This week we go sans guest and go deep on the latest retail earnings and overall big picture trends--and what they portend for a retail recovery and future winners and losers. We all knew this quarter was going to be hard to dissect given the crazy comparisons to this time last year where we saw consumers panic buying toilet paper and other items, while many "essential" retailers closed their doors for weeks on end. But what behaviors will persist as we move closer and closer to a largely post-COVID world.
This week we go sans guest and go deep on the latest retail earnings and overall big picture trends--and what they portend for a retail recovery and future winners and losers.
We all knew this quarter was going to be hard to dissect given the crazy comparisons to this time last year where we saw consumers panic buying toilet paper and other items, while many "essential" retailers closed their doors for weeks on end. But what behaviors will persist as we move closer and closer to a largely post-COVID world.
Most notable in last week's new was how many "experts" got it wrong and how certain categories (home goods, pet supplies) extended their momentum and apparel seemed to spring back to life--or did it?
Beyond taking on the high level perspective, and what it suggests about the second half of 2021, we also dissect earnings from many big retailers, such as Macy's, Kohl's, Target and Walmart, and what we need to focus on in the months ahead.
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 and The Food Professor with Dr. Sylvain Charlebois. You can learn more about Michael here or on LinkedIn.
Michael LeBlanc 00:04
Welcome to Remarkable Retail podcast, Season 2, Episode 17. I'm Michael LeBlanc.
Steve Dennis 00:09
And I'm Steve Dennis.
Michael LeBlanc 00:11
Alright, Steve we've got a solo episode today, I've got you all to myself. You know, we really haven't done one of these all season, you and I were talking off mic, it feels we've reached a turning point in both the pandemic, which of course means a turning point in the retail industry from, you know, focused on the COVID era and getting through it and into what comes next. And I thought, you know, we both thought this would be a great opportunity to kind of take a pause, and just you and I chat for an episode about lots of stuff that's going on and some thoughts for the future.
Steve Dennis 00:39
Yeah, I do feel like it's a good time. And we have quite a lot of news from at least, you know, mostly from US retailers in terms of earnings. So yeah, I think it's a good, good chance to dig in. But we will be back next week with an amazing inspiring guest Rob Smith, who is the CEO and founder of The Phluid Project and G.E.T. Phluid. He's a deeply a experienced executive, worked at quite a few big retailers, but now is off on his entrepreneurial path. And it's a super interview, both from a retail strategy perspective, and we get to learn about his personal journey and how that all intersects with what he's doing professionally. So, you want to definitely check that out next week.
Michael LeBlanc 01:19
Yeah, and we'll actually be wrapping up Season 2 in, in mid-June in a couple of weeks with a really great guest that will give our listeners a big picture perspective, Matt Shay, President of the NRF. So, that will, that will bring it all together. And then maybe next Episode, you and I can chat about how we're thinking about Season 3. And what, what, what Remarkable Retail looks like next.
But let's, let's jump right in, we have a lot of stuff to cover and where you and I were talking off mic, how do we frame up all the thoughts that we've been having and, and news that's coming out and this, this kind of this point, this turning point, right. So, you, you know, both Canada, the US and the UK, have got the vaccination programs underway, and they're moving ahead. And you know, US you're, you're the CDC said, “Take your mask off, you're fully vaccinated”, that seems to have triggered lots of off masking and sales of tooth whitener. I was reading and interestingly enough,
Well, let's, let's start at the beginning. You know it Q1 is always a noisy quarter anyway. And you know, so we're seeing some results come out of the big hitters. You know, what strikes me is and you as well, is how, and why do the analysts always get it so wrong? Like.
Steve Dennis 02:30
Well, that's what really struck me in reading through the earnings releases, but I certainly have seen analysts get things wrong, but also get things right in the past. But it seemed like every earnings announcement I've read in the past two weeks, basically the story was how wrong, or you know how great it was, and one perspective that the retailer had just crushed the sales and earnings,
Michael LeBlanc 02:50
Yeah, yeah,
Steve Dennis 02:50
Estimates. So, but yeah, way, way off on a bunch of really big retailers that you would think, would be pretty easy to understand. I mean, I have one theory, which is that, particularly for the more physically anchored retailers, that we just haven't seen such large swings in sales. I mean, it's not very often that you have a retailer report, you know, 40% increase,
Michael LeBlanc 03:15
Right.
Steve Dennis 03:16
Or something like that, at least among the traditional retailers.
Michael LeBlanc 03:17
Yeah.
Steve Dennis 03:18
And I think they probably underestimated the degree that last year, you know was such, you know the quarter last year was such a debacle for non-essential retailers in terms of you know, extra expenses, stores being closed in before liquidation, you know, so it's just very hard to anchor on that. And then you have in some cases, as we'll probably get into some of these retailers with very big increases. And I think they're leveraging their fixed costs, right? And so, you can take a decent sized increase and turn that into a massive profit improvement. So, I think,
Michael LeBlanc 03:52
Yeah.
Steve Dennis 03:52
They didn't appreciate those dynamics, but it's not, we don't often see such wild fluctuation.
Michael LeBlanc 03:58
Yeah, I mean, and it's also I think, nested in a bit of the whole narrative around, the false narrative around the retail apocalypse. It's like what do you mean like, ‘They're not dead yet?’ You know, it's kind of like that Monty Python skit right? And of course, they're not dead yet you got that wrong to begin with and stores still matter and get your head around that. So, it's like it's, it's kind of hard sometimes to sort through all the news.
I mean, the other thing is the Comp Story and the comps for 2021 are just going to be so strange, right? Because on the other side, you've got a lot of retailers who are trying to comp off a mass run for toilet paper or bread makers and
Steve Dennis 04:35
Right
Michael LeBlanc 0:46
You know, the numbers are very distorted. I mean if you think back this time of the year and a little earlier, I know here in Canada there is you know, there's, there's stock-outs on shelves, that was the first time Canadian consumers probably in most of our lifetimes had seen, you know, empty shelves was not quite panic, but it was like, Oh, oh this is, this and so, people started loading up and it distorts everything one way shape, or I don't know how retailers are going to make sense of this year. Maybe the, maybe the best approach is just to index against 2019. I mean, how do you make sense of you know, comping year over year numbers against such an odd year right? 2020.
Steve Dennis 05:09
Yeah, I certainly believe it's more relevant to compare to 2019 because of just all the distortions. You know this quarter in particular, also, and I know this varies a little bit by market but, you know, most of the quarters of the quarters ending in April so it's February, March, April. And as I'm sure people will recall that March was really when, in most places COVID was really starting to take hold so,
Michael LeBlanc 05:35
Yeah.
Steve Dennis 05:35
You know, you kind of had the panic buying stock up stuff going on in February, maybe the early part of March. Then you had stores closed if they were not essential so, if you were in the apparel business or whatever. If you were in the grocery business it was on fire because people weren't eating out and.
Michael LeBlanc 05:51
Yeah.
Steve Dennis 05:52
If you're in the home business then people's and pet business you know the people starting to so, so, you just have this reallocation of spending that in some cases was driven by store closings. In other cases, it was driven by just how people were spending money differently, given.
Michael LeBlanc 06:09
Yeah.
Steve Dennis 06:09
Work from home and all this other stuff. So yeah, it's, it's pretty, it's pretty hard to make sense of it. Though I think as we go forward it will, it will get easier we just have to anchor I think on the right comparisons.
Michael LeBlanc 06:19
I mean my goodness that the US consumer was like a Timex watch you know took a beating and kept on, kept on ticking man because the, you know a little bit of financial incentive for sure some stimulus incentive. But you know, the retail numbers were just blockbuster. And I guess, you know, but how many outdoor sets of couches can you buy and barbecues? Well, in my case I buy a lot but and you know.
Steve Dennis 06:40
You're, you're an outlier. I mean, certainly in the US and a few other markets, there's definitely spending that's being buoyed by, by the stimulus, right? I mean, it's a lot of the retailer's reference that.
Michael LeBlanc 06:52
Particularly the values ends at the segment right? Because if you're you know, if you're just making ends meet week to week that money goes directly into spending,
Steve Dennis 07:00
Yeah, Yeah.
Michael LeBlanc 07:00
Right? It may go into paying your rent, but it also you know, it doesn't sit around in an investment vehicle. Right? It gets spent.
Steve Dennis 07:07
But you know, you've also got again I'm not, I'm not sure how well this applies to markets outside the US but, the home market and the real estate market is just on fire. The turnover of homes so, you know, that tends to drive a lot of a lot of spending. People trading up to a bigger house you know, you got to furnish it etc. You got people investing in their homes if they're going to stay or maybe to put it up for sale so, there's a lot of very kind of home related spending. I saw a statistic somewhere that, that something like 21% of the US Stimulus checks were spent on home related projects.
Michael LeBlanc 07:35
Wow
Steve Dennis 07:36
But, to your point how much of that, like obviously if you're going to build a lot of houses people are buying lumber, right? If you're moving into a new house and it's bigger you got to buy you know another bed or you know, different furniture or whatever, but some of those things are very much one-time purchases.
Michael LeBlanc 07:57
Yeah.
Steve Dennis 07:57
But how long will that yeah, we had passed the stimulus perhaps in the next month or two. So, still probably part of the second quarter but not as important. But then how much of this momentum keeps going because of some of these underlying trends or just the, you know, like in the apparel category. Well, you know, if you're starting to go back to work more, you're starting to go out to dinner, go to a show you know. All those kinds of things that tend to drive apparel accessory type purchases. I mean that's a whole new dynamic that's coming back as markets open so it's just a lot of moving, moving pieces. I certainly think, in general, is very positive for retail. But certainly, as you point out in some cases, you still have lots of people that are struggling to make ends meet. Even COVID but unemployment tends to still be disproportionately affecting lower income people so.
Michael LeBlanc 08:48
What will be interesting to see in my expectation is that spending and retail will start to decelerate as the you know, as we get our lives back to normal we start doing all the things we used to do where we start to travel and we start to spend our money that way and we start to go out to restaurants. And I don't know if you've seen it the car sales in America are so strange you've got people paying over MRSP on the lot
Steve Dennis 09:12
Right.
Michael LeBlanc 09:13
So, that tells us some, something really interesting is going on. And that you know I wonder anyway we might be going down a rabbit hole on that one. But you know are people still afraid to get on mass transit? Are people going to travel for the summer? You know, inter-country, which I think a lot is, a lot is happening in most countries, right. A lot of the tourism as you know this is a good if last year was a good time to be a plexiglass salesperson. This year is a great time to own an RV rental business. Right?
What a great way to see you see your country, we have a great audience from all points of contact from around the world, not just US, if not in Canada, but around the world. I mean, you look, I was talking to all Oliver Banks yesterday from, from the UK and, you know, they're, they're coming out of it. Well, there's a few bumps in the road with some variants and what they're looking at carefully they were already ahead of in many ways that they're certainly ahead of Canada. I think they're at or even ahead of in terms of grocery eCommerce was actually more advanced in the UK than it was in the states, 7, 8 %. And, and so, in some ways they're, you know, they're interesting and they're, they're trying to make sense of it their high streets really got decimated even pre-COVID are getting decimated. So, they're, they're trying to make sense of that Australia's becoming, you know, becoming the hermit country where they're not even allowed people in or out until 2020, mid 2022.
And what do you make of China? I mean, China had this little speed bump really crushed COVID. You know, it crushed them for sure. But then they, they, you know, they crushed it, put it to an end, and it really didn't slow down their economy. And of course, the demand for their manufacturing. It's just been, you know, bananas, right? I mean, container shortages. And, you know, we've never seen container prices and traffic like we're seeing today. That's just, just one thing leads to another, right?
Steve Dennis 10:56
Yeah, well, I think there's a whole dynamic around, I mean, obviously, we're going to see different markets come back at, at different rates, you know, either because of shutdowns or pace of vaccinations, those kinds of things. One of things, I think, is interesting, maybe just even going back quickly to what you were saying about cars. Is, I think from a consumer demand standpoint, maybe there's a little bit of, you know, I want to treat myself, because it's been tough.
Michael LeBlanc 11:21
Yeah. Yeah.
Steve Dennis 11:22
So, maybe I buy a nicer car, or I buy a car a year or two earlier than I might have otherwise. And I'm sure that, that plays out in other things as well. But the supply side is, is really interesting. You know, there's this big chip shortage. So, I know I have a client that's in the automotive industry. And we were saying, they were, they were saying to me that they're just, they just can't make the cars. So, it's a little unclear how strong the consumer demand is fundamentally, but certainly that there's a supply shock. And as we've seen, you know, the Suez Canal thing, I mean, there's, there's a bunch
Michael LeBlanc 11:55
Yeah.
Steve Dennis 11:55
Of stuff that is, is making it difficult, in some cases for the, the supply to meet the demand, right? And then you've got China sucking up a lot of.
Michael LeBlanc 12:06
A lot of everything.
Steve Dennis 12:07
Using raw materials. So, that's putting price pressure on so,
Michael LeBlanc 12:10
Yeah.
Steve Dennis 12:10
Obviously, there's a bunch of concern. I mean, aside from whether or not you can get the product period, there's also concern about input prices, whether we're talking about the cost of materials, but also labor too. So, I think there's a lot to be revealed in terms of, of input costs as we get into the second half of the year. Because even if the consumers feeling pretty good, I mean, there's definitely a point at which, you know, it's basic economics, right prices go up tends to tamp down demand to a degree. So, I think, again, you know, kind of beat a dead horse here. You, you just got this really noisy quarter, because it's sort of half shut down, half not. Then we start to get into this, the second quarter where it's a little bit easier to do the comparison, but there's still just so many moving pieces.
Michael LeBlanc 12:58
Well, and I think if you're familiar with it, we start talking about financial analysts in the financial sector, they call when a stock kind of goes up, but really has no fundamentals. They call it a "dead cat bounce". And by the way, I love cats, so nobody send me anything, hate mail about cats, I love cats. But you know, basically that the, the theory is, if I put it in the context of retail, I think people are just going to rush into stores, right? Because it's just, you know, I certainly is going to be the case here.
And in countries where it's been, you know, really clamped down, it's like, I want to go back to the store. Some pent-up demand, some pent-up demand are just normal again, and go to a store. And then that's when it's getting interesting, right? So, I'm not sure what lessons we'll be able to learn for the next quarter or two, holiday will be really interesting because things will be pretty normalized. I think by the time we get to a normal holiday and well you know, and will customers.
I was talking about this with someone yesterday, you know, there is this forgiveness around, from consumers around retailers who, who didn't get it quite perfect, but we're nimble. And this is a theme we've covered many times is that forgiveness go away. And it's like, you know, I rush back to the stores, I've missed them so much. And then they go like, oh, yeah, I forgot this kind of sucks. Sometimes I don't, I'm not getting back into that store, right? Like, you see that and some of these results, and I'm not sure what sense we're going to be able to make of it over the next quarter or two, but I think it's going to take a bit of time to sort itself out. eh?
Steve Dennis 14:21
Most likely, most like, I mean, I, I, I've definitely get a sense you know, down here in Dallas, which has been more open than, than certainly many parts of the world, but many parts of the United States. But I think even, even given that now that we're opening up more, I think there's a real sense of excitement around like on this board and we've done virtual meetings for 15 months and in a couple of weeks we're going to do our first in person meeting and you can just tell me, like oh my god, like we're going to be on it together.
Michael LeBlanc 14:48
Are going to shake hands. Are you going to shake hands? Yeah.
Steve Dennis 14:51
Well, we'll see, we'll see what the protocols are.
Michael LeBlanc 14:54
Yeah.
Steve Dennis 14:54
But, but i think you know, there's just this, this like overlying excitement to,
Michael Leblanc 15:18
Yeah,
Steve Dennis 15:19
Go out to dinner or a movie or whatever. But I think to your point, like the not, that, not that newness of it, but just kind of getting back into it will, will carry things for a while because it's more the energy around it as opposed to the, what am I really trying to accomplish? But I, but I definitely feels to me like, it has to get the back part of the year, will be a little bit more back to kind of what is familiar to us. But you know that this open question of, you know, how much work from home persists?
Michael LeBlanc 15:28
Yeah.
Steve Dennis 15:28
Because that obviously we've talked about this a bunch of times, but. You know, that, that has impact on clothing that has impact on restaurants. That has impact on.
Michael LeBlanc 15:35
I think that’s one of the most interesting quote, I think that's one of the most interesting, and potentially actual real changes that COVID brings is, you know, have, have we changed the culture enough because I, I see the mistake that some businesses make. They basically take what they used to do before and just move it on to Zoom and it's just burning people out.
Steve Dennis 15:54
Yeah.
Michael LeBlanc 15:54
Because you see, you see the numbers across North America, around the world, people are working more hours they're feeling more stressed. And it's, it's a little hard to so, is there this you we, we often hear this hybrid approach, right? Where you've been in office a couple of days and it's a pretty compelling economics around the hybrid approach really, you know,
Steve Dennis 16:10
Sure.
Michael LeBlanc 16:10
You shouldn't have to invest in as big as offices and people they can't live wherever they want though they're expected to be in the office so that's, that's you know, I think people got a bit ahead of themselves or had perhaps you know, I’m never going back to the office and then oh yeah, we want you in there two days a week and you live playing right away maybe?
Steve Dennis 16:28
Sure. So, I think you have to pick out you know, you have to kind of unpack, overused term, but I think you have unpack. What are like the really fundamental strong reasons for behaviors to persist?
Michael LeBlanc 16:40
Yeah.
Steve Dennis 16:40
And certainly to your point
Michael LeBlanc 16:42
Oh, that’s interesting,
Steve Dennis 16:42
And certainly, to your point, there’s a lot of economic savings to downsizing your office saving commuting costs that's just the emotional toll.
Steve Dennis 16:48
But at the same time, whether we're talking about the office or we're talking about shopping in a store, we're social animals you know that people like to be with other people, people like to be in the same place enjoying an experience together you know.
Michael LeBlanc 16:47
Yeah.
Steve Dennis 16:48
Just not the same watching the YouTube video of your favorite band than going to the concert, right? That doesn't mean there won't be some permanent shifts. But I think there is a little bit of an under estimation of you know, how purely digital or virtual things can be both but, but we'll see you know, we've this is you know, my unprecedented use of unprecedents, right. I mean that's what we've been saying and so, I think we can glean some things from, from our collective experience and just our intuition about it, but we don't have a lot of good frames of reference.
Michael LeBlanc 16:48
Yeah
Steve Dennis 17:38
For, for this time. So certainly pretty, pretty dynamic.
Michael LeBlanc 17:43
There's a Canadian joke about our constitution there's a clause in it called the 'notwithstanding clause', which is basically like an out clause of everything and that, that the phrase is “notwithstanding, the notwithstanding” clause like just trying to figure out what's going to happen.
And we were not going to do Remarkable or Forgettable this episode but we should we've been circling around it we should probably touch for a couple of minutes on the on these blockbuster kind of results that came out Macy's, Kohl's, Walmart and Target because they again we're not, we're not really a breaking news podcast but I, I the way you and I see these things is they kind of are the news is a launching point to a more interesting discussion around strategy and, and what's happening.
So Macy's profits surprise like what's your depart you, you actually said earlier you know, ironically department stores are the one thing left standing sometimes in cities because they're, they're, you know, they're the one shop stop and they've got some financial wherewithal to survive you know, at the beginning of the pandemic many thought, well okay that's it you know, your usual cast of characters down never last through this, they'll never make it but actually they you know, they actually have made it and, and then haven't done too bad like look at the Macy's and Kohl's results.
Steve Dennis 18:49
Well yes and no I mean I, I absolutely believe that the department store sector and yeah there’s
always a little bit of question of well as you know, is Target a department store? Is Kohl's a department store? But certainly the, the kind of traditional mall based department store that, that business has been contracting for 20 plus years and I think it will continue to contract.But in Macy's case they're, they're not literally the last man standing but they are the, you know, "the cream of the crap" as somebody who worked for me at the most elegant description. But you know, they were.
Michael LeBlanc 19:24
Memorable though that's a very memorable description.
Steve Dennis 19:26
Yeah, but, but they were you know, very much hit both by store closings last quarter. And by people not investing in going out kind of style, which is a lot of where they sell so to have a big swing is not surprising. And as we were talking about earlier, earlier, I think you know that the profit comparison is, is a kind of you know, was so terrible a year ago that too heavy data profit, with all the lockdown on expenses and tight inventory and all that kind of good stuff. That's not surprising. They are talking about adding some new products. lines.
Michael LeBlanc 19:42
Now small store strategy you know why.
Steve Dennis 20:03
Yeah the small store strategy is probably a whole separate episode but you know the idea of opening off price you know 15 years after.
Michael LeBlanc 20:10
Yeah.
Steve Dennis 20:10
Off price became a thing so, the whole off-price thing I am just a little skeptical that that's going to be a game changer and I we'll see what happens with these Market buy Macy's stores but the first two are here in Dallas and very uninspiring and they managed to create a very kind of boutique feel in terms of the assortment and the design which I think is actually quite good. And then you buy this really expensive item and they put it in a Macy's plastic bag and the promotional signs are all the same ones they use in the department store so that's just ridiculous like unforced error so, that's certainly fixable.
Michael LeBlanc 20:15
And own, an own goal as we would say in the.
Steve Dennis 20:49
Yeah, yeah and, and they're, they're you know they should go take a look at Nordstrom local in terms of how to do the omnichannel fulfillment stuff so,
Michael LeBlanc 20:57
Yeah.
Steve Dennis 20:57
I think there's just a lot of problems with that but you know, it's two stores they're going to open some more they can fix that.
Michael LeBlanc 21:01
They'll figure it out. Yeah.
Steve Dennis 21:02
But, but you know when you think about the size of Macy's. You know how much volume could these stores do? And you know it's, it’s going to be a long time before you know this is even a you know even if it works it's going to be a long time for even a couple 100 million dollar business which is.
Michael LeBlanc 21:16
Yeah.
Steve Dennis 21:16
Almost a rounding error and Macy's unless they keep shrinking in which case that's one way to get the percentage up. But you know when we talk about Kohl's which I think is kind of the most direct solid competitor. Yeah, I mean they did pretty well but again, they're comparing sales are up 70% but you know to against a really small base. So, their sales.
Michael LeBlanc 21:27
Yeah.
Steve Dennis 21:31
You know, you were talking earlier about comparisons to 2019. So, so Macy’s sales I believe were 10% below 2019. Kohl’s sales were 5% below 2019 so, they're not even back to even. So, that I mean that's the thing to pay more attention to and Kohl's also they've been talking about getting a lot of returns traffic because they accept Amazon returns and that's, that's going pretty well. But I'm kind of like well if that's the thing that's driving a lot of incremental traffic then a lot of the rest of your business must be down pretty significantly,
Michael LeBlanc 22:07
Yeah.
Steve Dennis 22:07
Which doesn't give me great comfort. So, so their forecast is that they won't get back to 2019 and they have a pretty cautious outlook. So, I don't as much as, as there's a lot of news about the great increases there I mean, the reality is these guys are not even going to get back to 2019 it doesn't look like.
We start to talk about Walmart and Target. You know, this is pretty interesting. I mean, Walmart was up say only 6%, digital up 37% which is below where they've been but really great profit performance. But then you got Target that was up 23%, digital up 50, but interestingly that was that percentage increase which was great a year ago in the quarter was up 151%. So, I think we're seeing the as I mentioned a few times the great acceleration start to move more towards the great moderation. But it's interesting to me that Target did so much better than Walmart. And I don't know if that's because Walmart is more reliant on grocery and so, a little bit of the shift to the eating out maybe damped that down a little bit. I don't know. Do you have any, any sense of that?
Michael LeBlanc 23:16
You know, it seems that you know from an innovation perspective Target, I give the nod to Target. I mean Amazon certainly is no you know no amateur at innovation you know certainly around particularly around the fundamentals and distribution and those things. But Target seems to have some momentum which they lost for a few years for sure. I think they really invested well in things like in-store experience, which you know, on any given metric any given survey, Target in-store experiences outperforms the Walmart in store experience, like
Steve Dennis 23:47
Yeah. yeah.
Michael LeBlanc 23:47
the customer experience.
Steve Dennis 23:48
It's never been, I think doing a really good job with the private brand.
Michael LeBlanc 23:49
Yeah.
Steve Dennis 23:51
Expansion and some, you know, not only making that a higher balance, balance of sale, but some interesting partnerships with some digital native brands and those, those kinds of things. So, yeah, I think the, I think the customer experience the, the product innovation is quite good. They also announced that they're going to be spending $4 billion dollars on stores, opening up 40 stores and remodeling 150. So, they certainly don't seem to think that physical retail is dead. Well, one other thing I just want to point out quickly as they shared a bunch of stats about their, I don't know what you want to how you know, I’ll call it their say their harmonized retail experience but the intersection between digital and physical. So, what they call "drive up", which is curbside I believe up 123% from a year ago now I don't know how well deployed they were in the first quarter because you know curbside for a lot of people didn't even exist. Buy online pick up in-store up 52% and their delivery service shipped so, home delivery up 86% and I don't have the number in front of me, but they did quote out a very large percentage of their eComm orders are fulfilled from stores. So, it's just really interesting how they have not only improved their eComm capabilities but how much the store is involved with supporting their you know what we call eComm but.
Michael LeBlanc 25:17
Yeah.
Steve Dennis 25:17
You know it's really a blend
Michael LeBlanc 25:18
And of course, they took a different approach for that by, by backward integrating and buying shipped as opposed to going with an Instacart. You know I guess my, my final thought on that is you know, Walmart seems to have really addressed themselves to take on Amazon like over the past couple of years it's like where we feel like you know, we're going to align everything to make sure that we can beat Amazon at whatever game we're going to play together you know, even launching a kind of Prime like Loyalty Program. Where's Target.
Steve Dennis 25:41
Right.
Michael LeBlanc 25:43
Kind of said we're just going to focus on the customer we're going to go. They seem to kind of acknowledge Amazon. Whereas Walmart really said that's our number one objective we need to.
Steve Dennis
Right.
Michael LeBlanc 25:55
Grab back that you know, we're number one and that's where all their investments and focus and mental energy was poured into. So, I think it's just interesting. I mean, it's a good long game to play as if you're a Walmart you say what, “what's the risk to our business on a global scale?’ Probably more Amazon than it is Target, right. Targets in one country, Amazon's around the world
Steve Dennis 26:17
I believe that's generally right the thing I'm wondering about a little bit with Walmart and we've seen some reports on some of the things they're, they're worried about in terms of their ability to take on Amazon head to head is,
Michael LeBlanc 26:30
Yeah.
Steve Dennis 26:30
Walmart is a company that is so focused on efficiency. And so, it's kind of like you know, if all you have is a hammer all you see are nails and so, I think that they're, they're focused on, you know, supply chain and pricing and, and massive assortment. You know, like back to your point kind of trying to go head to head with Amazon, but leverage their stores as a point of differentiation. It's a pretty good strategy, but I just wonder whether they, they know how to, or they spend enough time on, the effectiveness side, you know, the product side, elevating the experience, I'm not suggesting they turn into a Nordstrom or something like that. But.
Michael LeBlanc 27:06
Sure. Sure.
Steve Dennis 27:06
But, but Target, you know, if anything, I think has been criticized for not being as good on the efficiency side as
Michael LeBlanc 27:12
Yes.
Steve Dennis 27:12
Walmart. But they clearly seem to understand visual merchandising and product.
Michael LeBlanc 27:18
Yeah.
Steve Dennis 27:18
Differentiation, better.
Michael LeBlanc 27:21
You know, if you look at who's opening stores, you know, you do these, these store count checks. You know, the, the biggest growth in stores is what is in America? It's Dollar stores, which right really eats away, it's another eating away more, I think Walmart than Target. I mean, it impacts both.
Steve Dennis 27:37
Oh for sure.
Michael LeBlanc 27:38
You know, it erodes Walmart's overall share of retail more than, you know more than. So, I think they're in a different you know, if you and I were putting a matrix together, what do we defend? And where do we grow? You got to defend against that Dollar store expansion, what seems you know, 5, 6, 7 thousand dollar stores. That's not stopping that's been happening for years. And that comes
Steve Dennis 27:57
Right.
Michael LeBlanc 27:57
Right at the base of the Walmart consumer versus the Target, I think, you know, so the dynamics are, are different. I wish, I you know, I think, you know, back to the analysts right, these are the conversations you hope are having with the analysts and trying to understand to piece these things together. But they seem to be kind of, you know, trying to figure out and piece together the elephant one, one piece at a time and missing some of the, maybe the bigger picture.
Michael LeBlanc 28:20
Let's talk about the bigger picture for a second, kind of the time we have left. You know, we're all now turning our minds to post, the post-COVID era and there's a bunch of things to think about. We've talked already about a bunch of them. You know, there's the I think about it in the short, medium and long term and in the short term, you know, this summer through to holiday you've got, you know, more distortions, you don't really have any tourism to speak of, you've got.
Steve Dennis 28:43
Right.
Michael LeBlanc 28:43
You know, different places around the world adjusting, not a lot of business travel, you know, people starting to get back to their life, the medium term, things get a little more interesting, as people start to say, okay, euphoria is kind of ebbing off I think it'll be a fantastic holiday season, because it'll be a normal holiday season, people will travel. I mean, I am sure the American Thanksgiving, Canadian Thanksgiving will be much, much different than it was last year.
Steve Dennis 29:02
Sure.
Michael LeBlanc 29:08
And this return to office. So, what are the things in your mind? If you had to kind of tick a box from us, you know, if you're, if you're sitting with a client, you say, "Okay, here's the three or four things we need to understand and keep a close eye on that are more structural". Alright, what would those things in your mind be?
Steve Dennis 29:25
A couple things, I mean, certainly there is the what part of the market do we play in. For example, if you're talking about luxury, like you know, I used to work at Neiman Marcus, I mean, the, the international tourism business was very important. The big occasion business, you know, weddings, after going out, you know, charity events, you know, all that kind of stuff drove a lot of business.
So, trying to understand the pace at which some of those things that really drive demand are likely to come back. I think when you get more on the discount, or not even discount side but you know, the more mass market a lot of things around the delivery dynamics you know how much does curbside pickup persist? What's going to happen with home delivery? I just got off a conversation with someone about the dynamics of home delivery and as we've touched on before it's just way cheaper to get the customer to come to the store to get it as opposed to paying somebody.
Michael LeBlanc 30:19
I am hearing curbside here in Canada and am hearing curbside ebb off a little bit.
Steve Dennis 30:23
That's what I'm, I've been hearing you know little, little minor research just in general some of the places I go my grocery store, Target, some other places, Best Buy been in a few times just seems way less busy. So, you know what does that mean for economics? What does it mean to you know are is that because customers are happy to come in the store? Is that because now they've gotten used to buying online and maybe they'll okay well I'll just you know ship it home. So, so I think the logistics fulfillment side. You know, there's, there's so much wrapped up in that in terms of doing it well.
Michael LeBlanc 31:00
Yeah.
Steve Dennis 31:00
And doing it cost effectively. So, understanding those, those dynamics in terms of the consumer behavior and how it reflects on your economics because then I know we've touched on this before I don't think you can necessarily project forward based on the adoption of some of these things because.
Michael LeBlanc 31:18
Yeah.
Steve Dennis 31:18
Retailers were being you know, frankly, desperate in some cases, just to preserve the volume. And consumers were so freaked out that they were opting for things because they either couldn't go to the store or.
Michael LeBlanc 31:29
Yeah.
Steve Dennis 31:29
They could but, they didn't want to well now they can go to the store and they start to go like "wow" you know, I mean this isn't, this isn't the Target world this is the food world but I ordered some Thai food the other day and you know the item was $10 but it ended up costing me 22 bucks because.
Michael LeBlanc 31:34
Wow.
Steve Dennis 31:34
The delivery fees.
Michael LeBlanc 31:36
Yeah.
Steve Dennis 31:37
The tip the whole thing and.
Michael LeBlanc 31:39
You start to wonder, I don't need to do that anymore so,
Steve Dennis 31:41
Well, Well.
Michael LeBlanc 31:41
You know.
Steve Dennis 31:42
And you know I didn't do as safety. I did it just because I was very busy. I don't have time to cook or whatever, but you know you start to look at that over time and the cost of doing that. I, I think they're they'll just be a different demand kind of, kind of equation and the retailers that you know whether they're paying Uber Eats or shipped or you know those, those fees or costs to do home delivery I think there's going to be a lot more scrutiny on that.
Michael LeBlanc 32:20
Yeah.
Steve Dennis 32:20
Going forward so that, that will affect how, how,
Michael LeBlanc 32:23
Yeah. That's why I thought they'd be more focused and we'll, we'll see more focused on encouraging curbside because at, at least you know it's an expensive way to do store retail. But it's a very inexpensive way to do online fulfillment, relative to the alternative. So, you know, and I don’t know I'm surprised a little bit at how quickly that's pulling back both from a, I think that can this is one of these, you know what happens in the short versus medium term. Because I think consumers are rushed back to the stores and then go "well this wasn't as fun and as much fun as I thought it was".Kind of like the workplace right? And.
Steve Dennis 32:56
Yeah.
Michael LeBlanc 32:56
Geez that, that two-hour commute wasn't fun after all. Why am I, why am I jonesing to get back to the office again? And then they'll go “hey that curb maybe I’ll go back to that curbside”, so it'll be interesting. Okay, so that's a, that's a big one. What are the, what are the key things that are you looking at, to kind of say, these are you know, these are the indexes. If I index these three or four things that'll give me some sense for, for how things are going to unfold in the next 18 months?
Steve Dennis 33:19
I mean, I think work from home and how that plays out is huge we've already touched on that I guess the other one is really you know going out whether the going out is.
Michael LeBlanc 33:26
Yeah.
Steve Dennis 33:26
To eat at a restaurant, go to a movie, go to a play. I mean certainly I think all those things are going to increase dramatically. But do we get back to where we were before? You know that's a big variable and you know, obviously if you are going to the theater, right, you know, well, then you're maybe eating at a place down the street.
Michael LeBlanc 33:39
For every action a reaction, right? So, all this spending does the just, the big giant whooshing sound as it comes out of retail and goes back into the service sector.
Steve Dennis 34:00
Yeah, I mean the couple other things, or maybe they're all or one thing is, is how does physical retail evolve? Because and I know you've touched on this before and, I think it'd be actually great maybe to really get into this and in detail. But where retail has gone or stores have gone from basically places for the consumer to go look at stuff, check it out and bring it home still got that, right?
But you've got the showroom part of it. You've got now all this digital fulfillment and so, it to use your example. If we're not doing as much curbside pickup is that because we're going into the store? And are we going into the store to actually shop? Or are we going into the store to do buy online pick up in-store? If there's a lot more buy online pick up in-store, buy online returned to store. How's our store set up to do that with a good experience and so, and you know, Target is fulfilling all I'm still trying to figure out how this works because they quote these amazing numbers for curbside pickup, buy online pick up, in-store and fulfilled from store.
And when I go to Target like I don't see it, what does that look like? Are they fulfilling all those eCommerce orders when the store is closed? Because there aren't much people running around the store, from what I can tell, picking and packing and or picking orders. So, and you know, what does that need to look like long term if, if, if that activity is half then you don't necessarily want to totally redo your, your store model or reallocate space. So, I think, trying to figure out operationally and from a capital perspective, what kind of investments you need to make.
Michael LeBlanc 35:30
Yeah.
Steve Dennis 35:30
To respond to this much more blended shopping world. It's a huge question. And I think it's because it's so expensive, and it takes so long, and from an operating model can be potentially much more complicated. You don't necessarily want to make those big bold moves, if you don't know how some of this stuff is going to settle out. So, I think it's a really hard thing.
Michael LeBlanc 35:42
Yeah
Steve Dennis 35:51
To, to plan out at this point.
Michael LeBlanc 35:53
I was looking, I was looking at a.
Steve Dennis 35:55
A bunch of scenerios.
Michael LeBlanc 35:56
Yeah, a bunch of scenarios, right? I mean, I was looking at a study from that was put out by (inaudible) with Wharton and actually a friend of mine, Paula Courtney, and she always takes the approach, and we did work together. What are the experiences in retail that break loyalty? So, she comes at it from the other side?
Steve Dennis 36:14
Yeah,
Michael LeBlanc 36:15
And, and I, it was fascinating. And we talked about it a bit off mic, the list that came out last month, you know, there's 10 things. What are the top 10 things? And I said, “Show me that list from 10 years ago”. And what a dramatic difference. Like 10 years ago, it was like slow checkout times,
Steve Dennis 36:29
Right.
Michael LeBlanc 36:29
Long lines, can't find a parking spot. You know, all the things you think. This year, the top eight out of the 10, were all had to do with the integration of online and physical retail.
Steve Dennis 36:39
Yeah.
Michael LeBlanc 36:39
You know, the that store inventory online was wrong. It said, you, you know, long lines for the pickup like it, it that's been in my mind the transformation from customer expectation is they don't expect after all this to see that kind of this isn't the store, store this is the online store kind of nonsense. That still happens every now and then you show up. Yeah, we don't actually have that yet that online thing. And this is where I think the watch out, and, and you know, from my perspective. And this is going to be great fodder for our Season 3, which is to be careful the lessons you learn from the COVID era. And, you know, the fact that consumers gave, I think, a fair bit of forgiveness, or wiggle room around things that weren't perfect, I think that will be short lived.
Steve Dennis 36:58
Yeah.
Michael LeBlanc 37:11
And, you know, the demands to have, I think perhaps one of the long-lasting implications of COVID. That was accelerated to give our nickel to our friend, Carl Boutet, was that the expectations of these two things they need to be together; if you're going to be a remarkable retail, step one, you know, foundationally, I need the basics to work and the basics are no longer long checkout lines or fast checkout or whatever. It's, you know, listen, I want the store inventory to be accurate. I want it to be online. I wanted all these things to merge together. And that I think that's, that's a new test of a new litmus test of customer experience and success.
Well, all right. Well, we've, we've kind of a wide range and great discussion, actually. And we'll be talking more about Season 3. Later on, maybe next, next podcast again, we got a great interviews coming up to wrap up, Season 2 with, with Ro’b and Matt Shay from the NRF. And so, we're looking forward to that. We'll get back next week with Remarkable or Forgettable’ because that's just a pile of fun, too. And, and but overall, that's, that's kind of a wrap on, on this Episode.
Steve Dennis 38:29
Well, yeah. And if you liked what you heard, please follow us on Apple, Spotify, Amazon Music or 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, please, please, please don't make me beg. Take a minute, to drop us that elusive five-star rating. And when I tell a friend in the retail industry about how remarkable this podcast is, 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 available at Amazonindigobookshop.org or just about anywhere books are sold.
Michael LeBlanc39:08
And I'm Michael LeBlanc, Producer and Host of The Voice of Retail Podcast. You can learn more about me on LinkedIn or on meleblanc.co. Steve, have a safe weekend and I will talk to you next week.
SUMMARY KEYWORDS
store, retail, people, Macys, retailers, Walmart, business, Target, consumers, big, spending, year, talking, Amazon, interesting, terms, home, buy, quarter, department store