Remarkable Retail

The 6 New Forces Of The COVID Economy

Episode Summary

This week we delve into some of the new material in Steve's expanded and completely revised 2nd Edition of Remarkable Retail: How to Win & Keep Customers in the Age of Disruption, which will be released on April 13th (see below for a special listener book offer). We dig into the effects of the pandemic and what retailers need to be doing right now to position themselves for the rebound. Steve outlines 6 major forces.

Episode Notes

This week we delve into some of the new material in Steve's expanded and completely revised 2nd Edition of Remarkable Retail: How to Win & Keep Customers in the Age of Disruption, which will be released on April 13th (see below for a special listener book offer).

We dig into the effects of the pandemic and what retailers need to be doing right now to position themselves for the rebound. Steve outlines 6 major forces:

  1. Bifurcation 2.0
  2. An Accelerating Acceleration
  3. Reallocation and the Redefinition of Essential
  4. Power Consolidation and the Last Men Standing
  5. The Great Rewiring
  6. Hybridization.

After our discussion we jump into our new weekly segment “Remarkable or Forgettable?” where we give our hot takes on retail headlines, and deem them wow-worthy, best ignored or somewhere in between. This week's highlights include Target's blockbuster earnings, Disney's store closings, ThredUp IPO filing, Nordstrom's partnership with Tonal and Saks decision to spin-out its online operations.

Special Offer! If you would like to see the new addition of Remarkable Retail before April 13, place a pre-order for the hardcover edition from any place books are sold worldwide. Then, email us the receipt, and we will send you the ebook version a few weeks in advance to get a jumpstart on reading the book. Send the email order confirmation to books@sageberryconsulting.com with "Podcast Offer" in the subject line. Once we get that email, we will email them back an Ebook file for Kindle Nook, Kobo, all the different formats. 

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 will be released April 13th and is now available for preorder 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  and       The Food Professor  with Dr. Sylvain Charlebois.  You can learn more about Michael       here  or on       LinkedIn. 

Episode Transcription

Michael LeBlanc 

Welcome to Remarkable Retail podcast, season two, episode six. I'm Michael LeBlanc.

Steve Dennis 

And I'm Steve Dennis.

Michael LeBlanc 

And this episode is brought to you by the Poirier Group. 

Well, Steve, it's, it's a solo episode today. And we're gonna delve into the new book coming out. So, you've got a new second edition of the book coming out. And we're going to cover off some of the new sections. Some of the new content and, and I'm really looking forward to this episode actually, because, you know, as we've talked over the past number of episodes, you know, you wrote the book, just prior to the COVID crisis breaking out. Some things were just endemic to the industry and other things have changed. And it's one of the questions I love asking my guests and, on our interviews, what's an adjustment versus what's permanent change? Well, first, what's just more of the same continuation? So really looking forward to it. So, what, what are you going to do to, you know, can I get a copy of it now? Can I preorder it? Give us a bit of that 411.

Steve Dennis 

Sure, 

Michael LeBlanc 

What is it, it's March, it's March it, you know, it's March already? So yeah,

Steve Dennis 

Yeah, it's coming up fast. Well, actually, we have a special promotion we're going to do for our listeners. If they want to see the new addition, prior to April 13, all they need to do is preorder the hardcover from any place books are sold, worldwide. And then, email us the receipt and we will send them the e-book version a few weeks in advance, so they can get a jumpstart on that. So, they can just send the email confirmation to books@sageberryconsulting.com. We'll put the, more of the details in the show notes. And then, once we get that we will email them back the, an e-book file for Kindle, Nook, Kobo, all the different formats.

Michael LeBlanc 

Fantastic, now, do you want to put something in the subject line like heard it on the podcast or something like that? 

Steve Dennis 

Yeah, just yeah, on the subject line, if they could say 'podcast offer' just so we know where that came from. That would be great. 

Michael LeBlanc 

Well, you're good performance marketers, so I would expect no less.

Steve Dennis 

Oh, we got, we got the attribution team is ready to do all the analysis.

Michael LeBlanc 

Well, fantastic. Yeah, so all that information will be in the show notes. So, be sure and take advantage of that. 

So, you know, before we jump into kind of talking about the, the contents and what's different, and I guess I kind of answered the question in my introductory comments about why a second edition so quickly after the first edition. And ordinarily, you know, retail changes, but not that much. But really the COVID crisis has, has really up ended. And I guess it really got you thinking about answering that fundamental question, right? What is different? And what do we need to be thinking about as we pull out of this?

Steve Dennis 

Yeah, when I get the question about why do this new edition so, so quickly? I guess the first thing I say is, well, really, the core principles of the book, you know, the first edition of the book are really the same, which is that fundamentally, very good is no longer good enough that, that you have to be remarkable. And so, all, you know, for the most part, all the reasons that went into that fundamental premise, are pretty much the same. The eight essentials framework, which makes up the second part of the book is still the same, eight essentials. 

But, you know, a lot of what I was talking about in the book, the first edition, as you recall, was how disruption was accelerating, and that it was getting harder and harder to carve out a place in the unremarkable middle. And that, I was really encouraging retailers to transform very, very quickly. And I think we talked about in an earlier episode, I guess, you know, and obviously, there's lots of different situations retailers find themselves in, but if they weren't, fundamentally, if you weren't changing fast enough, I thought, well, you know, maybe you got three, four or five years, right to get this done. Unless you're already in bankruptcy or something. And then just COVID came along and accelerated so many pieces of that. 

So, number one, the playing field is just fundamentally reset. Number two, some of the advice that I gave was like, well, you know, too late, basically. So, so I really wanted to kind of reset the point of departure, so to speak, and, you know, then go forward from there, which is just a different, different place.

Michael LeBlanc 

Well, it's, it's interesting about what you talk about, how much time you actually have, right. Because we've watched, you know, we've watched Sears in the US, I think you've described it as the longest liquidation sale in history. They rip the band aid off, here in Canada, really quickly. But you know, it takes years and years and years to unwind. 

But, you know, when you lock your stores down, and people fundamentally change their consumer behavior, even, you know, buy less apparel. That's going to, you know, that's going to transform that timeline, just massively, right. That's that external shock that if you weren't ready for it. 

And, we saw, that's the other interesting side of the coin. I think, you know, when I talked to retailers who were, you know, who were ready for it. Like, they were in a position of some, some of it was bad luck, good landlord, bad landlord in a mall. You know, you're in a mall that relies on commuter traffic and office workers, You know, it's not good, doesn't matter what, what or who you have in terms of talent running that business it's tough. But for others, you know, they were ready for it, they were already doing the right things. They were, you know, trying to be remarkable. And it felt like they had a big lead start, either in surviving it, or about to prepare to come out of it, would you, would you agree?

Steve Dennis 

When you, when you look at the winners and losers of the past year, you certainly have a big, I mean, to your point, you just, you certainly have some of it very much driven by, you know, particulars of their location, the sort of categories that could keep, you know, there were stronger digital categories, or were essential categories, and so forth. So, that's absolutely a big force. But even within that, I think the, the retailers that really adopted, you know, what I call this harmonized approach, that had strong digital and physical capabilities well integrated, that, you know, that helped them a lot. If they were already good at, at some of the digital analytics, you know, that really helped them a lot. So, so you know, not, not all the success is just the folks that you know, pivoted really quickly, or just kind of the luck of the draw.

Michael LeBlanc 

So back to the tradecraft of the book itself, how much would you say is, is new? You've got, we're going to talk about an entire new section about the six new forces of the COVID economy. But and you've said that the eight essentials remain essentially the same, who knows, maybe some are more table stakes now than they were before. But, you know, what, what, how long did it take you to, to get into this, and to craft that? And give us a sense of scope and scale one versus addition two.

Steve Dennis 

Sure, well, I don't know that I can give you a good percentage other than say quite a bit. But I can point to a few things. Well, first of all, there's, there are a couple entirely new sections, there's a new foreword by Sucharita Kodali, from Forrester. There's an entirely new introduction. And then there are several of the chapters that are significantly revised. But also, there's a bunch of new content. So, the book itself is actually, you know, went from, I think, like 215 pages to 260 pages or something. So, it's about 20% longer. So, some of that is yes, the new content, and some of it is just, you know, kind of massive revisions.

Michael LeBlanc 

Well, you took a big bet, we were talking off mic about the vaccine. And if we were just saying, imagine having conversations like this, or the industry having the conversation without the vaccine on the horizon. You know, now I think, I actually think the book is, you know, second edition is even more valuable, because you can actually activate on the book in 2021, and 2022, thanks to the vaccine. Things, all these things will pass, in other words, but the book provides such great, such great guidance, informed by the COVID crisis, and not, not just the, the basic fundamentals of things like your eight essentials.

Steve Dennis 

Yeah, well, I certainly hope so. I guess, you know, the other thing is that, you can't, I mean, I guess a few people can do this, right, but, but you can't really write a book with the idea that, 'Oh, this is gonna be read, you know, the first week of May', right? People, some people will, will, you know, read it right away, and other people will put it on the shelf and get around to it. And so, you know, I, you know, I wanted to make it of the moment in that it reflects the major forces and some reasonable, educated guesses about what the future might look like. But it's not a current events book, per se, it's a long-term strategy book that really just, you know, reflects what's transpired in the past, you know, year or so,

Michael LeBlanc 

Again, that circles all the way back to you know, what's different, and what do you need to do to adapt to COVID? Versus what do you need to think about post COVID and structurally? I mean, that's, that's where I think the book really shines. 

All right, well, listen, let's dig into one of the new sections, really, what the, this episode is about. Is this, the six new forces of the COVID economy. So, let's, let's start, take us through about this, these six. Let's start in with bifurcation 2.0. What's all that about?

Steve Dennis 

Well, some listeners, I imagine will know that I have said 'bifurcation' more times than perhaps any other word I've said in the past year, other than maybe unprecedented. It's an unprecedent, 

Michael LeBlanc 

Maybe pivot,

Steve Dennis 

Pivot. 

Michael LeBlanc 

Pivot.

Steve Dennis 

That's good. But, but well, for those who know about that, and those who don't, I've been talking about retail's great bifurcation for a number of years. Which was really this idea that success was being found kind of at either end of the spectrum. More of on the kind of value efficiency, speed, convenience, and at the other end of the spectrum, more kind of high-end, specialty concepts. And that those retailers that were kind of stuck in the middle weren't strongly in either direction. You know, those that were the ones that have been getting into trouble for many, many years. And, you know, that's frankly, where we've seen the vast majority of store closings or, or bankruptcies. 

The reason why I say bifurcation 2.0, just kind of going back to what we were talking about before was, you know, COVID just put even more pressure on these retailers. Because you know, they had bad capital structures are they were already in bankruptcy or on their way to bankruptcy, or they just couldn't pay the bills on a lot of their stores. And so they were forced to close a lot. So, I don't know that the fundamental consumer behavior of tending to want to spend at either end of the spectrum is, is that different, it's just there was no place to hide. So, the collapse of the middle, I think, is, you know, it's been accelerated, as we'll talk about in a second, but going away even faster than I imagined. 

The other thing that's part of bifurcation is what's going on economically, which has been driving some of this bifurcation, which was, you know, unfortunately, well, I guess it depends on where you sit. But you know, one of the things that's kind of weird about COVID, is as disruptive as it's been, is that stock market, you know, the stock market's done really well, incredibly well. Real estate, in most places, has gone up. And so those people that have a lot of assets that are heavily invested in real estate and or the stock market have done pretty well. And if you were employed, making a nice salary, and you didn't lose your job, you've got a lot more discretionary income. On the other end of the spectrum, the folks that have, you know, no real participation or very little participation in these assets, you know, they didn't benefit from any of that. And that, you know, and I think in a lot of markets, certainly in the US, the amount of unemployment has been disproportionately harder on the say, bottom 25% or so of the market. 

So, you've got this split of economic outcomes. And so the rich, you know, a lot more money, they're driving a lot of spending, particularly on higher end stuff. And the folks that are, you know, struggling to make ends meet, are tending to shift more of their spending to the lower price, more value-oriented retailer. So, it's really just creating this polarization, or bifurcation, at a whole another level. So that's what I mean by bifurcation 2.0.

Michael LeBlanc 

It's really amplifying something that we were seeing before this spread of wealth, you know, the, the end of the middle class, so to speak, which is connected to the middle. And it is worrisome, I think, you know, when I speak to retailers at the value end of the spectrum, they're worried because there's, you know, there's probably, I saw a number in the US, 20% unemployment at the, at the lower household income levels, it's massive, and that's not going to turn around until services come back. And that's not going to be a flick of a switch despite the miracle of the vaccine. So, it is it is worrisome, I think, you know, that being said, NRF numbers published, forecast for 2021, they're calling for huge growth, driven by all these other phenomenon, like the, you know, buying stuff for your house and not traveling. And, and it's all a lot of it's finding, not going to restaurants, a lot of it's finding way into the retail, so interesting. 

 All right, let's talk about an accelerating acceleration. I practiced to say that actually, so yeah.

Steve Dennis 

Well, I didn't want to call it the great acceleration, because our friend Carl Boutet, and some others have, have used that. But, but it's, it's kind of the same idea. But a big part of the, the first book and what I've been speaking about for the last few years, is that so many trends have been accelerating, you know, the disruption is happening, happening at an ever greater pace. But then we get into COVID, and it goes, you know, to a whole new level. So, some of this is, you know, e-commerce was growing 14, 15, 16% a year, you know, now it's growing 25, 30, 35%. Some technology like contactless payment, my online pickup in store, live streaming, you know, you kind of go through the list of technologies that people have been talking about having an impact, and, you know, the adoption of those technologies has been accelerated by, by multiple years. 

And so, you know, the one that I think gets a little bit more, like people act as if it's kind of a new thing, where it isn't, is really the blurring of lines between 

Michael LeBlanc 

Right 

Steve Dennis 

Digital and physical. I mean, I, you know, I, we've talked about that multiple times here. I've been talking about it forever. So, I think that's really more retailers waking up to it, the ones that weren't ready, and were sort of forced to. But anyway, I think, I think almost every trend has been massively accelerated. And, you know, the big question is, how many of these, you know, will these growth rates be maintained? Or will we see some settling down? Which, you know, I think we will for sure. It's just a question of which areas? 

Michael LeBlanc 

Yeah, it's, it's literally a billion dollar, multi billion-dollar question. We saw acceleration here in Canada, 70%. year over year growth in e-commerce, we were a few years behind. And it's a global phenomenon. So, it really is unique in that way as well, right. All countries suddenly reset, to have this great acceleration. 

Number three, re-allocation and the redefinition of essential.

Steve Dennis 

Yeah, so we started to touch, touch on this, but, you know, we've seen this massive shift in how people are spending their money. You know, obviously, with people not working In an office so much, you know, commuting expenses, gas etc, has really dropped. Nicer apparel, both because of work reasons, but also, you know, not going out and traveling has as declined considerably. You know, people aren't spending on vacations for the most part and so forth. 

But then we've seen this big investment in things related to work from home, like office equipment, and so forth. But, all the home upgrades, much more eating at home working out at home. So, there's this very big reallocation, as we talked about earlier, is affecting different retailers differently. You know, the big question, again, is how much of this will, will really persist as we get into more of a recovery? I mean, I certainly think that, on the one hand, people will be very eager to get back to traveling and get back to, you know, entertainment out, and eating out, and so forth. So, maybe it's the work from home piece that will kind of keep this reallocation at a, at a heightened level.

Michael LeBlanc 

We'll be right back. 

This episode of the Remarkable Retail podcast is sponsored by the Poirier Group. 

Do you want to move faster, streamline your processes, and have larger margins? If you're a retailer in 2021, chances are you do. The Poirier Group's award-winning team of industrial engineers and performance improvement experts, specialize in driving results for retailers and grocers across North America. From reducing call center wait times, to improving stocking and replenishment processes in warehouses, to seamlessly integrating IT systems and more. They are your trusted partner you need. 

TPG doesn't just design solutions. They leverage years of actual industry experience to implement them and set you up for long term sustainable success. Just ask their clients, over 15 years of business; 100% positive review. 

Visit the poiriergroup.com/remarkable to learn more today. 

Yeah, that, that last part, I think is one of the longest lasting implications. Because the work from home wasn't really a big, there wasn't a lot of momentum for work from home, pre COVID. It existed, but I wouldn't call it momentum. You know, outside of the tech companies and even within, there wasn't a lot of buzz about it, so to speak. But now that's, and it has tremendous implications. And it has implications, and brings about your fourth, your fourth one, which is power consolidation among, and the last men standing. What's that about?

Steve Dennis 

Well, a couple things here. One is, you know, related to the reallocation, and the shift from online away from physical is that, you know, this whole collapse of the middle is that a lot of retailers that were on the ropes are going out of business or closing a ton of stores. And so, as those, you know, it's probably easier to think about it in terms of, you know, mall anchors, right. You know, you got all these JC Penney stores, etc, that are closed. So, you know, some of those categories have been shrinking for a while. Some of them are very contracted during the COVID times, but presumably will start to come back. But you know that volume is going to go somewhere. So, as these retailers go out of business, or they close a massive amount of stores, then presumably that market share is going to be claimed by the more powerful, better retailers in the space. So, I think the rich get richer, so to speak, in the, in the business design model. So, we'll let's see this market share consolidate around the stronger players. 

I think the other part of this consolidation is, as we've already started to see, and I think it's actually gonna pick up pace a lot, is a lot of acquisitions. Or, you know, whether it's acquisitions of weaker players, or acquisitions of you know, we've seen this a couple companies that have been buying up, essentially, intellectual property. And relaunching like Pier One has been, are about to be relaunched as an e-commerce platform. So, so you know, you got these powerful players with a lot of cash, strong balance sheets, you've got a bunch of other players that are very weak and might get sold out of bankruptcy or at fire sale prices. I think in some categories, probably like the department store category. You know, you may have 6, 7, 8 players today, my guess is in a couple years, you have one or two. There's just not enough business to go around in some of the more contracted categories, or the ones that have just been weaker over the longer term.

Michael LeBlanc 

So, I guess I hinted at this next one with, when I started talking about work from home as a thing and a permanent. But you call it rewiring, basically the great rewiring. And, and I can see that in key industries, but I think there's a lot going on whether it's travel or, or how does that extend into, into retail as you think about the implications of some of the broader longer lasting consumer behavior impacts?

Steve Dennis 

We've really re-learned that one, right? I mean, you and I lived through 911. And that was, coming out of that it was like, 'Hey, I don't really need to do all this business travel', but it bounced back with a, huge. But maybe this time is different, right? Because it does affect everybody all the time, right. 

Yeah, so I borrowed this term from Rishad Tobaccowala, who wrote a blog post called 'The Great Rewiring' a few months back we had Rishad on last season. And, you know, he makes, he makes the point around a number of different areas where things are, he would argue forever change, so work from home is probably the biggest one. More entertainment from home, maybe more eating at home. You know, will there be as much business travel even when we get in post COVID? Because maybe we've learned that man, it just takes a lot of time and money to go fly across the country to go see this client.

Yeah, I think that's the hard thing. Like, I think it's very easy to get your head around work from home being a much bigger factor. I have a harder time believing that leisure travel, you know, I I think there will be people that are just dying to go travel again, once, once it's safe, and if they have the money to do so. But business travel, I have a lot of questions about. I think, as people have, you know, bought their peloton and started working out from home, you know, does that really keep the fitness industry? You know, the traditional health club business, is that going to be forever changed? You know, what's gonna happen with restaurants? Again, I think people will be very excited to go back out and eat in a nice restaurant. But, you know, we've also developed some new habits, about, about cooking at home. You know, entertainment, unfortunately, a lot of arts organizations have, have gone out of business or, you know, are in really serious trouble. 

 So, it you know, I think it remains to be seen precisely how this will play out. But I certainly think you know, to your point, like this is so massive, has affected so many people, for you know, what's going to be a good 18 months, right, before 

Michael LeBlanc 

Yeah, 

Steve Dennis 

We're back to any some, some semblance of whatever you want to call normal. So, I think it's hard to predict exactly the way this plays out. But you know, you've actually got to be thinking about it, I think pretty, pretty carefully and starting to take action to position yourself for that.

Michael LeBlanc 

Two quick two quick comments on the business travel. I talked to a lot of merchants who are loving, having their merchandising group not have to travel the world to find vendors and meet with vendors. Now that, you know, you need once in a while to go see and you know, you don't want to buy products from a hotel room, you want to go see a maid and everything. But they're really loving that. Because that was the real grind part of being a merchant, right. You're on the road, particularly early in the year to China, it's a long trip. And you know, it's a long way to be away for the family. And it's expensive, right, these things, there's an economic benefit, which is, which is there. 

And last one, hybridization.

And quick comment on the restaurants. You know it's been interesting. I've been thinking about, talking to some restauranteurs, and they're saying, 'Listen, consumers are gonna be different, they're going to be more educated, their expectations are going to be higher'. So as much as they want to get out in experience restaurants, I, you know, the general feeling is for many consumers, there'll be a bigger number of those consumers who are just way more discerning. And so I could have made that at home. So, I think it's gonna, it's gonna force them to, to up their game. And a lot of industries, I think, will have to figure this out as we kind of go along. 

Steve Dennis 

Yeah, so this is the one, so when I go back and look at the other five, I think, in all cases, I could make a pretty compelling argument that whatever we have seen during COVID, and you know, what we're likely to see, for the next few months, we'll start to moderate. You know, I can, I can see it pulling back. Hybridization, I think is the trend that will be accelerating for the foreseeable future. And so, what I mean by hybridization, is really this idea of the blending of various things. So, for the most part, it's the blending of physical and virtual in more profound ways. So, one way to think about it is the hybrid role of the stores. You know, we touched on this in a prior episode about how, you know, for the most part, stores were places to go buy things and take them home with you. Now, over time, obviously, as e-commerce has been growing, the role has changed. 

But what COVID did was start to really put more pressure, I guess, you could say, on the role of the store being a fulfillment hub, right. So, whether that's buy online pickup in store or, or curbside pickup, or e-commerce order fulfillment, but I think also as people are really taking a hard look at real estate costs and maybe shrinking their stores, you know, there's more of a showroom component. 

On the other end of the spectrum, I think, you know, with the commoditization of a lot of retail, you're going to see certain retailers that like really want to invest in, you know, for lack of a better term, the kind of more theatrical or demonstration aspects of retail when things are safe. So, I think the role of the physical store, which has been absolutely changing for many, many years, is really gone to a whole new level. 

The other hybridization is really more around format. The planet, so certainly have plenty of retailers that you know, the conglomerates that might have different sort of format, you know, Old Navy. Gap, Banana Republic, but I think we're starting to see is, you know, say with Nordstrom Local, or even with Apple, Macy's and some others, that are creating new, smaller formats to perform a different sort of function, perhaps. You know, part of a pickup location. Or be more tailored to a local market or micro segment. And so, I think when you start talking about some of these brands, it's not going to be well, you know, there's, there's just as one flagship version of the store, there'll be many more iterations. And so maybe, as retailers close some of their bigger stores, because as more stuff moves online, the economics don't work as well, they'll actually create smaller formats, which will be fulfillment hubs or pickup hubs or service centers, or what have you.

Michael LeBlanc 

You know, to kind of wrap it up this, or to wrap up the conversation, I want to ask you this question. So, when you sit with your clients, and, and or imagine yourself, you know, with a CEO of a company and say, 'Listen, to be able to thrive in the post COVID economy, your organization needs to be different somehow, than it is today'. What would one or two of those things that they need to be better at, or different, than pre COVID? Other than reading the second edition of your book of course, step one. But, fundamentally, I think organization, organizationally, culturally, what do organizations need to be to thrive post COVID?

Steve Dennis 

Well the things I'm going to say are, I think, all things that have been important for a while, they're just amplified. So, number one is agility, right. I mean, you, you just have to be able to respond much more quickly. Not, not necessarily, because I think there's going to be another pandemic, but who knows. But you know, technology evolves much more quickly, consumer preferences change much more quickly, the competitive playing field is constantly changing. So, I think you have to build a lot more agility, you have to be much more invested in a culture of experimentation. And I think, again, you know, another old idea, but I think you have to really go much deeper on understanding customer behavior, because the kind of one size fits all or even, you know, a few sizes fit many orientations of a lot of particularly big retailers, you know, just hasn't served them very well. You know, a lot of big retailers have missed interesting segments, because they took too much of a, you know, average kind of approach to the market. And I think, particularly as some of these new technologies come out, figuring out which ones are going to be adopted, which ones are going to be just like the, you know, flash in the pan or whatever, is, is harder and harder. So, if you don't have that level of customer insight, and you don't have a test and learn culture, and you don't have the agility to respond built in, you know, just, you just can lose a lot of market share pretty quickly, as we've seen.

Michael LeBlanc 

And we're back with another 'Remarkable or Forgettable?', Steve, let's kick it off with Target. Blockbuster earnings, what do you think?

Steve Dennis 

Well, it's hard not to look at the earnings and not say they're pretty remarkable, I think, something like, they had more incremental revenue in the past year than they did the last 10 years combined, or something crazy. Digital sales were blockbuster. I mean, pretty much firing on all cylinders. So, yeah, pretty remarkable. 

I think the other part of what they talked about was this big investment they're going to make in their stores and fulfillment capabilities, more broadly. Which I think really speaks to some of the stuff we've already talked about, is this even more blurred world and how important stores are becoming in fulfilling the whole customer journey. So, yeah, very remarkable. I think the key thing of watch going forward is going to be, it's gonna be a lot harder for them to post these kind of numbers as, as physical retail starts to open up more and, you know, there's just more spreading of the spreading of consumer spending and, you know, less government stimulus and things like that, which they warned about, but yeah, pretty impressive.

Michael LeBlanc 

Yeah, I think all retailers are going to have weird comps, right. Because, you know, it's hard to comp off a rush on toilet paper. News from Disney, which, you know, it's actually took me a little bit off guard. But they've been doing some strange announcements about you know, movies on you know, where the movies play, and talk about what their plans are for stores.

Steve Dennis 

While they announced they're closing a bunch of stores. I think about 20% of their store count. And it's a little bit curious, you know, again, something we talked about a lot but, I think the, the way they talked about it seemed to be very much about thinking about online and physical retail as separate things. And I think we've, we've learned pretty strongly that that's a bad way to think about it. And, you know, to me, anytime you close stores, you're making yourself less customer relevant. Now, I don't have enough access to their data to know whether or not you know, they could close some stores or relocate some stores. But it's surprising to me if you've got a strong brand that you would, in particularly as physical retail starts to open up more. It's a little, it's a little interesting to me that they would close so many stores. So, remarkable in a bad way, perhaps.

Michael LeBlanc 

Yeah. And I've found them entirely, when I've been in their average store, unremarkable. I mean, there's just piled high let it fly kind of merchandising. And which, which seems to me always to be a miss in terms of the experience. So, I don't know, maybe you think they would, amongst all people, would get experience right a little bit more than others. 

Let's talk about thredUP. So, they're, they're getting ready for an IPO. So there's this big talk in the industry over the past years that the reuse market is bigger than fast fashion in 10 years. Of course, that's all by the people who, you know, like thredUP. I don't know how much there is behind it. But what do you think about that market? And what do you think about thredUP going in the IPO market,

Steve Dennis 

Well, the resale market, like all of apparel, has certainly been pretty tough the last year. But, yeah, it was a hot category going into the pandemic. I think there's certainly reasons to believe that it's going to grow a lot as we get into 2022 and beyond. I think, some predictions of the market like, you know, tripling or quadrupling, in the next five years. A ton of competition for sure. thredUP is a little bit more mid-priced than some of the other guys like RealReal, and Vestiaire. Also, companies that have gone to the public markets and, and raised money. So, a lot of money going in, a lot of interest in the category. 

The thing I think that's really, so I think it's remarkable in that, you know, there's gonna be a lot of activity here for the next couple, couple years at least. The thing though, that's so vexing, even when you step back from the impact of the pandemic, is all these guys are losing a ton of money. And so you can get it from the impact of the pandemic, but even before the pandemic, I think RealReal's operating margins were like negative 40% or something. But, but Poshmark and others are all losing a lot of money. So, you know, it's hard to imagine how all these guys, even with the growth that they may start to get are going to be able to make it

Michael LeBlanc 

Well, it seems they're paying attention to unit economics because I was reading some of the documentation behind the IPO and they're talking about their model changing to almost like 70 or more percent consignment. Which means they don't have to outlay a lot of money; they're just become a facilitator. So, I think that, that has changed in their model, whether that's, you know, looking at, we need to firm up our economics or that's just what customers want to do.

Steve Dennis 

Yeah, thredUP too is also much more of providing a service to other retailers. So, they're partnered up with a bunch of retailers. So, I suspect part of what helps them is that it's really the retailers that are bearing the customer acquisition and some of the marketing costs. So, that may put them in a bit better position. But their lower price points also make the unit economics tougher. So, I don't know, I mean, it's just it's pretty hard to evaluate this right in the middle of the pandemic and just with it's so early, but certainly a hot category one to watch.

Michael LeBlanc 

So, let's talk about Nordstrom and this, and this company, Tonal. Which is kind of reminds me of Mirror, which is a high tech, at home, exercise, you know Mirror was invested in by Lululemon, now completely owned by Lululemon. We know Peloton, Peloton is hot. And talk about this, what's, what's up with Nordstrom and this brand?

Steve Dennis 

Well, this is too early, or too small scale, I guess to give it really a strong remarkable. But I think it's pretty, pretty interesting both in general the number of partnerships we're seeing between big retailers and then some of these up-and-coming brands. Which I think really can be a match made in heaven done right. Because retailers, and in Nordstrom's case, you know, they get to partner with a brand that maybe gives them some better credentials in the fitness, athleisure related category. Maybe attract some new customers, drive traffic to the store. So, I think there's a lot of advantage, you know, just differentiation. So, I think a lot of things that are good for the retailer. And then for the smaller brands, it gets them a ton of exposure and lowers their acquisition cost. So, I think this overall trend is pretty interesting. 

And Nordstrom has been pretty aggressive of partnering up with some of these newer brands. So, it's not really a change for them. It's, but this is a little bit getting them more into a slightly different category rather than kind of pure fashion.

Michael LeBlanc 

All right, a couple other quick things, not I guess the folks from Sachs weren't listening to our podcast couple episodes ago because they've gone ahead and done the thing. They've gone and spun their e-commerce site into a separate business, which, which boggles my mind a little bit, but talk about it briefly for the listeners and folks at home.

Steve Dennis 

Well, it's just dumb. I mean, I mean, it's very opportunistic in terms of I guess raising money, because there's these high valuations for fashion e-commerce companies. But, but it is so anti everything we've seen about what makes retailers remarkable in terms of integrating the customer experience and leveraging data and all, you know, everything that has been important as an underlying trend, this goes against. So, they've got a bunch of contracts, I guess to try to coordinate better. But you know, in essence they put their dot com business in competition with their stores and that's a really bad idea. 

Michael LeBlanc 

Anyway, all right. Well, that was another episode of 'Remarkable or Forgettable?' We'll be back next week. 

Listen, let's bring this episode to a close. We've got, we'll get back next week to more great, to more great guests and lend us their insight and tap into their wisdom. But for now, Steve, take us home.

Steve Dennis 

Well, if you like what you heard, subscribe on your favorite podcast platform so you can catch up with all our great interviews and insights and new episodes will show up every week. And please take a minute to drop us that elusive five-star review. I'm Steve Dennis the expanded and completely revised second edition of my bestselling book, 'Remarkable Retail: How to Win and Keep Customers in the Age of Disruption' is out in April. Preorder your copy right now at Amazon, Indigo, bookshop.org or just about anywhere else books are sold.

Michael LeBlanc 

And I'm Michael LeBlanc, Producer and Host of The Voice of Retail podcast and you can learn more about me on www.meleblanc co. Have a safe week everyone, and Steve talk to you again soon.

SUMMARY KEYWORDS

retailers, stores, book, remarkable, talk, big, retail, home, business, category, hard, people, pandemic, essentials, quickly, nordstrom, episode, accelerated, question, reallocation