17 Conference Report #techonomy17

Retail’s Rubicon


Julie Bornstein
Former Chief Operating Officer, Stitch Fix

Steve Carlin
Chief Strategy Officer, SoftBank Robotics

Christian Madsbjerg
Co-Founder, ReD Associates


Mark Bonchek
Chief Epiphany Officer, Shift Thinking

Session Description: The physical and digital are converging, and nowhere more so than in retail. Amazon’s astonishing inroads are daunting. Yet retail will not be exclusively digital. From browsing, to purchase, to delivery—how do retailers balance the in-store and online experience?

An excerpt of the conversation is below, with the full transcript available here.

Kirkpatrick: Mark, who’s a great retail and business transformation thinker and a good friend of ours, please take it away.

Bonchek: Thank you. So, please, if I could have my panel up here. Well, I think we had a great segue from John’s talk about market transitions because if I look at industries going through a transition, we all experience that with retail every day. And I think it’s also going to be a little bit of a microcosm for whatever industry you happen to be in, because it really is about the convergence of changing consumer behavior, disruptive business models, and digital technologies. So, to help us explore the new world of retail and how all those things come together, I’m really thrilled to have Julie, Steve, and Christian here. So, just a little bit of background on each of them.

So, Julia, until the recently, was the Chief Operating Officer of Stitch Fix. Before that, she was the CMO and Chief Digital Officer at Sephora, so a lot of the real innovations that have happened at Sephora were really coming out of Julie’s leadership there. And I think particularly interesting, she was the Vice President of e-commerce for Nordstrom from 2000 to 2005—so, not a typo there—really early on.

Steve—fascinating background—current Chief Strategy at Softbank Robotics. They make Pepper. If you’re not familiar with Pepper, it’s a robot we’ll hear more about it—but it can read human emotion. It’s being used as a shopping assistant in stores. He was the global head of strategy for gaming at Facebook and marketing at Ubisoft, and then also was at Procter & Gamble—so, a CPG background, interestingly.

Christian Madsbjerg—cofounder at ReD Associates, which is a strategy consultancy based on the human sciences and they have anthropologists and sociologist and even art historians? Yes. And also, the author of Sensemaking: The Power of the Humanities in the Age of the Algorithm.

So, some really great perspectives here in terms of consumer behavior, technology, and retail. So, I just want to get us started with a few facts because this is the setting that all of them are operating in—and you probably experience on a daily basis, but it’s really incredible to see these transitions. So, over 8,000 stores are going to close this year and over the next five years, one out of every four malls will be out of business. And since 2002, department stores have lost about half a million jobs and e-commerce has only added back a third of that. And then last year, 43 percent of all online retail sales in the U.S. went through Amazon and 20 percent of all U.S. consumers are Prime members.

So, we’ve got closing stores, closing malls, increase of e-commerce—it continues to grow rapidly—where do go from here? What is the future of the store? Julie, you see—let’s start with you. You’ve seen it from all different sides. Where is this going? Is it inevitable? Will there be something that turns it around?

Bornstein: I have always felt that shopping is a sport and human past time. And when you go back to the beginning of mankind, markets are not just a reason to go for getting physical goods, but also the socializing and the experiences is something that probably half the population enjoys, from studies that I’ve seen. I do not think physical retail is going away, I guess that is to say.

However, certainly the need to go to a store to get something you know you need no longer exists. And so, I think the way I have been thinking about it in different context is that, in the next five to ten years, it will sort of stabilize around 50/50 in terms of the consumer segments that I’ve worked in. I think it’s a little bit different for some categories that really lend themselves more to online.

But, if you think about sort of the 50/50 of online versus offline buying, you think about the fact that there is definitely too much real estate out there—so there is going to be a shrinkage and there is going to be sort of a displacement and sort of a need to reuse that physical space. I just recently saw a picture of Rackspace’s office in Texas and they took over an entire mall for their office. So, you know, I think the repurpose of physical space is definitely going to be an interesting one.

And then, the question is what’s the purpose of physical retail? And, you know, there are some examples—certainly, at Sephora, we were really focused on making the reason to come into store—I’d say a couple of key tenets to it.

One is, it needs to be located in a place that you’re either shopping on the street anyway—and so it’s easy to pop into—or you can go and park. So, one of those two things are pretty core to it.

And then the second is, there are actually people in there that can give you help. And so, if you go to a majority of retail stores today, it’s hard to find someone to help you and certainly the people don’t have a lot of knowledge. Obviously Apple is the sort of, you know, ideal opposite—where the people are so trained and so passionate and you actually need their help—and so you go in and talk to them and get the help. And I think Sephora was an example of—we did a lot of work on training the associates in the stores to be able to actually teach you how to use product and be able to get free services in the store.

And the third is that, you know, it needs to be a pleasant experience. So, you can go into places that are just depressing. I was in a JCPenney. My 80-year-old mom wanted pink slippers and she wanted to go to JCPenney, which cracked me up. And I was like, “This is the problem with JCPenney but—” So, you know, we were walking around, there were no pink slippers to be found. It’s sort of luck if they have what you want—and couldn’t find a person to help us to save our life. So, obviously, that’s not going to exist. There just weren’t enough people in that store to make it pay for the few people that were working there.

And so, I think the standards change and you think about a physical retail location as “What are we going to do draw people in?” Why would people be coming? How can we add value? And then certainly, as technology sort of evolves, the role that technology plays in the physical environment is going to be really interesting.

The only thing in my time at Sephora that I really found compelling was actually a digital experience that we created with a device. We partnered with Pantone’s technology arm and there was an actual device that can read the color of your skin. It’s called Color IQ. It could then automatically match you to, among thousands of shades of foundation—the right foundation for you. That’s makeup—a makeup product—for the men in here that don’t wear foundation. And the benefit was then you could sort of save that—your Color IQ—in your account, you could buy online or in-store in the future. And that’s not something you can yet do with your iPhone because it can’t actually capture the perfect color. It was a pretty technical device.

But, you know, I would say all of the things that we tried around messaging on your phone to get you to come in and to actually be able to tell you what to do when you’re in the store—all of that stuff, frankly, was more interference with the physical experience than anything. So, I think it will be really interesting and I’m excited to hear about the robot and how technology and physical environment will actually make the physical experience more compelling.

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