We go sans guest this week to unpack Steve's 2022 Retail Predictions, previewed in his recent Forbes article. We cover a lot of ground including future of certain unremarkable retailers, what's next for Amazon, the importance of understanding 'buying' vs. 'shopping' and more. We also unveil "The Great Reconfiguration."
We go sans guest this week to unpack Steve's 2022 Retail Predictions, previewed in his recent Forbes article.
We cover a lot of ground including future of certain unremarkable retailers, what's next for Amazon, the importance of understanding 'buying' vs. 'shopping' and more. We also unveil "The Great Reconfiguration."
But that's not all! Because we are all about accountability, we start out with a quick assessment of how Steve did with his 2021 prognostications.
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 four, episode two. I'm Michael LeBlanc.
Steve Dennis 00:10
And I'm Steve Dennis.
Michael LeBlanc 00:12
Well, Steve a solo episode, our first solo episode of our fourth season. We had a great kickoff to the season, a great response and a fantastic interview with the CEO of Ulta, that was just we had just a great response from our community. And once again, thanks, thanks to our fantastic speakers who always join us on this episode. It's a special episode, we're changing up the format a little bit. It's a prediction episode.
Steve Dennis 00:35
Yes, yes. So, I'm going to go out on the limb, with some, some predictions. You know, I don't I think I've said this a few times on the podcast that I don't really consider myself, a retail futurist. I don't really like to be in the predictions game. But hey, I have a joke for you, though. What's the difference between a retail futurist and God?
Michael LeBlanc 00:55
I don't know, what?
Steve Dennis 00:56
God doesn't think he's a retail futurist. (crossover talk) Yes, that's why I don't tell jokes on the podcast. But in any event, yes, we've got predictions today. But I think first we're going to recap or assess the predictions I made last year to see how I did.
Michael LeBlanc 01:12
Yeah, well, it's a great way to start, because it's a full end to end episode we will spend a bit of time on what you thought would happen in this crazy mixed up world we're living in. This COVID era that keeps on going and then 2022. So, let's start and I think you graded your predictions.
Steve Dennis 01:29
I did, I did I am all about accountability, Michael.
Michael LeBlanc 01:32
You are all about accountability. So, let's take it from the top. So, talk, let's talk about your review of 2021 predictions, self-assessment. How did you do? How did you feel you did overall?
Steve Dennis 01:43
Overall, I felt like I did pretty well. My, my caveat on my overall grade, which is probably a minus B+ is I did not anticipate, and I think I'm not alone here that COVID would still be such a big part of what was going on in retail in the second half of 2021. So, that's, that's my little muted grading. But yeah, I published these predictions for anybody, I guess, probably put this in the show notes. I published these on Forbes a year ago.
Michael LeBlanc 02:14
Yeah, I have the list in front of me, The Great Acceleration Moderates.
Steve Dennis 02:18
Yeah. So, this one I gave myself a B+, I think, you know, our, our friend Carl and Scott, a bunch of other people talked about the great acceleration that this idea, particularly for eCommerce and all things digital, that we jumped forward many years. And certainly, in 2020, we saw just a massive growth in all sorts of new technology, but in eCommerce adoption, in particular. And in fact, I got this mostly right, eCommerce growth has slowed down quite a bit, it's still pretty robust.
The other part of this prediction was that some of the categories that got really distorted, like home fitness, and you know, and well home office equipment, all these kind of work from home categories would start to go more towards their averages. And that has happened, not as broadly as I would have thought. Groceries still performing really, really well relative to restaurants and those kinds of things. So, that that's where I would say, I didn't get it quite right, but primarily because of COVIDs persistence.
Michael LeBlanc 03:20
Physical retail, still not dead. I got to think you did pretty well. You got to self-assess yourself pretty well on that one.
Steve Dennis 03:27
Yeah, I'm going to get myself an A on this. This was the first year in a while that store openings surpassed store closings at least according to Coresight, 13th straight year in the US anyway of physical retail growth. So, while eCommerce was growing much more quickly, physical retail still growing. And lots of investments in new stores on the part of in fact, you know, we talked about Ulta, because we just had Dave on, I mean, Ulta opened a bunch of stores a lot of I guess you'd consider more legacy retailers opening hundreds and hundreds of stores, but also folks like Target and Walmart investing in their existing stores. And then we've got the Warby Parker's of the world, opening a lot of stores. So, a lot of store growth.
And I think the other thing that happened that COVID really shone a light on is the role of stores in eCommerce fulfillment, and as, as a marketing for eCommerce and all those kind of things. So, kind of a new appreciation for physical stores I think this kind of put all the attention back on the stores themselves and, and the willingness or the smart thinking to open more stores.
Michael LeBlanc 04:32
Bifurcation 2.0 hollowing out of the mediocre middle (crossover talk).
Steve Dennis 04:37
Right. So, I get I get a little stipend every time I say bifurcation. But this idea that I've been talking about for a while. And the reason I call it Bifurcation 2.0 is because I've been talking about the bifurcation of retail for almost a decade, which is this idea that success has been found at either end of, a kind of a value spectrum. So, lots of lots of success in Dollar Stores and off-price at one end of the spectrum. And then the higher end specialty stores luxury, doing well the other end of the spectrum.
But these in the kind of unremarkable middle, or those in the unremarkable middle, are really struggling. What I thought would happen and I gave myself a B+. on this is that, while it's true, that kind of the differences between the haves and have nots are growing more pronounced, and, and definitely the value side of retail has done much, much better than those in the middle. I, I didn't see as much fallout in the middle as I expected. And I think again, some of that has to do with lots of stimulus dollars from the federal government. So, that I think kind of propped up the middle, a little bit more than I expected.
Michael LeBlanc 05:43
I also have to think, you know, when I look at the results coming out, as we were talking about our last episode, just, you know, huge growth in retail. I got to think it's one of those, you know, as the water rises all boats float scenarios as well, right?
Steve Dennis 05:54
Michael LeBlanc 05:56
The hybridization of retail takes center stage.
Michael LeBlanc 05:59
Yeah, so this one I gave myself, also a B+. So, we've talked about this on the podcast, and I've written quite a lot about it, and I'm speaking about it a lot is this idea that retail is not so much kind of a dualistic thing, you know, you've got eCommerce, and you've got physical retail, you know, we've seen much more blurring of that. And I think, again that's become really obvious. But it's also the hybridization that's occurring in the supply chain, where stores are serving this role, as we just talked about and fulfilling eCommerce orders, eCommerce is much more obviously driving traffic to stores and vice versa. So, we've got a much more kind of hybrid mixed retail world and that is starting to change the way some retailers are investing.
So, I think for sure that happened. I've noticed a number of companies talking about hybrid retail in a more active way. But, but again, I wouldn't say it was as pronounced as I expected. And I'm not sure that's because of COVID, I, I think I, I just felt like this was going to move more quickly and retailers would be more innovative and aggressive in making some changes and that hasn't really happened as much.
Michael LeBlanc 07:06
All right, moving on, grocery wars escalate.
Steve Dennis 07:09
Yeah. So, here's another one where I'm going to make a very similar comment, so I gave myself a B. I thought because of a lot of the new digital adoption in grocery, the increase in same day delivery, next hour delivery, in some cases, Amazon making a big push into physical grocery, that we'd really see this incredible battle, and it hasn't really happened. The grocery business overall has, has done well, we haven't really seen anybody drop out. And again, I think this has to do with the grocery spending is so elevated, that it's not yet putting much profit pressure on the weaker players in, in grocery
Michael LeBlanc 07:52
Work from wherever rewires retail real estate strategy. They all feel like they're kind of in a box of, you know, this kind of big sales year would kind of distort some of the end results. How did you rank yourself on the rewiring of real, the rewiring, -
Steve Dennis 08:11
It’s easy for you to say.
Michael LeBlanc 08:13
Apparently not the rewiring of retail real estate.
Steve Dennis 08:16
I gave myself a B-, this was another one, you know, there was this narrative, which I would say I guess I bought into, that some of the urban cores in big cities like New York, Toronto. I guess, you know, and this is where I think we see some real differences across country across, you know, even different parts of the US, that the urban cores would really struggle and that would cause many more stores to close in those areas. And the investment was shifted in a pretty massive way to the suburbs, or to second tier cities. And that is happening, but not nearly as dramatically as I thought. And I think we're even seeing, you know, notwithstanding the Omicron issues, that New York has rebounded much more quickly than I certainly thought it would. And, and we're seeing that play out in a lot of other cities.
So, again, is, is this a function of just so much spending in retail, not creating as much tension in these marginal cases? I think partially, but I think, you know, it turns out people like, like living in cities. And so, I think the thing that's really changed the most, and I think, Placer.ai, our friends there have got some data on this is that actually people spending during the course of the day is what's shifting. People working from home, you know, they might be running out to a store during the day where they couldn't do that, because they would be in their offices, and, you know, haven't done the commute yet. So, I think that's maybe perhaps the bigger change, but I, I don't think the full story is not been written on this yet.
Michael LeBlanc 09:48
Well, I think and that was going to be my one comment. And you may be judging yourself a bit harshly on that, because you know, real estate is a trailing indicator, right? It takes a long time to get in and out of these leases. So, I think, I think you're, you're right but, the change is going to be happening slower. Just because, you know, I've talked to retailers who said, listen, I got a 10-year lease and I gotta make it work until I move, -
Steve Dennis 10:08
Michael LeBlanc 10:08
The store, and (crossover talk),
Steve Dennis 10:09
All right, so Professor Mike is giving me an incomplete, that's what I'm hearing.
Michael LeBlanc 10:12
All right, all right, all right. Let's see what's next? Without a return to fun, we won't see a return to luxury and fashion recovery.
Michael LeBlanc 10:23
Actually, I think you skipped over cheaper real estate creates new opportunities.
Michael LeBlanc 10:27
Oh, I did. Okay. (crossover talk), -
Steve Dennis 10:28
And I don't want to skip that because I gave myself an A.
Michael LeBlanc 10:31
You don't want skip that, Okay.
Steve Dennis 10:32
And, and, and this is a little similar to the other point, I mean, there's lots of investment from legacy and disruptors and existing and new formats. We are hearing, I think you've heard this as well, anecdotally, that both old and new tenants are getting more favorable lease terms, both cheaper, but more flexible, you know, not having to sign a 10 or 15 year deal. And I think certainly when we talk about Allbirds and Warby Parker, and we're going to have the founder of (inaudible) on you know, there's a lot of great deals that are allowing folks to expand more aggressively. Whether it's literally much cheaper that's driving that, you know, that's arguable, because as we talked about earlier, I think some of this is really an appreciation for how physical retail is complementary to a total brand experience.
Michael LeBlanc 11:19
And thinking back to our interview with Scott Galloway, he colorfully said, you know, you’re used to be stuck with a 10 year weeping sore, but maybe the rates are the same. But you can get the hell out if you either, you know, if the situation changed, and maybe didn't make the right call in a year, not, you know, stuck with it for 10 years, I think that's a huge, that's a huge thing, you can take more risks. So, back to number eight, without a return to fun, you won't see a luxury fashion recovery.
Steve Dennis 11:44
Yeah, so I gave myself an A- on this, but I should have been more specific, because it's really a full recovery. I mean, we've absolutely seen a bounce back, compared to just terrible 2020 numbers. So, most of the bounce back if we look at apparel and accessories in, is in more basic items, athleisure, those sorts of things, not so much the high end. But the, the affluent are doing very well and we are seeing, I think a better a better bounce back in luxury than I might have expected. But the main thing here is we've got to really look at the comparisons to 2019. And for the most part, we aren't remotely close to being back there.
And the reason why I said without a return to fun is a lot of high-end spending is really based on or, or is driven by travel at special events and, and those sorts of things. And, and it's going to be a little while before, before, -
Michael LeBlanc 12:38
Steve Dennis 12:38
Michael LeBlanc 12:39
All right, last but not least, Penney's kicks the can down the road.
Steve Dennis 12:42
Yeah, so I gave myself about an incomplete here. I mean, I think it's absolutely the case that had Brookfield and Simon not acquired them, that Penney's would either be in liquidation, or would have closed a huge number of stores to try to keep them afloat. So, the buyout that occurred out of bankruptcy, allows Penney's to, to keep kicking here. Because they're now private, we don't have the kind of data around their performance that we had when they were a publicly traded company. So, there's a lack of visibility there. But as I've looked at other data that talks about Penney's relative performance to other players, it's clear that this business is still struggling, but we'll come back to that with my, my predictions for 2022, I suspect.
Michael LeBlanc 13:29
All right, well, overall, pretty good grade generally, given the uncertainty of all these different things that are happening, let's talk about 2022 and your provocative retail predictions.
Steve Dennis 13:41
And I guess in no particular order, I've got 10. So, we'll go through these hopefully, relatively quickly. The first, is what I'm calling, the store's strike back again, again. And the reason I say this is a couple of years ago, I wrote a piece, and I was talking about it and it's a little bit tied to what I said last year, is that there is a new appreciation for physical retail and I think that just keeps evolving. You know, as we talked about the, the diverse hybrid roles, people appreciating the different purpose of the store, you know, everything from, as we talked about a few minutes ago, the eCommerce fulfillment and the marketing role and how physical drives digital and vice versa. But I also think it's retailers starting to really think about how physical stores can provide entertainment and omni-channel service.
And I think so I think there's just this new appreciation for stores which I think is sort of ironic, because with this big shift this acceleration to digital, if anything, you might say wow, you know, that's really going to put pressure on physical retail and I think for the and it has put pressure on the unremarkable retailers for sure, like that's made their situation even worse. But for the retailers that are strong, and have a compelling value proposition, you know, they're investing behind it. So, it is like this resurrection of physical retail, but I feel like it kind of resurrected a few years ago and now we're in the second wave.
Michael LeBlanc 15:09
Steve Dennis 15:10
Moderate department stores. So, this is Macy's, Kohl's, JC Penney, Dillards, they experienced a dead cat bounce. And I just like saying dead cat bounce, (crossover talk),
Michael LeBlanc 15:19
Borrowed from our Wall, borrowed from our Wall Street friends, which basically means that it's going to go up, but it's really not going to stay up. That's really (crossover talk),
Steve Dennis 15:29
Yeah, and the fundamentals here are? Well, number one; don't be misled was as I think we've seen some reports over the last few months, you know, where people are like, oh, department stores is back, Macy's is back, Kohls is back or whatever. And they're comparing two very, very weak numbers. So, the increases by themselves, I think, don't mean a thing. My question is, what is fundamentally different to change the fortunes of any of these individual retailers, but the moderate department store sector, you know, in total. And this sector has lost market share for 20 straight years. There's a bunch of reasons for that, which is maybe a separate episode. It's not just because of Amazon. But the question is, what is suddenly going to be so different, that customers, lots of customers will start to switch back to these retailers? And my answer is nothing. There's nothing that I can imagine that can realistically be pru-, pulled off that is going to, to change this. So, I, I believe by the end of this year, it will become readily apparent that all these guys are in trouble.
Michael LeBlanc 16:38
We're back to J-C-P, JC Penney, what do you think is going to happen in 2022, with JCP?
Steve Dennis 16:43
Well, this is certainly related to what I just talked about. But you know, and I hate to be so negative, but some folks that have followed my work over the years will know first of all that I worked at Sears a long time ago, but that I have referred to Sears for many years as the world's slowest liquidation sale, because they were effectively out of business 15 or so years ago, we could argue about exactly when. So, they've been dead brand walking for a long time. Yet it is taking them a really long time to go away. So, I think they're now down to like a dozen Sears stores and a dozen Kmart stores or something like that. So, for all intents and purposes, Sears is gone. They're not worth talking about anymore. Whether they will technically still be alive with any presence by the end of the year. I don't know. But JCP, JC Penney has the honor of now being elevated to the mantle. You know, I guess there'll be the world's second longest liquidation sale. Because I just don't see a path for them. I mean, they're the, they're the what's the expression, the wounded Gazelle and the herders, I don't know. I'm getting that wrong but, but (inaudible) you know, relative to Kohl's, relative to Dillard's, relative to Macy's, they are the weakest in a sector that continues to contract that basically has no profit pool available, and so short of continuing to be propped up and have their corpse sort of dragged around like Weekend at Bernie's, or whatever, I just don't see how they aren't going to get into this downward spiral of cost cutting, store closings, and I just don't think there's enough time or money or even a strategy that really saves them un-, unfortunately, but you know, that, that will maybe allow some of the other players to, to actually be successful as, as they retrench. But they got a lifeline as we talked about from, from Simon and, and Brookfield, but I, I suspect the patience of those owners is going to start to wear thin before much longer.
Michael LeBlanc 18:36
Mm. hmm. All right. Number four, the profitless prosperity of disruptive brands comes under increasing scrutiny. What do you mean by increasing scrutiny? Talk about that.
Steve Dennis 18:47
So, we've, we've talked about this a bunch of times where, where there are a lot of these disrupter brands, the digitally native vertical brands, direct to consumer brands that have attracted a lot of venture capital that have struggled to see profitability. And this actually, maybe this isn't such a bold prediction, because we started to see the wheels come up a little bit towards the end of last year. Casper basically imploded. A number of the companies that have gone public like Poshmark, even even Wayfair, Chewies, a bunch of these brands that have grown like crazy but are struggling to make any money, they really started to see their stocks take a hit. So, I think there's just more and more attention to the unit economics, you know, our friend, Dan McCarthy, all over this for a lot of these brands. And I think what I mean by increasing scrutiny is this, this demand on the part of investors to see a path to profitability is increasing. I think it will grow and the other thing that will happen during the course of this year is we'll have many more quarter you know, we won't just have one quarter of Allbirds performance. We'll have five, right? Peloton you can go through the list of, or Stitch Fix, you know a lot of these brands that won't have been public for a short amount of time, we'll really be able to see a track record, we'll really be able to see a trajectory. And I think that will put more and more pressure on, on some of these brands to produce. And we'll really see kind of who the who's for real and who's who's not, I think for the most part, across the next year,
Michael LeBlanc 20:21
You are drawing a, a direct line to you know, whether it's stock price, or whether how they're seen in the investment community, you, you're speaking less to how consumers think of them.We asked the average consumer, they don't know what happened to Casper, they liked their bed, and they might buy another one. So, how, how do you reconcile the two? Is it, is your concern, that this scrutiny or this, this reality of performance starts to impede their ability to grow and acquire customers and just run the business?
Steve Dennis 20:47
Yeah, I, I think well, I think a couple things could happen. I mean, I agree with you, I don't think consumers pay much attention. That's why I kind of call it profitless prosperity, because, you know, they look, they look successful from the outside, right? But, eventually, you know, they've got to make money. So, I think the, the, there a couple possible things that can happen, I think some of these will get in a significant enough trouble that they need to be acquired, you know, what I call sort of a savior, acquisition, which is kind of what happened with Casper, arguably what happened with, with Bonobos and Walmart a few years ago, (inaudible). So, I think there'll be some acquisitions in this space, because there will be some there, there just that the economics don't allow them to, to keep going as independent entities.
But I think it will affect some of these companies’ ability to raise the capital, they need to expand and, and fund these losses. And in a lot of cases, because many of these brands are either well into or starting the opening of physical stores, which I think in general is a good strategy. You know, though, that's not an insignificant investment. And so, I think some of them are going to really have a reckoning between what their path, their preferred path of growth looks like, and just the realities of being able to fund it.
Michael LeBlanc 22:00
What's interesting, because we've seen some other consolidation plays happening out of the first wave of, you know, companies going retailers going into protection, we had, you know, companies start up and kind of consolidate many companies under their wing and the idea and we even spoke to a few do that in the Amazon world that say, well, like, we're just gonna have a bunch of common services that serve all. Individually, they can't stand on their own. I mean, that's what you and I would kind of figure out, is that kind of industry vertical consolidation strategy, I, I think that's a possible outcome to some (crossover talk).
Steve Dennis 22:31
Yeah, I think there's definitely, right. There's a set of, set of companies that fit into that, you know, but if your unit economics aren't strong, and you're facing escalating marketing costs, you know, the whole marketing equation has gotten a lot tougher. Because the tollbooth operators are raising the prices, and you know, you've got the cookie restrictions. And, you know, there's a lot of things that just made that what was a fairly low-cost channel for, for gaining customers way more expensive. So, you know, so there's going to be different outcomes, depending on different players. So, you know, this whole disruptor space is a pretty, it's a lot, there's a lot of them, right. So, it's a little hard to boil it down but, but I think in general, we're just going to see a lot more pressure to, to achieve profitability, and, and some difficulty in being able to raise the capital to continue growing.
Michael LeBlanc 22:32
Alright, number five, we're halfway through understanding buying versus shopping becomes more important.
Steve Dennis 23:25
Yeah, I think, I think this is really an important distinction I've been, I've been talking about, I didn't come up with this, but I talk about in my book, and I've talked about regularly this, this idea of making a distinction between buying versus shopping. And generally speaking, what I mean, think about buying as more kind of task oriented, mission driven, you know, just trying to get something off your to do list, there's not a lot of, you're not investing a lot of time in it it's, you know, showing pretty much of a kind of a commodity, sort of activity, convenience driven. Whereas shopping is more discovery more passion driven, maybe it says more about you as a, as a person.
I think what we have learned or I know what we've learned over the years is that eCommerce, and certain largely brick and mortar retailers are really good at the buying part. You know, they're all about efficiency. It's been harder to really differentiate yourself on the, on the shopping side. But the, the challenge, though, it's another kind of idea around this collapse the middle is, I think you really, as a retailer, have to pick a lane, you know, not 100% and don't want to be overly black and white about it. But you know, part of the problem just to pick on JC Penney some more is, JC Penney has a lot of stuff in a really big store. And none of it is particularly differentiated. So, if you can get a polo shirt anywhere, whether that's online or at Kohl's or TJX or whatever, like what's the reason to go to Penney's like that's the worst-case scenario because in many cases, (cross over talk), -
Michael LeBlanc 24:51
Location I guess, location, -
Steve Dennis 24:52
Yeah, potentially, right. But you're in a commodity driven business, you know, for the most part where convenience is really important and malls in general, just less convenient on average, right? So, so, you really have to pick, pick the lane more clearly. And I think there's going to be more appreciation for, you know how difficult it is to stake out a position if you don't really pick a lane and, and stick to it. And I think the folks that really kind of straddle the middle, but also even if they pick the lane don't get really, really good at what, whatever lane they choose, it's just going to be harder and harder for them to compete. Particularly as you know, retail sort of settles down and we don't have as many effects of, of stimulus and, and, -
Michael LeBlanc 25:37
Steve Dennis 25:37
Stock market going crazy.
Michael LeBlanc 25:39
All right, speaking of forks in the road, actually, that's not a great segue. But Amazon double clicks on its physical dreams. What you think of that?
Steve Dennis 25:46
Yeah, so I got some pushback a few years ago, when I when I wrote a piece for Forbes that said that, that Amazon's future was going to be increasingly driven by brick and mortar. And a lot of people told me I was crazy. Well, I don't think I'm that crazy. I mean, obviously, Amazon still is overwhelmingly an eCommerce company, they still have plenty of growth in that model. But what a lot of people don't appreciate is number one, they already do $20 billion, or almost $20 billion in their physical stores.
Michael LeBlanc 26:16
Does that include like Whole Foods is that, -
Steve Dennis 26:18
It does, it does and Whole Foods is the big part of it, for sure.
Michael LeBlanc 26:22
Steve Dennis 26:22
But they are increasingly investing in, in physical formats. So, the Amazon Go stores, Amazon 4-star, they continue to open those. The big push, though, really is in grocery with Amazon Fresh. And so, I forget exactly how many they've opened. But they've signaled that they're opening a bunch more.
And they're going to, I think, continue to test around some different formats. Because again, I think, you know, they, they understand that physical stores can add value or physical presence can add value. Now in some cases, it's the pickup lockers, right, it's a place for you to go get something at a store, or, or like their returns programs (crossover talk) calls. So, there's that kind of omni-service or whatever you want to call it, part of it. But I think they absolutely want to grow in certain product categories, like apparel, where physical store presence is important to, to generate sales as well as to reduce returns. So, they've got this, they're calling it a department store, this 30,000 square foot store, a couple stores are going to open, I think they're going to continue to, to push here. Because where they're under penetrated is largely in those categories, like, like home improvement, like apparel, where physical stores can be very important to making the sale on building loyalty.
Michael LeBlanc 27:38
Do you think it's still the case that and I sometimes think that Amazon doesn't really care that they're in the retail business, that they're in the consumer data business, that this is really a means to an end? That mean grocery is not like, it's a tough category, right? There's not a, there's not a lot of margins on the ground to pick up in the grocery category. But it feels like there's a bigger strategy here for growing in the grocery sector.
Steve Dennis 27:59
Well, I, I would, yeah, I would make an argument that, that they're owned physical retail. In other words, we know where they actually buy the product and sell it themselves as contrasted with the fulfilled by Amazon, Amazon Marketplace piece that's really a loss leader for them. It is, it, it allows them to get the data, it allows them to then monetize it through their advertising, you know, Amazon Marketing, and just kind of spinning the flywheel more broadly. I, I think, you know, they understand if they can form relationships with customers through some of these gateway categories, or like grocery of more frequently purchased items that it drives the overall growth which is good for their investor story. But it really turns the flywheel it's not because, oh my god, groceries is amazingly profitable, (crossover talk), We can, you know, generate billions of dollars of incremental profit through selling groceries, they can generate billions of dollars of incremental value through, through the whole flywheel and, and monetizing that customer relationship and data.
Michael LeBlanc 28:59
All right, number seven, we're at seven. I guess that's the seventh inning. So, we should get up and stretch here just for a minute. All right, all right, that's the great reconfiguration, gains momentum, what's that?
Steve Dennis 29:11
Well, I'm, I'm pretty jealous because there are a lot of other people that have their own great you know, so I'm now going to coin the rate reconfiguration. I don't know that I love this word yet but here's, (crossover talk), -
Michael LeBlanc 29:23
You heard it here fans, you heard it here.
Steve Dennis 29:24
You heard it to here (crossover talk) it here. But here's the thing that I think is, is going on, which is not yet as fully appreciated. And I'm going to be talking about this more is I, I think this you know, number one, we're having quite a lot of unbundling of, of services you know, digital technology in general obviously reduces the need you know to do things in person but it also allows you to go to market in ways that you couldn't before. You know, for the most part retail is kind of a one size fits all model if you look at the most successful retailers historically you know the Walmart's the Target's they are pretty much kind of a one size fits all, and then they layered on top of that eCommerce.
But I think because of this hybrid thing we talked about, there's really going to be a need for a lot of retailers to fundamentally think their go to market strategy to think less about formats and channels, think more about their brand as a platform that they could reconfigure in fundamentally different ways. So, you may be reconfiguring your, your value proposition, right? Maybe bringing more services in or subscriptions or, you know, some of the, the you know, NFT's, you know, there's a whole bunch of other stuff that you can, you can bring together in a value proposition in ways that you couldn't before, but also I think it's going to really be reflected in how physical retail changes, you know, malls need to be, for the most part reconfigured in a really different way, the go to market strategies for certain retailers, where maybe they have some flagship stores, and then some more satellite stores, the supply chain needs to reconfigure.
So, I actually like that there's a sense to me where some retailers really need to think about kind of blowing it up and starting with a blank sheet of paper, and thinking about okay, as, as technology advances, as some of the assets we have relied on, are, aren't fundamentally productive, and we can't keep putting, you know, kind of good money after bad in them. What, what is the future state look like? And can we over time, reconfigure our whole business model to be more successful? I think this is going to take some time. But I think some of the savvy retailers are really starting to look at this in a different way. Whether it's Nordstrom with full line stores and Nordstrom, local as satellite stores or whether it's, you know, people thinking about their media networks and their marketplaces and other, other kinds of ways to, to generate revenue that really leverages your brand platform, not so much that you're the seller of physical goods in a particular kind of box. So, more to come on that but I think, I think that's something that will start to gain some traction.
Michael LeBlanc 29:32
I was reading this headline today and I thought of your next prediction. Ralph Lauren, CEO says Metaverse is the way to tap in a younger generation of shoppers. So, what's your prediction is Metaverse a thing?
Michael LeBlanc 32:08
My prediction is Metaverse, sch-Metaverse. I think it will be a thing. Not this year. I think it's a lot, a lot of heat and not as much, not much light, yet.
Michael LeBlanc 32:20
Steve Dennis 32:21
As I stand here, looking at my 3d printer.
Michael LeBlanc 32:24
Jump up that second life site again. I bet you and I both built one of those in our past. So, there we go, we were, -
Steve Dennis 32:31
I'm still on MySpace, I don't know about you.
Michael LeBlanc 32:35
All right, number nine, hyperbole. What do you got to say about hyperbole?
Steve Dennis 32:39
Hype-, I don't know if you know this, Michael. Hyperbole is the greatest thing ever. So, this, this is actually a little bit. Well, more than a little bit related to Metaverse, sch-Metaverse. (crossover talk) I think there are just there are a lot of things that get talked about, you know, I guess it's the hype cycle stuff, is that what they call it? Whereas, as a guy I used to work with, say, you know, the invitation is better than the party. Things sound cool but there's not a lot of there, there again. Yeah, I'm not saying these things will never happen. But things like voice commerce, you know, live streaming (crossover talk),
Michael LeBlanc 32:42
That was a good one, that was a good one.
Steve Dennis 33:08
Yeah, that was a, you know, NFT's crypto. For some people, I think marketplaces and media networks, I mean, they can be very powerful for some players. But, you know, not every retailer can be successful having a marketplace or having a media network. So, I think there's a lot of stuff that gets talked about that has still fairly limited application at least in 2022. So, watch this space, but I don't think a lot of, a lot of people are going to see a lot of, of real dramatic results.
Michael LeBlanc 33:47
Well, you heard it there fans, advice from Steve Dennis, watch MySpace, and (crossover talk). Well you do remind me of back to our interview with Brandon Witcher, you know from our last season where he said, you know, does anybody walk in the store and go, I'm not shopping here, there's no (inaudible) here, I'm leaving.
Steve Dennis 34:03
Exactly, right. I mean, I, I think if you go into, I mean, I'm feeling like, I'm really ganging on to, to JC Penney, but like if you go into JC Penney, and your conclusion, is that what they're missing is they don't have enough NFT's and there's no Metaverse, you know, okay.
Michael LeBlanc 34:19
I can't pay with my crypto, my Dogecoin is not, (crossover talk) at JC Penney, -
Steve Dennis 34:25
I am out of here, I mean, if they would just do that there would be so much better.
Michael LeBlanc 34:29
That's a thing maybe, there you go. All right, number 10, we have reached the last one number 10. What's the last prediction you want to make for us today?
Steve Dennis 34:38
Well, this one is probably the one maybe this is why I put it at number 10. It's the one I'm least competent about, which is that we will see some, a come to Jesus moment in the convenience wars. You know, we've seen this you know what I think is mostly a race to the bottom, it is just upping the ante on convenience. You know, so much investment and certainly consumer interest in home delivery, but we know, generally speaking, home delivery is lighting a bunch of cash on fire.
Now, in addition to something that's already profit proof, now we've got some of these other new JOKR and some of these other delivery companies that are going to deliver, you know a subset of goods to you, in 10 minutes or 20 minutes, or whatever. And I, I just think, you know, there's, there's limited utility to some of this convenience, but it's become increasingly table stakes. And, I think at some point, some rationality has to come to both all this venture capital money going into some of these startups, but retailers chasing their tail on, on convenience, but the issue is, I think Amazon is really setting the pace here. They're much better positioned with all their local home delivery assets. And so, there's part of me, which is Amazon is just like, you know, like, I don't know, Snidely Whiplash, I don't know if that's the right reference. But just like, ha ha ha, you know, we're luring you it's a trap, you know, (crossover talk), guys, keep chasing your tail and, -
Michael LeBlanc 36:05
We will do this thing if we think is so important, we'll try to convince consumers that it's so important, and really, there's only two or three of us that can actually do it without going bankrupt. Really,
Steve Dennis 36:14
Right, I mean, I feel like it is really, or it is really a race to the bottom and I know I've quoted Seth Godin a few times on this, you know, the problem with a race to the bottom is you might win, or worse, finish second. And I think we're just going to see, but again, I think I could be wrong, because there's so much venture capital money going into this. And I think on the part of, particularly the, the Kroger's, the Walmart’s of the world, you know, trying to keep pace with Amazon in some respects, but they're kind of forced to do it. So, perhaps a reckoning won't, won't come. But I definitely think somehow or other, there's already there's going to be pressure to try to dramatically improve the profitability. And some of that can be done with technology like micro fulfillment, which we talked about with Fabric a while back on but, some of this has to be pricing and, and kind of re-merchandising you're offering to try to steer people away from fundamentally on economic behavior.
Michael LeBlanc 37:04
You, you could be and, and you, you put it as number 10, as you said, purposely, I think you're a year ahead on that one. I think there's another year to go of venture capital investment chasing this with until the penny, so to speak, drops. So, I think this could be 2023, when you kind of look back and go, you know, or the end of 2022, you know, sales. You, these sales can't just keep going up the way they are. I mean, you know, the retail sales are benefiting from this transference of activities, right? You can't fly, you can't go vacation yet, you know, (inaudible) you're, you're freaked about doing basic stuff. You know, it's gonna end right. And then people kind of resume their normal activity of living their life again. And that doesn't always mean, you know, spending their brains out in the shopping in a shopping center, right?
Steve Dennis 37:48
Right, yeah, I think, I think so yeah, I, I'm a, I wish I had a little bit more confidence about this one. I think it's a little bit of truth, justice, you know, like it should correct itself, it's just the right thing. But yeah, there may be enough forces that kind of keep this going. Keep, keep the music playing for a little bit longer.
Michael LeBlanc 38:07
Well, listen, that's a great wrap up. And we'll, we'll come back next year and see how you do maybe we'll give it a little quick pulse, as we pulse back during the rest of the season. But for now, let's, let's wrap it up. And congratulations, I think on the whole, you know, very interesting, very provocative and, and I look forward to kind of continue to talk about those.
Steve Dennis 38:29
Well, and thanks and I hope, I hope listeners will feel free to come at me, you know, on social media or email me directly, I definitely want to hear people's, people's ideas. And yeah, I think it'd be great to kind of do maybe a mid-year, check in as things unfold.
Michael LeBlanc 38:44
If you liked what you heard, please follow us on Apple, Spotify, or your favorite podcast platform so you can catch up with all our great interviews, and insights, and new episodes will show up each and every week. Be sure to check out our YouTube channel and last but not least, tell your friend and colleagues in the retail industry all about us.
Steve Dennis 38:59
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com. and I'm
Michael LeBlanc 39:13
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. And you can learn even more about me on LinkedIn, or meleblanc.co. Have a safe week everyone.
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