories such as fashion and homewares. Meanwhile he notes that Walmart’s strength in grocery created huge opportunities for it in digital as he announced that customer shopping Walmart stores could now have their whole basket automatically uploaded into their online account to act as the basis for future shopping trips online and in store.
Meanwhile Faricy played a cute hand by reminding us that Amazon “is driven by customer obsession… we start with the customer and work backwards.” But that “customer is a very broad definition at Amazon...brand owners and entrepreneurs are customers in our eyes”.
Before going on to make an outright appeal to everyone in the audience whether they be a large or small brand to get on board with Amazon.
An advantage both have is that they have owners with a view to the long term. Lore outlined an innovation strategy focused on outsourcing innovation through its “Studio 8” incubator and Amazon is famous for its long-term view.
Meanwhile Cornell of Target, surprised many in the audience by admitting that Target was focused on pursuing short term goals when determining where to place its chips, saying
“We’ll look around corners. But I want to make sure the innovation investments we’re making are going to impact our business over the next two or three years.”
Which means that while the squeezed middle is busy playing the hand they are dealt; Amazon and Walmart exude the easy confidence found in those who believe they are dealing it. Both have conviction and belief in their blueprint for the future and both crucially have the runway and investor confidence to deliver it.
Hope is also to be found, in the great abundance of smaller retailers and brands popping up in every conceivable format and vertical who dominated the breakout sessions at the show.
Emblematic of these is Tristan Walker of Walker and Company, a men’s grooming brand aimed squarely at people of color. Embodying all the characteristics of the digitally native vertical brand, Walker has taken a narrow initial vertical (shaving) and a very focused audience that isn’t being addressed by main stream players. The problem he is solving is that no major brand makes shaving products that address people with coarse and curly hair.
Having earned share dominance in this distinct niche of a niche, by creating a product that works beautifully and marketing and distributing it to customers digitally and directly.
Walker is now fashioning a classic three-point blueprint for exponential growth; Grow range, grow audience, and grow distribution…and his platform of choice to do this? Amazon.
“Away”, a company that claims to make “thoughtful luggage”, featuring unbreakable shells, interior compartments, and built-in USB chargers, is using “Pop Up” stores in major metros to build buzz and sales through recommendation. In her presentation Steph Korey, the company’s founder highlighted the difference between her KPIs for a store’s performance (Brand Impressions, Social & Media mentions and online sales lift in zip codes around the store) and traditional KPIs (sales/ sq ft, footfall and conversion).
Unencumbered by Wall Street’s measurement criteria these brands have space to flourish denied to their established brethren.
Primary makes and sells replenish able children’s basics in primary colors at price points under $25. Care/of the online vitamin and supplement retailer is a company built around a customer problem rather than a legacy supply chain. Their mission is to be a customer driven company in a formerly stagnant category with a low customer confidence to create a whole new direct to consumer model. Removing an opaque layer of distributors and product centric companies delivering products of unknown quality. In so doing they are removing confusion and adding in a high perception of quality and transparency into the supply chain.
The list of emerging brands, retail models and marketplaces is literally as endless as the aisle that is the new retail reality. These brands and many others are not only playing by different rules, they are also playing with house money (courtesy of the many VCs also in attendance at the show) giving them the confidence and the freedom to think long term, to focus on things that matter to their customers and to earn the ultimate customer accolade “Brand Love”.
And as Matt Kaness the CEO of recently acquired “Mod Cloth” wryly noted “Brands that are loved get bought”.
Sounds like a Blueprint, right there.