In this episode we delve into why unremarkable retailers often struggle to make the changes they must until essentially being forced to, as well as what it takes to embrace a true culture of experimentation.
"The future is already here--it's just not very evenly distributed."
- William Gibson
In this episode we delve into why unremarkable retailers often struggle to make the changes they must until essentially being forced to, as well as what it takes to embrace a true culture of experimentation.
Among the areas we explore are
But first we open up with retail stories that caught our attention, including a big week in earnings reports from Macy's (not as good as many thought), Wayfair (a big whiff) and Allbirds (not so high flying anymore).
We also announce plans for a future episode where we answer your questions. Please record your questions at Speakpipe.com/remarkableretail.
Dan Pink's New Book The Power of Regret
Michael's interview with Dan on The Voice of Retail #podcast
Steven Pressfield's The War of Art
Central Market rolls out curbside pick-up (2018)
About Us
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome to Remarkable Retail podcast, season four, episode seven. I'm Michael LeBlanc.
Steve Dennis 00:11
And I'm Steve Dennis.
Michael LeBlanc 00:12
Why does it take a crisis for retailers to innovate? Steve, welcome back. We're back on the mic for another solo episode. Thanks again to all the listeners. These episodes, and we've got lots of interviews coming up, but these back to back solo episodes, these are, kind of, fundamental, interestingly, provocative strategy points. So, and, and it's resonating well with the listeners. So, we're going to talk about, it's actually part of your book.
Steve Dennis 00:36
Yeah, it's been, kind of, an interest of, of mine, probably for 20 plus years, having worked in innovation and often running into or being part of organizations, when I was in senior roles, but also, last bit here, as a consultant, seeing why is it that retailers often struggle to make the changes they, they need to make?
Michael LeBlanc 00:58
All right. Well, we've got our news coming up. But before that, speaking of innovation, we got some innovation, we have a new feature, a new segment that we want to tell listeners about, "Ask Steve". What is this? You can ask Steve a question. And we will pick the most, the most remarkable questions and answer them.
Michael LeBlanc 01:21
And I've set up with an organization, or a link, called SpeakPipe, where you can leave a voicemail for us online, we'll get it and you got 90 seconds to give us, ask us a question. And we'll pick one, and, and we'll pick remarkable ones, and we'll put it into the podcast and, and we'll hear the vox populi, voice of the people.
Steve Dennis 01:46
That's Latin, isn't it?
Michael LeBlanc 01:49
It's Latin, that is Latin. All right, so if you want to participate, we'll put this in the show notes. But it is at SpeakPipe, S-P-E-A-K, pipe, speakpipe.com/remarkableretail. So, speakpipe.com/remarkableretail. You got 90 seconds to leave a provocative or interesting question. And, and, and we'll take it on.
Michael LeBlanc 02:11
All right. Let's get to the news. Now, it happens to be a big earnings week, but behind the earnings, because we're not really, you know, current events podcast, lots of great people do that, we are more talking about what the earnings mean. So, let's, let's talk about Macy's. So, Macy's came out with a couple of interesting statements this, this earnings, bundled together, one of which was about e-commerce, but talk about what you saw in the Macy's earnings.
Steve Dennis 02:37
You know, they were, they were quite strong on, on an absolute and a relative basis. They had strong sales growth. And like we talked about with Walmart, I guess last week, a huge reversal in fortunes when it came to, to earnings. So, swinging from a very sizable loss to a pretty solid profit. Really, the discussion that I saw was, does this mean that Macy's is back.
Steve Dennis 03:02
That this is really an indication of strength and perhaps renewed interest in mall-based department stores. And I think that's the wrong conclusion. I think they, they're comparing certainly to very weak numbers. We, as we've talked about a few times, the consumer continues to spend at above normal rates. And that's not going to last forever.
Steve Dennis 03:23
And I don't fundamentally see, while I think Macy's is arguably executing, not arguably, I would say they are executing better than JCPenney and some others. But as I often say, better is not the same as good. And it often is far short of remarkable. So, I really don't think the fundamental challenges of the moderate department stores have gone away. There's a lot more that has to happen over the long-term for, for Macy's to really be a long-term player.
Michael LeBlanc 03:51
Now, we've, we've talked about, these organizations that are spinning off their e-commerce and putting them into separate divisions, and, you know, there's pros and cons, feels like more cons, but Macy's was, was being chased to do that, and they seem to have reached a decision.
Steve Dennis 04:05
Yeah, they were, they said they are rejecting that. They're not going to pursue that as a strategy. And I think that is absolutely the right call, so, we'll give, give props to them on that front. And I think that will help give them, you know, the right structure to, to move ahead.
Michael LeBlanc 04:21
Well, I was thinking about the old saying birds of a feather, Allbirds and Wayfair, both released earnings, and neither of them were great. What do you think, what's going on?
Steve Dennis 04:33
Well, we've been, not that we're in the predictions business here so much, though, I did include some, some references to this in my predictions for 2022 about the profitless prosperity. In other words, this great sales growth we're seeing from some of these high profile brands, but not so much profitability.
Steve Dennis 04:53
So, Wayfair, which has actually been around quite a long time, I think about 20 years, finally swung to a profit after losing gazillion dollars, I think that's approximation, gazillion dollars over about 15 years—
Michael LeBlanc 05:06
A rounded, you rounded up there, I think.
Steve Dennis 05:07
I rounded, I rounded up.
Michael LeBlanc 05:08
Yeah.
Steve Dennis 05:09
They, they swung to a profit for a few quarters during the pandemic. And there was some suggestion that that was a sign that they were onto greater things. But yet, they have really hit a wall. Their sales were down 11% year-over-year. And so, for a company that's been growing at 20, 30, 35%, for a number of years, that was a big step back, and they lost $202 million for the fourth quarter.
Steve Dennis 05:39
So, despite all the interest and distorted spending in home furnishings, despite this move to online, they don't seem to be benefiting from that. And I think some of it is, you know, they certainly have some issues with supply chain. And, you know, there are other things that, that aren't awesome for them.
Steve Dennis 05:57
But I think what they really did, most likely, is pull forward a lot of demand, they would have had otherwise. And they seem to struggle with moving the top line without spending a ton on marketing and pricing very aggressively. Their gross profit’s only like, I don't know if I have that number in front of me, 27% gross margin. You know, that's—
Michael LeBlanc 06:16
Doesn't leave a lot of EBITA at the bottom line, right.
Steve Dennis 06:18
Exactly. So, I think until, until they can really drive this business without having to spend so much money on marketing and, and lowering price. It's a, it's a, it's a shaky business model. And then Allbirds we talked about, I mean, we had the discussion with Dan McCarthy last year about some of the dynamics of customer value for, for Allbirds and others.
Steve Dennis 06:41
And when they went public four or five months ago, I predicted that this stock would not continue to be high flying, see what I did there. And their first quarter as a public company came out and their sales were up pretty strongly, like 27%, I think for 2022.
Michael LeBlanc 07:00
Yeah, that's good, that's good.
Steve Dennis 07:01
But their loss was even wider. They lost $45 million for the year. So, that is a negative margin of, what, close to 20%. Not so awesome.
Michael LeBlanc 07:15
Yeah.
Steve Dennis 07:15
And the stock is now down 50%, since its IPO.
Michael LeBlanc 07:21
I saw, I think I also saw some other news that they were opening and, was it Kohl's, they were opening shop-in-shops in physical stores, that was their, their game plan. Did I read that right?
Steve Dennis 07:30
They, they did announce that they're, they've had a couple of, or maybe just one wholesale partnership with Nordstrom I believe, I'm not sure how expansive that is. But yes, they are now looking, they're going to look at wider wholesale distribution, in addition to continuing to open their own store. So, yes, that was, that was a news, new piece of information, in terms of their growth strategy.
Michael LeBlanc 07:53
It feels like a pretty conventional go-to-market strategy to me, you know. Start a brand and then do shop-in-shops. And boy, we're seeing, we're seeing, we're seeing a lot, right, we're seeing Ulta in Target, we're seeing all kinds of interesting things, but digital native vertical brands being a little less digital and more physical, right.
Steve Dennis 08:10
Well, I think the broader point, probably two broader points. One is that, as, as we've, we've talked about it, it's kind of, you know, the foundation of my book, is that there, you know, physical retail isn't dead. There's a lot of reasons why physical retail is an important part of an overall strategy.
Steve Dennis 08:24
And I think a lot of these digitally native brands have, have come to realize that some sort of physical presence is important. I think the partnerships on the wholesale side, you know, that not only gives the digitally native brand, more exposure, you know, sort of marketing—
Michael LeBlanc 08:41
Yeah.
Steve Dennis 08:42
You know, the margin is, is shorter. They don't have to spend all this money on customer acquisition, because they're leveraging the existing traffic of the retailer. And from the retailer perspective, where it's very difficult, you know, in a world where you can find just about anything online, what's that point of differentiation?
Steve Dennis 08:58
What's that reason to shop at, you know, whether it's Kohl's or Macy's, whatever, all these brands, these multi-line department stores, or multi-line retailers are trying to find an edge over, over the Amazons of the world. And so, the semi-exclusive wholesale deals can be—
Michael LeBlanc 09:14
Yeah.
Steve Dennis 09:14
Something that really works for both. So, I think it's a very logical strategy and I suspect we'll continue to, continue to see more of it.
Michael LeBlanc 09:21
All right, let's get on to our episode here. We're talking about, and I share your interest but not your, your depth of expertise in this, why it takes a crisis to make change happen. And goodness knows we are faced over the past couple of years with, whether it's environmental crisis, whether it's a, goodness, today, a new war in Europe, or whether it's COVID, that it does seem to motivate behavior.
Michael LeBlanc 09:48
I hate that saying a good crisis no, what is it, never let a good crisis go to waste. Which I hate as a saying, particularly around COVID, but it is the case that we did see a lot of things happen under, whether it's duress, or whether it was a crisis, or which, whether it was need. And let's talk about it, let's talk about why this, this seems to consistently move the business or industries forward.
Steve Dennis 10:11
Yeah, it's really, it's really a pattern. And, and maybe we need to have a, a psychologist on, on the show as much as somebody like me. Because I do think that it's, it's a pretty persistent pattern, whether we're talking about innovation in the corporate world, or in other types of organizations, or whether it's, it's change in our own personal lives that most, most people don't make dramatic change until they're, in essence, forced to, or they've, kind of, run out of options.
Steve Dennis 10:42
You know, it's quite unusual to see people in organizations be, be proactive. And so, I think a lot of what we saw during the COVID-era was really born out of desperation, right. I mean, when, whether it was customers can't come into the store, how do we get inventory out of the store? So, we’ll, we’ll do e-commerce fulfillment from stores or curbside pickup. Those, those kinds of things. Contactless payment.
Michael LeBlanc 11:07
Customers, yeah, customers don't want to touch us anymore. So, how do we do that?
Steve Dennis 11:10
Yeah, so, so it's very responsive to, to that, that reality. But then there were other things like buy-online-pick-up-in-store, which got massively accelerated or buy-online—
Michael LeBlanc 11:21
Yeah.
Steve Dennis 11:23
Return-to-store, that had been around for a really long time. And I think, I don't know the exact numbers, I'm sure somebody can find them, but, I mean, I want to say that maybe 30, 40% of all retailers already had buy-online-pickup-in-store.
Michael LeBlanc 11:35
Yeah.
Steve Dennis 11:36
And then, you know, and then it got to like, you know, 90 plus percent. And my question would be, was there really a good reason that you didn't roll it out pre-COVID? I think I've mentioned this another time on the podcast, but, but down in Dallas, where I am in Texas, H-E-B, the big grocery store chain down here has an upscale supermarket called Central Market.
Steve Dennis 11:59
Several years ago, so before COVID, they retrofitted, I believe, all of their stores to create a whole dedicated curbside pickup area where they segregated, you know, they don't have people going up and down the aisle picking-to-order, you know, so the consumer doesn't have to dodge the, the pickup people, but they created all this special signage, and parking spaces, and, and everything.
Steve Dennis 12:23
And it really, really is a slick operation. And, you know, they were in beautiful shape for, for COVID. Whereas everybody else, you know, the Krogers and Albertsons, and everybody we know we're scrambling to try to figure this out, and ultimately, don't have a very good setup for it.
Michael LeBlanc 12:39
Yeah.
Steve Dennis 12:39
Yeah, so I don't know in Central Market's case, I don't know the whole story there, whether it was just some customer insight they had, whether it was something about their business.
Michael LeBlanc 12:49
Was it philosophy? I mean, I've talked to retailers who look at BOPIS as an expensive way to do retail, retail, rather than a, you know, a strategic advantage in something that customers want. I mean, you know, I think there's a philosophical, you know, we're talking about one specific thing, but it, I think it has broader implications about, let's not do it until we have to, kind of thinking, right.
Steve Dennis 13:10
Well, I certainly think there's, there's sort of this, this automatic push back, that comes from something that is costly, complex, etc. You know, you don't, you don't want to necessarily automatically sign up for that, unless there's a very clear competitive advantage.
Steve Dennis 13:31
I'm assuming in Central Market's case and in other retailers that have, kind of, keep pushing the edges on, on innovation, that they believe that it's, it's to their advantage to get out in front of things and, and make that, make that (inaudible).
Steve Dennis 13:47
So, I think you can certainly look at a lot of businesses, a lot of retail businesses where, you know, I sometimes call it the defenders of the status quo, or, or the department of no, I think Sucharita Kodali calls it but—
Michael LeBlanc 13:59
Right.
Steve Dennis 13:59
But where the organization is fundamentally wired to say no—
Michael LeBlanc 14:03
Yeah.
Steve Dennis 14:03
And they relentlessly defend the status quo, and it's only under duress that they're likely to change. And, you know, of course, perhaps the obvious implication of that is, you, you're always playing catch up. And in many cases, particularly the pace at which things move today, you can get so far behind that it's impossible to catch up, you know, back in the good old days, when most things were, were not digital, it wasn't so easy to scale things.
Michael LeBlanc 14:33
But, but is, is there room in your thinking for a, let's call it, a fast follower strategy. We know that being too far out front, you know, whether it's an edge case or wherever means, you know, leaves you liable to spending a lot of money and maybe going in the wrong direction too fast, then maybe you take a pause.
Michael LeBlanc 14:49
Like how do you figure that, how do you figure that, the right cadence in other words, right. Let's, let's, let the competitors take this on and, who knows, maybe even create the market. I mean, if customers decide they like it—
Steve Dennis 14:59
Sure.
Michael LeBlanc 15:00
Okay, then we'll do it, right. And—
Steve Dennis 15:02
Yeah.
Michael LeBlanc 15:02
You know, is there room, is there room in your thinking for that kind of approach.
Steve Dennis 15:05
Yeah, and I think there's no one size fits all for this. I do think a starting point has a lot to do with the essence of your brand, and the story of your brand, and why customers are enrolled in your brand.
Steve Dennis 15:17
And if your brand is more towards innovation, and being the latest and greatest, and you identify with that brand because the brand is at the forefront of fashion, or technology, or whatever it might be, then you're going to prioritize that differently than a, than a more, kind of, mundane price-oriented brand, right.
Steve Dennis 15:35
So, so I think the brand strategy, and the positioning, and, and being aligned with your customers values is, is a starting point. But then you have to go down into the, into the nuts and bolts of it. The second thing I was going to say is my, my biggest assessment of why it takes a crisis for most retailers to innovate, is they fundamentally misunderstand risk. In other words—
Michael LeBlanc 16:01
Yeah, say more about that, what do you mean?
Steve Dennis 16:03
They think, yeah, they think that a slow and steady approach, or a wait and see approach, or, you know, we'll be able to catch up approach, is fundamentally less risky, when in fact, I think we, what we have learned through history, but certainly learned over the last five or 10 years, is really the opposite is risky.
Steve Dennis 16:25
That taking that wait and see approach often puts you so far behind that you can't catch up. So, I think there is a, you know, you have to really do the work to understand the risk of inaction. And unfortunately, that's, you know, that's a hard thing to quantify until well after the fact, right. That's a very, like—
Michael LeBlanc 16:46
Yeah.
Steve Dennis 16:46
You can say, I'll give you an example. When I was at Sears, a gazillion years ago, when we were looking at some of these off the mall concepts. Because we were losing market share in certain categories on the mall. When we would say, well, we could build this, let's say for sake of argument, kind of, Best Buy knockoff, but would have Kenmore and some of the other Sears advantages.
Steve Dennis 17:09
We could create our own version of that. The question was usually well, or the, the philosophy was, well, just don't build it anywhere close to one of our stores. Because—
Michael LeBlanc 17:17
Right, don't cannibalize our own.
Steve Dennis 17:19
Or cannibalization, right. And of course, you know, because we took that attitude, well, in many cases, we didn't pursue things very aggressively. But, you know, then the Best Buy opened across the street from the mall, and we lost all that market share. So, you know, you have to, it's easy to say, I don't want to have that outlay of money because I might lose it all, or I don't like the diversionary cannibalization effect of, of disrupting ourselves.
Steve Dennis 17:46
But the reality is, you're going to get disrupted most likely, at some point, whether you do it or not. And so, I think a lot of these, these, you know, whether it's an acquisition, whether it's a new format, whether it's a new service offering, a lot of times they get, at least the industry leaders, that get slow walked because they're not willing to compete with themselves, or they're not willing to have a certain expense today, against a theoretical expense in the future.
Steve Dennis 18:13
So, I don't think it's easy to precisely model that out. But my experience, both working within organizations and as a consultant, has been, there's really just a fundamental misunderstanding, of, of risk.
Michael LeBlanc 18:29
You know, you bring up a, a thought, or, I interviewed Dan Pink and his new book "The Power of Regret". And it's a great interview on The Voice of Retail. And basically, in this book, and I tell, I advise everybody pick this book up, because it's such an interesting read, not unlike your book, of course, is that he, he classifies regrets into four categories.And one of them is regret of boldness, and that turns out to be the biggest category. In other words—
Steve Dennis 18:53
Yeah.
Michael LeBlanc 18:56
When asked, the most people's regrets fit into, I should have been bolder, I misread the downside. In other words, what could have happened, you know, and it's really reflecting on what you're saying.
Steve Dennis 19:08
I think, absolutely. I really do think and I, you know, I believed this before reading Dan's book, that, but his book is beautiful, and lots of richness there in a way that, that I hadn't thought about, for sure, but I do think that the power of regret and, and really going through that, that thought process can be really, really motivating.
Steve Dennis 19:33
I think it's, it's very useful to ask yourself, well, what might we regret if we were not to make this acquisition, or not to start this pilot or, or whatever it might be. Just trying to get a sense of that, again, it's very hard to quantify because you're talking about a theoretical future. But you know, I often say if you look at the, the unremarkable retailers today, most of them watched the last 20 years happen to them, right. Like talk about Macy's, right.
Michael LeBlanc 19:59
Yeah.
Steve Dennis 19:59
Department stores, just to go back to that because we talked about it, but department stores have lost market share in the United States, for, I think it's 21 straight years. And I left the moderate department store business in 2003. But I can tell you, we absolutely understood at Sears, that the secular trends for the department store were terrible.
Steve Dennis 20:22
And nobody had any real compelling reason to suggest they were ever going to change. Like the, that ship was moving. Now, did we do enough about it? Absolutely not. But you know, you think, and Sear's problems are a whole other, whole other thing, right.
Michael LeBlanc 20:35
Yeah.
Steve Dennis 20:35
But if you look at Macy's and JCPenney, in particular, and you can say this about other department stores in different countries, they took very small measures, or half measures availed us nothing, as we say in the 12-step tradition, to respond to what was going on. And it's been a slow-motion car crash really.
Steve Dennis 20:51
And, and but what, what were those bold steps they could have taken all along the way. And now, if you look at Macy's, if you look at JCPenney, Dillard's, many others, what is it they're doing now that is really going to move the dial? All that's happened—
Michael LeBlanc 21:14
Wetzel's, Wetzel's Pretzels.
Steve Dennis 21:16
Wetzel's Pretzels apparently is the answer. But, you know, you think about how do you let 60, 70, 80% of your profit pool disappear to the T.J. Maxx's, the Kohl's, the Walmart's, the Targets of the world, and not do anything meaningful to stem the tide. And there's very fundamental reasons why those, those formats are more successful than the on the mall versions.
Steve Dennis 21:43
It's, it's not because they don't have the Jennifer Lopez line of, of athleisure or something, like that, that's not, or pretzels, you know that, that is not solving the fundamental relevance and remarkability problem. But again, you know, now, and reason why I say, you know, the regret thing is, well, you know, would have been really helpful for Macy's to address those issues more boldly, any time during the last 20 years.
Steve Dennis 22:07
And now, you know, that market share has solidified with those other players. And in an era where very good is no longer good enough. To try to win back customers that have already placed their bets with other retailers is incredibly hard in this environment, or in this, you know, this age of modern retail.
Michael LeBlanc 22:26
Well, for the listeners, particularly the retail operators listening, what is the prescription? What is your prescription? You know, where, wherever you happen to sit, you've often said in terms of the future, that great quote, the future is already here, it's just not equally distributed.
Michael LeBlanc 22:42
Is it that, kind of, you know, hit the brakes and hit your head on the windshield, kind of, recognition? Like, what, what, and as you sit down with clients and say, listen, here's how I see the world, and here's where I see you going, and here's perhaps one element you need to improve on.
Michael LeBlanc 22:56
What's, what's the first step, like how do you move an organization towards a place that isn't just fast following or isn't just behind, that actually starts to innovate and, and move the business forward?
Steve Dennis 23:09
Well, there's several things and unfortunately, it is very complex. You know, people have been studying innovation, certainly more thoroughly than I have been, for, for ages. But I would say, you know, number one, you know, what are the cultural barriers? Why is it that if, if you're wired to say no, if you are constantly defending the status quo, what is fundamentally behind that, and cultures are notoriously hard to change. So, that, that's, that's the big one—
Michael LeBlanc 23:32
And compensation, of course, right.
Steve Dennis 23:33
Yeah, compensation, different talent, you know, there's a lot of things, but it's certainly hard. That's a really hard one, you know, to, to move quickly. I think really understanding, and this is why I say sometimes might be good to have a psychology here, but I think, you know, so much of, of why, again, as individuals, as teams, as organizations, we fail to take the action we must, is really rooted in what Steven Pressfield, great author, talks about.
Steve Dennis 24:00
Particularly in "The War of Art", which I would recommend to everybody, is the resistance, you know, is this fear, it's this, kind of, primal lizard brain of being wrong, of, of looking stupid, of, of getting fired. And, you know, in many cases, those are, are real, I think it's, I always get this wrong. I think it's, I think Mark Twain said, you know, I've, I've had many horrible things happen to me in my life, some of which actually came true. You know, it's like this thoughts.
Michael LeBlanc 24:25
Yeah, yeah.
Steve Dennis 24:26
I think I've totally bastardized that quote, but maybe we'll get it right in the show notes. But in any event, it's, you know, it really, you know, what is it, what is it that we're afraid of that keeps us from, from acting. And is that fear rea-, real, and this is the chance to get into the regret thing, right. Like, well, what about the fear of having your, you know, your business be decimated over the next five years—
Michael LeBlanc 24:46
Yeah.
Steve Dennis 24:46
Because you didn't do it. So, you've got to, you got to try to reframe that and get that risk perception. But fundamentally, though, I think you have to really, you have to realize that innovation is a discipline, like merchandise planning is a discipline, you know, SEO maximization, or SEO is a, is a discipline. And treat it as a real set of capabilities and a process, or series of processes, that you have to design well.
Steve Dennis 25:12
Some of that is actually having what I would call, other people use different terms, you know, an R&D budget. You know, how much, how much budget, including, you know, dollars, checks you're going to write, but also people are going to be devoted to whatever your innovation agenda looks like. Because if it's not budgeted, and people aren't responsible for it, it's not very likely to get done. But a lot of it is also just being willing to try to more, try more stuff.
Michael LeBlanc 25:38
Can you buy innovation? So, we, you, between you and I, we'd probably come up with half a dozen examples of big retailers, whether it's Walmart or Macy's, buying small innovative retailers. I think of, you know, Walmart, and basically, they bought Marc Lore's business and—
Steve Dennis 25:53
Right.
Michael LeBlanc 25:53
Brought that into the organization to ostensibly inject the DNA of innovation into a, just the, the, an organization that size. I can think of others like Macy's who bought Rachel Shechtman business, who also tried to do the same thing, right.
Michael LeBlanc 26:10
Where, you know, they tried to say, well, let's, let's bring her in as Chief Innovation Officer, let's buy our way to some innovation. Do you, can you think of as many examples where that might work? It feels like it worked okay at Walmart. I don't know, what do you think?
Steve Dennis 26:22
I definitely think acquisition of, of businesses tends to work better when it fills a broader gap. It's not just about acquiring the talent, because it's usually a lot cheaper just to hire, hire that in, than, than buy a business. I mean, you know, and in Walmart's case, with Jet, you know, they did get a lot of talent, they also got the opportunity to burn through, you know, a billion dollars of cash for a couple years until they figured that out.
Steve Dennis 26:46
So, but I think overall, yeah, it's probably helped them. But I don't think they're that many examples of, kind of, buying your way into a cultural change, because usually the culture that you buy is fighting with the culture that you have. And you still haven't solved the underlying problem. But I think it, you know, it takes a village, you got to try a lot of different things if you're really going to try to change—
Michael LeBlanc 27:07
Yeah.
Steve Dennis 27:07
The culture. But, you know, you've got to do an analysis of, you know, kind of a gap analysis and a capability analysis, of where you need to move to, and then do a build-and-buy, sort of, analysis to decide what's, what's right for your particular organization. But I wouldn't generally say that you can, you know, just buy an innovative organization. And somehow, you know, that's just going to, through osmosis, make your, your overall organization more, more fundamentally innovative.
Michael LeBlanc 27:33
Well, let, let's end on a couple of examples. And, and, you know, we're not shy about naming names here. But when you think about innovation in retail, or a brand that, that you look to for, for case studies, or you look to for inspiration, who do you look to?
Steve Dennis 27:47
Well, this one is probably a cliche to say by now, but I think Amazon continues to be a great model of a company that culturally is really wired to say yes, try a lot of stuff, celebrates failure, you know, all the kind of, fail forward, all those things that innovation consultants talk about.
Steve Dennis 28:05
You know, it's, it ends up being, kind of, a trite example, I suppose, at one level, because they're so huge, and have so much profitability, that it's easy to say, well, yeah, if it—
Michael LeBlanc 28:15
Wasn't always so though, right. I mean—
Steve Dennis 28:17
It wasn't always so. And that's, that, I think, is the broader lesson. And there's several books out there, you can read about the earlier days of Amazon and how Bezos established that. So, I, I would still go to school on Amazon, maybe not so much the last five years.
Steve Dennis 28:33
I may have mentioned this on the podcast before, but one of the things I just did, this Monday, in my keynote, is I asked the audience to take out their Fire Phones and hold them up high. And, of course, nobody has a Fire Phone—
Michael LeBlanc 28:46
Yeah.
Steve Dennis 28:46
Because that was seen as a massive failure. But, you know, Amazon did invest very heavily in creating their, trying to create their own smartphone. It didn't work, but they, they wrapped it up, they moved on, but they took some of the lessons out of that to inform their Alexa and other, you know, voice commerce and other technologies.
Steve Dennis 29:03
So, you can, you can fail productively in many cases. But, but yeah, I would go back and maybe look at the earlier days of Amazon, because so much now, it's just they've got this enormous cash flow, and they can, you know, they can lose $50 million, and it doesn't blink on the radar screen.
Michael LeBlanc 29:18
And it doesn't, and it almost doesn't impact anybody's career either. And we've talked about, you've talked about it in terms of compensation. But it's, it is, you know, too many of these failures and the risk is its career limiting, but whereas in Amazon, I think that's, Amazon and others, they set up a culture where that's, you know, if you're not failing, you're not, you're not innovating, and maybe you're not the right person for us, kind of thing, right.
Steve Dennis 29:37
Yeah, it's very much, it's very much baked into their culture, and their leadership training and, and performance measurement, and things like that. Another example I would give, another big company, though, is, is Nike. I think Nike has really been going through a pretty radical, particularly for a company of their size and history, a pretty radical rethink and reconfiguration of, of their business model.
Steve Dennis 30:01
I think that's been informed, you know, going back to the, because I, kind of, skipped over this, but I'll use it here. Going back to the quote you mentioned of the future is already here, it's not evenly distributed. One of the things I take away from that quote is, the, what's going to happen to your business is probably happening right now, somewhere else in the world.
Steve Dennis 30:19
Might be happening in your comp-, in what a competitor is doing, it may be happening in what's going on with a retailer in an adjacent category, it may be happening at the other end of the world, you know. But, you know, most innovation finds, you know, because customer innovation anyway, finds a home somewhere else and starts to gain trac-, traction.
Steve Dennis 30:38
And in today's world that often transfers very, very quickly. So, I think that is about being a student of the business, you know, seeing how consumer habits are changing, seeing what technology is making a difference. Maybe it's making a huge difference in the car wash business or something, right.
Steve Dennis 30:53
But why, why couldn't that, if customers love it in one way of shopping, or customer experience, why couldn't that be relevant to your business. And, and Nike really has, has taken that outside-in view. They're very rooted in customer insight, they're very rooted in competitive insight, consumer trends around the world, when they started the Consumer Direct Offense, they took their team around the globe, to see customer experience innovation in many different forms, in many different countries.
Steve Dennis 31:21
And so, some of that is the, is that process of innovation and stimulation. But they've been willing to really rethink their business model, they've backed out of a bunch of long-term wholesale partnerships. They've invested very aggressively. I think we mentioned this a little bit in, in a recent episode. But, you know, a lot of people think that the Nike innovation in their business model is all about going more direct. But it's also about leveraging customer data.
Steve Dennis 31:50
It's about personalization, membership, you know, there's a lot of elements of what they're doing that's not just about, oh, we're going to really get good at e-commerce. And they're innovating in their, in their business format, as well. Deploying a lot of different types of retail to, to get closer to the customers and maximize their, their share of wallet and, and general market. Whether that happens to be through a physical store that they own, or distribution partner, or their own dot com.
Michael LeBlanc 32:18
I guess in the vernacular of Amazon, it's the flywheel, right. The flywheel effect. A lot of different things that eventually start to spin and create geometric gains, not arithmetic gains. And I guess I, I'd also like to end, because often we talk about the digitally native vertical brands. We've had the Citizenry on recently, and, and we talk about them in earnings.
Michael LeBlanc 32:37
But really, there's a tremendous amount of innovation and disruption happening there, right. So, how do you, you know, that probably is another pool of learnings. You may not want their business model, but certainly, innovation stems from a lot of things that happened in the DNVB's, yeah.
Steve Dennis 32:50
Yeah, I mean, I would look, and they're, they're, kind of, like the most obvious, kind of, category to glom on to. But I think, both within retail and outside of retail, what are those companies that are really gaining market share quickly? You know, what is it that they are doing? You know, is it the product design? Is it the go to market strategy? Is there interesting use of technology?
Steve Dennis 33:15
You know, there might be a whole host of things that they're doing. But there's, there's something about a Warby Parker, that is more than just they happen to be in the eyeglass business, right.
Michael LeBlanc 33:25
Right.
Steve Dennis 33:25
So, I particularly think, I mean, one of the more obvious examples, from the digitally native vertical brands, is because they started as digital only businesses, you know, they never develop the silos between the channels, they are very data driven. They put the customer really at the center and, and end up being pretty channel agnostic.
Steve Dennis 33:47
And so, there's plenty of things to be, be learned. Of course, as we talked about with, at the top of the show, about some of the earnings are not necessarily, you know, they may be, they may be doing things that are inherently not sustainable. So, you got to be careful.
Michael LeBlanc 34:00
Yeah, yeah, yeah.
Steve Dennis 34:01
Not to take away the wrong lesson. But when you look at so much innovation that's occurred in, in the consumer industry world more broadly, not just in retail. I mean, I'd go to school on that and see, see what could be possibly relevant to your business today, or just maybe things that you need to be watching out for, for the future.
Steve Dennis 34:19
And maybe it's not to your earlier point, you know, you don't necessarily have to take bold action on it right this second, but you better be on top of it and, and build that agility into your system so you can move when you need to move.
Michael LeBlanc 34:29
Well, I can't think of a better way to leave this episode with that thought, right, which is you don't necessarily have to be on the bleeding edge or right on the edge cases, but you got to be ready to move. And you probably, as you often say, got to be ready to move faster than you think.
Michael LeBlanc 34:45
So, I think it's a great way to, to wrap this episode up. A reminder once again, to our listeners to leave us a question. If you got questions about anything we were talking about, anyone we've talked to, or anything that's on your mind that, that you want Steve or myself to give our opine on, leave us a message at speakpipe.com/remarkableretail, and you too may hear your voice on our podcast.
Michael LeBlanc 35:11
If you liked what you heard, please follow us on Apple, Spotify, or your favorite podcast platform, so you can catch up with all our great interviews and insights, and new episodes will show up each and every week. Be sure to check out our YouTube channel. And last but not least, tell your friends and colleagues in the retail industry, all about us.
Steve Dennis 35:27
And I'm Steve Dennis, author of the bestselling book "Remarkable Retail: How to Win & Keep Customers in the Age of Digital Disruption". You can learn more about me, my consulting, and keynote speaking at stevenpdennis.com.
Michael LeBlanc 35:40
And I'm Michael LeBlanc, producer and co-host of the Conversations with CommerceNext podcast, The Voice of Retail podcast, keynote speaker and host of the all new Last Request Barbecue cooking show on YouTube. You can learn even more about me on LinkedIn or meleblanc.co. Have a safe week everyone.
SUMMARY KEYWORDS
innovation, macy, business, customers, retail, brand, retailers, organization, buy, earnings, people, department stores, talked, lost, store, fundamentally, years, amazon, big, podcast