Name: Doug Stephens
Moniker: The Retail Prophet
Job: Retail Consultant, Author, Blogger, Co-Host of Pay Pal’s webisode series ‘The Future in Store’
Superpower: Ability to predict and see the future of retail
No one knows the retail game better than Doug Stephens. He has dedicated his life to the retail space and I had the privilege of speaking to him about the current and future state of the retail game.
Q1. How did you learn all of your retail knowledge? Can you walk me through your career journey?
A1: I spent my whole career in retail. I got into it accidentally. It certainly didn’t start as something that I would be doing for the rest of my life. I began my career as a Manager for a small chain of stores in Canada. Those were the days where you could start from the bottom rung and work your way up through the system. I moved from field management over to training and development, then to franchise sales then to the marketing department and operations and just slowly worked my way up. Eventually in my career I worked for a company that took me down to the U.S. and I was working out of New York City for about 4-5 years. I just came to a point in my career where I exercised my potential at the corporate level and the idea of doing something on my own had always intrigued me and having the freedom to explore the themes and the subjects that really excited me. At that time, it felt like we were coming into a really exciting period in retail. I began ‘Retail Prophet’ in 2008 and it really started because I felt there was a lack of foresight in the retail industry. My experience with retail was that retailers were pretty good at doing analysis on the past and relatively good at reacting at things in the current but they weren’t really strong at projecting out further than a quarter or maybe a year forward. So I felt there was a need for someone to take what was going on in the marketplace, try to contextualize that in a language that retailers could understand and than bring that back to them in a format that could inspire action.
Q2. When you say there is a lack of looking into the future, how do you look into the future and figure out what is coming next?
A2. It’s an abstract and iterative process. This is what makes it difficult for the average retail executive to do. If it were just a matter of reading certain publications or attending certain conferences, it would be a relatively easy thing that everyone could do but I have the luxury of being able to dedicate myself to doing this everyday. Everyday I am scanning the horizon to see what is going on and in an iterative way, try to assemble on an ongoing basis what this picture looks like; what the picture of the emerging retail market looks like; what the picture of the emerging consumer behavour looks like; what the emerging economic picture looks like. And I’m trying to synthesize all of that into this understandable articulation of a story that an executive can sit down and either read through a book, blog post or via a presentation. Now within that, a lot of the stuff I look at is not always classified as retail or consumer behavior information. I’m looking at in a very undisciplined way frankly, things that are happening in pop culture, things happening in entertainment, medicine or even sociology and religion and trying to amalgamate that information into the things that I’m seeing in the retail market to try to get a full picture of what’s happening. I don’t think that retail is this island that lives in isolation. Consumer behavouir is impacted and affected in totality by everything that is going on in the world and unless we are considering everything in totality, I don’t think we are ever really getting a true sense of how consumers and markets are changing. The analogy I use is basically every morning attaching yourself to the fire-hose of information that is out there and trying to distill from that torrent the things that are meaningful for the industry.
Q3. In this new era of retail where everyone price matches each other, drives prices down to minimal margin levels and where showrooming is an increasing behavior, how can a retailer differentiate itself in its sector?
A3: It’s coming down to a binary proposition in the sense where there are two ways to thrive or even survive in today’s market. One is, if you can sell a product that no one else sells than that’s great and will guarantee you to some extent, some degree of protection in the market. The unfortunate truth is that there are very very few companies that enjoy this luxury. Some may have a slight design advantage like Apple but for the most part, products today and access to products by consumers are relatively interchangeable and ubiquitous. So product as an advantage doesn’t really work so well anymore so what it really comes down to for most retailers is the differentiated way in which you sell the products that you sell. It is the experience that you wrap around your products that wholly differentiate you from anyone else in the market and will simply not only drive more consumers to you out of interest because what you are doing is different, unique and remarkable but hopefully also drive a higher level of loyalty among those consumers because of that uniqueness because they feel special by doing business with you. So it really comes down to you either finding something that no one else is selling or you have to sell what you sell in way that no one else is selling it.
Q4: Will we see the end of brick and mortar stores in the future? Will they just be showroom areas and will we all shop online?
A4: I think that the purpose of brick and mortar retailing is changing. I don’t think we will ever see the complete eradication of physical retail spaces for a few reasons. The main reason is that I don’t think we purely shop for acquisition. I don’t think as consumers that the only reason we go into stores and shops is to pick something up and bring it home. I still believe there is this social underpinning and entertainment facility to shopping. We enjoy doing it and I think this is something that has existed since the beginning of time. However having said that, the strategic purpose of having a retail store today and into the future is going to be very different than that of 1965. Retail at its roots and at its core is a distribution play. It was and to some extent is still about availing products to a market in a relatively efficient way. That really is the core purpose. But as our capacity and our ability as consumers to access products wherever and whenever we want and not at a wholesale level but as one’s and two’s shipped to me from anywhere in the world; as that ability perceived and progresses then our reliance on retail as a distribution mechanism begins to subside.
So the question that retailers need to starting asking themselves today before that progresses any further is, what is the purpose of our store and why would we have a physical space in a retail market and what should consumers expect when they walk into that store. My believe is that we should go from a product first experience model – where principally the customer is coming in for product and we will try to give them good service and try to make their experience in-store pleasant – to a model where we say, the customer is coming in, first and foremost we need to focus on the experience they enjoy in the store and maybe they’ll take something home. The product can now be purchased downstream of that experience or upstream from them coming in the store but the store needs to be in the business of selling experiences first and products second and that’s the reality of living in a multi-channel world.
Online pure plays, like Amazon, Google and eBay are talking about opening physical spaces because they are realizing that they can’t truly have a human face to their brand until they have that physical human experience that a consumer can go through. A good example is from the US, Bonobose, the largest men’s clothing retailer online. They recently opened up ‘Guideshops’, really small shops in New York City where customers can go in, speak to a stylist and try on products, find what fits them, but there is nothing for sale in-store. You have to buy online and ship to your home. Having that physical experience in the marketplace that really puts that human face on the brand and gives that brand the capacity to create that physical, visceral and emotional experience in the market drives better consumer affiliation and loyalty.
Q5: I recently wrote a blog post on how social media is making its way into the retail store. How do you see social media playing a role in the retail environment and how will it evolve?
A5: It’s a really interesting question because we are really coming off the social media hangover where lots of people were following our brand on Twitter and ‘Liking’ our Facebook pages and that got us excited but then there was this let down when we realized that it wasn’t an automatic recipe for conversion. Than all of a sudden you had the CFO and CMO pounding their fists on the table saying that we can’t invest any more money in this social media nonsense until we see a payback. Since then there has been this ongoing debate on how do you quantity and monetize the value of a ‘Pin’, ‘Like’ or a ‘Follow’. My belief is and I use the analogy of going out to a bar, meeting a few people, chatting with them and than wondering why at the end of the night you’re not married yet. Any rational person would say, between the time that someone shows interest in you and then the time in wanting to marry you, a lot of things have to take place. The problem for most brands is that they are looking at the ‘Like’, ‘Pin’, or ‘Follow’ as a means onto itself and what I believe is that what it should be is the trigger for something else. So if you say hello to me at the pub that night over a beer, the next thing I will do is ask you out for a movie and than out to dinner. Retailers aren’t taking that step into taking a ‘Like’ into an action or into something of value.
That’s why I like what Nordstrom is doing where by they are saying, ok people are pinning so lets use that social validation as a means of navigation in-store for other customers to use to their benefit. Another example comes out of Brazil where a clothing retailer is using the Facebook likes for products in their store and beaming them to the clothing hangers in-store. So now all of a sudden, you are not waiting for the customer to prove the value of the ‘Like’. The retailer is taking the ‘Like’ and turning it into a currency that has value for their customers. I still believe that retailers need to ask themselves ‘and then what?’ So you like our page on Facebook, and then what? The answer to ‘and then what?’ can’t be another ad or coupon or promotion. We need to go deeper than that. It’s like never getting beyond small talk with that person in that bar analogy. You need to get beyond that small talk and provide something of meaning and value to consumers, otherwise you are just treading water and turning people off.
Q6: There seems to be an influx of American retailers coming north of the border. Organizations like J.Crew, Target, Marshall’s, Nordstrom’s, and now Saks Fifth Avenue. Will we see more of this activity and which US or International retailers do you want to see make the move to Canada?
A6: I think we have seen the front-end of the insurgence and I think a lot of that was based on the economic data around 2009 to 2010. Retailers that have come, came because of the very desperate economic conditions in the United States. They saw Canada as an opportunity, a great deal so I think we saw a first wave and now how are they doing. You see the results that Target posted and they are doing ok. They are not blowing anyone away and the wind is coming out of those sails. I don’t know if we will see the same velocity of U.S. retailers coming north of the border. If you look at Sears Canada, I see them as a buy-out target. I think that they have come to the end of whatever strategy they had. I expect with real estate in the commercial market in Canada being at a premium, I think that there will be another large retailer make a play for Sear’s locations and if I’m a betting man, I think it will be Macy’s. If I look at the retail space right now at the mid-tier department store space, who do we have? The Bay, that’s it. You can’t really regard Sears as being a serious entity in the marketplace so if you discount Sears, we have The Bay and if I’m Macy’s and I’m looking at a market that is principally being monopolized by one mid-tier department store, then I’m thinking that is a market that I could walk into and at least take 25% of that away by just being an alternative. So I wouldn’t be surprised at all if Sears was sitting down at the table with a large American retailer and I wouldn’t be surprised if it was Macy’s.