Ep. 75 | Retail Reimagination with Steve Dennis
This week Forbes contributor and regular keynote speaker, Steve Dennis, joins Allison Hartsoe in the Accelerator. Steve has witnessed first-hand the reimagination of retail from his former senior executive roles at Sears and Nieman Marcus. Steve describes the combination of forces affecting modern retail from scarcity to the power of digital measurement to customer lifetime value. Steve breaks down what’s working for retailers who will success (and those who won’t). Steve believes, “Retail is not dead. Boring retail is dead.”
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Allison Hartsoe: 00:01 This is the customer equity accelerator. If you are a marketing executive who wants to deliver bottom line in packed by identifying and connecting with revenue generating customers, then this is the show for you. I’m your host, Allison Hartsoe, CEO of ambition data. Each week I bring you the leaders behind the customer centric revolution who share their expert advice. Are you ready to accelerate? Then let’s go. Welcome everyone. Today’s show is about retail reinvention and to help me discuss this topic is Steve Dennis, President and founder of SageBerry consulting, keynote speaker, and a regular contributor to Forbes. Steve, welcome to the show.
Steve Dennis: 00:48 Hi, Allison. Thanks for having me.
Allison Hartsoe: 00:50 So could you tell us a little bit more about your background and how you came to focus on retail in the first place?
Steve Dennis: 00:57 Sure. Well, I’ve been at this a long time. I was doing a few other things very early in my career, but really for over about 25 years, I’ve been pretty much exclusively focused on retail. I spent about 12 years. It’s years in a number of different leadership roles on the operating general management side and marketing side, finance strategy and innovation. And then I join the Neiman Marcus group is the chief strategy officer where primary focuses on innovation but also started to getting to multichannel marketing, what we would call Omnichannel, a customer inside loyalty and all that kind of stuff. And then I went out on my own a few years ago as a consultant really wanting to focus on how retailers and related brands can drive or accelerate their growth strategy and drive more innovation. And then I just kind of wandered into the writing and the speaking side of it over the last few years. It’s been really nice to gain some traction and started to grow,
Allison Hartsoe: 01:50 Well, I have been fortunate enough to have you share a copy of one of your keynote speeches with me, which I find really interesting, very compelling. And what we oftentimes see from people who are speakers is either no slides or like a whole bunch of junk on this lies, but your slides are awesome. They’re really lively. And a lot of really rich information. So let me start off with one of the questions that may lead you into those retail slides and we can kind of take it from there. Tell us a little bit about why companies should care about the reinvention of retail as in Amazon just going to take us all over, and before we know it, it’ll be just like by and large from the movie Wally
Steve Dennis: 02:32 Well, which is perhaps the most prosaic is companies have a responsibility to their shareholders to do what they can to maximize shareholder value. So they have threats and uh, if they don’t keep pace or find ways even to get ahead of things, then they’re not doing their jobs. But I guess the more interesting side of that is retail is clearly changing at a very rapid rate. There are very few categories that aren’t being disrupted in some way, shape, or form. How does that part of the that which we should be talking about in a second? Oh, some of it is just some more broader trends. And so you’re not changing in most cases, you’re just risking falling further and further behind in potentially becoming completely irrelevant. So I just think any retailer that I can think of circuit to varying degrees has to really dial up their game if they haven’t already.
Allison Hartsoe: 03:19 When you say retailers changing at a rapid rate, how is that different from the piece of change previously?
Steve Dennis: 03:25 I guess sort of an obvious point is that first and foremost, the invention of the Internet followed by Internet shopping really changed so many things. One of the things I talk about in my keynote is what I call the end of scarcity, and if you think back now, in some cases only 10 years ago, but certainly you go back a little bit further, and so much of retail was based upon scarcity. What I mean by that is as an example, 15 or 20 years ago, as a consumer, you are limited to, from a shopping standpoint, you were limited to whatever retailers happen to be in your particular town. When you were willing to drive to, you were limited by whatever they happen to carry and hope that they had it in your size. Could only shop whatever ever hours they happen to be open and all sorts of things.
Steve Dennis: 04:05 The way you got information about what a good price was and probably, I mean all that was very, very limited. And the Internet and they had been online shopping, various other Internet-based services. It’s just completely changed that equation. And so you really, as a retailer can’t get away with being good enough anymore. And so that just really flipped the equation and has focused a lot as far as forced a lot of retailers to either change or In many cases, it’s forced a bunch of retailers to go out of business. So, and you know, I think particularly, I guess the next part of that was the widespread adoption of smartphone technology, which they’re having customers having to go online and do their shopping, they’re basically following all the time. And so you know, that really picked up really just over the last five or six years. And then you’ve got an advent of these venture capital funded models, Brent does Amazon, etc. Then there’s just been so many forces that have really radically shifted the way retail operates just in the last two years really.
Allison Hartsoe: 04:56 That sounds like a very complex equation compared to how they might’ve done business in the 1950s
Steve Dennis: 05:01 Well it isn’t. I mean I sometimes say that retail and a certain level, you know, retail is a very simple business. You buy stuff, and you tried to sell it at a price that allows you to recover your costs and then make a profit. I mean the fundamental essence of that hasn’t changed, but certainly, the way that many retailers go to the market and the way many consumers go through their shopping journey is profoundly different.
Allison Hartsoe: 05:21 So essentially the math is the same. It might still revolve around unit economics. It might still revolve around CAC to CLV ratios, but the bar is higher in terms of attracting people in or in terms of scarcity, how, I guess, let me just ask them, how has the bar gotten higher?
Steve Dennis: 05:39 Well, you know, it’s shifting alive. I mean one thing that’s really an issue, you know, particularly as you start to talk about cost of customer acquisition and customer lifetime value is before Internet shopping. Most of marketing was really pretty straight forward. You know you’re doing, depending on what kind of business you’re wearing, how you are getting TV, you’re doing radio, you’re doing magazines, billboards, those sort of things. Vary mass, one size fits all. Certainly has some exceptions with catalog marketers that we’re doing things a little bit differently, but for the most part you didn’t really have a good understanding of what your marketing ROI was down to me, not even real level of detail and the way you find a customer acquisition was pretty broad for the most part, unless you’re really doing a lot of direct marketing now the game is, it’s shifted so radically. The digital, the one hand you can typically measure things so much better than you could a few years ago. On the other hand, I have what I sometimes refer to as told with marketing, which is in order to reach some of those customers, you’ve got to pay the toll booth operators, which is pretty a Facebook, Google, increasingly Instagram. And they are very good at raising the tool rates to kids to, you know, cut to the retailers to allow them to get through to the most valuable customers. So the challenge really is that in many cases, the folks that understand the high lifetime value customers and a toll booth operators and they have an ability to really price in a very precise way. And that’s just changed the game in terms of now they’re finding ways to acquire customers in ways that you don’t have to pay Google or Facebook. We could find a category in a different way. So you’re not just kind of this race to the bottom in terms of keywords and so forth. So, and then, you know, there’s just another, a lot of other different dynamics, physical retail’s mark, a fixed cost business, direct to consumers is variable cost businesses. Some pretty, I don’t want to get too deep in the way they’ve done that, but that’s pretty profound differences in just retailers. Overall economics, it’s more business goes online.
Allison Hartsoe: 07:27 I think it’s really interesting what you’re saying about the toll booth operator and the high-value customers being kind of gated by these operators. I would even throw Amazon into your list because of the Amazon marketing program now in order to appear on the marketplace, you’ve got to pay to get better placement, and one of the interesting things that came out a couple weeks ago on the podcast with Mark Mahaney from RBC was that they had estimated that about 25% of Amazon’s customer base for about a hundred million customers, we’re really high-value customers and these were largely the prime customers, the recency and frequency, the things that drive a CLV model where indeed much higher with these customers. So the ability to get to high-quality customers is starting to become, I think a little more obvious once people lift the cover and say, Oh wow, who is it that we’re acquiring? We can’t just take, and forgive me for calling blue apron on the carpet here, but I’m going to call it the blue apron strategy of acquire like crazy or maybe even the AOL strategy of acquiring like crazy until I can’t acquire anymore or until my cost of acquisition or just so sky high, I can’t maintain it.
Steve Dennis: 08:38 Sure. I mean, you’re absolutely right. I think there’s a couple of things to unpack there. First, there’s a tendency I think on the part of a lot of folks to think of Amazon as one thing was primarily an online retailer. And going back to your earlier question, I mean Amazon is a retailer certainly very important, but they are 5% of the market, and five years from now there’ll be under 10% of the market. So this notion that somehow Amazon is eating the world is, is this fundamental wrong? Now, as I always say, you know, the future of retail and the future of most things is not evenly distributed. So, I mean, Amazon is absolutely, they have destroyed the book and CD market, you know, anything that can be digitally downloaded and they’ve done very little in some other categories, or they’re very unprofitable in some other categories. So you really have to look at the Amazon effect, I think at a more nuanced level.
Steve Dennis: 09:27 But the other thing is Amazon is, as you point out, I mean, they have a marketing business, they have the AWS business, they have a lot of different components. And so, and you know, even when you talk about retail, there are some pretty profound these differences between the marketplace and what they do as a direct merchant. So anyway, you have to kind of get into that. But I mean it’s definitely an issue that when people thought about Amazon eating the world or they kick about these digitally native vertical brands disrupting major categories, one of the things to keep in mind, and blue apron is a great example of the Wayfair today. That great example of that. I would say probably at least half of the businesses that get a lot of press or you know, very, very unprofitable. And in many cases are acquiring customers at significantly below a net customer lifetime value.
Steve Dennis: 10:13 So the question there will be to what degree can they fine-tune their model, you know, because the idea of the more you grow, the more you lose. It’s not really a great business strategy. Uh, but as long as invested, I mean the thing that’s so different now, I was at, I’ll take a quick story. I was at a conference where this guy presented after one of the CEOs of a digitally native vertical brands presented. And that CEO talk about how amazing the NPS scores were and how fast they were growing and its valuation are over a billion dollars. And then this guy came up and described a hotel he was going to build that had incredible features and benefits. It’s going to be like the most spectacular hotel in New York that you ever heard of. And then he said, the great thing is not only is it gonna be the best hotel, but my prices are going to be 10% lower than every other great hotel in New York.
Steve Dennis: 10:58 And then he said, how many of you would like to stay in this hotel? Everybody raised their hand, said, how many of you love, we’d like to invest in this hotel. Nobody raised their hands. And then he said, well how is what I just described any different than the last one the last presenter told you they were going to do and kind of brought the room down. But, and there are some thoughts parallels there, but when I was at Sears if it was acceptable to any that that’s a complex issue to try being skewed. But I could say if it were available to us that we could invest more money in sales associates and products and on beyond and marketing and our investors would be okay with a negative 10% Ebitda. It would be I way better store for sure. And our growth trajectory would change radically.
Steve Dennis: 11:38 But that was not available to us. But that’s available to most of these digitally native vertical brands. And then the question is, at what point will they ever, was it just an exercise in futility and then be able to raise enough capital to keep the thing going as it’s happened to some notable find outs, you know, or will they be to adjust. But it’s, it’s a very big problem, and it’s very disruptive to a lot of the traditional players that are trying to keep up when the competition is spending that on anything, on the amount of money on marketing and often operating at gross margins that are five or 10 points below. Yeah.
Allison Hartsoe: 12:07 Right. And it gets back to what you said at the very beginning about the responsibility to maximize shareholder value. Now when you have Wall Street or the board coming down saying, show me the money, show me the money today. It’s harder to have or to pivot to a longterm strategy like LTV versus the digitally native brands that maybe aren’t public or don’t have that pressure.
Steve Dennis: 12:28 Yeah, absolutely. So, you know, at some point, I mean, I don’t have a crystal ball, and I certainly have been surprised in some cases how some brands have been able to fund their growth. It’s been interesting that nothing like it’s retail, but it was Uber and Lyft have gotten profitable. Public markets have taken a look at their numbers, you know, why their ventures that failed, right? And, uh, you know, it would be interesting to see it’s more of these digital native vertical brands come public and people start to see their numbers. What point are they able to keep the Sanger Bros? But in any event, for now, it remains, even though there are some pulling back in some notable failures and some that are like way for that, or do they print and so forth that are very much on the radar screen now. And you probably don’t have much latitude for more than a quarter or two of bad performance for the most part. There’s still plenty of money behind some of these growth companies. So I think, you know, as a practical matter, most retailers have to plan that that world’s not gonna change that much, at least for another couple of years.
Allison Hartsoe: 13:20 Well, let’s talk about one of the interesting ways I’ve seen some of these companies grow. So take bonobos, for example. It started out as digitally native, and then they used the high-value customer density to understand where to open the physical store on top of the reinvention, the physical store. How do you see physical stores changing?
Steve Dennis: 13:41 Well, I hate to give you the, it depends answer, but I mean Bonobos and a lot of these brands that are opening their own stores. I mean I often say everything is all old as new again, that was very much the model that catalog retailers followed 20 or 30 years ago. We used to know Matt, sort of a Todd, Eddie Bauer, etc., all open stores, number one because they realized that they were missing the rest potential by not doing it. They started to understand particularly the cases prepare all that returns would be much lower, returns in apparel in particular really costly. And third often, which gets you a certain scale, the cost of customer acquisition is actually lower. So I think it was totally predictable that most of these companies, even though Andy John in particular whom I know personally told me six or seven years ago that they would never open stores.
Steve Dennis: 14:24 And so I checked yesterday because I quoted that in my speech that they have 62 stores now. So never, never is a long time. But anyway, I mean but and I don’t think you have to be a genius to know that you just have to understand the dynamics of how to reach out, what’s working. So I think it underscores particularly for certain categories which still have a high degree of consumers wanting to touch and feel the product and sizing are important, things like that and they want to involved in the shopping is a social event and so forth. I think you’re going to continue to see plenty of growth on the part of these brands with their own stores. And I think in general the big shifts in physical stores are the ones that I think were the shifts that are important is to really understand that really in every category.
Steve Dennis: 15:08 Talk about that it’s just more pronounced than some, but online drives physical and physical drives online and you really have to think about your brand as one experience that plays out in multiple channels. And that just forces you to really think about what is the role of digital media and the digital presence? What’s the goal of the store and how do you harmonize those things in a way that really works well for the customer but ultimately has to work well for your own economics. And so we’re seeing it playing out in different ways and we’re seeing some concepts like Beta that are not selling anything that basically is that Stephens other retail consultant talks about is this idea of stories as media where the physical space is really being used much more for marketing, not for selling stuff, which it really starts to make us think about different sort of metrics.
Steve Dennis: 15:55 Brands like Bonobos and Warby Parker where it’s much more of an obvious blend of, you know, where they might have 50, 50 or 40, 60 between online and physical. And then traditional brands like best buy, Walmart, target, that of all really started to invest in stores again while at the same time improving their digital presence. But I think more importantly starting to understand better how stores and digital new to work in concert. So I think it really varies by category for sure. And I think generally it will result in east among the players that have traditionally had big boxes that will certainly result in smaller stores over time in smaller store counts, but um, how do you just have to really understand the customer’s needs in economics and delivering on them?
Allison Hartsoe: 16:36 How much do you think that store reinvention is being driven by the desire to really deeply understand the customer. So if I have a little bit of information on you and the digital space, then you come into the store, and I get your credit card information, and I start to kind of maybe get more and more and more information about who you are as a customer. Is that what’s really driving all of this?
Steve Dennis: 16:58 Well, I think for the retailers that are winning for the most part, absolutely. I think, and it’s starting to change. I think just really in the last year, or so, I think there was a lot of knee jerk reaction on the part of traditional retailers anyway. Once that one more well over one of the brick and mortar, they were changing their stores more to reduce costs. That where they saw their stores as liabilities and are really trying to figure out, okay, well how do I become more efficient? I think so. So some examples I mentioned, I think the smarter retailers, so to speak,
Steve Dennis: 17:31 I think the retailers that we’re really paying attention to, the different sorts of customer journeys and how they were shifting and we’re using more, not necessarily formally human-centered design process, but really trying to understand more the emotional side of what customers are seeking to do and applying at to their stores. They were much better informed about the role of digital and the role of stores and how they want that experience to look going forward. I know I worked a little bit with Nike a few years ago on some of their reinvention to their stores and very limited way, but it’s very clear that they were using a lot of customer data, but mostly they were using human-centered design principles and then that was helping me understand the customer data and to gather to not only shift their stores but reinvest their loyalty program and a bunch of other things. And I suspect that and that’s what’s going on with somebody better companies or companies that are performing better instead of mindset.
Allison Hartsoe: 18:26 Okay. I wonder if those two are slightly different focuses for the ultimate goal of, you know, bringing higher value customers. So if I use human-centered design and I’m using all my customer data, on the one hand, I might have the odds of really pleasing a lot of customers, but it’s not sliced by the precision of the high-value customer base and what that particular customer base once or maybe even the step below that the people who have the highest propensity to become the high-value customer base. Do you think that some of this store remodels are maybe a little bit misguided in terms of focusing on the customer experience as an aggregate or are they coming up with the right thing and then eventually getting closer to high-value customers?
Steve Dennis: 19:13 Well, from what I’ve seen, it’s a pretty mixed bag. I mean, I think first of all, and I said this on stage in my last keynote, I would really love for the industry to get a working definition of what we mean when we say customer experience because I see a lot of stores adding things that are quote-unquote experiential. And in many cases I think they’re gimmicky and it is hard, I think to your point to understand, okay well that may get you more posts on Instagram or does that may get you a nice write up and design magazine, but is that really pointed towards acquiring, growing and retaining and get creating raving fans or whatever you want to call them for your brand that really drives customer value. So I think in many cases there is sort of this, you know, get me some experience.
Steve Dennis: 19:53 Uh, I get me some more posts on Instagram, and it’s not rooted in a good understanding of customer equity or customer value analysis. I do think there are two different things. I would say I’m more expert in marketing optimization than I am human-centered design. But I think there’s two, a little bit, two different things. I think human-centered design can be very informative from a very big picture strategy perspective and I think you have to hit certainly had in mind or it seems to me like it works better if you have in mind who are we redesigning the experience for? You don’t have a very clear understanding of the customers that are important to your business today and that’s what you want to retain, the questions you want to acquire, but that can be done at a fairly macro level so that you’re not designing it for customers that aren’t a good fit for your brand or having a potentially profitable. I think when you start to talk about more precision marketing or marketing zation absolutely you can be much more scientific about ideally dieting, certainly kind of second patient, and then if you’ve got a good understanding of that, that certainly can inform specific marketing tactics, but I think can be dialed into your store experience and some of the tactical things you do. So I think it’s a little bit of two different lenses, but they should open please be pretty, pretty tightly aligned over time.
Allison Hartsoe: 21:05 That makes sense. And that’s certainly what I think where the organizations are starting to go slowly and gradually. We’ll talk a little.
Steve Dennis: 21:13 Yeah. But you know, I just felt as, I just want to think of, I mean, I think, I still think that most retailers are a bit in the dark ages on the way they approach much of these issues. And I think that some of it, which is I think one of the reasons why these outsiders, so to speak, these digitally native vertical brands, in particular, have been able to do so well as if they just come at the consumer and the marketing experience in a really different way. And I think it’s very hard for legacy retailers, traditional retailers, whatever you want to call them, to really shift their thinking because it’s really different, there are so many aspects that are so different that it’s not easy. I think I’ve certainly dealt with some something, you know, they don’t even really, they don’t really get what’s going on in some ways they’re approaching it in a very traditional, incremental sort of way.
Steve Dennis: 21:58 And so I think it’s not just a matter of, um, I certainly like to think that if somebody hears my keynote or when my book comes out, reads it, I gotta be a, okay, I’m going to know exactly what you do. But I certainly hope it’s helpful, but I also think that some of the issues in these retailers are so profound of talent level at the culture level that just having it different way to look at it or hiring a consultant or reading a book or whatever, it was only going to get you so far.
Allison Hartsoe: 22:22 That makes sense. I like to think about that as product-centric versus customer-centric thinking, but customer-centric. Yeah. The way that the digital brands I’ve noticed have infected their brands with so much personalities, so much heart that you feel like your signing up to be a member of their tribe. But the product center grants are so much more like, okay, I need a shirt. I need a. I need an item. And it’s not personalized, or I don’t mean personalized, but it’s not a heartfelt experience. Can traditional retailers create that kind of heartfelt experience in an authentic way?
Steve Dennis: 22:59 Well, I would hope so for so I completely agree with you. I think retail really suffers and has suffered from not only the product-centric thinking but the channel-centric thinking. Having been an organized by stores versus E-COMMERCE, I’ve started to use the term and it’s a little bit to be provocative and maybe proprietary of being human-centric as opposed to customer-centric because partially because I don’t think customer centricity has worked to me just about every company I’ve ever encountered talks about being customer-centric customers first. Just the heart of everything we do, you know Yada Yada Yada. But when you look at it your point, it hasn’t happened from those products. I think when we started to about being human-centric, the reason why I like that is number one, I think from a customer point of view it starts to inject what you’re talking about I think, which is where’s the heart?
Steve Dennis: 23:43 Where’s the emotion, where is there something about the story? Now I often say the original idea that often says people buy the story before they buy the product, and my friend Seth Godin talks about people like us buy things like this. There is this aspect of affiliation and tribalism and so forth or how it, how the product makes us feel, what it says about us that is important in so many categories and I think you have to get to that. What do you do it through anthropological studies or human-centered design or whatever, but it is really dealing much more with that emotional connection. Its part of human-centric is I think you also start to think about you bring your sales associates into the equation. I think we talk about customer-centric. We often say, well the associates and the process get left behind and so I think when we think about who are all the humans that are involved with it in this decision, because my spouse may not be the customer, but my spouse is, is human who’s important in my life.
Steve Dennis: 24:32 Maybe also important to the decision as associates will be as are the social networks that I’m involved in. And then I think human-centric also brings anymore what are we doing for the planet? Not to get super PC about it, but as humans, the things we buy, how we source products and so forth affects all of us. So I think as human dimension is anyways without, I mean it’s a higher level ideal, but I think it’s a good starting point. Then you can start to drill down more into the customer-centric behavior. But I know it’s a real issue. It’s very far from the heart of most traditional retailers, ways of thinking. So it’s a big leap for them. I think to get there. And you’re actually right, a lot of these other brands that have done well. It’s, I don’t know in all cases having done it, but it’s absolutely in your DNA. It’s more than just misuse mission statements from most of them.
Allison Hartsoe: 25:15 Yeah, and I think maybe if they understood it as the emotional loyalty is a stronger bond than a transactional loyalty, maybe they would be more inclined to shift over into that vein. But I also think it’s hard for them because they’ve got such a broad mix of customers and they haven’t grown up as a specific tribe focused. Then it’s hard for them to figure out, well what do they stand for without alienating another group? Whereas the smaller companies have the luxury of the focus.
Steve Dennis: 25:43 Yeah. I mean the smaller companies have many huge advantages I’ve said for a while. I think loyalty is another term that people throw around. I think to me the only loyalty that matters is the emotional loyalty. Behavioral loyalty isn’t often addressed. It points to something for them. It’s often not the case that doesn’t turn out to be loyal, or you know, we’re really talking about frequency or span, not loyalty, but regardless of that, I think you’re right. I mean, you know, I mean somebody, traditional companies have no, not only in having worked for two that are in the consultant to a couple that are, have very strong cultures, have been around for a long time. It’s really tough to turn that battleship no matter how good the leader might be. No matter how much money he or she throws out of that. So I don’t, and I, it’s easy to say, you know, just do all these things.
Steve Dennis: 26:29 But I think it’s the cultural shifts that are huge in many cases. As I said earlier, just even really getting what people are talking about, what that really looks like. It’s almost like people are speaking a totally different language. You think you’re too communicating one person speaking Mandarin and the other person’s speaking Farsi or something, you know. And in many cases, they don’t have the tools they need, and they’re beholden to rather not have to be necessarily. But you know, I don’t think it’s having the two companies where I was chief strategy officer of a public companies, and the demands of the public markets for short term performance and the sort of metrics they look at the street it looks at are helpful in some respects, but oftentimes to be very constraining. So there’s a lot of things that would have to change, I think a sort of bigger picture in the ecosystem.
Steve Dennis: 27:16 Do we want to call it in addition to just the hard work of changing many decades old in some cases culture, even though even if you have the technology, even if you have the money to invest. I think the other thing, which is really sad and I think it just speaks to how dangerous it is to wait, and I talked a lot of times about it. Most of the retailers that I see in trouble today basically watched the last 20 years happened to them. It wasn’t. I would say that when I was at Sears it wasn’t as if we didn’t know what was going on. Certainly not perfect information, but it was not news to us that we were losing market share to these various competitors back in the 90s that was something that we weren’t aware of, but for various reasons, which is, you know, a lot of podcasts with self, you know, we didn’t do anything.
Steve Dennis: 27:57 So the difference between knowing and doing is often huge. But now for many of these retailers have gotten themselves so much into being backed into a corner and their performance is in such that they have the cash flow to invest. And to the point you made earlier, in many cases, even if you had the cash, and even if you had this brilliant longterm plan, it’s unlikely that Wall Street would trust your team enough or just you know, for their own short term interests would go along with Mike might need to be done. So it’s very, very hard. I think once companies get boxed in to make the changes they need to make. So it’s sad to see it. I think it’s just unfortunate. It’s a harsh reality for many of these companies.
Allison Hartsoe: 28:38 I agree. And let’s just assume that maybe there are a couple of retailers out there who are capable of change. If they were going to change, what should a traditional retailer focus on to reinvent themselves? And if you can prioritize that in order, that would be great. And if it’s relevant, what would a digital retailer focus on?
Steve Dennis: 29:00 Sure. Well, the first thing I’ll say is I don’t really believe fundamentally there’s any difference between the physical and digital retailer. I mean, there’s almost no colors of any size that are purely digital anymore. I guess the only thing I would say that digital retailer is, is there actually a future for you as a digital-only retailer? What is your harmonized strategy potentially look like? But certainly really all of the retailers that were growing quickly that were digital five years ago, I mean, they’re all opening stores and in some cases, thousands or hundreds of stores. So I think that distinction that you’re, you know, really won’t exist a year or two, I mean, Amazon, it was going to do close to $20 billion in brick and mortar stores this year. So bigger than, I don’t know, 99% of the retailers, so but I mean I think you have to, I mean it’s always good, I think to a point that you brought up earlier.
Steve Dennis: 29:47 You need to have sent some sense of, you know, who are you doing this for? Who the customer’s accounts that account either because they’re very valuable to you today or are you thinking of great potential for them to grow with you or they’re going to be important to you in the future, and you need to acquire them. So you have to, I think some sense on a strategic level. Okay, so you need to have this down at the tactical market level, but at a strategic level who the customers that matter and have some sort of workable segmentation that’s based upon the value in behavior and so forth. And then we really need to dissect those customer journeys. And this is where it gets a little wild and crazy, right? I mean you even have say four or five strategic segments of your customers, but you know, particularly for sunk a lot of different products, the same type of customer might behave very differently if they’re buying a coffee pot from you versus redecorating their home.
Steve Dennis: 30:31 Right. But even, you know, you have to have some sense of those different customer journeys and where’s their leverage to by talking about a harmonized retail experience and talk about where are there opportunities in the customer journey to really root out the so-called this important notes and in pain points of friction points in the journey that really matter. And then conversely where you had those opportunities to really be remarkable in terms of amplifying the experience that we know that could be unbelievable product, unbelievable service, just a magical shopping and bright, he knows a number of different ways that could play out depending upon what segments you ran. So I think starting with some sense of long term customer value, dissecting those customer journeys and figuring out where your leverage is. And then I think it’s, you know, fundamentally being more agile and being willing to experiment.
Steve Dennis: 31:14 Because I think when I was growing up, most of my time in retail, when we were doing big strategic things, we would do a lot of study, might have consultants involved in, it’d be sort of this Aha moment yet we’d reveal our new marketing strategy or a new concept or what have you. And you can start this big bang of innovation. And I think over the last few years, and I think both in Amazon in some of these other disruptive brands are there, they’ve got such a culture of experimentation where they’re just constantly testing things, and it’s this fail fast kind of mantra. And that’s another barrier I think to a lot of ways the traditional retailers operate. You don’t have that culture experimentation and testing and learning. And I think you really need to be very, very agile because it’s too, you know, it’s too hard, but for his life and you know, you need to operate on a more personal level anyway, there’s much more of a micro focus to how much of it is important businesses today, but also just too hard to predict where the customers are going. And we just need to kind of wash, rinse and repeat really quickly.
Allison Hartsoe: 32:11 I think that’s right. And I also think the interesting thing about the testing aspect is that you can start it slowly and help change the culture of the company as you go. And as you try to make it faster and faster. I think that a traditional retailer could be successful in generating cultural change by using testing and engaging their teams as to, you know, what’s gonna happen with the test? Is this to be a good test or a bad test? What do you think’s going to happen? It can be a really good tool for cultural change.
Steve Dennis: 32:44 Yeah, I think so. And I have seen some of that. I think you know what we’re about. So CD get hung up is you have to, I have found that most people, perhaps myself included earlier in my career, go to big companies because they’re not fundamentally that risk-averse. And so even if the associated without, you know, there are the CEO and the answers that she wants to start being, I should put x millions of dollars and create a team or whatever, do at least test them are pilots, you know, which we started to some of that man we may use. A lot of times the reaction was, well why would I want to go work in that group? You know, in a career path, what’s going to happen if this doesn’t work? I gotta be able to go back into the organization. What happens is these things don’t work, and so it takes time.
Steve Dennis: 33:22 I mean I think you’re actually right. It’s, it shouldn’t be that hard a thing to get started on. It’s often a little bit hard to scale because the organizations sort of watching what’s really going to happen to these people. So that’s where some of these upstart brands have such a huge advantage because the fundamental premise of the other startup right as you very risk-seeking and you’ve got investors that are much more risk tolerant, and you know, if you don’t discover things and iterate quickly, you’re not going to be able to keep getting funding. So there are some real advantages on the innovation side, but absolutely there are plenty of things that legacy retailers can do on being more radical. They can certainly do more things to be, to do more personalization. I mean there’s a whole lots of things I think that are really important to reimagine retail that are available to legacy retailers. The big question is can they scale those, those things where there’s just sort of this kind of random experiments and is there is a strength of conviction over the long term to uh, I heard this term yesterday, proven news, prove these things happen, then invest behind it. Not just kind of get stuck in this laboratory mode, which I have seen quite a few
Allison Hartsoe: 34:24 Did you say proven move?
Steve Dennis: 34:25 Yeah. Proven moves. Like, I mean, one thing, question being asked. But one thing I’ve seen with some of the innovation efforts on the part of some bigger retailers over the last couple of years is that some of them have actually done a really good job of piloting a number of things or prototyping or whatever you might want to call it, and have the really pretty hefty portfolio of really interesting things. But they often have a hard time getting them out of that proof of concept mode, even if an abominable because they don’t really have the budget or the process to take something from fairly small scale, the fairly large scale. So what I think people often forget, or at least people that haven’t done a lot of real innovation work is that innovation is a process and innovation is also a big quote, has to become a cultural norm. And so, you know, it’s a, it’s a pretty comprehensive effort to do at any scale over time in many retailers certainly are doing a pretty good job of that on many are just trying stuff at all, kind of random model. But no, many of these retailers are going to have to get a lot, lot better at it quickly or they’re going to be left in the dust. I think we’ve seen a pretty example of a couple of years ago of retailers that are just either on or for all intents and purpose is down because they didn’t do it.
Allison Hartsoe: 35:31 So true. Well, let’s hope that they get the hang of it. They hear this podcast, they get inspired and no baby they can prove and move and get it dialed in. Now, if people want to reach you, Steve, what’s the best way for them to get in touch?
Steve Dennis: 35:43 Sure. Well, you can if you want to follow some of my stuff. I’m on Twitter and Instagram at Steven P. Dennis is Steven with a v and p like Peter, and then my website is stevenpdennis.com and then probably the easiest way to find my Forbes writing is just to Google Steve, Dennis Forbes and that’ll, that’ll take you right to my page on Forbes.
Allison Hartsoe: 36:01 Great! I know I have enjoyed a lot of your articles on Forbes. Thank you for posting those. And for putting your perspective out there. Are you also going to be at IRCE? I guess we call it retail x now they’ve renamed it.
Steve Dennis: 36:13 Yes. And actually, I’m doing a keynote to retail X so I will be in Chicago, that’s the end of the month again and the next month.
Allison Hartsoe: 36:20 Do you know the day and time of your keynote?
Steve Dennis: 36:22 I believe it is something like 1140 on, I should properly, let’s set up beforehand, I believe it is June 25th at around 1140
Allison Hartsoe: 36:35 Excellent. June 25th, 1140, and we will be at that show as well. We’re going to be in booth 646, so hopefully, we’ll get a chance to connect in person there as well, but if you are going to retail x be sure to catch Steve’s keynote. It is. I’ve had the lovely advantage of seeing a copy of the slides ahead of time. It is top notch. It is, definitely don’t worry. Don’t miss it and we’ll look forward to seeing you there. As always, links to everything we discuss our ambition data.com/podcast. Steve, thank you so much for joining us today. I’ve totally enjoyed our conversation, and I always feel like we’re in sync on our thinking.
Steve Dennis: 37:13 Well, maybe we’re both. Maybe we’re onto something. The nice thing is time will tell. No, I appreciate it. It’s been great speaking with you, and I look forward to seeing you in person in Chicago and hopefully a number of other listeners.
Allison Hartsoe: 37:27 Excellent. Remember when you use your data effectively, you can build customer equity. It’s not magic. It’s just a very specific journey that you can follow to get results. Thank you for joining today’s show. This is your host, Allison Hartsoe and I have two gifts for you. First, I’ve written a guide for the customer centric Cmo, which contains some of the best ideas from this podcast, and you can receive it right now. Simply text, ambition data, one word, two three one 996 and after you get that white paper, you’ll have the option for the second gift, which is to receive the signal once a month. I put together a list of three to five things I’ve seen that represent customer equity signal, not noise, and believe me, there’s a lot of noise out there. Things I include could be smart tools. I’ve run across articles, I’ve shared cool statistics or people and companies I think are making amazing progress as they build customer equity. I hope you enjoy the CMO guide and the signal. See you next week on the customer equity accelerator.