In our Season 4 finale, we peer into Steve's crystal ball to review his annual predictions as we approach the half way point of the year. In addition to unpacking what they are all about, we go for radical accountability, assessing each of them hits, misses or, perhaps, a bit too soon to tell.
In our Season 4 finale, we peer into Steve's crystal ball to review his annual predictions as we approach the half way point of the year. In addition to unpacking what they are all about, we go for radical accountability, assessing each of them hits, misses or, perhaps, a bit too soon to tell.
But first we open up with the retail news that caught our attention this week, including the scary inventory overload facing many of the industry's top players, and the impact of continuing high inflation, weak consumer confidence, mounting consumer debt and lower savings rates on retail's immediate future. We also discuss Kohl's bizarre potential tie-up with the Franchise Group, the growing potential of a disruptor apocalypse, highlighted by disappointing earnings from TheRealReal, StitchFix, and Rent-the-Runway. We close optimistically with Tractor Supply's remarkable financial results and aggressive store opening plans.
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Steve Recent Relevant Forbes Articles
10 No-Holds-Barred Predictions for Retail in 2022
Too Much of a Good Things. Retailers Are Drowning in Inventory
Amazon Should Buy Kohl's--With One Big Caveat
Past Podcast Episodes We Reference
The Stores Strike Back Again. Again.
Blow It Up? It's Time For the Great Reconfiguration
The Original Predictions Episode
Placer.Ai Department Store Traffic Data
About Us
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome to Remarkable Retail podcast, Season 4, Episode 22. The grand finale. I'm Michael LeBlanc.
Steve Dennis 00:13
And I'm Grandmaster Steve Dennis.
Michael LeBlanc 00:16
It's been such a great, great season, Steve and I really appreciate being on the mic with you. And, and -
Michael LeBlanc 00:22
Great news as we've said, we're renewed for season five. So, look forward to that kicking off on July 12.
Steve Dennis 00:27
Likewise,
Steve Dennis 00:28
Yeah, got that Netflix money now coming in. So, high production values,
Michael LeBlanc 00:33
Four to go.
Steve Dennis 00:34
4k 5k. I don't know.
Michael LeBlanc 00:35
There you go. There you go. Well, I think you've got a new mic in your, in your kit. So, maybe there'll be a bit of, you know, a bit of more, bit more sense.
Michael LeBlanc 00:42
And we've got a, some very exciting news, that we'll share a little later in the month about some support and sponsorship we're getting actually for the, for the series. So, we're very excited about that. And we're excited to share that. But we'll keep that under wraps for now.
Michael LeBlanc 00:43
It's a solo episode. So, as we, as is our want we, we want to talk about predictions, we want to go all the way back and look and evaluate how you did in terms of your prediction. So, we'll get to that right after the, right after the news.
Michael LeBlanc 01:12
So, let's kick it off with what's in the news. Inventory overload. I, I keep reading warnings, red, red, yellow, green, yellow lights from lots of retailers. What do you, what are you hearing out there?
Steve Dennis 01:24
Oh, I mean, this, this is really such a train wreck, in a lot of ways, a pretty big surprise. It all kind of started with, which we talked about, I guess a week or two ago with Walmart's earnings and their surprising increase. Then the Wall Street Journal wrote an article about in general, how inventories for the industry are up like 26% or something in total. And then, and this was the one that really kind of blew my mind, I, I wrote a Forbes piece on it, Target comes out three weeks after their disappointing earnings announcement and revises their forecast and says they've got so much stuff they're gonna have to aggressively start promoting it, canceling orders, all this kind of stuff. Which really kind of sent shockwaves through, through the retail industry. But they're you know, they're not alone.
Steve Dennis 01:50
I was looking at some of these other figures, Ross Stores, their inventories up over 50% on negative comps for the quarter. Target, Walmart, we talked about. TJX which had actually pretty strong comps, like I think 78% range, but their inventory is up like 33, 35%, something like that. Kohl's negative comp, their inventories are up over 30%. So, you know, it's just, it's, it's hard to understand how big, sophisticated companies could get it so wrong. It's certainly supply issues.
Steve Dennis 02:16
Is it because of too much inventory? Too much inventory or too little planning? Like what's going on here? Like we all knew I mean, we've been talking about it for, I don't know, a couple of seasons that eventually consumers will turn their minds to experiences, and services, and flying, and traveling, and getting back to normal life, and, you know, good. You know, they'll stop buying, you know, more TVs, because they just want to get out of the house like, -
Steve Dennis 03:14
Yeah, that's, that's I mean, there's clearly some of it. And it's really hard to parse out from what people have talked about. But I mean, it's clear from what some folks have alluded to, in their announcements, as well as some things I've been hearing that there's definitely things that are specifically related to the supply chain and things arriving too late. And retailers trying to grab stuff early. So, that, that's part of it. But if you listen to what Brian Cornell talked about, and what some others have talked about, they do put a lot of this unjust not anticipating consumer spending correctly, most of that seems to be related to what you were just talking about, which is this mixed issue that, you know, they're not able to sell casual apparel as much anymore because people are buying, you know, more going out apparel, and they've got the TVs or the furniture or whatever. But it still is shocking to me that multiple big companies could get it so wrong. And when you layer on top of this, which I guess we'll talk about in a second, but just in general. I mean, it definitely seems like we're seeing some deceleration of consumer demand. So, to have a lot of inventory at a time, where it might be tough to drive positive unit sales. That's a scary, it's a scary situation. And so, so, you know, we'll see.
Michael LeBlanc 04:36
We'll see, I mean, I see this deceleration of demand in one way I mean, generally at the broad economic basis, sales are still strong in the US, the US consumer is tapping into all those excess savings during the COVID era and they're powering through inflation, but not all,
Steve Dennis 04:54
Yes, yes.
Michael LeBlanc 04:55
Right. This is where it gets to that bifurcation, right? And, you know, now I got to spend $100 dollars or whatever to fill up my tank of gas and put more food on the plate that's going to crowd out a lot of discretionary spending.
Steve Dennis 05:05
Right? Well, there's the whole, there's the whole inflation thing. And what we're seeing so far, because we're recording this on Friday, the US consumer inflation numbers came out today showing that inflation is not yet moderating also shows consumer sentiment at an all-time low. Across the last couple of weeks, we were seeing that consumer credit is going up quite a bit, not close to record levels, but going up, and savings is coming down still at a pretty healthy rate. So, it is fair to say that the consumer balance sheet is generally pretty good. But it's clearly weakening. And anecdotally, and I think if you look at the forecast that some of these retailers are talking about, I mean, they definitely are signaling we expect consumer demand in many areas, particularly if you're not serving that upper income customer, to your point about bifurcation, is going to slow down a lot. And I think we'll really, really have a clearer picture with the next quarter. Because I think we are, we are seeing this shift in consumer spending, I think we are seeing inflation start to really affect things.
Steve Dennis 06:07
And you know, they'll have had 13 weeks to try to move, move this stuff, I think the, the X Factor, because I don't think they're going to be able to do it by like radically increasing the amount of units that could push through, I think the X Factor is going to be, you know, how much of this mix is really, you know, this season goods versus, you know, sitting around waiting for the fall, as well as, how many orders can they get out of, because if they can, you know, if you just play with the math, like if receipts are constant, and you're up 33% in inventory, you know, you got to run about that sort of comp, you know, across the next few months to get back to where you want to be. But if you're able to really reduce your receipts substantially not to get into too much math here. But, you know, there's an opportunity to close that gap more than might be apparent. So, we just don't know, other than clearly, they're trying to do, you know, Target and others are trying to do that. Just supply and demand I think is going to continue to put a lot of pressure, food costs are still very high. But yes, I think, I think because of the glut of inventory in those categories, you know that, that rate of inflation, I think is going to be down actually, very, very noticeably pretty, pretty quickly, because these, these companies are clearly convicted in dealing with this fast so that they can bring fall goods in basically.
Michael LeBlanc 07:25
Assuming they have something, anyone wants at this point, which is also the other you know, lots of inventory.
Steve Dennis 07:29
Details, details.
Michael LeBlanc 07:30
I mean, I guess at some point, somebody wants everything. But anyway, we'll, we'll see speaking of somebody wants everything or somebody wants something. So, Kohl's came out and announced a specific suitor and took me a little bit by surprise.
Steve Dennis 07:46
Well, I didn't so, the suitor was just they have a three-week exclusivity, I guess to try to reach a deal is this company Franchise Group which I had never heard of. They're a small holding company that by far their biggest holding his Vitamin Shoppe. When I heard this, I was like, What? Who are these people? Why does this make any sense for them other than doing something,
Michael LeBlanc 08:11
Is Kohl's franchised? Did I miss? Did I miss something? Is Kohl's a franchise?
Steve Dennis 08:14
Well, yeah, and I, I don't think they're going to be turning Kohl's stores into like, really big Vitamin Shoppes'. If everybody anybody's ever been there, they seem a little bit big for that. So, I don't get this. It seems either desperation, or Kohl's isn't really serious about wanting to get acquired, or it's a stalking horse for, for somebody else. So, I haven't heard anything other than, you know, people speculating similar kinds of things. But I don't have any insider kind of information or perspective on which it is, you know, I still think Amazon should buy them. So, what do I know? But doesn't, doesn't seem like that's likely to happen unless Andy Jassy just goes Oh, come on.
Michael LeBlanc 09:01
So, you and I have been, in fact, you and I, when we first met talked about our lack of belief in this whole retail apocalypse narrative, but more and more, I think we're starting to think about, or you're starting to think about or frame it as a disrupter apocalypse? My goodness, there's, there's been some tough news in the, in the, in the press this week.
Steve Dennis 09:20
But no, I think yeah, I mean, I was very critical, the retail apocalypse pretty early. I wrote about it in the first edition of my book, which is now you know, more than two years ago. So, you know, I've been on this for a while. And I think by now, it should be pretty clear to everybody, that for the most part, it is nonsense. In my book, and we almost edited it out in the second edition, where I suggested that, you know, perhaps what we will be talking about is a disrupter apocalypse in the future. And this idea that we work was kind of the canary in the coal mine, I think, is the line. I didn't go back to look at it, but it's something like that. And, you know, it's been pretty apocalyptic for just about all these companies, you know, we're going to talk about it a little bit more in my, in the predictions part here in just a second.
Steve Dennis 10:04
But just in the last couple of days, the RealReal, which is in the resale high and resale business, their founder and CEO, Julie Wainwright has left after 11 years, they just reported a surprisingly weak quarter. Now, you know, we talk about all the high-end fashion businesses coming back, they had a very weak quarter their operating margin, here we are, you know, 11 years in they have a negative 30% operating margin, the stock is down over 90% in the last year. Now, the stock markets obviously had some, some issues and generally has been down, (inaudible) 90% is, is incredible. Even if you sort of say, well, you know, there was excess frothiness in general in that market. Similarly, Stitch Fix, you know, this one really is starting to look like a train wreck, their revenue growth has stalled again, you know, they're in the fashion business higher end, you would think that business would be on fire, Trunk Club has just exited the business though that wouldn't be in the numbers, but they're losing customers, which even some of the brands we talk about that have had their stock prices go down and are having losses, most of them are still gaining customers.
Steve Dennis 11:18
So, they lost a lot of customers, they're laying off 50% of their salaried staff. And here's another stock that is down almost 90% in the last year. And just a little while ago, I think a month or so ago, Katrina Lake, who is you know, it's kind of that first wave of founders of these digitally native type brands. She is now kicked upstairs to the being executive chairman or something like that. There's some new new leadership there. So, the more data we continue to get, there have been very few positive stories in the, this disrupter group. And as we talk about in a second, you know, most of the high price profile brands that have been around for a while, have seen their evaluations really, really collapse in the last six to 12 months.
Steve Dennis 11:20
Well, let's end with a couple of positive things. First of all, the news is actually pretty good for a couple of companies. I saw that both Lululemon and Tractor Supply. We've had some executives on from, from TSE Tractor Supply, they've posted some great results. So, you know, it is, it is possible to make money in retail still.
Steve Dennis 12:26
Yeah, Tractor Supply's is one of these great stories. I was really first seriously introduced to them, because I spoke to their management team about four years ago, and apparently, they listen to all of my advice. And that's really the only explanation for their success. No, they (crossover talk) I, I was looking. Their, their stock is up 3x over five years, they are now at just over 2000 stores. They're planning to open 75 to 80 this year. Their sales are up I think 8 percent or so in the last quarter, strong operating margins. I mean, it's just it's just, you know, very, they are doing a lot of work on, on, you know, Omni-channel harmonized, retail, whatever you want to call it, but it's certainly a business that has really been driven by the strength of its physical footprint. And it's just a great, great story. You know, as is Lululemon. I think one of the things with Tractor Supply is they were kind of you know, like, I think Lululemon, I feel like has been sort of in the common vernacular of retail for five plus years. Tractor Supply figures, kind of like they were like under the radar for a while and they've just really, really exploded there. They're on a good trend before Hal Lawton has been their CEO for two or three years now. And yeah, just continue to slide it up.
Michael LeBlanc 13:41
Yeah, they're doing great work. And speaking of other great news, I saw you post a picture with our friend Ron Thurston. So, he, you had some time to chit and chat with Ron, had a coffee in in Dallas, I guess?
Steve Dennis 13:54
Yeah, I I loaded up the, the horses and, and Pack Mules and we went all the way out to the great wilds of Grapevine, Texas, which some people may know is just north of DFW airport. I suspect many people been through there. And yeah, we met up as part of Ron's retail in America tour. He's in Dallas just wrapping up here in Dallas today, I believe. And yeah, we got a chance to chat for, for a couple of hours about a lot of things that could have been on air, a bunch of things that absolutely would not be on air. And it was, it was really
Michael LeBlanc 14:26
Heard it on the grapevine so to speak.
Steve Dennis 14:28
Oh, heard it on the grapevine, I like that damn, I wish I knew about that one. But yeah, it was, it was great to see him and just learn more you know, we listeners should go back and listen to that episode because it's a great episode but got into a little bit more of the planning and logistics and the great experiences he's, he's having and I really, I really admire his creativity and you know, it's a big, it's a big risk to pack up and you know with your spouse and head out onto the road for, for multiple months,
Steve Dennis 15:00
Yeah,
Steve Dennis 15:01
But it was very cool. It was very interesting.
Michael LeBlanc 15:02
Well, and a reminder to everyone that that was our last episode, Episode 21, it's a very popular episode so check it out. It's a great interview with Ron. Alright, so as I said, this is our last episode of the season, and we reserved it for predictions, we're going to go back and see how your predictions are turning out so far. Let's start at the top, the stores strike back again, again. So, you predicted that there would be if not a renaissance, lots of energy and positive vibes around stores? What, how do you think you did?
Steve Dennis 15:09
I feel like so far, I'm on track, you know, obviously, mid-year review. So, maybe things could fall apart. But I think if you look at what's happened the first six months of the year, you know, we've seen if anything, stores become, in a lot of respects more important. You know, a lot of the traditional retailers have been really leaning heavily on their stores for eCommerce fulfillment. And we've seen a moderation in general in eCommerce with physical stores doing in some respects, surprisingly well. So, you know, I've been pushing against the retail apocalypse narrative forever, which was kind of the first time I brought up this idea of the store is striking back. But going into COVID. You know, I think people probably assume that with this acceleration in eCommerce, that would make things even more challenging for stores. And it turns out actually almost the exact opposite.
Michael LeBlanc 16:26
The "Profitless Prosperity" of Disruptor Brands come on, comes under increasing scrutiny. You don't even have to be a necessarily a listener or a follower of our podcast to see the, the downdraft in the stock market on the valuation of these firms.
Steve Dennis 16:39
Yeah, well, you know, I've been so, I think when we did an episode on this, one of the things that I took accountability for was, I've been predicting that this scrutiny would come much earlier, that some of the hype around many of these brands in the sky-high valuations had to come back down to earth. And I was definitely too early on that. And I think some of that was, I didn't understand the dynamics as well. But a lot of it, of course, is what happened during COVID with things shifting back to being more online dominant, so that, that kind of kicked the can down the road a little bit.
Steve Dennis 17:11
But since the beginning of the year, virtually all of these disruptor brands that are public have seen their valuations collapse considerably. I'll just mention a few real quickly. Since the beginning of the year, Warby Parker is down 63% Allbirds down 66%, Wayfair down over 40%, even Chewy, which just reported a profitable quarter. So, I guess I can't put them in the category of totally profitless prosperity, but it's one of the first times they've, they've shown a profit, even Chewy is down 50%, Peloton down 65%. So, pretty much across the board. We've seen a new like a whole reevaluation of these business transpire. And I've also heard some of this has been reported, I think pretty publicly, other things I've kind of heard through back channels to set them and quite a few down rounds, in terms of the private companies that are, that are taking in new investments. So, I would say I did pretty well on this one.
Michael LeBlanc 18:07
I'd call that a hit. If we were playing battleship here, that's a hit. All right, another good segue. Let's talk more about stores. And in this case, you had a prediction around Amazon. Amazon double clicks on its physical dreams, more stores, more fresh, more, more go, style, you know, what, what's your evaluation?
Steve Dennis 18:26
I would say I'm mostly right. But I suppose this is up to a little bit of interpretation. You know, the data is not as clear here. But what we have seen is Amazon announced several dozen more of their Amazon Fresh stores. So, these are their, more their traditional grocery format. So, they seem quite committed to that and are starting to ramp up the rollout. Also, continuing to open Amazon Go stores, there's also several dozens of those around the country and they are experimenting with different sizes and locations. And so, I think, (crossover talk)
Michael LeBlanc 18:57
But not 1000s, right? You remember when they first came,
Steve Dennis 18:59
Not, not thousands. (crossover talk)
Michael LeBlanc 19:01
3000 Go stores. It was the end of convenience stores. Hey, you Couche-Tard guys in Quebec, you're finished. But it didn't play out that way, right?
Steve Dennis 19:08
No, this is certainly much more of a slow roll and that's why I said I don't think the data is quite as clear here. You know, they could have closed the Amazon Go stores when they closed what I call the land of misfit toys. There are other, there are other formats which weren't quite (crossover talk) right range. Yeah, they vary. So, they're good at naming stores in a, in an ironic way because Amazon 4-star was very much one star. Amazon Style remains to be seen exactly how stylish it is. But in any event, I think they are committed to the Amazon Go store and they keep investing in it and they just are making their first step into kind of the department store apparel world with Amazon Style, which they opened up a couple weeks ago. But you know, oh, and I guess this doesn't necessarily prove it, but last quarter was the first time I think in the history of the company, that physical stores grew more than online in Amazon. Way smaller base, way smaller, (crossover talk) percentage wise, percentage wise. So, but we you know, we've also seen the head of the overall consumer business Dave Clark leave.
Steve Dennis 20:14
Yep.
Steve Dennis 20:15
So, I, I'd say definitely pointed in the right direction. But I'd like to see more data before I'd really put this in the, the clear W category.
Michael LeBlanc 20:24
Yeah, I'm a clearly of two minds around Amazon Fresh. On the one hand, you know, the just walk out technology applied at a large grocery formats' pretty compelling. On the other hand, it doesn't excuse them from executing flawlessly, like many of their competitors do, big, experienced grocers, you've had that firsthand experience, right? Out of stocks, shelves, you know, it doesn't matter what technology there is, if you know the basics of retail merchandising aren't, you know, more than double click right there? They got to be nailed, right?
Steve Dennis 20:54
Yeah. And you know, the I know, we touched on this on a previous episode, and I've written about this in Forbes. You know, as much as I absolutely believe that Amazon has to get much more deeply into physical retail. So, far, they haven't been very good at it. So, and I think a lot of that has to do with a really different mindset they need to take to most of these stores. Whether they will really do that or not and learn the lessons they should have learned, perhaps by now, one could argue with Whole Foods in particular, remains to be seen. So, I feel like I'm always going to be a little bit or at least for questions, I always but for a period of time, there's always going to be a little bit of a caveat around how I talk about Amazon's physical stores because they need more physical stores, but they certainly need to be better at executing them than they've demonstrated so far.
Michael LeBlanc 21:39
So, our last guest Ron Thurston, very popular episode. He made me laugh a couple of times, and one of them was when we asked him what he was hearing in the, you know, on the road in his, in his trailer, and we said, are you hearing a lot about the metaverse and he's, he literally laughed out loud.
Steve Dennis 21:57
Metaverse schmetaverse.
Michael LeBlanc 21:58
Metaverse, show us your prediction, metaverse schmetaverse. You know, between crypto and the metaverse. What? What are you feeling? You didn't (inaudible)
Steve Dennis 22:08
Well, I guess where I continue to be on the metaverse so far, is that it absolutely, the, the potential of it absolutely needs to be explored by most retailers. But the idea that it's going to be important, anytime soon, I think is just silly. And so far, we've seen some interesting experiments, I have yet to hear anything that anybody seems particularly excited about. And we know that our friends at Mehta have blown through a ton of money in this legend, but
Michael LeBlanc 22:42
Yeah, like, that's an understatement. Like I guess, like a ton of like when I say a ton of money, I don't think $10 billion, like I think you know a lot of money. That's not, that's an epic amount of money. That's, it's going they're making a big bet, even for a business of their size, right?
Steve Dennis 22:58
Right. So, you'd think for like $10 billion, you might want to have, you know, 10, (crossover talk)
Michael LeBlanc 23:03
More than a store (inaudible). More than a store (inaudible). Or wherever they set up their store.
Steve Dennis 23:09
Right. So, this doesn’t, and you know, I don't mean to suggest that this means it won't be big at some point. But this idea that this is going to be transformative to retail over the next few years. Like it's not happening. (inaudible)
Michael LeBlanc 23:21
Right. That's right. I think I'll give you a hit on that one. Because the fact that we still talk about this and amongst all the other things that go on, on retail, I think it's disproportionate to its importance, to your, to your point, right? And, and speaking of over-hyping you, you've talked about Hyperbole Remains the Greatest Thing Ever. And you were saying that context of a whole bunch of things. Digitally Native Vertical Brands, buy now pay later, but how do you? (crossover talk)
Steve Dennis 23:50
Well, I mean, this, this is a bit of a cheat. Maybe I, I added this to get to 10 because that was the title the article, but because it's not exactly a prediction. It's I think it's a truism, but I guess I added it in particular because I felt like going into this year, you know, back in January when this came out, there was so much talk about all these different things that are going to change retail forever. So, Metaverse, we just talked about. NFTs. Buy now pay later. And I think you know they get a lot of heat. You know it's more, more hat than cattle, as we say here in Texas, right?
Michael LeBlanc 24:24
So, wait, it's more of what? What did you say? More what than cattle?
Steve Dennis 24:29
More hat than cattle. You know, it's all, it's all show. Not a lot of substance. And again, it doesn't mean that they won't, that there isn't some there, there or that some of these things won't be important down the road. But to your point about the metaverse like it gets so much attention and hype, you know, out of proportion with its importance in the near term.
Michael LeBlanc 24:53
Alright, so those are your hits. Now let's get to misses and maybes. So, you talked about understanding buying versus shopping becomes more important. First of all, what did you mean by that, and tell us about where you think and you may have missed or be off the mark for it, with it?
Steve Dennis 25:14
Well, if I have any say in the matter, which I think I do, we're going to do an episode on this in the not-too-distant future. But this idea of shopping versus or buying versus shopping, is really understanding how the world is kind of bifurcating, as I love to say, it to kind of two types of fundamental purchase occasions, buying being more, I'm running an errand, I'm trying to get something off my to do list, you know, I'm trying to be fast and efficient. You know, that's sort of the fundamental thing, which, you know, the internet is great at places like Walmart are great at it. But there's not, you're not generally seeking a very emotionally fulfilling experience, or putting together an elaborate solution. That's really what more shopping is, you know, it's more discovery. It's more complicated.
Steve Dennis 26:04
And I think what we're seeing is that the world is getting pretty good at saying, and you can even look at the way real estate is configured like the neighborhood shopping center is built for buying, for the most part. You know, malls and lifestyle centers are built for shopping, and everything, and the thing in the middle is the thing that's getting hollowed out. So, I think they're, you know, my prediction was more like people would start to appreciate this more, maybe even use this language more, to start to explain how they're driving their strategies, whether that is a real estate strategy, or whether it is a retailer strategy. I think the data supports generally that this is happening. But I wouldn't say that it is happen, happening quite as quickly as I might think. And I certainly don't feel like this language is really making it into the broader, the broader market. So, that's why we have to do the podcast episode that should completely change how the retail industry speaks about purchases.
Michael LeBlanc 27:01
Just, just so you don't have to tick one little X on a prediction, but also think it's, and you've often made this point around talking around at a strategic perspective around, you know, Omni-channel that, that it's not very helpful to help or guide retailers in terms of what to do with that. Right? And I think you're, you're, you're creating these categories, I think is far more illustrative of Okay, I can work with that, I can figure out something to execute along both those parallel lines or one or the other. Right? So, I think it's. I think it's,
Steve Dennis 27:33
Particularly because I think it gets at, you know, I'm always about, as I think you are as well, like, you know, starting with the customer. And if you understand the customer intent, and you understand the customer's options, and how you stack up in that set of options, that helps inform your actions. And I think, you know, in context, it makes a big difference as to why like, we'll maybe get to this in a second. But one of the reasons why JC Penney is losing is they haven't really picked a lane, like they're not experiential enough or differentiated enough to be shopping. And they're not convenient enough, or inexpensive enough to be bought to do well at buying. And there's plenty of other choices. So, because they haven't really picked a lane over the past 20 years, they're just getting chipped away at by all sorts of competitors. Now a lot of that has to do with their real estate. But, but anyway, so, I think it's not just to be cute about coming up with a framework, it's about how does this help you decide how to formulate your strategy?
Michael LeBlanc 28:38
Yeah, I think, I think, you know, you give yourself a miss on this one. This one might be a not yet or too early, maybe we'll create a fourth category, because I think it's I think people will, will turn their minds to trying to figure this out in a more real, that doesn't mean they're going to be successful at it but,
Steve Dennis 28:54
It's tough to be a pioneer, Michael.
Michael LeBlanc 28:56
Arrows in the back, arrows in the back. All right let's talk about the next one, The Great Reconfiguration Gains Momentum. What did you mean by that? And I guess we're in the misses category. So, where do you think you fell short?
Steve Dennis 29:09
Well, this is another one, which where I think it's going on, but not as quickly. So, I'll give you a snapshot version of this. We did do a whole episode on the great reconfiguration, but what I was, what we're really getting at is that brands, you know, we're seeing this blurring the line between digital and physical, we're seeing the role of stores changing and just, just in general, this kind of hybridization of everything. And also, kind of the, the brands operating more as a platform. So, the lines of kind of conventional structure of channels and formats, and these sorts of things starting to become more blurred. And this is causing retailers to change their go to market strategy. So, a great, good evidence of this going back to what we were talking about with Target is instead of thinking you know, here's stores, here's online, separate supply chains, you know, we're now creating a more hybrid store or more hybrid supply chain to support that.
Steve Dennis 30:05
Walmart's very much moving in this direction, Nike in thinking about the blurring of the lines between wholesale and direct, really kind of changing up their strategy in a very fundamental way. So, I think we're seeing some of this go on, at a somewhat increasing pace. But I don't, you know, I'm not seeing as much kind of radical changes to strategy. Some of that I think, is just, you know, inherent to retail. But retail is slow to change. Some of this I know, this came up on a couple of other episodes as well is, because we're getting this post COVID bump in revenue. Some retailers, though, recent events are maybe starting to make people wonder about that. But you know, we, we've had several quarters now, where results look pretty good, because they were comparing to absolute abysmal results. And maybe that's creating a sense of false security or the lack of urgency to transplant (crossover talk)
Michael LeBlanc 30:56
Good congress over a bad year, right? The easiest way to hit your bonus.
Steve Dennis 30:59
Right, right.
Michael LeBlanc 31:00
Have a bad year, the prior year. All right. Well, let's move on to and you and I tried to figure out the best title for this the best we'd come is The Jury Is Out. But basically, it's a little wishy washy, as in maybe, maybe so, maybe not. But let's call it too soon to tell, the jury's out. Moderate department stores will experience a dead cat bounce. So, before you send us all, all the listeners send us hate mail on.
Michael LeBlanc 31:26
No violent language.
Michael LeBlanc 31:27
No violence, that is a Wall Street term for, explain dead cat bounce. And your prediction.
Steve Dennis 31:33
Well, you can sort of visualize perhaps what I mean by this, because if you have a dead cat, they don't actually bounce. I mean, (crossover talk) This like, a little bit, a little bit.
Michael LeBlanc 31:43
And then they come down to the ground pretty quick though.
Steve Dennis 31:45
Yes. And to be clear, I've never experimented, this is not empirical data. (crossover talk) can intuit. But yeah, the idea is that there, there's a bounce. But you know, you don't, you don't stay in the air. But that is a episodic, sort of, sort of, (crossover talk)
Michael LeBlanc 32:00
Not a lively, it's not a lively event, it just did
Steve Dennis 32:02
Yes.
Michael LeBlanc 32:03
In one direction, and then the other direction.
Steve Dennis 32:04
They don't stay in the air. And I think ultimately, the big takeaway. And so, what I believe about moderate department stores, is that we're going to see significant improvement in the results, which so far has absolutely been the case. But that is not a real, solid, sustainable improvement. Because nothing has fundamentally changed about the strength of these businesses. So, pre-pandemic, all of the moderate department stores were struggling to varying degrees. Their stocks had been down, comps going nowhere, mediocre performance pretty well everywhere from terrible, and JC Penney's case, to mediocre performance on the part of Kohl's, Macy's, Dillard’s, a bunch of others so. So, now there's this kind of narrative emerging that like, oh, department stores are back. And I would argue department stores are better than two lousy years, but better is not the same as good. And I think what we will find that once we get kind of past this year, people replenishing their wardrobes going back out traveling, whatever, some of the things that are driving the numbers up, we will find ourselves a year from now, you know, either at or worse than the performance of 2019, which was a pretty mediocre year.
Michael LeBlanc 33:21
Well, you know, what's interesting is we do talk, I tell you, when we first started our podcast, I didn't think we'd be talking so much about department stores, because I just thought they would kind of fade from the news, like, you know, just fade away in terms of importance, but they really, you know, we talked about them a lot. We just talked a lot about one of them in the news just now. Right? We, you know, still lots of activity happening in the sector. So, there’s, there's, you know, there's, there's a lot of energy in the sector, that's for sure. We still talk about it.
Steve Dennis 33:47
Well, they're still, they're still big, you know, on an absolute basis they're, they're not as big as they were in the past, but they're still quite big. And they're also so big in terms of revenue. But the other thing, which is course out of proportion with their, their economic value, but when you think about a large power center that has a Kohl's, you know, Kohl's is an anchor tenant. If you think if you go to any regional mall in America, you're going to find, you know, 2-3-4-5 Department Store anchors. So, you know, they're still part of the zeitgeist, I guess you could say of the way we think about, about retail now, most of them are significantly underperforming in most of those locations. But nevertheless, they have this big footprint, (crossover talk) as well as their history.
Michael LeBlanc 34:33
Including in their, (crossover talk) including in their fundamental role, right. They're anchors of malls because they're, you know, their historical role was to drive traffic to the mall people would come to the anchors and then go meander through the hallways, right. So, they're even failing, I would say, at they're, one of their fundamental original roles was literally to be an anchor now, I guess you could say the anchor around the neck in some cases.
Michael LeBlanc 34:35
I was going to say I think, you know, I went, at one time, I've played around with an idea called an anchor to anchor the history of the American department store. Because yes, there's a different term for anchor, which is actually much more descriptive of where we find ourselves today then, then back in the glory days of the 50s or whatever, before I was born.
Michael LeBlanc 35:19
Well, let's talk about the next one. JCP. JC Penney, I mean, we've been waiting for the penny to drop on that one for years.
Michael LeBlanc 35:27
Yeah, thank you, thank you. You, you thought they'd take over the mantle as the world's lowest liquidation sale. But, you know, they have a new leader. They've got a, they were swinging the bat, allegedly, or perhaps for Kohl's. I mean, what's going on with JC Penney? And how are you thinking about them?
Steve Dennis 35:27
Well played.
Steve Dennis 35:45
Well, part of the problem here on this prediction, which I'm convinced I will ultimately be right about this is because they are no longer public, we do not have as much information about how they are actually doing. My assumption is they continue to do quite poorly. I know some of that, from some anecdotal information from talking to some vendors. I took a look at the place through AI data about store traffic. And their traffic is, you know, worse than Macy's but actually better year to date anyway, than Kohl's. But we know, we don't know how that translates to business. We don't know how that translates to profitability. But when I look at JC Penney, in the competitive set, it's very hard to point to what is their, their level of differentiation. And given that they have been on a slow slide to oblivion for 20 years, what can you point to at least so far, that is going to meaningfully change what they're doing. And I think, you know, they're fundamentally very disadvantaged by their real estate. And so, it's one thing to improve your service a little bit or have some interesting brands. I mean, they've been trying to do that for 30 years. And so, this is nothing about their new leadership. I wish them well.
Michael LeBlanc 37:03
Marc, Marc Rosen came out of Levi's, right?
Steve Dennis 37:05
Yeah. I mean, I agree.
Steve Dennis 37:07
And he wants to change the focus to consumers? Right. I mean, is that the secret sauce?
Steve Dennis 37:11
Bold idea? Bold idea? Yeah. So, I just think they have so many structural issues. That, you know, and they're in a, what will, you know, I think prove to be after this little bump here. You know, the dead cat bounce will prove to be a continuing contracting sector. So, you know, you're in a contracting sector, and you're not growing market share within it. That's just a sign that your days are numbered.
Michael LeBlanc 37:38
Yeah. All right. Let's talk about the last one, which is, you know, for those of you listening who are of a certain age, Happy Days, jump the shark, that term jump the shark. That's where that comes from, from those of you younger folks that comes from a particular Happy Days episode, you can look that up on Wikipedia, but you thought convenience wars were jump the shark? Talk about what, what do you mean by jumping the shark? And how are you feeling about this prediction?
Steve Dennis 38:06
Well, I was probably a little fast and loose with, with the term jump the shark to have a catchy headline, which is, of course, what I'm always going for. But we have been in these convenience wars, you know, kind of ever escalating battle, to get things to consumers were more quickly. And, you know, that's gone from, you know, today to one day to same day to in some cases with some of these ultra-fast delivery companies, you know, 20 minutes or half an hour. And, to me, it always seemed like a race to the bottom. Because the cost of doing it seemed just out of proportion with what consumers were willing to pay. And of course, in many cases, consumers weren't actually charged anything. So, when your prices don't go up, but your costs do, I don't know, I'm not that good at math. (crossover talk) That seems like a recipe.
Michael LeBlanc 38:53
Yeah, that's that land grab stuff, which, you know, never works. Never worked.
Steve Dennis 38:57
Yeah. And so, you know, in addition to the sort of hype around this, which is causing a lot of people that basically try to play catch up with Amazon, you have on top of that venture capital money going into companies, like you know, Instacart, DoorDash, you know, those, those sorts of players, but also sort of are the getters and jet are not just, the super-fast.
Michael LeBlanc 39:21
Super-fast at like. (crossover talk) Like the 15-minute guy.
Steve Dennis 39:23
So, you know, again, this is where it's hard to point to a ton of data to say like, wow, the music is stopping, get off the dance floor. But we have seen a number of these ultra-fast delivery companies pull out of markets, a few have shut down. Quite a few layoffs. Definitely heard about some down rounds in, in funding or just the general sense that venture capitalists aren't going to touch these deals anymore. So, among the disruptor model that, that seems like, you know that that's really coming to an end. But I think we're also seeing a lot of the bigger retailers basically emphasize more store fulfillment and having the customers come get it because the economics of home delivery aren't generally very good.
Michael LeBlanc 40:11
And getting worse, right? Because you've got huge, I was talking to retailers, recently, and they're talking about huge fuel surcharges from their couriers, right, not only have you got running charges, I mean, we all experience it firsthand, the cost of gas has gone up dramatically, and that, that's going to leave a mark on eCommerce, I feel.
Steve Dennis 40:29
Well, there's an extra, I think there's a whole extra squeeze, that probably would have happened anyway. But because fuel is going up, labor costs generally going up, you know, all the input costs to or not all of them, but most of the input costs are going up in a way that it doesn't seem possible to pass on to consumers. So, you know, again, it's like free returns, you know, we sort of taught customers to expect a certain kind of price point for, for ultra-fast delivery. And I think generally the experience has been as retailers have tried to pass that on whether they do it in marking up the price of the item, or, you know, it's more explicit or the service fee, (crossover talk) their time of the day resistance.
Michael LeBlanc 41:15
Remember the days when as a retailer we used to make a bit of profit on shipping fees? Remember those days?
Steve Dennis 41:20
Oh, oh, absolutely. (crossover talk) I ran a division at Sears, some 100 million dollar division, where we made something like $15 million a year on delivery profits.
Michael LeBlanc 41:32
Shipping and handling. (crossover talk) Ah, yep. Yeah. Well, you know, I think there's, there's one thing that we should probably explore a little more in this rapid delivery, and that a lot of the rapid delivery isn't done by automobile. So, there's all kinds of things that are happening in that intercity that may not be impacted by the price of fuel. And who knows, there may be a kind of a, an ironic twist where that it gets more affordable, not less, because it's, it's on a bicycle, it's on a scooter, or it's on whatever, right? I mean, it's hard to navigate big complex downtown cities in a car and get anywhere 15 minutes, I mean, basically, pull out into the lane in 15 minutes in Manhattan so,
Steve Dennis 42:10
Yeah, well, I think in some respects, this is a little bit in, you know, always I don't want to like overly caveat these predictions. But I think that a lot of cases, you know, the devil is in the detail, it's not that there won't be some ultra-fast delivery in the future, I believe there will be just like I believe, you know, buy now pay later. And some other these technologies, like there is a way for that to be a real business. It's just that the hype, and the investment has gotten so over its skis, in terms of where the potential really is. So, I think what we're seeing is, or what we're going to see is a shakeout, we'll see some of these companies go away, I think you're absolutely right. There will be cases where it's like, well, maybe in urban markets, this type of, you know, bicycle delivery, or drone delivery, or robotic delivery, or whatever actually works. In other cases, you know, to get narrowed down to the customers who were super busy, have a place for stuff to get delivered. So, you know, there will be a premium segment of people that can offset the cost of the high service. But as a broad based, everything's going to 20-minute delivery, you know, that, that's not going to happen. And I think it's becoming more obvious that that's not going to happen by the day.
Michael LeBlanc 43:21
Yeah, I guess your argument is valid in that it will be with us, but it you know, it's very, some ways, maybe it's just purely densely packed, urban cities, right? It only works where it works, which is, you know, kind of it doesn't work outside and, you know, the great plains of Wisconsin, right? It's just hard to do 15-minute delivery, unless, I don't know, maybe there's drones, we haven't talked about drones all year, we should probably talk about drone delivery, that's going to come back somehow, some way.
Steve Dennis 43:45
Well, there's also, I mean, some right, some of these are, you know, trying to talk about it in a more absolute basis. And, you know, like, how many, how high is up with, no pun intended, with drone delivery? Like, how many deliveries can you do and not have the skies filled with drones buzzing around where people are like, you know, it's like cell phones on planes, like, some people are just not going to stand for that. So, I think there are some limiting factors that aren't just the technology limitation and the cost. It's just like, what is the system? Broadly speaking, going, going, going to handle?
Michael LeBlanc 44:19
Our job here is done, my friend, as is our episode, so great evaluation, hits, misses, and jury's still out. But overall, it looks like you're pretty good, right? I mean, if you put up the to where you're, you're dead on, or maybe it just hasn't happened yet. Looks like you know what you're talking about my friends. So, good for you. And yeah, well, listen, it's and we get great feedback about these episodes, and we'll keep doing it make, make some predictions, and then do the evaluation. This actually is a wrap on season four. It's been a great, a great season. Steve, it's been just a blast. We've talked to some interesting people. We've had some great discussions and we will continue. So, we've been renewed for season five, we're going to take a bit of a break. We're going to, we're going to take a bit of a hiatus, as is our habit we're going to pick up in early July and breaking news-ish. We have a very exciting announcement to make. In our, in our preview and in our teaser and in our trailer. And for next year, we've got a very exciting announcement to make about the show, but you'll have to tune in and stay connected to social media to hear that all out. But for now,
Steve Dennis 45:32
Cliffhanger. Cliffhanger. Cliffhanger. (inaudible)
Michael LeBlanc 45:36
Remember that when, when TV shows used to do cliffhangers before there was on Netflix and you just watch the next one, remember that, like your whole season of what the heck's going to happen next, right?
Steve Dennis 45:45
In my day, we currently watch every show.
Michael LeBlanc 45:49
And MASH. Let's why, MASH was a great. Anyway, all right. Listen, Steve, great to be on the mic with you, as always. And that's a wrap for the season. But we'll be back sooner than you'd, sooner than you'd imagine. We'll be back on the mic. Let's, let's leave it there. If you like what you heard, please follow us on Apple, Spotify, your favorite podcast platform so you can catch up with all our great interviews, like our discussion with target SVP, Nancy King on their innovative approach to harmonize retail. New episodes will show up each and every week. And be sure and tell your friends and colleagues in the retail industry all about us.
Steve Dennis 46:24
And I'm Steve Dennis, author of the best-selling book ‘Remarkable Retail: How to Win and Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 46:37
And I'm Michael LeBlanc. Producer and co-host of the Conversations with CommerceNext podcast, The Voice of Retail podcast, keynote speaker and host of the all-new Last Request Barbecue cooking show on YouTube. You can learn even more about me on LinkedIn or meleblanc.co.
Safe travels everyone!
SUMMARY KEYWORDS
prediction, crossover, talk, stores, retail, people, Kohl, consumers, brands, business, retailers, Amazon, metaverse, bit, year, big, pretty, customers, department stores, starting