Rod Sides, Deloitte's Vice Chairman and US Retail & Distribution practice leader, joins us to discuss his firms forecast for robust holiday sales. We delve into the underlying drivers, specific category dynamics, as well as which trends are likely to persist into next year. We also get Rod's perspectives on the impact of government stimulus, an increasingly challenging supply chain, on-going labor shortages and how work from home impacts the apparel market. Lastly we talk about the changing definition of e-commerce and the new (and costly) prominence of convenience in the face of shifting consumer preferences.
Rod Sides, Deloitte's Vice Chairman and US Retail & Distribution practice leader, joins us to discuss his firms forecast for robust holiday sales. We delve into the underlying drivers, specific category dynamics, as well as which trends are likely to persist into next year. We also get Rod's perspectives on the impact of government stimulus, an increasingly challenging supply chain, on-going labor shortages and how work from home impacts the apparel market. Lastly we talk about the changing definition of e-commerce and the new (and costly) prominence of convenience in the face of shifting consumer preferences.
But first we open up the episode with our quick takes on recent retail news that caught out attention. First up we opine on Stitch Fix's earning report and strategy pivot. Then we jump into further details on Amazon's rumored "department store" plans, followed by the shocking news that physical retail isn't dead after all.
Rod Sides
Vice Chair & US Leader | Retail & Distribution, Deloitte Consulting LLP
Rod is vice chair, Deloitte LLP, and leads the US Retail & Distribution practice. He is responsible for driving key sector initiatives that include original research, talent development, and strategies that guide retailers as they navigate uncertainty, compete globally, and improve performance and profitability. A principal in Deloitte Consulting LLP, Rod has more than 25 years of experience in store operations, supply chain, procurement, back-office operations, and IT.
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.
Please drop us a rating and review wherever you subscribe to your podcasts and be sure to check out our newish YouTube channel.
Michael LeBlanc 00:04
Welcome to Remarkable Retail podcast season 3, episode 9. I'm Michael LeBlanc.
Steve Dennis 00:09
And I'm Steve Dennis.
Michael LeBlanc 00:11
Steve, welcome. We're back in the mic together again, again a reminder, and it'll be the last reminder to our listeners and viewers on YouTube. We're now weekly. So, lots of lots of chit chatting going on for the rest of season three and beyond and another, yet another amazing guests for this episode we have Rod Sides, Vice Chairman, Deloitte LLP, US retail and distribution sector leader and he joins us to add some great color commentary around Deloitte recent releases, recent research released that forecasts for US holiday retail sales just blockbuster numbers just, wow, right?
Rod Sides 00:49
Yeah, like I think 7 to 9% is what they're forecasting for the increase for the holiday which you know, actually comes off of a pretty good holiday last year, so yeah, it looks like consumers according to their forecasts, anyway. Consumers are going to keep on, keep on spending.
Michael LeBlanc 01:05
Well, you're very calm about that number. I mean, if you and I were working in the retail business, you know, we'd be happy for 7 to 9% we'd be like you know, these are epic numbers like it's funny we've almost become immune to these big numbers, like.
Steve Dennis 01:19
Yeah. I think there's some danger of that of course as we get into the some of the questions about how much of this persists right you know, pent up demand and the savings rates and all these other kind of macroeconomic factors seem to be pretty strong but yeah, you know and then you got, as you go on a sector by sector basis you have some of these particularly apparel retailers post you know, 40% increase 50% increase. These are numbers we haven't, we haven't seen before but, you know, it's a lot easier to run a big comp, when you run a huge negative comp the year before but it's such a, it's such an interesting unusual, I daresay unprecedented time.
Michael LeBlanc 01:58
Yeah. Yes, not for the first time on this podcast or in many others that we said the word unprecedented. All right, well, let's, let's jump into the news of the week. So, what do we want to do, where do we want to start, Stitch Fix, I, I've always found Stitch Fix a very interesting company, whether it's because they're AI driven, because they're their management team is super, super savvy, Julie Bornstein, who was there for a while on their board and their CEO, I've interviewed, you know, super savvy, their results came out seem pretty good and then it looks like a bit of a strategy pivot. Talk about your observations.
Steve Dennis 02:32
Yeah, Stitch Fix. Well, they have been a really interesting business, they were, I think the first retailer really of any size to be so reliant on data science, I remember seeing some of their original early pitch decks where they were talking about the 150 or 200 data scientists they had and how this was going to be the source of their competitive advantage.
Steve Dennis 02:53
For people that aren't familiar, Stitch Fix puts wardrobe suggestions together, their core model is they send a fix to you, who are on a certain schedule, and then you keep what you like, and you return the rest and they learn better to make recommendations, they have found, I guess in the last year or two that they need a little bit more human intervention to make the predictions as accurate, so, they've shifted a little bit I guess, from being quite so reliant on pure AI. It was a little bit of a mixed report I guess because as we were just talking about we get some of these apparel players that are having 50, 60, 70% increases and I think they're, they were up 27% or something like that's so below the trend for apparel, but because their business isn't in a physical store business, they didn't lose as much a year ago, so, it's a little apples to oranges, I think in terms of putting them in the general retail category, but, but they did swing back to profitability, which has been a question for them. So, that was very positive.
Steve Dennis 03:57
The thing that's getting a little bit of critique, I kind of think is a little bit much ado about nothing, is they're adding the service I believe they call Freestyle, which is essentially regular apparel ecommerce, they're just going to be selling items through, through a website but the premise is they'll be able to use this this AI to make recommendations, so, it's not a recommendation for a set of things as recommendation for, for individual items. So, you know, in theory that expands their addressable market, puts them of course in competition with a million other people, but I guess, the secret sauce is the, is the AI, so. That's another one where, just announced, no results we'll have to see, but in the scheme of their business, I'm not sure it's a big, big expansion.
Michael LeBlanc 04:44
Well, let's talk about a company that I don't think we've talked about in a few hours Amazon and you know, we,
Steve Dennis 04:53
Don't we have to talk to Amaz-, about Amazon on every episode?
Michael LeBlanc 04:56
I think by podcast law, business podcast law anyway. But, they have I guess released or it's leaked or rumored details around what they consider their department store, department store strategy, what have you learned?
Steve Dennis 05:11
Well, a couple things and again, you know, reported, it seems like it was a pretty well sourced article, but people might remember there was the story a little while back about, they're going to open these department stores, which I think we get into a little bit of semantics of what's a department store, and a lot of speculation about whether it was going to be more like outlet or what have you, but this this report is more than, it's going to be pretty apparel centered, much smaller though than your typical department store and the two things that appear to be new are that they're going to emphasize their private brands which they have quite a lot of though, not certainly as well-known as plenty of other national brands and that they're going to probably no surprise have a fair amount of technology as part of this so like with virtual try-on rooms and, and these, these sorts of things. So, we're getting a little bit more details, whether it turns out to be true or not, I mean, this doesn't make me go, wow, you know, I wish, I wish I could get Amazon apparel, but you know, I wish I could go to a store to get it I mean, that's not in and of itself
Michael LeBlanc 06:25
Yeah, I wish I could, I wish I could have a robot that showed me if it's going to fit well or not said, pretty much nobody in retail, right?
Steve Dennis 06:31
It feels to me, which is a very Amazon thing, you know, if you think about,
Michael LeBlanc 06:35
Yeah, yeah.
Steve Dennis 06:35
What I believe is they're, kind of, messing up Whole Foods because they focus on what's in it for them, you know, from an efficiency standpoint, as opposed to really what's going to be an amazing customer experience and certainly, I got to imagine you know, Amazon's trying to grow its private brand because the margins better and, private brands I should say because the margins better, and the returns are probably pretty high. So if you can put in virtual try-ons and you can let people try on stuff, you know, physically then you know, you're going to lower your return rates and all the way-
Michael LeBlanc 07:10
So, wait a minute, you're telling me, you're telling me they're gonna have a department store, where people can actually go try stuff on before they buy it?
Steve Dennis 07:17
It's crazy, It's crazy.
Michael LeBlanc 07:20
What?
Steve Dennis 07:21
I know this will never work.
Michael LeBlanc 07:23
All right. Speaking of spending more time with retailers, American retailers, this out, from our friends of Coresight research have some great, interesting, anti-retail apocalypse store numbers, 4969 store openings, 53, sorry, 58.3% increase year over year. So, yeah, store, there's more stores opening, like that's a lot, that's a big store count. So, it does seem to counter. Now, we should talk, or I should ask you. I should say qualitatively, you know, a store isn't a store, isn't a store. We're not talking, you know, 100 Nordstrom's opening up, we're talking some classifications of stores, speed by your thoughts on that.
Rod Sides 08:02
Yeah, I mean, the mix, well, one is just to just to and I think I mentioned this before, I love Coresight, Deb has been on the podcast, they did predict that 25,000 stores would close last year and it ended up being about 8000, so, there's
Michael LeBlanc 08:21
We lost some of them
Steve Dennis 08:22
Some, they got, missed it by a little bit but, yeah, I mean there's there are a lot of stores opening it's up quite a lot I think it may be a record year in terms of units opening, not the same as square footage there's a real tilt as there has been, really for a while to dollar stores, Dollar General in particular is like 20%, they're opening 1050 stores or something like that. So, they're, they're a big percentage but there's a bunch of the other, you know, Family Dollar, Burlington Coat Factory, Ross. So, there's a really high concentration of the value-oriented retailers, you know, we're not seeing department stores open or relatively few, kind of, mainstream retailers, so, that, that's been a pattern, I think for five or six years now, where the store openings are really heavily on the value side.
Michael LeBlanc 09:17
Yeah. All right, so anyway, this has been a great discussion and a reminder to all of our listeners who have not yet to find our YouTube site. We've got this episode and bonus content up because we, we sit and chat for longer than we put on the podcast for, for we, kind of, tighten that up but so, lots of great bonus content available on our YouTube page. If you're on YouTube right now you're listening to it, so, and if you're on YouTube right now, go to the podcast because then you'll hear our interview with Rod, so, Rod Sides is our guest and without further ado, let's bring him on, and talk about US retail and some pretty big growth numbers.
Rod Sides 09:57
Well, we're delighted to have Rod Sides, from Deloitte, join us on the podcast this week. And we're gonna jump into some of the forecasts and predictions around the fourth quarter in the holiday season, but before we do that Rod, would you mind just kind of kicking things off and telling us a bit about yourself, your professional journey, and the work you do at Deloitte?
Rod Sides 10:17
Sure, glad to do it. Glad to be with you guys today. So, I started with the firm, many years ago, over 30 years ago, started in the audit practice, moved immediately into consulting. As I realized pretty quickly, I needed to get to something a little more proactive than auditing financial statements. So, that was a good journey, I moved immediately into our consumer practice. Over time I began world leading our, our consulting practice eventually began to lead the practice for the entire firm in retail in the US and most recently, I've taken on a new role, where I'm in charge of our insight development team. So, any research that we do across all industries, that also is something I spend a lot of time in, but my passion is really retail, my background is really retail, you know, helping folks with strategy all the way through operational execution. So, glad to be with you guys today.
Rod Sides 11:02
Well, thanks for joining us and I imagine we'll, we'll touch on a number of different things but, I thought we could just kick things off by talking about the forecast that Deloitte published, it indicates a very strong holiday season and could you just describe a little bit about what the forecast is, and what's behind that, that strong forecast and the competence you have about the fourth quarter in the holiday?
Rod Sides 11:25
Sure, every year about this time, we spend time looking at macroeconomic factors to determine what do we think the holidays is going to look like and we've done this now for over 30 years, what we look at is a couple major factors, certainly things like savings rate come into play, we look at unemployment rates, we look a little bit of the impact of inflation, but we take more of a macro view. So, this year, our forecast is for holiday sales to be up 7 to 9%. Now that covers a period from November through January, we keep January in the mix, because there's a lot of spending that happens after the holidays with gift cards, etc. So, that was one of the key drivers to look at, that.
Rod Sides 11:35
We also look at what's going to happen in ecommerce. And we're going to touch on that a little bit later. And we expect that to be up year over year, somewhere between 11 and 15%. So, it's something we've done for quite some time. Our economics team spent a lot of time, you know, looking at the model and adjusting it for things like COVID, etc. But we think it's going to be a great holiday season.
Rod Sides 12:20
So, can we unpack that just a little bit, I mean, I know a lot of, lot of different groups are predicting a pretty strong holiday season and there's lots of speculation around you know, how much of that is government stimulus, how much of that is consumers having a lot of discretionary spending because they're not spending it on going out and on vacation, you know, pent up demand, all those kinds of things, any, any, way to, kind of, characterize how much of this is, you know, kind of, of the moment versus a general consumer confidence going forward?
Rod Sides 12:50
Well, I think it's all the above if we're really honest about it but, I think what we found is what the government, government stimulus, what that did was put a fair amount of savings in folks pockets and to your point, we didn't see travel be as strong as we normally do over the summer, even though you look at availability on you know, certainly the airlines, and they certainly looked like they were closing in on, you know, some capacity, numbers of constraints that they had. But there was a lot of savings that is still sitting in the bank accounts of many of the consumers. And so, generally as we go on to holidays, kind of, given the fact that folks, a large number of them are vaccinated and starting to get out, back in the market, there is a bunch of pent-up demand.
Rod Sides 13:29
And if you look at what's happened in retail for the first six months of the year, we've seen it come roaring back, we've seen the consumer lead the charge back. And I think we're going to continue to see that as folks are looking to spend more time together, I think we're going to find certain aspects of the holiday spin, which includes travel, I think that's going to go back up, we believe that entertaining inside and outside the home, which was a category that dropped pretty dramatically last year will come roaring back as well, as folks are looking for that social connection and they have done that for quite some time. So, that's, that's what we think is gonna happen over the course of the next, say, 90 days.
Rod Sides 13:37
And what would be some of the indicators to, and we'll probably get into this in a little bit more detail but, you know, as supply chain issues, the COVID overhang, how, what should people be looking at to try to sort out the likelihood that we end up on the high side of the forecast versus perhaps the lower side?
Rod Sides 14:23
Well, I think there's a couple things you can look at, often we'll go back and look at back-to-school, back-to-college. So, those are areas where we always do forecast as well and see how that's tracking, that looks like it was pretty positive as folks were going back to school. So, that's one thing that we normally look at. The other thing that we will look at is how early are people moving in the market, I think but some of the supply chain challenges you referenced, I think we're gonna find consumers are now aware that the supply chain is pretty interconnected globally and so, I think we're going to find consumers charging in the market sooner rather than later because they are a little bit worried about stockouts. So, I will tell you, a lot of the big retailers have stocked up and so they have, certainly, goods on hand, the big question is, are they the right goods, right, and, so that's the bigger challenge, is did I get the mix right versus do I have goods available for sale.
Michael LeBlanc 15:08
When you think about it, let's talk, let's peel that back because the supply chain, you know, who knew we'd be talking so much about supply chain this far into the COVID era. It's certainly present on our minds. Steve and I were sharing a video where we saw on an, I don't know, 92 boats waiting to be unlocked. I mean, it's still jammed. And it feels like the supply chain is one of the top line governors or drags on performance. And, you know, big, big retailers have the wherewithal to bring in advanced inventories, you know, they're struggling to find space to put it from when I talked to them. They're running out of space, as you said, is it the right stuff or not, at the end of the day, they'll have stuff, it seems like, there's a, there's a bifurcation, here between mid, and small, and the large folks, who can manage through supply chain issues, you know, Home Depot bought a whole boat, for example and it feels like there'll be winners and losers again, in this economy and that overall, there'll be a bit of a, bit of a drag retailers tell me that they're not even sure what they're going to put on their promotional marketing material for Black Friday, because they're not sure exactly what they've got, or what they don't. What are you hearing in all this supply chain stuff?
Rod Sides 16:14
It's very similar, I mean, if you think about where we were in COVID, it was a bifurcated retail environment, the stronger got, the strong got stronger as we went through that. And so, if you think about the big players, you know, they drew down on, you know, certainly revolving lines of credit, etc., they were strong financially. And so they were able, certainly to weather the storm as they went through and we also found, the big players that were deemed to be necessary, retailers were able to stay open and so they were able to garner market share from some of the others who weren't there. So, I think their balance sheets were much stronger going into the holiday season, this year, and I think we're going to see the exact same thing. So, I think you're, what you're hearing is exactly what we're hearing in terms of concerns from, you know, our clients.
Michael LeBlanc 16:52
You know, let's talk about labor for a bit because if there's two constraints one is, is, is the product, the second is the labor. Now, we're in better shape, I think, as an industry, then our friends in restaurant and food service but, you know, when we unpack or peel back the layers on the labor shortage issue, at a very high level, it's, there's complaints about government programs that are, need to be better calculated to not incentivize people to stay home. In other words, don't compete with retailers, for the people, for government programs. But that feels too simplistic to me, and Steve and I talked about that before. How does that feel to you is, what else is going on, do you think, that is generating labor shortages in the retail industry?
Rod Sides 17:33
Well, I think the predictions of moving to a gig economy are alive even though we don't call it that anymore. So, if you think about a number of the delivery services, you know, the, the ride hailing services, etc., all of those services are pulling temporary labor out of the workforce in droves, right, even some of the, the shopping delivery services that are shopping on your behalf and so, if you think about the number of folks who have you know, joined those subscription services in the last year, and the number of employees who stepped in there, that's where a lot of the part time labor is going because they can work their own schedule, it's predictable when they want it to be and so we don't talk about it much but that's my view of what's happening from a labor perspective that that maybe nobody's talking about.
Michael LeBlanc 18:17
Well, and that's, that covers the frontline labor and that seems to be like a, like a, an organic shift, maybe accelerated by COVID, of well, we need less people on the frontlines and we need more people delivering stuff to people's doors you know, with the kind of, growth we've seen in ecommerce which we'll talk about soon. Let's talk about though those other roles in retail because we know frontline is one part but you know, I talked to retailers and they're trying to find supply chain, warehouse, it, you know, it wasn't exactly the halcyon days in the before time like these were rolls that were hard to fill for some anyway but do you see that resolving itself where you can work and hire anywhere in the world now do you see that as something that could revolutionize and fill those sometimes hard to fill spots?
Rod Sides 19:03
Yeah, I think the virtual workplace is going to really drive, potentially, more people to be available for those types of roles. I think the big challenge if you look at the, the super scalers and hyperscale, tech companies, that's where a lot of towns gravitating to, I mean their wages there up seems to be more exciting in terms of what those individuals doing it makes it really tough to compete and you know, the shifting landscape around technology in terms of you know, what should I insource or outsource is a real challenge for many retailers today to figure out what that right mix is.
Michael LeBlanc 19:33
Yeah, yeah.
Rod Sides 19:33
So, I do think that there are some things that are probably going to work in favor of the retailers, to be able to find that talent now when you get into warehouse workers etc. To me that's really interesting and challenging. I think what we might find, and I don't want this to be too scary, but there will be some level robotics I think
Michael LeBlanc 19:47
Yeah, yeah.
Rod Sides 19:48
There it's gonna have to in order to have the productivity that's needed.
Michael LeBlanc 19:52
Last question about, about your prognostications around, around sales I mean, you know, there's, there's a mix of this pent up demand there's a mix of this stock case of cash that's just not been spent, you know against that is this changing mix of people who are not going back to work in an office, I have to feel that that's going to be a drag on the apparel sector back to school is great, I think on both sides of the border. So, that kind of lifted, you know, college university, high school apparel sales, but you still see a drag because not enough people are, so to speak, going back to work in the office, which, what do you, what's your prognostication on that I mean, is that going to be a reset in the apparel industry, more than it is a short term shock?
Rod Sides 20:36
That's interesting. I think we may see apparel do okay, as we go into the holidays, because it's, generally, it's one of the two top categories every year. So, when we talk to consumers, generally apparel is one, gift cards are two, or vice versa. So, it may be a little bit light relative to what we've seen in the past, but generally apparel does okay during the holidays, but I do think, to your point, there's going to be a shift.
Rod Sides 20:58
I think about durable goods. You know, things like home gym equipment, those types of things, where we really doubled down and made big investments last year, you know, a lot of, a lot of spending went toward decorations last year, because folks were home for the first time, they didn't travel the family's places, etc. So, I think there's certain categories like that, that we're probably gonna see moderate, to your point around apparel, you know, I think it's gonna do just fine. It may not have a blowout year, it may not fully recover to where it was, to your point. But, generally speaking, I think it's easy and easy purchase for many people to make, you know, they don't want to give gift cards, necessarily, feel that's too impersonal but, you know, picking up a tire sweater is pretty easy.
Rod Sides 21:36
Before we dig into ecommerce predictions, in particular, just, kind of, going down this path on some of these distortions that are pretty COVID specific, like Michael was talking about, you know, how apparel has been hit, but you also, in your forecast, touch a bit on the mix between services versus products. And, and on this topic of these, kind of, one-time purchases or distorted purchases for the home. As we get beyond the holiday forecast, do you have any guidance on how to sort out which of these category dynamics are more permanent, as opposed to just, as Michael was kind of getting at, that episodic stimulus or pullback because of COVID?
Rod Sides 22:23
Yeah, I think what we'll see is probably as we get midway through next year, we will get to some level of normalcy for what that mix will be. And so, a lot of the dribbles I think will come back down, I have many clients, that their forecasting models simply didn't work, because the little wisdom would have said that you're going to experience a major slowdown, and suddenly, with the stimulus money in the savings from vacation, travel, etc., they found themselves flush with cash, and they decided to make some of those purchases, maybe they put off for four or five years.
Rod Sides 22:52
I think once we get into learning to live essentially with whatever variant COVID is out there. And we kind of settled back in I would say mid next year, in my mind is where we get back to some normalcy. When I talk to my clients, most feel like the first half of you know, the next year are going to be just fine. And I think they start to worry about, you know, next year, this time, what happens in terms of getting back to some level. So, it's hard for me to say category by category but, I do think we'll return to a new level of retail, whatever that is, you know, likely in the next six to eight months.
Michael LeBlanc 23:22
Interesting. Well, all right, well, let's, let's shift our thinking to ecommerce, you're talking about what is it, 11 to 15% in ecommerce, which is lower than we've been seeing, now some of that is just hard to, kind of, comp off the big growth numbers, I suspect. Let's talk though about, if you could comment on that and then let's talk qualitatively about what ecommerce looks like, how the stores are involved. You know, I've seen and maybe you've seen it as well. Ship to, you know, pick up at store, or curbside just fall off to be next to nothing and retailers are like, oh my god, I built all this infrastructure and nobody's using it anymore. Is, was that just a fleeting moment of ecommerce history or is that something that's going to continue or, so, give me your thoughts on those two, talk about the, the increase in ecommerce and then this this qualitative, what is the role of the store, as you see it in ecommerce going forward?
Rod Sides 24:11
Right, well, the 11 to 15% was largely based on a pretty big comp last year. Right, so, we expected and we saw that grow dramatically and so you know, it's interesting, if you go back and look at our forecast, and the actual say over the last 10 years, we're in kind of a similar range, and we we've seen growth somewhere in the high teens almost every year in ecommerce, but it's building off a bigger and bigger base and so, we're seeing the mix, especially the growth, move more online than in-store, although in-store does okay, obviously during the holiday season. So, that was really the reason why that number, maybe, is lower than, maybe, some other, some expectations. So, I think a lot of that comes back to, maybe, method of which we use to predict that.
Rod Sides 24:49
In terms of the other things that retailers have put in place. I think we're gonna see that continue. So, I think folks have looked to get back out but when we went, I'll reference our back-to-school study that we put out mid-summer, and we asked folks about things like curbside pickup, are you going to continue to use that online and pickup store. And, what we found is folks, at least from intent perspective, said they would continue to use it. It was actually a small percentage, I think, 3 to 4%, when we ran that study. We're asking the same question, over our consumer study, that'll be out in about three weeks. I anticipate folks will continue to use that, especially as we get closer to the holidays, for two reasons.
Rod Sides 25:26
One, I think we had a whole group of folks who had never use buy online and pickup in store had a whole group who had never done curbside pickup, and they did it largely for safety last year, I got about halfway through the pandemic, and I said, you know, what, is pretty convenient,
Steve Dennis 25:40
Right.
Rod Sides 25:40
And they started using it to be able to find inventory ahead of time to essentially reserve the inventory run by and pick it up later, etc. So, I think we're going to find, especially some supply chain challenges, that folks are going to come back to that, I think maybe we'll
Michael LeBlanc 25:53
And retailers found religion about it as well, in other words, for many retailers, they, it was the department of no, there was a lot of reasons not to do it. And, even when it was done, it was done, okay, because the volume wasn't there. But I think I think, you know, there is a mix of, I want to use it, I need to use it and retailers going, hey, if we do this, right, this could really enhance the customer experience.
Rod Sides 26:14
And that's exactly right. So, I think we're going to see that, kind of, come back, maybe we're, you know, we're a little bit of a lull in terms of the application of that over time. But I think what we've learned in the last, say, 10 years of this, of doing these kinds of surveys, is that price and product, were always one, two in retail, so, no surprises there. But what we found is a rise of convenience, especially as digital has become easier, more user friendly and as the role of digital has changed. Convenience is now, you know, the third leg of the stool, and I think the more things retailers can do to make it easy and frictionless for me as a consumer and meet me where I am, is exactly where we need to go, now, might be a more costly model. So, you know, it's gonna challenge my, certainly, my bottom line, in doing that but, I think we're gonna continue to see that be taken advantage of by many more consumers.
Michael LeBlanc 27:01
Well like, I got to follow up on that one with this drive for same-day, next-day, versus the economics of doing it from store. I mean, you just mentioned profitability, do you really think that this, you know, this, this waterline objective that seems to be set, the I want to get it today, I want to get it tomorrow, is where ecommerce is gonna settle out or is that just over, you know, over, we're overthinking it a bit. And consumers don't actually need it the next day and will still make choices and, or, will retailers say fine, I'll just ship it from store, come pick up at the store. Where do you, where do you sit on that one?
Rod Sides 27:36
Well, I think what we'll find is there'll be some mix, depending on the product. So, we asked the question, every time we do a survey of shipping, you know, fast versus free, what we find is about 85% of folks prefer free over fast and fast and defined as two days.
Michael LeBlanc 27:51
Yeah.
Rod Sides 27:51
Now, there's a, there's, kind of, a curve, as you might well imagine, for what's acceptable. So, to your point, fast is viewed as being same-day, next-day. Free to be reasonable is anywhere from three to five days. Now, most products that probably each of us have shipped to our house, three to five is pretty reasonable.
Michael LeBlanc 28:08
Assuming the customer is reasonable, like they get it free and same day. Why wouldn't I do that?
Steve Dennis 28:13
Yeah, 'reasonables' doing a lot of work there, in that sentence.
Michael LeBlanc 28:16
Is that, is that going to distort economics so much that it's going to tip the boat?
Rod Sides 28:21
Well, I think at some point, the retailers aren't going to be able to offer that, just because I'm not sure the economics, you know, play themselves out in that way and if you look at a lot of smaller players, they still have, you know, fees for expedited shipping. So, it depends on the game you want to play, around that. But I think there'll be a handful that, that move quickly to using micro fulfillment for you know, a portion of their products. But I think there's going to be the extended assortment. I think consumers are not demanding that to come the next day to a large degree. So, I think we'll find it'll settle out.
Rod Sides 28:51
Rod, can I ask you, perhaps an unfair, somewhat philosophical, question on, on ecommerce. It's something that I talked about in my book a little bit, and Michael and I have touched on, but do we need a definit-, different definition for ecommerce? Because I feel like the first, I don't know, 15 years or so, when we talked about ecommerce, what we meant was a product that was ordered online, yes. But it was sent through the mail from a central distribution center and stores really weren't involved. And it was largely stuff that, you know, fit into that logistics model. In the last few years, you know, the fulfillment of ecommerce orders has really shifted much more to local home delivery, as we talked about curbside and, and all this, kind of, stuff and I don't know, maybe it's just, maybe it's just my frustration with the media. The way the media depicts it is, kind of, like well, as more things shift to online that means stores are less valuable in some respects. And maybe that was true until the last few years. But, actually so much of the online growth is just ordered online, it's not fulfilled in a, in what we commonly think of as ecommerce. So, that's, kind of. Well, an expansive question but, but I'm just curious if you think we need more nuance or some, some different definitions, because ultimately, from a consumer convenience standpoint or from a retailer's economic standpoint, it's much more important how it's fulfilled, not how I happen to place the order or research it.
Rod Sides 30:23
No, that's exactly right, I mean, it's, it's more of a, you know, around ecommerce, it's, it's almost more of a digital channel, right, in terms of the interaction with the consumer. And, what's interesting about that is, from a customer service perspective, it's probably easier for me to have a consistent digital experience than is even in the store. But, but those retailers who have that vast store network, I mean, the big question is, how do I make sure I have the goods for, deployed in the right way. And, if you look at a number of the micro-fulfillment players that are coming online now, I mean, that's the whole play.
Rod Sides 30:51
So, I think you're right, in terms of calling that out that, you know, it's not being sent from that, you know, fulfillment DC that is, for each is only, so, so from that respect,
Michael LeBlanc 31:02
Right.
Rod Sides 31:02
you would do it locally, I think makes a ton of sense and you're able to get, you know, better economies from a shipping perspective, I think we're gonna see, you know, with these last mile players, it'd be interesting to see which of the traditional retailers perfect that model, right now, it's largely something where, you know, they're using third parties to be able to do that, but at some point, you know, I could foresee some of the big players being able to do that on their own, you know, with some type of localized milk run, etc., that will, you know, allow them to, to be more productive and how they're moving that last mile.
Rod Sides 31:34
My follow up question would be just fundamentally, do you think the big retailers whether we're talking about Target, Walmart, Best Buy, etc., or the grocers, I guess, large grocers, do you think they fundamentally want to use their stores as fulfillment centers and, and will make investments to their stores or will they likely be biased towards more these micro-fulfillment centers, local home delivery hubs or sortation centers, I guess, Target and Best Buy, have been referring to them?
Rod Sides 32:06
Well, I think it's a math equation, right so, you know, these retailers are really smart, in terms of, kind of, what the, you know, what the rental cost is, how much they're locked in versus what it takes to be able to create something in a much lower, you know, cost from a micro-fulfillment perspective, I think we'll find that there'll be a mix as they go forward in the real sophisticated ones the, you know, a lot of the technology in the supply chain right now is about that optimization using AI and other edge computing capabilities to figure out what that right mix is so I think we're gonna find big retail you know, goes down that path I think the big thing that we're not talking about is the role of the consumer has changed pretty dramatically, so, we have always been a member of supply chain team, right, because each of us go out, we pick our products, and bring them home, etc.
Michael LeBlanc 32:48
Well said, that’s well said.
Rod Sides 32:48
Now, you know, we're moving to becoming merchants because we start by selecting the products online first. So, I'm not asking you as a retailer necessarily to merchandise on my behalf, generally I'll start, that destination myself and then, you know, the role I'm asking you to play as you take on supply chain, last mile, I'll be the merchant now, so it's really interesting that challenge.
Steve Dennis 33:10
Yeah, that's a really interesting way to think about it. I hadn't, I hadn't ever looked at that that way, I love that.
Michael LeBlanc 33:16
I have one, one, kind of, final question and then I'll pass the mic back to Steve to bring us home. What's going, what's going to stop all this, Rod. Like, this growth, I've seen growth, upon growth, upon growth. I've seen a consumer that's like the Timex watch that keeps on ticking after a beating. Is it inflation, what, I mean, this can't, you know, the numbers just don't always go up, and up, and up? What if anything, is going to stop this momentum in retail as you sit back and look at macro-economic trends, what goes up eventually will come down, what could stop it?
Rod Sides 33:51
Well, I think we tried to stop it, last year with the pandemic, right.
Michael LeBlanc 33:55
I know.
Steve Dennis 33:57
Sales prevent-, sales prevention department.
Rod Sides 33:59
It's, it's a great question. I think if we end up with a massive bout of inflation, we find interest rates and the share wallet shifts to a, to more things like housing, food, etc. I think that probably stopped some of the momentum but, if we're able to keep the inflation in check at a, at a macro level then I think what happens is consumers, you know, especially in, you know, kind of, the major countries, US, Canada, etc., I think will continue to carry us along. I think if we get into a protracted, you know, recession, etc., that would be a different issue. And so, I think it has to be something at a macroeconomic perspective, that kind of slows the momentum but, you know, I think a lot of central banks have, at least for now, figured out how to, you know, moderate the growth and the inflation in a way that, you know, keeps folks fairly confident. Markets continue to go up and as long as we can continue to nurse that long, I think that it continues to grow which is, which is pretty neat. You know, at this point.
Michael LeBlanc 35:00
Yeah, yeah. I think, I think if I, if I would throw one idea in there, it would be climate change. So, there's no vaccine for climate change, long run problem that's becoming a short run issue, when your basements flooded, and, you know, these things start to become a drag on the economy, but who knows, right, so, yeah, anyway, thanks for, thanks for your thoughts on that. Steve, back to you.
Steve Dennis 35:21
Well, I think we're going to have to leave it there, as they say in the news programs, but this has been a great conversation, really appreciate the perspectives, always good to talk to our friends at Deloitte. Rod, I don't know if you know, but we had Kasey Lobaugh on, as one of our first guests, when we started the podcast a year or so ago. So, which, and also when, whenever we say bifurcation, Kasey and I each get a nickel. So, that's, that's the, that's our official policy. But, but thanks so much, we'll put some links to some of the reports that were referenced, and we'll keep our fingers crossed for a really good holiday season and keep on building that momentum into next year. So, thanks so much, Rod, for joining us, and good luck with everything.
Rod Sides 36:02
Thank you, Steve. Thank you, Michael. Good to be with you again.
Michael LeBlanc 36:05
If you liked what you heard, please follow us on Apple Spotify, Amazon Music in your favorite podcast platforms so you can catch up with all our great interviews, subscribe so that it just automatically shows up. Tell your friends and, and also new insights and new episodes will show up every week. So, tell your friends because that will help us share the word, the good, the good wisdom. Now, be sure and checkout, and be sure and check us out on our new YouTube channel. Not so new anymore, get a couple episodes up there and just look for Remarkable Retail.
Rod Sides 36:35
And, I'm Steve Dennis, you can check out more of my work at my website, stephenpdennis.com or on Forbes, or on Twitter and please check out my second edition of my book Remarkable Retail: How to Win and Keep Customers in the Age of Disruption, available just about everywhere books are sold.
Michael LeBlanc 36:56
And, I'm Michael LeBlanc, producer and host of The Voice of Retail podcast and a bunch of other stuff. You can find me on LinkedIn learning about me on meleblanc.co.
Michael LeBlanc 37:05
All right, Steve, great episode. Look forward to chatting again next week. Be safe and have a great rest of your day.
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