In this exclusive Q&A, industry expert Steve Dennis shares his predictions and recommendations for retailers struggling to find the best ways to survive and thrive in the age of Amazon. Dennis is the President of SageBerry Consulting, a strategic advisory firm focused on innovation and growth strategy for retail, luxury and social impact brands.
Dennis will be speaking at the Retail Innovation Conference, April 30-May 2 in New York City. His session is titled: A Really Bad Time To Be Boring: Reinventing Retail In The Age Of Amazon.
Steven Dennis: It's mostly nonsense. The fact is plenty of physical stores are being opened on both the high-end (like Apple and Nordstrom) and the value end (Dollar Stores and TJX just to name a few). Sales at physical stores continue to grow, just at a much slower rate than online. We've definitely seen a major consolidation of excess real estate, some of it driven by decades of overbuilding and some driven by the shift of sales online. And obviously retailers like Blockbuster and Borders that were made irrelevant by the digital delivery of their core products were devastated in the past decade. But now what's mostly going on is the death of boring retail, particularly those retailers that got stuck in the vast undifferentiated middle.
RTP: How has the shopper journey changed in the last several years? What does the future of the shopper journey look like?
Dennis: First, the power has shifted overwhelmingly to the customer and what was once scarce — pricing and product information and anytime, anywhere, anyway product and service access — is now mostly ubiquitous. Second, some products, like books, music and games, can be digitally downloaded, making a trip to the store mostly irrelevant. Third, we no longer go online, we live online, and a smartphone is a nearly constant shopping companion for many consumers. Lastly, most shopping journeys now start in a digital channel, making the need for a customer experience that is well harmonized across physical and digital touch points increasingly essential.
RTP: Should today’s omnichannel retailers be focused more on improving their e-Commerce experience or their brick-and-mortar experience?
Dennis: For the most part I don't really make a distinction. For most retailers, digital drives physical and vice versa, so you really have to do an in-depth analysis of the various customer journeys and understand where there are friction points to eliminate, and levers to amplify the customer experience. The biggest mistake many traditional retailers have made is treating e-Commerce as a separate channel and creating siloed experiences, metrics and incentives.
RTP: Amazon seems to be the elephant in the retail room these days. How should retailers be thinking about their business in terms of competing with Amazon?
Dennis: I like to make the distinction between buying and shopping. Amazon is starting to dominate most aspects of buying, which is more assortment, convenience and price driven. Shopping is more experiential and physical stores are often key to being successful. Few retailers can truly compete with Amazon, and trying to do so is a race to the bottom. And as Seth Godin says, "The problem with a race to the bottom is you might win. Or worse, finish second." With few exceptions, most retailers can't out-Amazon Amazon, so they need to forge their own more relevant and remarkable path. And they should hurry before Amazon makes more physical retail acquisitions.
RTP: What will be the secret to success for retailers in the long term?
Dennis: I've developed a seven-step process to help retailers reinvent themselves. The essential concepts center around being more intensely customer-centric, which puts a premium on deep customer insight and the ability to deliver more personalized products and experiences. Good enough no longer is, and brands really need to push harder on aspects of their value proposition they can amplify to be truly remarkable. Given the increasing role of digital, retailers need to be sure to execute a harmonized experience across channels. Lastly, it's pretty obvious that most of the retailers that are in trouble failed to innovate. Winning in today's environment takes an attitude of radicalism and a willingness to embrace experimentation and a sense of urgency. As the saying goes, "The best time to plant a tree was 20 years ago. The second-best time is now."
RTP: Which retailers do you believe are leaders in the area of positive disruption?
Dennis: Clearly Amazon has been the most innovative, though we can argue whether all of it has been positive. Nordstrom has clearly embraced most key aspects of customer-centricity and been quite successful in a very mature category. I like what Sephora and Ulta have done to smartly deploy mobile technology into the customer journey.
RTP: Which new technologies should retailers be planning to implement in the near future (AI, VR, AR…)?
Dennis: Many retailers just need to get the basics of channel integration and sales associate support right. Brands need to be careful not to chase technology as a bright shiny object when they don't understand the basics of the customer journey well. Technology should be prioritized and deployed to eliminate friction, amplify points of remarkability and lower costs against a clear understanding of where the leverage is in the customer experience. Having said that, clearly personalization technology, particularly where cross-channel attribution is enhanced or where online analytics is brought to the physical world, can be impactful. Artificial intelligence has some really promising applications, though retailers that haven't figured out how to leverage small data yet need to be careful. I think we will see plenty of interesting experiments with AR and VR but most of this is too early to have major impact in the next couple of years.
Register for the Retail Innovation Conference to hear more from Steven Dennis.