“…We are in a period of Darwinian evolution in retail. The brands that evolve, that go from single channel to multichannel to omnichannel to unified commerce, the brands that understand we’re past the era of the merchant prince, the brands that understand that shopper must be at the center of processes as well as marketing, the brands that make it easy to say yes in new and different ways, the brands, the retailers that evolve faster than the overall pace of industry evolution, those are the ones that will be walking this earth tomorrow and in years ahead.”

BIO: Jon Stine is a former global head of retail sales and strategy for the Intel Corporation, and now the leader of the Open Voice Network, the new industry association dedicated to bringing standards-based and interoperable voice assistance to consumer-facing enterprises worldwide. Jon’s career in retail spans more than 40 years and includes serving as head of sales for a major apparel vendor, as well as leadership roles for technology giants Intel and Cisco Systems.   

Transcript:

Mani: Hello, everyone. Welcome to the series of podcasts that RetailSingularity, an offshoot of Litmus7 Systems Consulting is hosting on the future of the retail industry. We see retail changing very rapidly before our eyes, and we want to be a part of the forces that are driving these changes. I am Mani Subramaniam, president RetailSingularity. In this series of podcasts addressing the future of retail. I’ll be talking to leading retail influencers to understand the direction retail is taking and to try and evaluate the impact of these changes.

Mani: Hi, welcome all to today’s podcast on the future of retail. I have with me today Jon Stine, formerly the global head of retail sales and strategy for the Intel Corporation, and now the leader of the Open Voice Network, the new industry association dedicated to bringing standards-based and interoperable voice assistance to consumer-facing enterprises worldwide. John’s career in retail spans more than 40 years and includes serving as head of sales for a major apparel vendor as well as leadership roles for technology giants, Intel and Cisco Systems. John, thanks for joining me today on the podcast.

Jon: My pleasure, Mani. Thank you for the opportunity.

Mani: John, I’m sensing that the world of retail is changing much faster now than it has in the last 10, 20, 30 years. Am I right in sensing that and would you agree with that? If you do, what are some significant changes that are happening?

Jon Stine: Mani, I strongly agree with that and there’s some advisors and futurists who would tell us that the rate of change will never be as slow as it is today. That the rate of change, and especially in retail and consumer goods, will continue to accelerate. Why is that and what is happening? We can take a look at social changes, demographic changes, political, economic changes, but most of all, I think we have to take a look at the enormous impact that personal technology has made, in not only how we shop, not only how we consume, but just in the pace of decision-making, the pace of information flow. That has just enormously reshaped retail.

Jon Stine: We’ve gone through a number of phases in retail and we talk about what has happened over the past decades and the rate of change. What we have now underneath it all underneath, even the huge impact of consumer technology, is an enormous change driven by consumer technology in the core value proposition of retail. When you and I, Mani, were starting, we’d be in a retail class and professors would talk about the five Ps: price, and product, and promotion, and place, and people. That’s how a brand would distinguish itself, but any more, those have been commoditized. In a world of a digital economy, those are all commoditized. And now, the number one value proposition is about ease and convenience. That will continue to accelerate when you can order online and have it shipped to your home in two hours, that’s an enormous shift and change from the day when we were children, let alone the day when we were in our middle age. So this rate of change and this drive towards convenience and ease as the differentiating value proposition, that will continue to push forward and rapidly.

Mani : Wow. Okay. That’s very interesting. John, for somebody like me who has worked in technology at services retail and for the rest of my colleagues in Litmus7, we work with major retail partners, but we are baffled by the fact that retail stores are shrinking. We hear about a lot of stores being shut down. I think this year, the number is going to cross 7,000, but the retail itself continues to grow at a steady pace of around 3.5%, 4%. How do you explain this? How do you reconcile what appears to be a contradiction to somebody like me?

Jon Stine: Well, Mani, there’s a lot of press and some analysts who would say that to your point about store closures that retail has entered this Armageddon period. It’s the retail meltdown, and yet you point out that retail continues to grow. We’ve had some years here recently, not only of 3.5% to 4%, but even 5% and 6% growth in retail. What’s happening is that the shift, there’s an enormous shift in consumption to online, to digital forms of choice, digital forms of making decisions, digital forms of transaction, and certainly digital forms of driven fulfillment. The entire industry is now a digital industry and stores, which used to be the be-all, end-all of retail, are now a node in a distribution, fulfillment consumer connection network. That’s an enormous shift, but yet that will continue to shift. It wasn’t so long ago when there was first, and listeners may remember this, but how big is eCommerce going to be? Well, people would say, “Well, it’s roughly the size of one of our stores. It’s kind of interesting, but its transactional volume is the size of one of our stores.” You could dismiss it.

Jon Stine: Today, there’s two or three things… Two numbers that everyone needs to keep in mind as to the impact of the internet. Number one, in terms of total transaction, it will exceed 10% of all retail volume in the United States in the year 2019, and certainly increase that in 2020, but the most important number is not the transaction number. The most important number is that more than 50% of all transactions, all revenue in retail in the United States is now being directly influenced by the internet. We shop through the internet. We make our decisions through the internet. We make our selections through the internet. We may transact in the store. And so understanding that retail is now a digital decision-making process is critical to placing store closures in proper context.

Mani : Great. That’s a very useful explanation. John, we work as you know, with a number of retailers. When I talked to retail executives, the discussion often centers around to what changes should they be making to thrive. What will help them to survive in this changing world? You pointed out to one of the factors, but then what can retailers do there?

Jon Stine: It’s a cliche, Mani, as you and I both know to say that one needs to be consumer-centric, and yet that as a headline is exactly what is required to win. If we take a look at the most dominant force in… a transitional, transformational force in U.S.-ruling retailing today, I’d say it’s Amazon. What has Amazon done? Amazon put the consumer, the shopper at the center of its overall set of processes, and went out of its way to make it easy to shop, easy to make decisions, easy to transact, easy to receive, easy to fulfill, easy to understand what you’ve ordered and every step along the decision journey and, again, Amazon thought it through, through the entire decision journey, “How do I make it easy?” Amazon asked, “How do I make it easy for a shopper to say yes?” And that right there, it is working through processes and then designing technologies, which enable processes, which make it easy for the shopper to say yes, to make a store shoppable, a website shoppable, to be able to being nudged, and encouraged, and given confidence in the decisions I make with a specific brand with some specific products. That’s what’s making retail work. Make it easy for me to say yes. And those who do that will win.

Mani : Okay. Interesting. John, in my days in working with a retailer, I worked very closely with merchandisers. They were often seen as the kings of retail. They were the ones who’d go travel through the world, see what products are there, and then they would be the ones making decisions on what they want their customers to see. So from that distant world of push-retailing, is the world transforming to a pull-retailing where the consumer knows about every single product that’s available in the world and pulls whatever he or she want?

Jon Stine: I think you’re spot on, Mani. I think we are in an enormous change. In fact, those who can’t wake up to the fact that the era of the merchant prince or the merchant princess is largely over. The transparency of data, the transparency of information that the internet has provided and the access to so many different brands, so many different opportunities for accessing products and services that has, number one, commoditized products and services. And it also has created, getting back to an earlier point, where it is the fulfillment. It is the ease. It is the convenience becomes the differentiating factor. Same product, relatively the same price. One of you can ship it in a week. One of you can get it to me tomorrow. Who wins? And so, we shift in value proposition. When we say, “Ease and convenience,” it moves away from a product emphasis into a product and operational emphasis.

Jon Stine: Now, is product emphasis interest importance going away in retail? Heaven sakes, no. There’s always a room for a smart, intelligent, very creative merchant, but it’s now about operational fulfillment. It’s about operational execution. It is about creating ease for the shopper. Those are not necessarily just product-related. And so the importance and the leadership begins to shift within an overall retail organization. A critical change that has happened in retail. Those who don’t get it will be lost.

Mani : So the emphasis is shifting it appears to me from mere product-centric to an experience-centric. So whether it is online or in-store, the richer the experience and the more binding the experience, the better it is for retailers. Is that right?

Jon Stine: I think without question it’s about experience, but I think the critical question, Mani, as we move from product to experience is what is the operational definition of experience for a shopper and a retailer. What do you place your emphasis upon? You can go to a retail technology show. And there’s a lot of people talking about, “Oh, we can create great customer experiences.” Well, there may be fancy mirrors or there may be fancy this or there’d be fancy that. To a degree, they’re kind of toys. I think some of the wisest observers of enterprise business and especially retail business will point out that great experience is delivered through operational brilliance.

Jon Stine: What does a customer expect in terms of great experience? Well, I want product on the shelves. I want great products on the shelf or availability to me. I want on-time shipping. I want to have your promises fulfilled. I don’t want confusion. I want clarity. I want it easy to make decisions. I want information about products. Those are operational, brilliant, demanding things to do. That’s what creates great experience. It’s not fancy this or fancy that or some technological whizzbang thing. Operational excellence creates great experience. That’s what makes a store and a brand shoppable. That’s what brings them back.

Mani : Very great insight. John, I’m shifting direction slightly. Within the U.S., among the first to take off were books, apparel, et cetera. Now grocery, which should lead to, let’s say, the rapid growth of Walmart in the ’90s and early 2000s is slow to take off. Now, why is there a difference in some formats? And particularly for grocery, where do you see it heading?

Jon Stine: The difference in grocery, Mani, to your great question and why grocery has been slower in, let’s say, eCommerce and the digital world is probably two to three things. One is the traditional desire, understandably so, to choose your own fresh products. My mother was choosing watermelons or cantaloupe. She was going to… By God, that’s not something she would outsource to someone she didn’t know. She had her own sense of what was proper.

Jon Stine: The second thing is that in shipment, in fulfillment, it’s one thing to wait a week for a sweater or a new dress or wait three or four days for a book, but for groceries, that’s not what the temple of fulfillment can be. The temple fulfillment in groceries is today. It’s within hours, which puts much greater demands upon visibility of inventory, much greater demands upon processes from warehouses or stores, much greater demands upon the cost of fulfillment. All those things come into play. However, if you visit this year’s grocery shop show, if you are in conversations with leaders, say of the Food Marketing Institute, online grocery retailing is where it is happening. If we take a look at the billions of dollars of online grocery revenues that are expected, hundreds of billions of dollars in online grocery revenues by the year 2022, that it is moving and moving rapidly.

Jon Stine: It’ll move in three or four places. It will move because of shoppers’ desire for ease and convenience, the ability to order. It will move because of the changing demographics, smaller households and certainly, individuals who are time-pressed and thus are looking for delivery of prepackaged foods and meals for instance. A very interesting and rapidly growing area of the grocery business.

Mani : Oh, my.

Jon Stine: It’ll also be a combination of buy online, pick up in-store and buy online, ship to home. All those things are and are unfolding right now. There will be rapid growth over the next two years in the size, the capabilities, and the importance of online grocery.

Mani : So it looks to me that if you like solving problems, now is the right time and place to be in in a grocer’s world, right?

Jon Stine: If you have an interest in changing retail and if you have an interest in tremendous opportunity, which is going to be in tremendous competition, but tremendous opportunity, it is in grocery, and it’s transitioning retailers into the online, digital, omnichannel, unified commerce world. That is the red hot center of opportunity in retail right now.

Mani : Great insight. John, as you know, Litmus7 is a technology-centric company. Wondering where is the future for technology in retail going to be and what are some areas that somebody like us should be focusing on?

Jon Stine: I think the great… the big blank canvas for technologists in retail or any other industry, the big blank canvas is not only answering the what and the how, which Litmus7, I know those very, very well, but, Mani, other companies do as well. It’s answering the why. It’s giving and thinking through not only the technology value, but the business value, and placing that business value in the broader strategic context of what C-level decision-makers are facing. So, of course, you’ve got to start with the what and the how. Every technology company must not only be good at that, but be superb at that.

Jon Stine: But what distinguishes technology companies today… And it’s not just consultancies, it’s every technology company. Retailers are demanding and asking that if they’re looking for strategic partners, strategic partners must answer, be able to answer, and guide on the question why. I think that’s a great opportunity over time for Litmus7 to take leadership.

Mani : Okay. That’s a great insight again, once again. John, from your opening statement, it appears to me that consumers today have more tools at their hands than they did maybe 10 years ago and perhaps more tools than retailers themselves have. So do you see a world where retailer consumers are more empowered and do you see that empowerment growing?

Jon Stine: Oh, Mani, that’s a great question. I would answer without question. We have in our hands, as we all know, just in the mobile phone. We should understand the smartphone. To me, the remote control for daily life. It gives us power and insight that retailers seek to have, to gain access to. Okay. So the consumer is tremendously empowered. What is critical is not just the tools that now consumers have, which retailers need to catch up to. It is with those tools, the expectations, the mental expectations of consumers also have changed. When you put the power of a top-level personal computer in my hand through a smartphone, I now expect the world to operate like the internet. I expect it to run as fast as the internet. I expect access to information as the internet. I expect good, clean answers as I get on the internet. And so I expect you, and your store, and your entire retail operation to operate as in a digital world. Standing in line, not going to do it. Waiting for someone who doesn’t know the answer, don’t care. Not going to do it.

Jon Stine: And so my expectations, the expectations of the consumers have shifted. They will continue to shift at a rapid rate with the demographic change. Millennials continue to age. The generation younger than them come into their home-buying, primary purchasing power years. We’ll be living in this and the expectations will be driven by the digital world.

Mani : John, is it a buzzword or am I seeing D2C, direct to consumers, becoming physically spoken about?

Jon Stine: Mani, not a buzzword at all. I think it is absolutely essential. It’s going to be the way for traditional, great consumer brands to maintain their relevance directly to shoppers and to maintain leverage with retailers, going direct. And as they do that and speak directly to shoppers, sell directly to shoppers, and speak directly to shoppers, social media, voice assistance, on, and on, and on, that is a way they can listen, and learn, as well as complement their traditional wholesale relationships with the retail industry. So, yes, we are going to see more of it, and we’re going to see it in parallel with the rise of private label on the retail side. So DTC will grow. Private label will grow. The landscape will continue to shift. Everyone’s seeking to be in direct contact. Again, with a very consumer-centric world being demand-driven, they’ll want to be in direct contact with that consumer.

Mani : Great. John, there are a number of questions that keep coming up, but for today’s session, one last question. From the fact that over 7,000 retailers have shut shop this year compared to around 5,500 last year, it appears to me that there is an element of efficiency that is expected and that inefficient retailers are falling by the wayside. So would retailers be perceived as a middleman, and if so, will it be that only the efficient ones survive?

Jon Stine: I think there’s two things, Mani. I think your very good question points to one. One is that operational efficiency, which is delivered. Operational efficiency and operational effectiveness, which turns into customer experience, and also turns into a very sharp P&L, that will be how retailers succeed and survive. Survive first and then succeed, survive and thrive. There’s another thing that’s tied to that, Mani, that I’d like to bring up. That is we are in 7,000 stores closing this year. 5,000 closing last year. Retail brands going out of business. Sears collapsing, etc. We are in a period of Darwinian evolution in retail. The brands that evolve, that go from single channel to multichannel to omnichannel to unified commerce, the brands that understand we’re past the era of the merchant prince, the brands that understand that shopper must be at the center of processes as well as marketing, the brands that make it easy to say yes in new and different ways, the brands, the retailers that evolve faster than the overall pace of industry evolution, those are the ones that will be walking this earth tomorrow and in years ahead.

Jon Stine: It’s those who haven’t evolved or just couldn’t figure out how to evolve that are falling by the wayside. In Darwinian evolution, there’s no mercy. Species disappear and species grow. Species evolve. We’re in that period. And so, efficiency will be one of the hallmarks of that evolution. The ability to shift and change, the ability to make it easy for the shopper to say yes will be all part of how a brand can evolve to survive and thrive.

Mani : Great. John, now we’ve run out of time. It’s been very illuminating talking to you. I am sure not just people in Litmus7, but others can benefit from the light that you’ve thrown on this. Appreciate you sharing your thoughts with us and particularly clarifying some of the questions that we had.

Jon Stine: Mani, it’s been my pleasure. To all those at Litmus7, it’s a delight and a pleasure to be working with you. Mani, thank you for this opportunity.

Mani : Thank you, Jon.