The B2B Revenue Executive Experience
The B2B Revenue Executive Experience

Episode · 4 years ago

Michael Dart on Understanding Retail Dynamics

ABOUT THIS EPISODE

Turn on the news and you hear countless stories about store closings and forgotten malls – no doubt casualties in the evolution of retail. With ecommerce displacing brick and mortars, it’s easy to cry “death of retail,” but retail is very much alive and thriving.

To better understand the new retail landscape, we sat down with Michael Dart, partner at A.T. Kearney and author of Retail’s Seismic Shift: How to Shift Faster, Respond Better, and Win Customer Loyalty.

You are listening to the BB revenue executive experience, a podcast dedicated to helping the executives train their sales and marketing teams to optimize growth. Whether you're looking for techniques and strategies or tools and resources, you've come to the right place. Let's accelerate your growth in three, two, one. Welcome everyone to the B Tob Revenue Executive Experience. I'm your host, Chad Sanderson. Today we're talkling the changes being experienced in the retail space to help those in our audience who sell and focus on retail better understand the landscape and market dynamics. Anybody who's been watching the news those that retails kind of in a changing evolution as we speak, between e commerce for some more things like that. To help us with this we have Michael Dart, partner at at Kearney, with over twenty years experience consulting with and leaving projects in the retail space. Also author of retail seismic shift, how to shift faster, respond better and wind customer loyalty. Michael, can't thank you enough for taking the time to they welcome to the show. Chad. Thank you very much for having me. I really appreciate your kings of join it. So I'm always curious, fascinated actually, by the journey our guests go through to arrive at the point that they're at in their career. So just for background, can you kind of run down for our audience how you came to be an expert in the retail sextor, I mean, when did you realize as a passion or enter us? Was it more happened since how did that come to be? A great question. A combination of things really, a little bit of happenstance, and then I found that I really liked the sector and liked everything that's going on in retail and consumer facing businesses. So I'm a consumer consultant. I've spent my career consulting and in the early two thousands had an opportunity to join a firm that was focused on retail and consumer goods and while I didn't necessarily know a lot of that time, I realized there was a really interesting intersection between...

...what that firm did, which was really understand everything that's happening in retail, and actually an emerging sector of investors looking to invest in retail and consumer businesses. And I thought that I could play a bridge connecting those two things. And then when I got into looking at reach our businesses, I just loved everything that they were doing because there's so much about the promise of a brand in retail, about what it's trying to do to delight and satisfy the customers, and it's always forward looking in trying to understand that, and I found that pretty invigorating and intoxicating because you're always dealing with creative people looking at doing new, new things, new ways of doing things, bringing new products to market and and so that combination of those characteristics, combined with the discipline of the financial side analytic side, I found a particularly compelling and a twenty years later, here I am still in it and enjoying it, writing books about it. It's an interesting sector that it's a beautiful blend of science and art. It really is. It really is, and a ABBS and flows. Quite frankly. You know, right now you're seeing an awful lot of people coming from the science aspect into retail because of all of the data, all of the algorithms, all of the analysis. But other times you'll have the merchant princes will be the dominant force of they the creative types and ultimately, I think in the look forward, organizations that complain both of those types recruit great analysts, use the data really effectively, but also don't lose the sense of inspiration. Artistic, creative Stini will be the winners. And so let's start for their audiencing. Let's start with the kind of a contextual question, because anybody that you know steps out from underneath the Bell Jar knows that the retail sector is, you know, in I don't want to say turmoil, that may not be the right word, but it's experiencing some definite changes right we're hearing about the store closings and things like that, and then there's all...

...these talks about pop up experiences. So News on the sectors kind of legion for those those that don't live and breathe it, but for our audience, is it possible to provide kind of a clear, focused, maybe even slightly simple, summary of how the retail sector is changing, in evolving right now? Sure, let me. Let me attempt to do that, because I do think it. I do think it's a great question and I think quite often what you hear is people say to retail apocalypse, no, no, you know thinks are as bad as everybody said, and those opinions all, you know, useful on some level. I think this the fundamental forces that are shaping our industry and are changing the entire retail structure. So let me just highlight three for your audiences, I think give a really clear perspective of the level of change it's taking place on why it's going to be systematic and endemic and it's not something that's going away. The first is that is a supply and demanding balance in our economy. In other words, there's more supply of material goods than the underlying demand for those material durts. There's a lot of reasons why that's occurred. Obviously, globalization has driven the supply, manufacturing efficiency all sorts of new sources of supply coming online along the term. You can look at d printing, is going to increase the supply of material goods. So only there's a whole slew of reasons why demand is constrained, from demographics to the fact that we're spending a lot less on material products much more on technologies. You know, moving from physical atoms to digital electrons. We're spending a lot more time on experiences and services etc. Well, that means again this space simply is when supply and demand is out of balance, the supply curve, if you think about basic one hundred and one, moves down the demand curve and price falls, and that's what's been happening across the board. And when price falls significantly, and in in the book I proved coockeratively say everything's heading to free. While that sort of things down ridiculous. Obviously in information technology it could be free. In material goods, quite frankly,...

...it could become such a small percentage of how we spend our dollars in the future if you think five, ten years, because it's almost acting like a free good. When that happens, the basis of competition fundamentally changes, and so you move from wing competing on the on the basis of the product itself. Two things, like convenience. That's why you have obviously, all the online guys and why Amazon has stamp. is because the products less important, but how you get me the product. Second thing that becomes important is how you compete on experiences that you wrap around the product, and that's why you hear so much about experiential retailing. And the third thing that happens is people now want to buy product that aligned with their value, so you get a lot more association with values. So that's the first part that's taking place. And, by the way, as a as a price declines in the market, the economic structure that supported all of these scale retailers is under threat, which, of course, is why you're seeing somebody still closings. Second big thing, and I'll try and still keep it simple as that, there's a massive fragmentation taking place in consumer taste. Has Been going on for some time, but it's accelerated dramatically with miner millennials, Gen Zars others, and the way I like to articulate this is that we're moving from craft foods with a K to craft foods with a sea. In almost a resector. You start to see the crafting industry taking over, where lots of small niche brands that never existed at coming in a because the consumer base is fragmenting. And again, there's a lot of reasons I go into in the book around this. It's whether it's psycha psychological, psychographic reasons, whether or not it's demographic, ethnic, sexuality, geography. I mean you think about it, is just incredible fragmentations they place and that that is meant that you can have these companies coming up and serving all of these niches. That is creating what I refer to as the D massification of our economy. The mass markets are no longer...

...appealing to people because they're looking for something much more individual. The third big thing that has been going on for some time of accelerating is the technology catalysts, and what the technology has been able to do is to create new business models. It's being linking buyers and sellers in ways is never anticipated before. Whether or not you can think of air B and be over any of those new delivery services coming up where one wing you can be a consumer, next minute you could be actually working for the company. It's enabled Amazon, obviously, to very efficiently sell a thousands, millions and millions of skews, quite frankly, at a touch of a button, very simplistically, again technology based, and then redesigning the physical world for that. So you put all of those together and if you think about we tell that for a hundred years was effectively designed for the call where we would drive out to do buy things. It's now being redesigned for the smart devices where you can search for unique product, you can find out what the price is, you can find out what values are associated with it and then you can get it delivered to you in a completely new and it a depression. So I'll stop that, because a lot of I guess that that is my simply sew out why this industry is going through such fundamental change. Well then there's are those are great perspectives, right, and there's a lot there. There's a lot that I could definitely dig into. I mean, the the economy one is interesting to me. Right, you see the stores closing because, as you said, moving to free your margins shrink, that your top line becomes are you got to watch the bottom line and the cost of those stores kind of outweigh your margins at time. So that completely makes sense when people really stop to think about it. The one that, though, that really speaks to kind of meeting is that experiential aspect of it. I think it was a Harvard business of your article I read said something like eighty nine percent of people will pay more for a better experience and up to like eighty six percent will actually stop. But...

...purchasing process because the experience is unpleasant or what we would say full of friction. And we see this, you know, translating. Everybody lives a BBC life, so we see this translated to be tob sales. In the world that I live in, people are expecting those experiences to change. How do you think retail is going to be able to, you know, overcome that? Are the pop up experiences that we're seeing kind of a response to that experiential aspect of it? Well, I think that's a great point, and they certainly are, because they're one great way of driving engagement interest from the consumer by having suddenly a new product and you lay out and you store that you hadn't seen last time you went to the store. And the reality is you're only going to go to the store if you think about it against simple mathematical equation, if experiences is greater than convenience, and so that's that's the equation. And so now you can define experience in many different ways. of Pop up is one, and certainly going to a store where you can find something new in a bit if interesting, and each time you go and see something like that it's going to be it's going to be engaging for you because the smartphone so compelling. Every time you go on your smartphone there's something new to try and grab your attention on only any multiplicity of APPS, any type of news feeds, any type of product you want to search. So the retail store has to in its own way, evolved to create that and doing something like pop ups. There's a store, I don't know if you're familiar with called story in New York. It started where they actually change the entire store, I want to say every couple of months, based around a whole new story. So the story could be, for example, crew we're be in art, it could be around the United States and France and something. All the products would be around that particular theme and then the store will have that for a couple months, change and next time you go in it be the next story. And that's again it's a pop up in a fixed structure,...

...but it's a cating this high engagement of reason to go back something new for the consumer. So that's could be very powerful. The other things that are going to be powerful, I believe, our entertainment type of retailing. So in the malls where you have incredible technology. The stores will become more show room like. They'll be great restaurants services a definite day out. People will spend money even if they don't necessarily physically walk away with a product. That's going to happen. And then the other part that's also clearly happening right now and is going to expand, is what I term the values based, community based retailing, of which the best example iways use as farmers markets, where, if you've been to a farmer's market, you'll see it's actually pretty jam packed as people go around buying basic product that you could, quite frankly, getting almost any other supermarket. Yeah, the variance of that is so dominant. Yeah, only twelve percent of companies from the original fortune five hundred list remain on the list today. How do you ensure your organization stands the test of time? At Carny works with fortune five hundred companies every day. To answer this question, visit Eighty Carnycom to find out more. Well, to the farmers one. It's sure. Okay, I'm going to tell myself. You know, people buy for emotional reasons and just FY with logic right. So I'm going to tell myself I'm going to the farmers mark because it's health here, it's more organic. I want to support my local whatever. I like the experience, I like being around those other people, I like seeing what they have right, the smells, the it is a it's not as drudge. Is as much drudgery. Is like a round the target and get some more paper towels like. That's it's completely different experience and honestly, and I do do a lot of farmers markets, when I think of farmers markets, I don't think of it as shopping were or I don't put it in the same category in my head. I even view it differently. That's well said. I think you put that really nicely and I agree, because...

...it stops being at Chore and Actually Becomes Part Of your leisure time. YEA, because the way the experience is shifted. No, I like that. And so in your book, I think it was around Chapter Eight, you talked about the the new consumer value being rational altruism. Can you explain this in more detail for audience? I thought it was fascinating. Yeah, I will. So another part of this abundance of material goods that we we now live in, and not only just the factors more supplied to just to she abundance is is sheer selection of material goods has changed the way the consumer thinks about purchasing and what they're looking for. And they're really looking because, because now they have so much product, they're really looking for people who seem to understand their lives and are looking to really solve problems for their lives engage in that consumers lives in a very, very meaningful way. And so when I took about rational altruism, I took a lot about the shifting mindset that retailers and need to have farm really thinking about their own internal economics, if you like, or their own internal business model, to constantly saying, in touch with how the consumer is evolving and changing and what they are what they are really seeking when they go on a shopping trip. And quite frankly, it changes a lot depending upon the income level of the consumer, the nature of the purchase, the time that they have, and retailers fulfill different roles, some multiple roles, you know, for for the same consumer, different times, etc. But they play different roles and really thinking through how do I get very, very close to understanding and solving the problem for the consumer is very, very important right now. So that that's the altruistic part I took about really developing an empathy for the consumer, really trying to understand their needs, because the way retail has grown over the last, you know, twenty...

...years or so, certainly last five to ten, is almost replicating a formula that works and then just blowing it out across the country a great thing. So they came a class that. If you know, if you think adventure is dangerous, try try boordom. It's lethal. And some the amendment. And the trouble is all of them, alls, all the retailers, have the same and have had the same formula and so and they have not really stayed at tune to okay, what is it that my customer really wants? What is the consider the consumer really needs? And so I think that the essence here every retailer, every brand should be really posing, you know, three questions and asking their customers and constantly pulling back, is, do you believe that we really interested in improving your life? You know, do we understand your life and you believe that we have your interests at the core? And that's the altruistic, the empathetic concerned part. It's still going to be better wrapped around obviously making economic sense. That's the rational part, even though, of course, a lot of these start ups appear not to not to be imbued by it. Are Too much bottom line right now. But but that's the rational part. But the empathetic part is I'm really doing this because I can always see ways in which I'm going to improve my consumers lives. It's the Best Company, I think, that has done this and it's one of the reasons they are such great retailer as Costco. Costco has a mantra of really consistently trying to improve their consumers lives. Is They can save a dollar on echting a good and then they'll pass back seventy two, seventy five cents straight to the consumer. That's what they're trying to do, the looking for products and categories that really enhance the value for consumer. That's what they're trying to do. But there's a lot of other retailers I've seen who play a sophisticated fancy games pricing algorithms to figure out how they can just take money...

...from and almost becomes detached from the needs of the life of of the consuver. So so that's the basic concept, but I think it is a shift in the mind that and direction that a lot of businesses will take. It's easier, quite frankly, to do as a start up in most cases than established retailer, but I still think it's got to become foundational to it's always every retailer, if not every consumer, facing business well, and it's not a small challenge, right, if you think about it, increasing empathy for a business, the empathy, excuse me, the business increasing empathy towards their customers, and customers. I mean, we've trained people essentially through this lovely little smartphone that does everything I wanted to do when I wanted to do it. We've trained people to be very self centered in the experiences that they pick and how they spend their dollars and things like that. So it's almost kind of like a revolt against you know, we used to use the demographics, so the broad brushes to pay people will. People don't want to be paying with those brushes anymore and that's a huge challenge, I think, for retailers and hopefully one I'm kind of seeing technology jump been in solve it in some places, but it's a it's a massive problem. It's not an easy one, I think, for retailers to wrap their heads around, and I think the ones that crack it, like I want to go to New York now and go to story just because you told me about that. I don't even don't I think I'll buy anything, but that sounds phenomenal. So next time I'm in New York I'm definitely going to check that out right. But it's more about how does a retailer at scale build that empathy into the way they do business so that the person that they're dealing with feels like they have that tailored experience? That's a huge challenge. So I think it is a huge challenge in it and it's something that a lot of companies don't even spend that much time investing in. Yet it is, in my opinion, one of the biggest, most powerful levels that you can pull in today's marketplace. One of the best companies that started and another example is Patagonia, and I highlight...

...them because they've consistently stay true to a core set of values that is very closely identified identifiable to their target consumer. It's not sent ex positioning and saying, you know, we're not trying to sell you stuff that you don't need. And their advertisement, I think it's very clever. Will even go into this jacket, use this amount of water, this much cotton, you know this environmental impact. So only by it if you really need it. And and that's a very, very powerful statement and it's a very, very much aligned with a lot of the way in which consumers think about goods today. And and so that's what I think is the challenge that really every retailer has to confront. It's a great exercise is to put out the Patagony or advert and says do not buy this jacket, which is what they're out said and say. For for each we try to say what is the equivalent of that for us, for actual consumer? And it's a very, very hard question to answer. Well, that requires deeper valuational friends, right, it's deeper valuations. What do you stand for? What are you trying to do? People aren't just you know, if people are getting out, I don't know if they're more discerning. Maybe I'm just getting old enough that I'm getting a little skeptical of people in general. I don't know if they're getting more discerning, more picky or more aware, more informed. In some cases that's a good thing, in some cases not so much. But I mean that awareness requires these retailers, all companies, really to really take a deeper look at their brands. Right, it's their calling card. It's what people connect to. Anybody who's ever worked with me or or or spend time at mean knows I'm a huge Harlie Davidson Fan, right, and I could. I can tell you all of the reasons why I buy a Harley Davidson and spend ridiculous amounts of money on that hobby, and I think I can give you all the rational reasons. But it is much more than just a motorcycle. For...

...me, it is much more the brand. It is a connection that I have. They have, over the years, come to know my buying habits and what I find appealing my local retailer. I won't go anywhere else. Even when I moved across the city of Denver, I still drive forty minutes to go to the place that I originally about the Harley because I know those guys, they know me. Then it's a first name basis and experience right. So how do you recommend retailers tackle that type of challenge of that self evaluation and that redivine defining involving of their brands? Yeah, well, first of all I gotta have to say I love the Holly Davidson brand as well and that that is a true, true brand. And the way, and I use that expression, is a sense of whatever anybody else does with Holly Davidson has no impact on the Holly Davidson brand, if you know what I mean. In other word, because it's so strong and it's so identifiable that it could be taken by, you know, a group of riders who say they know Holly Davidson folks, but it doesn't diminish Hollidavidson's brand. There's no transference for that individual back to Holly Davidson. The brand is so strong, so true, so authentic that it's undiminished, if you like, by almost how or who uses it. And that to me is a litmus test, if you like, of an incredibly strong, strong brand. And so what is it? What you have to do to accomplish that will? First off, I think you have to have clear set of values. Number One, when we talked a little bit about that a minute ago with Padagonia. Secondly, you have to be a constantly raising the consumer self esteem. It's what you what you just described it. It means so much to you that brand, being on that bike, being associated with those people, that it actually makes you feel much better. So you've got to be constantly thinking about how do I do that? I think you have to be in it. But if obviously you've got to be still offering, designing new product new ways of doing things, new ways of interacting. Obviously I think Holliday's been pretty progressive...

...with its APPS, connecting a lot of riders etc. And being active in the community. That's that's another form of a evotion. Be Relatively scarce. One of the things a lot of brands do is, in search of growth, will dilute their identity and will try and put out products that really end up undermining the brand and if an outside con influence the brand, make it impacted. The people who can are inside the company. And if you put out a very poor holly Davidson motorcycle product at the bottom end of the market targeting another eventually you could diminish the brand and and that does my said one of my final point, which is having that consistent identity. A lot of brands vacillate, bounce around all over the place trying to find new consumers and the perennial search for growth and, in the end, under mind the brand connection. So so those two are the most important fives. Excellent as another portion of the book that I found way compelling was the concept of platforming your brand, and I'd love to see you kind of talk about that a little bit. So I think it's a it's a very powerful concept. I think applies in retail and beyond personally, but would love to hear you kind of explain that a little bit. Yeah, so the thought process, again, a lot of businesses think of themselves is relatively one dimensional. We have our stores and we're just selling product and that that's what we try and do, as opposed to saying, actually, I'm a platform for creating all sorts of interactions. I've got all sorts of assets that are embodied in this ecosystem, this business system, that I should be trying to figure out ways to liberate and to create new things. Now the idea platform and really, I think, the strongest in technology businesses because if you think about whether or not it's apple, or Google for that matter, or Amazon, they're clearly platforms and...

...able all sorts of activity. So yeah, apple sees itself as a platform for education. It sees itself as a platform for communication. It's a platform for music, it's got all the APPS. So the iphone is incredibly powerful because it is a platform for everybody to think about you ways of interacting on it and with it and new ways in which you can connect on it. And so apple, you know, has the iphone. Google can put out Google maps. Google can then look at both of those two platforms and say, actually, all I need to do now is put on cars and location. I can whole new transutation system into cart. Can Look at that and say, actually, if I can put invantry in stores there, I can now start and houses I can start delivering really efficiently as well. And and all that comes because there's a platform that exists. So that's that's what I think creates the most value for a business. Same thing with Amazon. Amazon is obviously created an incredible level of transactions for lots of other retailers and brands on its platform. Where you should be imagery and Amazon will advertise or shiver it on or you can ship it from your own location as well. It's just an incredible vehicle for creating all sorts of new interactions for retailer. I think you have to think, okay, what are the assets that I have and what is in my platform? While I have, for example, lots of space, could I use my space differently? I think in a world where we've got too much real estate, be really interesting for some of the big department stores potentially to create an APP that says, I've got this amount of space if you've got a product or you want to come in and show an art display, etc. You know, tell me what you want to do, submit it through the APP, how much space touving, etc. And it's yours to be leased, because it's really new, quick, easy way of US leveraging that particular asset, which undervalued, by the way. That might drive a lot more traffic to department stores as well. But so...

...you think about the space is something that you could left which you've got all this data own customers and you've got all this data on your suppliers. How do you think about connecting them or creating forms that they could interact more differently. How do you think that just doing a whole of different sets of relationships and products based upon everything you currently having side your ecosystem? Potentially even then thinking about, okay, who is adjacent in our ECO system we should be working with and sharing information, data, space, employees, etc. And and so that home mindset, I think, breaks down the side. I was just saying this. I just do this one thing and that one thing is getting increasingly squeezed in this marketplace. So creates a different strategical process well, and it requires a different way of looking into things. We've been looking at for years and years and years right questioning our own assumptions, getting outside of our comfort zone, looking at it a little bit differently, and I think some people struggle with that. Out of respetter respect for time, I because we could talk about this all day. I find its amazingly fascinating, but as we get towards the end of each interview I like to ask just kind of two questions, standard questions for the guests, and the first is as an executive yourself, that makes you a prospect the sales term, I guess, would be target for others that are out there trying to connect, maybe sell you something or they have an idea they want to share with you. When somebody doesn't know you, when they don't have a connection or a referral, why do you find to be the most effective way to get your attention and build credibility? So the notion I'll go back to because I spend so much time talking about it earlier with you, is this whole idea of empathetic concern and really understanding what it's like to be someone else's shoes. So, based upon anybody's inside knowledge understanding of what I do and what I've done, thinking about that, putting themselves in my shoes and thinking how would how...

...would they, if they were me, like to be approached on something? What would add value, and that mindset. Too often, I think, people, when they reach out, reach out in the sense of they have their own objective. I've certainly done that so many times where I've heard that. You know, I went into that meeting and I just thought about my objectives. I really didn't openly think about the other person's objectives and how what I have can really help them. And I think when you have that mindset in that tone, it comes through in almost every communication, every document, and it makes the person on the other end much more open and receptive to engage, even if, quite frankly, what you have at the time doesn't necessarily fit with what they're looking for. But they get a sense that this person is actually interested in helping me, as opposed to thinking about their own objectives. So that's something that I over the years, I know I've done most valuable, if you like, an most effective as a consultant, is when I've really had that top of mind as opposed to I've been thinking about what I need to get done. Excellent, I said last question. We call it our acceleration insight. So if you had the ability to give sales, marketing retail professionals one piece of advice that, if and the big if they listened and took it to heart, would make them more successful, what would that one piece of advice be? In why? So, you know, it came a course to the other day. I thought this was a really good and I think I've been trying to implement it everywhere. In every interaction, think about the following three things. Number one, be a solution to a problem. Secondly, tell a story about how you solve that problem and then certainly ask a question to the person about that problem or issue that can't be answered with a yes or no answer. And then I think you'll find in your selling situation trying to get people's attention, when you go through that thought process and if you have that dialog, you'll be memorable and your...

...will you'll find that people are interested and engaged on the topics that you're bringing up. Perfect, Michael. For listeners interested in talking more about the topics we touched on today, what's the best way to get in contact with you? My email address is Michael Dot dot daart at at conniecom, and that's KAEA and eycom. You really want to say that, but I my accent always gets blood. It's Michael Period Law, which is PA R T at atknycom. So hopeful that's clear, but it was a time. I'm on the phone people say, is it Michael Don't Dot Dad? Excellent. Well, Michael, I can't thank you enough for taking the time to be on the show today. It's been an absolute pleasure. Now it's been great. I really appreciate you making the time with Atable for me and stone enjoying the conversation and you'll sold provoking question. So thank you. Excellent. All right, everyone that does it for this episode. But do not forget to go check out retail seismic shift on Amazon. It is truly a fascinating read, whether you're in retail or not. There's a great deal of takeaways in there. We all know I'm focused on B tob really enjoyed the book, but and they're things that I can take away and use. Highly recommend to go pick it up. Of course, promote out the episode of friends, families, Co workers. I feel like what you hear it is favor wrie. It's review on itunes and until next time, we have value prime solutions. With you all, nothing but the greatest success. You've been listening to the BB revenue executive experience. To ensure that you never miss an episode, subscribe to the show and Itunes for your favorite podcast player. Thank you so much for listening. Until next time,.

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