Q&A: Doug Stephens on How to Give Retail Customers Something Unique, Memorable, And Valuable


The following Q&A with Retail Prophet founder and ‘The Retail Revival’ author Doug Stephens is excerpted from Credibly Business Journal: Understanding the Needs of the New Consumer, the first in a three-part series on retail trends and innovation. Click here to download it for free.

CREDIBLY: When it comes to retail innovation, much of what’s being discussed these days relates to “digital experiences” and technological advancements. Is the retail industry putting too much faith in technology as a savior?

DOUG STEPHENS: There are two schools of thought right now pertaining to technology. Some brands are trying to sum up an entire generation of consumers by saying, “Well, they’re digital. They want digital experiences.” And I don’t believe that there’s really such a thing as a digital experience.

We all have experiences every day — we have transportation experiences, we have entertainment experiences, we have work experiences — and some of those experiences are enabled by technology, but they’re not necessarily technological experiences, in and of themselves. I don’t get in my car each morning and think, “Okay, I’m going to have a really great internal combustion engine experience here.” I’m just getting to work, or I’m going to a friend’s house.

I think some retail brands are going down the wrong road by filling their stores with more screens, simply to try and placate this generation of millennials who want to look at screens. The reason people are going to get off the sofa, get in their cars, and drive to a location, is to have an experience that they cannot have online.

Other brands are taking a more sober, logical approach to technology and saying, “Look, there are known problems and friction points along the consumer’s path to purchase, whether that’s getting the right information about a product, or having the ability to try a product before you buy it, and we can use technology to alleviate, minimize, or eradicate a lot of this friction.”

The convenience and wholesale-level prices offered by so-called “disruptive” online retail companies are big selling points with consumers. If I’m a mattress store, how do I compete with Casper? If I own a men’s suit shop, how do I compete with Combatant Gentlemen?

That’s a good point, but let’s forget about the winners for a second, and let’s look at the losers. The losers in any category, almost inevitably, are brands where the value proposition being given to consumers is not clearly discernible. And what I mean is, there are brands you can look at and say, “I can’t tell if this brand is exclusive, or if this is a brand that’s convenience-based.” They’re somewhere in the middle.

The way the market is shaping up is that in almost every category, you have two kinds of players that are winning. One is what I call the high convenience player, which is a brand that focuses on the user experience. These brands take all the friction out of the buying process, and do everything in their power to lower input costs in an effort to keep prices down. They also focus on a very strong cognitive connection, so when you think about that product category, you just immediately default to that brand.

For me, the best example of that today 
is Amazon. Amazon is almost becoming the cognitive default for product search now; 44% of product searches take place on Amazon because they’ve done such a good job of becoming that ubiquitous marketplace for everything. The Casper mattress model sort of fits into that as well: Let’s take all the friction out of buying a mattress. Let’s make it as easy as pie and put everything online, and the next day I’m sleeping on this mattress.

At the other end of the spectrum, we have high fidelity retailers. These are retailers that say, no, it’s not about convenience. It’s about exclusivity. It’s about a rich, deep, customer experience, and building a connection with the customer. It’s about these really high touches along the path to purchase, and it’s about premium pricing. It’s about giving somebody the feeling that, “Man, I just bought this thing and I’m a different person for having done business with them.”

And those kinds of brands are doing fine too. It’s everybody in the middle that is just being cleaved off. And you can put Macy’s in that category, Kohl’s — a lot of the department stores find themselves in that predicament.

doug stephens retail prophet retail revival headshot

“Unless you can find some point of differentiation, either by virtue of product or experience, you may as well start planning the funeral now.”

In your “Retail and the Economics of Boredom” blog post, you wrote, “The bottom line is that in a world where three taps on a piece of glass gets me anything I want, there’s simply no more room for boring stores.” What’s the first step towards being less boring?

I’m a firm believer that there’s still value in product discovery. Small retailers that are traveling far and wide to curate their stores with unusual unexpected goods can be successful doing that, in many cases. It’s wonderful to walk into a store and discover a brand that you’ve never heard of, or to see a product that you’ve never seen before.

But if you can’t do that, and you’re sitting there in the cold light of day saying, “The things that I sell are available on every block of the city that
 I operate in,” then you have to find a way to sell those things in such a distinct and remarkable fashion that people will come for the experience. If you sell ice cream, and there are many other places in your market that sell ice cream, you 
can sell it in a unique and differentiated way, and create theater around the experience so that you can say, “You’ve never had ice cream like this.”

Those are your choices. And if you’re shrugging your shoulders as a retailer saying, “You know, the problem is I really can’t do either. My products are the same as everybody else that sells them, and I really don’t think I can mount some sort of experience that nobody else has” — then, your time is limited. That’s just the simple fact of the matter. Amazon is growing at 28% a year and they are swallowing every category whole. So unless you can find some point of differentiation, either by virtue of product or experience, you may as well start planning the funeral now.

Outside of product and experience, are there any ways that retailers can innovate in the way they operate their businesses?

First and foremost, they need to start having a different conversation with their vendors. I’ve spoken to a lot of retailers and manufacturers over the years, and the one resounding point that gets everybody’s head nodding is that the days of the old conventional showdown between retailers and their suppliers is coming to an end. Both parties now recognize that the consumer is holding all the cards.

The consumer now has access to a spectacular amount of selection and choice. If retailers and vendors won’t come together to better serve the consumer and provide a better guest experience in general, then both of them are going to get left out in the cold, because the consumer is willing to move on.

Retailers and vendors should start by asking, “How can we mutually break out of this transactional behavior that’s all about sales per square foot, sales per hour, gross margin return on investment? How can we start building better experiences for consumers across channels?” Retailers in particular understand that if they continue to go down this road of using the same ancient metrics, then their stores and their businesses are simply going to look less productive each year. And we’re seeing that already. We’re seeing brands that are questioning their real estate investments. They’re offloading real estate and downsizing their stores, and it’s a huge mistake.

Related: Why Are Retail Spaces Shrinking?

I understand the motivation; I mean, their P&Ls must look horrible. But 
the fact is, each of those stores is a brand outpost in the marketplace and generates a value over and above four-wall sales. There’s an awareness value and there’s an experiential value, and all of those can be reciprocal to online sales. Now, how you tactically go about adding extra value is really down 
to your own creativity, but unless you understand that the current set of metrics are not the metrics that we need to be following in the long-term, it won’t work.

You’ve praised b8ta for defying conventional retail models by charging rent for the space their product occupies, rather than following the traditional wholesale-to-retail model. What lesson should retailers take from them?

The b8ta example is really interesting to me because they have essentially acknowledged the fact that as long as you’re tied to sales
 per square foot, and you’re depending on revenue strictly from the four-wall sales of the store, you’re only going to carry the products that are guaranteed to sell, and those will tend to be the same products that everyone else carries. Best Buy is only carrying merchandise on the floor that they believe is going to turn into revenue. As a consequence, their stores have become extremely predictable.

What b8ta said was, “Look, we can break out of that model. If we can charge brands for the data and insights that we can provide about consumer behavior with their product, we will then be able to carry things that nobody’s ever seen before. We’ll be able to carry products even from start-ups.” It’s a really, really interesting model. And frankly, it’s a model that Best Buy could’ve done first.

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Doug Stephens is one of the world’s foremost retail industry futurists. His intellectual work and thinking have influenced many of the world’s best- known retailers, agencies and brands including Walmart, Home Depot, Disney, BMW, Citibank, eBay, Intel and Google. Doug is also listed as one of retail’s top global influencers by Vend.com.

Prior to founding Retail Prophet, Doug spent over 20 years in the retail industry, holding senior international roles including the leadership of one of New York City’s most historic retail chains.

Doug is the author of the groundbreaking book, The Retail Revival: Re-Imagining Business for the New Age of Consumerism and the nationally syndicated retail columnist for CBC Radio. Doug also co-hosts the popular web series The Future In Store, and sits on the advisory boards of the Dx3 digital conference and the David Sobey Centre for Innovation in Retail & Services at St. Mary’s University.

His unique perspectives on retailing, business and consumer behavior have been featured in many of the world’s leading publications and media outlets including The New York Times, The BBC, Bloomberg Business News, TechCrunch, The Financial Times, The Wall Street Journal and Fast Company.

Doug speaks regularly to major brands and organizations across North and South America, Europe, Asia, The Middle East and Australia.

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