Innovator’s Corner: Retail Prophet’s Doug Stephens on the Future of Retail
Collision Conference has quickly become one of the world’s largest tech and innovation gatherings. This year’s event, Collision From Home, took place online from June 23-25. Over 32,000 startups, investors, industry leaders and innovators from across the globe came together virtually to explore, discover, learn and connect.
Doug Stephens, best-selling author and founder of Retail Prophet, joined a panel at Collision From Home to discuss Rebuilding the Retail Sector.
The Society of Innovators’ Jason Williams helped provide media coverage for the event and met with Doug to ask about innovation in the retail sector and the long-term impacts of COVID-19.
What will be some long-term effects of this pandemic for the retail industry?
First of all, COVID-19 has basically been hunting for retailers with preexisting conditions. If you happen to be a retailer that has taken on tremendous amounts of private equity debt, COVID-19 has found you. If you happen to be a retailer who has been too dependent on physical stores for the distribution of your product and your top line revenue, COVID-19 has discovered you. If you are a brand that has struggling to find your positioning or find your place in this new retail environment, COVID-19 has found that vulnerability. Many of the brands we see struggling in these initial stages are brands we already knew had problems.
My deeper concern is that as we venture forward we are going to be operating against what economists call the 80% economy. There is not a sense on the part of consumers that the coast is clear. There is a percentage who are still sitting out or being extremely cautious about their behavior. Even in a reopened economy, consumers are going in, getting the things they need, and they’re getting out. They’re not taking the time to shop.
What are some retail innovations and trends you were excited about heading into 2020 and how those have shifted?
It’s interesting. Our team had a project lined up with a major retail client prior to the pandemic that was aimed at creating a live stream from stores in New York City. We were going to put together a full broadcast, using the store as a stage to produce really intriguing content for an audience around the world. We thought that part of the the future of physical retail was using the store as a stage. I don’t think any of us realized at the time how predictive that actually was, and certainly none of us expected that only a few months later live streaming would become one of the most essential needs of retailers actually bridging the gap with consumers.
I think another thing we’ll see is the redistribution or redeployment of in-store resources, or the people side of things. There’s already been some really creative efforts on the part of brands to maintain relationships and interactions with customers using technology. They are using live video technology to assist customers or setting appointments to have personal interactions with customers in the retail space. There’s a lot of creativity out there and some of those trends are absolutely going to take retailers in a very different direction in their thinking around the purpose of the physical store.
There’s no question that money is moving from the physical to the digital. If COVID-19 proved anything it’s that about 90% of retailers are not prepared. They’re not capable of literally serving any customer at any time across their entire range of products. As stores are closing, that is troublesome for most brands. I think you’re going to see a reallocation of assets. We will see store closures, downsizing of locations, rental agreements being rehashed and renegotiated, and that money will be flowing back into digital capabilities.
How might this pandemic change the shopper and our collective consumer behavior?
Some of the long-term changes for consumers are going to be really compelling. Will people be germaphobic? Will they move more of their spending online? I think these things are almost academic at this point, but the real question is what happens to our cities.
If people in New York City all of a sudden don’t have to come into the office to work anymore, what does that mean for the city? If people can work from anywhere they want, what does that do to the complexion of the city?
If students are all of sudden told, “Hey, you don’t have to come to classes. You can study online, regardless of where you live.” How does that change the complexion of a city like Boston, and how does that change transportation in that city and much of the retail that has been dependent on those commuters, students and transportation systems to bring them customers every day.
I think we will see an exodus from cities to the suburbs. How will that reshape retail in those areas? These are the big, open questions that I think are far more momentous than just what do we do between now and the time there’s a vaccine.
What are some silver linings to COVID-19 that will open up longer-term opportunities in the retail sector?
I like to think of the retail industry as an old growth forest. If you talk to any arborist, they will tell you that if you want to make a forest more robust, you must burn a lot of that old growth down. For the most part, the retail that we see around us today was born out of an industrial era. It was a construct that was necessary in an era where it was all about the distribution of products to market and segments. If you were a brand, you needed that physical network of retail distribution.
The silver lining for me is really twofold. COVID-19 and its impact will burn down a lot of that old growth retail forest and make way for new ingenious concepts coming from younger, more tuned in entrepreneurs. And that’s a good thing for the industry.
The other part is this will pull the entire retail industry kicking and screaming into the digital era. And if we’re being honest about it, I think that is just fundamentally better for consumers.
What is something you wish more people asked about the retail industry?
If we were honest with ourselves, retail over the last 30 years has not necessarily been a force of good in the world. We have tranquilized ourselves as consumers with mindless consumption. We ship a boatload of cotton to one side of the world, and ship a $2 t-shirt back to the other side of the world so that a consumer can buy it for $7 and throw it in the garbage after two uses. It really is an embarrassing amount of waste.
My question is this: Is COVID-19 really the universe tapping us on the shoulder and saying, get your shit together. This really is the opportunity we have as an industry to sit down collectively and say, “You know what. We have a choice here. We can either continue on this perilous path to destroying the world around us, or we as an industry, can sit down together and make a change.”
We can change the course of history and we can work collectively for the betterment of humanity and the preservation of the planet. That really is the question I wish more people were talking about and less about what payment paths customers will still want in stores.
What does innovation mean to you?
I think innovation starts with humility. If you don’t have humility in the leadership of your organization, it’s very difficult to be innovative because humility is what drives you to say, “I don’t know what’s going to happen. I don’t know what the answer to this is.” And as soon as you admit that you don’t have the answer, that hopefully propels you to set about trying to find what the answer could be, and that leads to experimentation and ultimately to innovation.
In some cases, we also need to open ourselves up to the idea that maybe our entire business model needs to change. Maybe what we considered to be our core product is not our core product. Maybe we should be exploring other things, other services, other experiences that we can monetize. Maybe there are different ways.
This is a time when everything is up for grabs. Consumers are changing, the landscape is changing, and business does need to change along with them. Otherwise, you’re just going to be a refugee, held back in the industrial era. And that is a not a good place to be.
About Doug Stephens
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. He is the author of two groundbreaking books, The Retail Revival: Re-Imagining Business for the New Age of Consumerism and Reengineering Retail: The Future of Selling in a Post-Digital World. Doug is also the nationally syndicated retail columnist for CBC Radio and sits on multiple advisory boards, including the David Sobey Centre for Innovation in Retail & Services at St. Mary’s University. You can learn more about Doug’s work at retailprophet.com.
For further insights from Doug Stephens, you can read his full interview with Jason Williams at the Disruptor League.