Retail Digital Transformation Thought Leader, Ricardo Belmar

Julia Raymond:
Hi. Today we’re kicking off another episode of RETHINK Retail with my guest, Ricardo Belmar, a leading retail and digital transformation thought leader with 20 years of experience in a variety of technical and business roles. He frequently contributes to blogs and publications across retail, payments, enterprise, networking, and focuses on topics ranging from the future of shopping, to mobile payments, customer experience, and employee productivity. So with that, Ricardo, welcome to the show.

Ricardo Belmar:
Thank you, Julia.

Julia Raymond:
Yeah, it’s great to have you on.

Ricardo Belmar:
I’m happy to be here.

Julia Raymond:
Will you start off by just telling us a bit about your background and what your role is today?

Ricardo Belmar:
Yeah, I’d be happy to. So, as you said, I’ve been pretty much involved in the retail industry in one way or another for many, many years. And most recently I’ve really been involved in working with retailers to kind of help, as I like to describe it, find value out of technology investments, particularly infrastructure level investments that really impact the overall experience in the store and whether that’s experience for customers or store associates. Currently I work for Infovista, I’m responsible for our global enterprise marketing for our networking products that we deliver to retailers. And we really view the industry as one that’s just going through so much digital transformation, right? So many other industries are as well, but I feel that retail was one of the earliest industries that really got into this digital transformation mode.
And where I really got involved in this, is in working with retailers who stumbled a little bit, to be fair right, in some of these digital transformations. And when we dive into, why the stumble, what’s the problem? It always became an issue of scaling. It’s one thing to do a POC at one or three stores, it’s another to roll something out to 30, 50, 150 stores or more. And one of the areas that I find is key has always become the network infrastructure into the store. Whether sometimes it’s as something as basic as, “How good is the wifi installation in the store?” for example. To areas like, “How much bandwidth do I have coming into the store?” Or, “How am I managing all the different applications and systems that are in the store and how they use that bandwidth as a network resource.” And these are always things that people don’t often think about, and it doesn’t really become an issue until somebody recognizes a point of failure. And then suddenly you realize, “Oh, this is something we should have looked at earlier.”

Julia Raymond:
Yeah.

Ricardo Belmar:
So, that’s kind of where I get involved in helping people do that and bringing solutions like what I’m working with today at Infovista where we really help soften the blow, so to speak, of all these new digital things you bring into the store and give a retailer a way to kind of manage the network as a resource. So, if I’ve got anything from a fancy digital mirror to just a tablet device in the hands of an associate, these are all different systems with new applications and they’re all vying for the same precious bandwidth to get data, right? And at the end of the day it all comes down to the data, right, that’s generated in the store, and how you access that data, how quickly you can complete transactions with that data. That really is what controls at the end of the day the user experience for the customers in the store.
I view this often comparatively with some retail executives that if you were the store associates standing on the store floor with a customer and you got a tablet in your hand, what’s the difference for the experience if it takes one second for the screen to refresh or five seconds for the screen to refresh? And it’s always surprising that most execs think about that, think, “Well you know, one, five seconds, that’s not that big a difference.”

Julia Raymond:
Yeah. That’s huge.

Ricardo Belmar:
How bad can it be? So, we usually do a role play, and I’ll say to them, “Well, let’s try it out. I have my iPad here. So, I’m going to point to the screen, and I’m going to count to five. And let’s see what you think about that experience. And I’ll start counting. One, two, three … five seconds when you’re sitting there staring at a screen, I usually don’t make it to four. The retail exec says, “Wow, that’s way too long. I would walk away.”

Julia Raymond:
Right.

Ricardo Belmar:
And I look at them and say, “You know, that’s the problem, right? That you’ve just nailed it. That’s exactly the issue with the experiences. You give it one shot, right? And after that one shot, most customers just walk away and it’s a loss sale.”

Julia Raymond:
Yeah. And is it even one second anymore? I mean it’s like a quarter of a second.

Ricardo Belmar:
The standard is so much higher now, right? Yeah.

Julia Raymond:
Yeah.

Ricardo Belmar:
It’s a great point too. When I talk to retailers, “What are you comparing to? Right?” Because you’re absolutely right, even one second now it starts to feel like a long time. Why is that? Right? It’s because as a user of an application, it doesn’t even have anything to do with retail, right? It could be how long does it take when you tap the button to request an Uber, right? And the Uber app responds to you. Right? So, we’re all used to these super fast responses that you expect even more when you go shopping. It’s just become a part of human nature to expect it to be better. And I think a lot of especially traditional retailer execs have lost sight of that a little bit, because the expectations they have for what they view as internal technology may be a little different than what customers are now expecting.

Julia Raymond:
Yeah, I can definitely see that. And it’s funny because we don’t usually talk about as much the network, which is obviously the foundation, and the bandwidth, we just talk about the cool things that retailers should be or are putting in stores.

Ricardo Belmar:
Yeah. The shiny new technology.

Julia Raymond:
Right. So, it’s like are there new technologies that are really stressing the networks overall that retailers aren’t thinking about? Or do you see that being a really big problem in the next five years?

Ricardo Belmar:
Yeah, actually there’s two ways I look at that. There’s the issue of what’s the volume of data that these new technologies and new applications of the store are generating? And then it’s also a function of how much of that is real time data. Because once you look at it in terms of realtime data, particularly for inventory control, there’s a trickle effect into other applications that govern other experiences. So for example, if you’re a forward looking retailer and you’re really trying to master your inventory control, get to that 100% accuracy, or as as close as possible, well then you really need to track in real time everything that’s moving in the store, everything that’s being purchased and so on. But what happens if you don’t? Right?
So, you have to look at it in terms of the alternative. If it’s not completely tracked and someone’s at another store, and let’s say there’s an associate trying to get an inventory count because they’re store’s out of something and trying to save that out of stock moment, you offer to ship it to the customer from another store. Well, if the data’s not accurate, and that real time data hasn’t flowed from every store essentially perfectly, then that application now that that associate is using is not going to present the right answer when they go to put in this order. And the potential then is there that the order management system may let this transaction go through because the data is flawed, but ultimately when it goes to be shipped to the customer, a flag’s going to get triggered in the app. And it’s probably going to generate an email to the customer saying, “We’re sorry this item was out of stock.” Now you’ve just taken what would have been a saved sale and now you’re going to lose it again for that customer.

Julia Raymond:
Yeah, and they’re going to be even more upset, right?

Ricardo Belmar:
Exactly. And we all know the impact of one bad experience propagates to everyone’s friends on social media. And then you’ve now just dinged the brand, so to speak, right? Because you didn’t have data where you needed it when you needed it. So, that’s the real time element.
The volume one though is also one that I find people don’t always think about. So take for example, I like to think of it as a fancy solution, something like a digital mirror, right? Or we’ve seen lots of test cases I’ll say of digital fitting rooms, but anything that has a lot of screen imagery, video imagery, that’s a lot of data. It’s a high volume of data. Or let’s say it’s a VR experience, right? That again also generates a lot of data. And most of the time that data is not actually stored in the store. It’s across a network connection. Because again, you want to centralize this, right? You really want to store it in the cloud. So it’s easy to update, easy to maintain, but it means access has to be spot on. The performance of it gets dictated by what the network in the store lets you do.
So, if you don’t look at your network infrastructure when you put these kinds of applications in, you most likely will find that whatever tester you tried it out in it worked fine, because of course you probably only had one customer trying this experience at a time. You don’t really notice these issues until you get to those moments of scale, right? When you’re trying to get to store number 50 and enable this experience, and you’re not just trying to enable it for one customer at a time, you’re enabling it so that you have 10 customers at a time using it. And now that volume of data really multiplies quickly. And if you haven’t thought about this in advance, now you’re going to have to jump into a recovery mode.
Because now you’re going to see failed experiences, customer complaints, associated feedback saying they don’t like introducing the technology to a customer because they’re afraid it will fail. And these are all counterproductive to the real goal, which was to leverage all these experiences to increase sales. And it all came down to that network infrastructure that just wasn’t ready for it because you didn’t remember to look at it at the beginning of the process.

Julia Raymond:
Yeah. It’s kind of like there’s a tipping point in the process of scaling where they realize, “Oh, we have a problem.”

Ricardo Belmar:
Exactly, exactly.

Julia Raymond:
Yeah. Well that makes sense. And regarding the realtime inventory, I think that’s a huge issue that retailers still haven’t nailed. I mean, even in my own personal experience, I’ve had, someone, a store associate says, “Yeah, the tablet says it’s here in store, but we can’t find it.” You know?

Ricardo Belmar:
Yeah. And then they can’t find it. Right. I mean, I’m seeing examples with some retailers I’ve worked with where they’re trying to implement ship from store to try to get that delivery time down to a customer. And they think about their inventory counts, and if it’s a retailer that knows their inventory is not close enough to 100%, they may institute a limit that says, “Well, when the inventory count at a store gets down to quantity three, we block that eCommerce transaction from being fulfilled from that store because we don’t want to take the chance that it’s not really three.”

Julia Raymond:
Oh okay.

Ricardo Belmar:
Yeah. Because at least they planned ahead and they recognize they don’t have the realtime data, so they need to give themselves a cushion. But the downside to that of course, is that you actually might’ve had all three of those items in inventory, and that could have been a sale. So, what happens now when you’re reporting on that online screen, “Nope. Don’t have it.” You hope that you have another store nearby you can pull it from or that distribution center has it and you’re leveraging that inventory data, but it complicates things, right? So, you’d much prefer to just have an accurate count.

Julia Raymond:
Right. And in that example it seems small, but if you’re scaling it, if you’re a huge retailer, you could have 300 items that are down to the last three. Hopefully not. But it really starts to add up.

Ricardo Belmar:
Yeah. And these are all potentially lost sales, or potential sales that just never close, because the inventory data wasn’t there. And there’s an interesting point here. I recently sponsored a study with IHL group. They were looking at Amazon sales data. And through a lot of analysis they concluded that they can attribute as much as 24% of Amazon’s retail sales to out-of-stock moments in other retail stores. There are so many examples of retail customers in a store ready to buy something, but they find, oh no, they’re out of it. It’s not in the store. The knee jerk reaction that so many of these customers will have, because let’s face it at the end of the day, the majority of people are now Amazon Prime subscribers. So if you are, what do you do?
You’re in a store, they’re out of something. You take out your phone, you open the Amazon app, and you check their inventory. And of course if they have it you’re just going to order it on the spot, because you know you’ll have it in one or two days. So, it becomes a lost sale for that retailer, and the customer was in the store. And so, solving those out of stock moments, having accurate inventory, I see this regularly as a repeated issue that everybody needs to solve and can really get some benefit out of. I know there was another study that found that every 3% increase in inventory accuracy can be attributed to a 1% increase in sales. So, we’re not talking about small numbers.

Julia Raymond:
Yeah, definitely not. That really impacts the bottom line. And that’s with Amazon, too, being such a competitor, even if you’re in store, there’s still, I think I read it was close to 20% of people will still check the product on Amazon. Probably not for apparel, but for other items.

Ricardo Belmar:
Yeah. For other things. Yeah. It’s always kind of product category dependent, but there are just so many of these examples you can think of.

Julia Raymond:
Totally. And not to talk too much about Amazon, but I’m curious because our first RETHINK Rundown, one of the topics was about the recent split between Amazon and FedEx. Big breakup. And we kind of had like two camps. So the one camp was FedEx will be able to make up the lost market share, they’ll be fine. And then the other camp was no, in five years we might see that Amazon is a direct competitor when it comes to delivery outside of just serving itself. Right. It might be serving other retailers. So, I was curious what kind of opinion would you have on that?

Ricardo Belmar:
So, yeah. I would lean towards that second camp a lot. I don’t know if I would say it’s a five year window. I think there could be other variables here. But at the same time, I do think in the short term FedEx is not going to have a problem absorbing this. Right. I think they’ve even said in the past, the last time we got an announcement of a different, one of the FedEx’s services that they were canceling with Amazon, it only represented something like a percent or so of totals. So, I’m sure they’ve calculated this into their forecast and know what they’re doing. It really becomes a question of what’s Amazon’s next move then? Right. I’m a big fan of kind of declaring that Amazon, as much as we like to talk about them as a retailer, at the end of the day, they’re a technology company that really focuses on logistics.
Everything they’ve done in their supply chain, warehousing, distribution, all of these logistics areas they have just really, really mastered, and I think have such efficiencies that that’s where they really pulled away from other retailers. I know it’s, we all would like to talk about what we hear in Amazon PR announcements, because that’s another tool they really mastered, right? Is the art of press releases. But when you put that aside, I think it really comes down to what they’ve done in the logistics space. So, when we start to see more Amazon branded delivery vans in the neighborhood, you know that something’s going on. And you know that there’s a big change coming. So, I’m sure this is going to really, as if Amazon needed more motivation to do this, I think this will help further motivate them to speed ahead and continue to develop that last mile delivery options they have. To me these are the reasons we see them doing more outside the box things like the delivering to your car, delivering a Amazon key to deliver inside your home. All of these things.

Julia Raymond:
Yeah, don’t get off your couch, we’ll just bring it into your house.

Ricardo Belmar:
All you have to do is one tap on your phone or of course use an echo device and order via voice and yeah, we’ll even open the door for you and hand it to you.

Julia Raymond:
Yeah. And I haven’t seen any stats on that, but I wonder, you know, what kind of market response they’re seeing now? Because I mean there was obviously a huge PR angle there, but now it’s like how many people are using that in their pilot markets? I don’t know.

Ricardo Belmar:
Yeah, I tend to believe that when we don’t hear things it’s usually because it’s not worth hearing about, and it makes a great PR story as long as we don’t have any numbers associated with it.

Julia Raymond:
Yeah, exactly. There’s one thing I wanted to ask. You mentioned the cool mirrors and things that retailers can put in store. And I was reading an article where you said that technology in the store has to be transparent to the experience technology for the sake of technology doesn’t work. But I was curious, what do you mean transparent to the experience?

Ricardo Belmar:
I like to talk about this with an example. And this year so far, my favorite example is Nike’s House of Innovation in New York. So, what do I mean by transparent to the experience? In my mind the best use of technology for an in store experience is when you as the customer don’t even realize you’re engaging with technology. Now, sometimes that’s because the engagement happens through an app and because smartphones and apps are so just natural to everyone now that you don’t think twice about it, so you don’t even consider that a technology engagement. It’s just an extension of your hand. Is right for most people.
But I think what you see in Nike’s store, you could go through that store, shop, make a purchase, and never touch a single item of technology. Or you could do the opposite and walk into the store and never engage with a human being, and purely drive your entire experience with technology apps and mobile checkout and so on, and still walk away as a happy customer, and also anywhere in between. So, it really is a matter of you don’t realize how you’re using technology. I mean they have some things there where are maybe less high-tech in the sense that it’s as simple as scanning a QR code and something happens. But how they’ve done it I think is pretty clever in that you expect to hear examples in retail where, oh, I take my phone, I scan a code and something comes up on my screen. And in Nike store sure that can happen. But you also have scenarios where I scan something and a person shows up and brings me a product, because by scanning it I basically made the request.
So, you have all these variations that I think seamlessly integrates the technology into an overall shopping experience that you come away thinking, I bought what I wanted, I liked how I engaged with people and what I did in the store. And you don’t think about the technology. So, I think if you come away from the experience and you don’t think about the individual technology components you use, the retailer’s done a good job integrating that technology transparently. I think for every example of that that someone comes up with of a successful implementation, there’s probably an example that’s not so successful. I would argue that most of those not so successful experiences are because the technology was at the center of the experience rather than the customer. And when the technology is the only reason for the experience to exist, it’s kind of artificial, and it means you’re hoping that the customer is going to be drawn to it for the sake of using the technology.
And I’m of the opinion here that when you build those experiences and you try to scale them out, it puts too much burden on the technology and you start to run into the problems of well what happens when the technology doesn’t work flawlessly? And you always have to have a plan B for that, right, or the experiences completely falls apart. And when the technology is the central focus point and not the customer, it doesn’t matter what your plan B is, the customer comes away unhappy. Because the whole reason for the experience’s being was the technology. Now when it didn’t work at 100%, I as the customer am not satisfied.
Whereas if the technology was just integrated in the experience like it is in the Nike store, there are built in alternatives. If one piece of it doesn’t work, I turn around and I can do something else, and I still am able to get the products I want, have the shopping experience that I want. And I think that’s what makes the difference there. So, you can’t lose focus of what does it mean from the customer’s point of view, versus what does it mean by just having this technology.

Julia Raymond:
Yeah, that makes a lot of sense. And I love the Nike example because obviously what they’re doing is really cool. Do you think other retailers are going to adopt that model where it’s kind of up to the customer to determine how much they want it to be?

Ricardo Belmar:
I expect to see more of this, because I think the right perspective here is for years we’ve been talking about omnichannel experiences, right? And everyone seems to have a different definition for what that should be. And my view on that is, the real promise of a quote omnichannel experience is very much what Nike has done in that store, right? It’s that however a customer wants to buy and wants to engage, you’ve accommodated it. And it doesn’t matter what channels are used, what technology is used, where the sale comes from. The point is you close the transaction, the customer bought something from you, and they went away pleased with the experience and likely to come back. So that longterm you’ve increased that customer’s lifetime value to your brand. I think that’s really what the promise of all of the talk around omnichannel has been for years. And I think the struggle that retailers have had is because again, if you focus it on the technology and the integration of it, you’re not focused on what the customer’s experience is. So, I would expect to see more, but at the same time I will say that it doesn’t automatically imply a lot of heavy technology. My other favorite example of these kinds of immersive experiences are the Starbucks Reserve Roasteries.

Julia Raymond:
Yeah.

Ricardo Belmar:
You’re a coffee drinker, right, you love this store. I stay there all day.

Julia Raymond:
It’s beautiful. And they have a bar, at some of them. Yeah.

Ricardo Belmar:
They’re really, really wonderful, but that’s one where it’s not at all about the technology, right? It really is about the brand and the culture around the brand and what it represents, and being immersed in all of the brand’s history and products and what it means to you. It’s not about enhancing them with technology, that achieves the same thing I think.

Julia Raymond:
I think so. And have you been in that store, the Starbucks Reserve? Any of them?

Ricardo Belmar:
I have, yeah. I’ve been in one in Seattle.

Julia Raymond:
It’s probably their best one.

Ricardo Belmar:
Yeah. It’s their first one. But yeah, no it was definitely a worthy experience.

Julia Raymond:
Yeah. I went to the New York one and it was just amazing to see. It’s beautifully laid out, just the way they have it so that you can sit down, it really is inviting. So, love what Starbucks is doing with that. I really want to move to a question about innovation, because that seems innovative for Starbucks, but it’s also relevant to their core, which is experience. So, how do other non-experience driven or maybe even more commoditized brands innovate?

Ricardo Belmar:
I think a good way to look at that is you take a segment like department stores and in large scale are for the most part struggling, right? They’re sort of caught in this middle territory where they don’t have a inherently unique experience to draw people like a Starbucks might, where it’s not all about the experience. They don’t necessarily have unique access to merchandise either, because a lot of the manufacturer brands they work with now have their own stores, right? So, they’re almost competing with them. So, they’re really caught in a situation where how do they define innovation, right? How do they do something innovative that gets people to come back to the store and actually keep coming back? Right? So that it translates into sales. So, I think that’s a good place to look at what’s happening there. And you see some different models.
So, Nordstrom for example, has always been known for their customer service. So, you look at what have they done to enhance that? At one point or another, they’ve done what may seem like basic things to us now, things like allowing associates to be able to text with customers while they’re shopping in the store. Things like curbside pickup now that they’ve done it in a lot of locations, they’ve expanded to this concept of smaller format stores in surrounding neighborhoods where it’s really just there for pickup and return of merchandise. There’s no real inventory at these locations, it’s all about the service. So, they really focused on taking what they were good at at their core, the customer service piece, and finding new ways to augment the service level. Not necessarily focusing on bringing in different products or making the actual shopping experience of looking at merchandise and everything in this store, that hasn’t really fundamentally changed there as much as they’ve added new service elements.
Then you go to other examples like a Macy’s. So, they’re adding different concepts in the store. They acquired Story, so now they’ve started a rolling out Story store-in-a-stores all in right of different locations, where there’s a theme to the merchandise in that area and it’s all about the discovery and curation of the products that are there. You’re hopefully enticed to come back six weeks later, because you know it’s going to be a different theme and a different set of merchandise. But then they didn’t stop there. Right? So, they’ve also added Market at Macy’s, and they’ve got their collaboration with b8ta, which is really more of a retail as a service offering where they’re hoping to attract unique digital native brands that didn’t otherwise have a store footprint, so that people can come to the store and find different types of merchandise they might not otherwise even know they were looking for.
You’re really there for the novelty of discovering what you might find. And for the brands that participate in this where they get a lot of data around their customers. So, Macy’s seems to be trying to create an environment that helps both these unique brands, as well as makes it a purely interesting experience for the customer because they discover something new. And that seems to be a current strategy to get them back into the store. And then you’ve got a third example would be like a Kohl’s, who’s decided to embrace Amazon. Take Amazon returns in the store, sell Amazon products. And then not only that, they’re really thinking outside the box and they’re embracing adjacent formats and giving up space in their store to these other formats, like an Aldi’s grocery store within a Kohl’s footprint and things of that sort.
So, you see them experimenting with the idea of “How can I reuse my space” rather than filling it with the merchandise they’ve always sold or changing something about the service level. Let me add new adjacent experiences or products that people might not normally think of to come to my store. But now they’ll come because they know, “Oh, I can do these other things while I’m at Kohl’s.”

Julia Raymond:
Yeah, and that’s so interesting that Kohl’s is doing that because it makes a lot of sense, right? Because Kohl’s is more about value, and so is Aldi, so that’s a good matchup. And then it’s like, you could either return something that you bought on Amazon at Kohl’s, you could be shopping at Kohl’s, and you could also get your groceries while in Kohl’s. So, that makes sense because it’s so true to their core and we see that with some other brands. I know Lululemon, they have their yoga studios but they also are now testing a restaurant. So, that’s a really interesting example. I actually didn’t know about that. Really cool. And actually I was talking with Doug and you were talking a lot about Macy’s. And Macy’s, I know that they are big on couponing, or over the years they have been.

Ricardo Belmar:
Many customers expect it.

Julia Raymond:
Exactly. And Doug said, membership is kind of the new loyalty standard, because consumers are more sophisticated. Do you see any movements there with Macy’s? Do you think that we’re going to totally move away from, I mean direct mail coupons. Because I still receive them and I’m wondering if we’ll see less of that and more membership programs being rolled out?

Ricardo Belmar:
It’s a good question and it’s a tough one, because the classic example for me of trying to say, all right, we’re just cutting off all the coupons completely is the Ron Johnson days at JCPenny. Right. Where you try to completely change the definition of everything the brand stood for, and it was just too much of a shock to customers, and it just didn’t work. On a good day I’d probably argue that he was just a little bit ahead of his time.

Julia Raymond:
Yeah, kudos for trying. Yeah.

Ricardo Belmar:
Yeah, exactly. I think he was onto the right idea, but it was just forced a little too quickly, and therefore too much of a shock for anyone to really withstand it. Had it been a brand new store concept that had no history that he was trying to bring together, maybe it would have worked a little better. But this whole coupon thing that, Macy’s is a good example. Bed Bath & Beyond is another great example. I don’t think I know anyone who historically had said they were going to go shop at Bed Bath & Beyond if they didn’t have a coupon on hand.

Julia Raymond:
So true.

Ricardo Belmar:
Yeah. Exactly. It just becomes this issue of consumer training, right? These store brands that have relied on discounting and couponing so heavily, people just know that you don’t go shop there unless you know there’s a good discount going on in a sale, or you have a coupon that you can use. Because you know that if you don’t today probably tomorrow you will get an email and have one. So why not wait? So, there’s almost a little bit of reverse training that has to happen. And I think the only way to do that, and I think in my view, this is what Doug and others are really getting at is that you’ve got to offer an alternative. You can’t just stop doing it. That’s what JCPenney tried to do in that era, and it didn’t work. If you just stop and customers don’t come back, you’ve got to give them an alternative.
Loyalty programs seem to be a logical way to do that. So, then you have to look at it and say, “Well, how do I tier this loyalty program? Do I need to have a specific membership level in some ways analogous to an Amazon Prime type program where I’m going to deliver value for the cost of membership? Or do I need to have some minimum level of value?” And I think the answer to this is really going to vary for every brand. So, for example, you’ve got, if you’re already a value-based brand for example, let’s say you’re Walmart. Walmart is very much not coming up with a membership level program to get free shipping, right? In fact, they’re heavily promoting the fact that you don’t need that. So, they’ve taken that opposite viewpoint. But I think that works for them because A) of just their inherent size, they can do this. So they’ve got some built in scale from that perspective. And because they’re already a value brand. So, what do you do if you’re not necessarily that value brand? So again, we’re going back to Macy’s, right?
Macy’s is in this middle territory. Could they get away with a membership level program that has a cost associated to it to bring value? I’m not so sure they can do that with customers. And I think this is why we see so many different approaches from Macy’s, right? In some ways between b8ta and Market at Macy’s, Story, the VR experience they rolled out to some of their furniture departments. They’re trying a lot of different things and trying to appeal to different segments of their customers to get them back into the store. But we haven’t yet seen a big loyalty play there. So, it’ll be interesting to see if that changes. I personally feel that a lot of these brands, I don’t think they can pull off what Amazon did with Prime. I think timing is everything in these things, and you have to be doing it at the right moment to hit a sweet spot with your customer base to make that work.

Julia Raymond:
I can see that and I liked the example you gave of Walmart that was spot on. The fact that they have the size that they can offer something comparable to Amazon for no cost.

Ricardo Belmar:
Right. And there’s certainly proof points that you can do it without that. Right. I think Target is another great example. They’re doing a lot of interesting things and doing well. So it’s not just Walmart. We don’t have to analyze the industry and say that, well, only Walmart can do it because of their size. It’s not true. Right. There are others and it’s not that Target’s a small brand, but they’re to me proof that you can do things here without having to have a membership program. You can do things at the product level, with their private label brands that generates new interest and new excitement from customers. You can do service level things, whether it’s free shipping is a basic thing, but that’s not all about free shipping. You can do other things like the Target Restock program, they acquired Shipt for a reason, to enhance their delivery capabilities. Target’s doing the store remodeling where they’ve got one side of the store is going to be devoted to people who want to just be in and out. Right. Quick purchase. And then there’s the other side of the store that will be geared for more exploring and discovery. So, I think they’re really.

Julia Raymond:
Yeah. What’s your take on that, because I haven’t seen that personally.

Ricardo Belmar:
I personally haven’t seen one, so I don’t know a lot of details about that one. I think conceptually it’s an interesting approach. I think it marries what we’re seeing Target do with varying size formats. They’re doing a lot of small spaces in more urban areas to just get, which in my mind I view it more as a brand play. They’re getting the Target name in there for certain key product categories and building customers that way. And probably hoping that that drives some e-commerce sales for them in those areas as well. I think most retailers I think have figured out both on online pure play side of things, to the brick and mortar side that there is definitely a symbiotic relationship in any given geographic market between having a store presence and your online website. And one or the other just doesn’t work anymore. Right. If you’re going to grow, you’re going to have to have both, and I think these are all good examples of that.

Julia Raymond:
Yeah. And I’m sure Target has a ton of data that they use to determine where to put these new locations that are more geared toward branding like you said. And speaking, because you’re a data guy. So, there was a question I wanted to just pick your brain about, because we’ve come a long way when it comes to data and analytics and warehousing over the past five years even.

Ricardo Belmar:
Yeah, absolutely.

Julia Raymond:
But what are key questions that you recommend retailers ask themselves when they’re planning initiatives to enhance their data capabilities? Because we all know it’s something that sometimes has to be more incremental. So, how do you approach that?

Ricardo Belmar:
Yeah, I think there’s a lot of different things here. It’s certainly not as simple as just saying I need to generate more data. I think you could pick any random retailer, and they don’t have any trouble generating data at this point. They’ve got more data than they know what to do with. But the trick of course is what can you do with that data? How do you derive meaningful insights that you can take action on? And I think initially what I always talk about with retailers, is there’s a couple of key areas.
So one is: how do you get the flow of data in and out of the store, right? Because that connects back to one of my earlier comments about the network infrastructure and how does that support your ability to get data in and out of the store. So that’s one element that does require some thought, because you are going to generate so many new volumes of data, new sources of data, and that growth is going to be so quick from year to year you have to account for that.
The second part that I think is maybe even a bigger challenge for retailers is: who is going to look at this data, right? It’s one thing to listen to vendors who might tell you, “Oh we were going to develop a great AI based system that’s going to analyze and churn away and all this customer data and give you valuable insight.” Maybe you can, maybe you can’t. The issue really is that even if you do that you still need to take action on it. So, who are the people in the organization who are going to be responsible for that? And I think what most retailers quickly find is that this is not a traditional area of responsibility.
And it means for most that they’re going to have to acquire new staff, right? They’re going to have to hire people to handle this, and whether they’re handling it on the output side of it and that they’ve got some fancy AI system that will give them insights, but more likely they need someone who can also look at the data and interpret things and understand it at a pace that will be meaningful. I hear a lot of examples at conferences and shows, particularly from vendors who will pitch a story that by using their solution, you’ll gain all this valuable insight from your data, that your store manager will be able to almost instantly act on it and make changes. But when you think about it really in a store, what kind of real time change can you physically accomplish? Right? So, and I always struggle with these.

Julia Raymond:
That’s a good follow-up question.

Ricardo Belmar:
Right? It was so great. The data is telling me that this one product is selling like crazy at store 123. Well, what am I supposed to do about that today? If I knew that today, can I make a change that’s going to impact the rest of my sales for that day? Or am I really doing something that’s going to hopefully impact my sales later in the week, because they have to physically move product now from store to store? So, I think some of these examples get a little out of hand. But at least, even with an example like that, someone has to make the decision and I’m not sure that the systems are being designed so that it’s the store level person that makes 100% of these decisions, right? Some of the more longterm impacting decisions, it’s got to be someone at corporate that does it.
So, where do you get the labor for that? And I very often hear from retailers that they’re challenged, they think there is not as much finding the labor that actually hiring them because they view this as these are such in demand people not just in retail, right, that they can go work anywhere they want. If someone really has this expertise and that level of data science and data analysis, they’re going to be in demand at a lot of different industries and a lot of different companies. So, how does a retail organization compete with that in a way that they can actually compensate this person attractively enough that they’ll want to work for the retailer? I’ve heard some anecdotal points from retailers who say, this is a person who probably a tech company like Google, or Apple, or Amazon is going to want to hire, and if they’re going to go live in Silicon Valley, well then they’re probably looking at a $300,000 salary or even higher.

Julia Raymond:
Yeah, definitely.

Ricardo Belmar:
How does a retailer compete with that if they’re not based in San Francisco, where that’s primarily driven by a cost of living. If they’re somewhere else, well, how are they going to compete with a salary of that magnitude? So, there’s definitely a labor challenge there. And when I hear a lot of folks saying, I kind of agree with this point, is that at the end of the day, if the retailers are going to do this, they’re going to have to accept that this is how they need to compete.
And I recognize that the argument is usually one of cash flow, where most retailers don’t have the cashflow to support this and it’s almost a catch 22 right? They say to themselves, I need these people. I need these technology systems to increase my sales, which will then allow me to hire more of them and compensate them accordingly so I can keep this circle flowing, but where do I start? I don’t have the cash today, so how do I get them? And there’s almost a fear of investment in that area where if the question instead were, should I invest in smart mirrors in the store? It’s almost as if, oh well that’s a customer experience issue so I’m more willing to invest in that.

Julia Raymond:
Yeah, that’s nice. Let’s add some of those. Yeah.

Ricardo Belmar:
Exactly, right? But then what, okay great. By the way, that’s another system that’s going to generate a lot of customer data that you’re going to want to analyze. Who’s going to do that analysis? You’re still back at the same problem. And yeah, did you make sure that the network infrastructure could support all of that data volume from the smart mirror? If you didn’t look at that then you may have another problem. So, all these things relate, and I think it comes down to what’s the right level where these questions need to be asked. Right. Retail is one of those industries where we think of legacy brands as having had very siloed organizations. Right.
I mean one anecdotal story I had one a department store retailer telling me is that they had a new product segment launch, it was going to have a dedicated area in the store. They had to work across 70 different departments to execute that. And I heard and I said, “Did you say 70? Not 7? 70, really?” You have that many departments involved?” And they said, “Oh yeah.”

Julia Raymond:
Wow.

Ricardo Belmar:
So talk about siloed organizations. Right. And that’s, I think been one of the big things that hold these companies back as compared to young disruptive brands that enter this space who have no legacy infrastructure, no legacy organization, they’re not hampered by any of these things. We used to say that the bigger you were in retail, the more scale that implied. And you’d look at Walmart as your example for success. But in some ways, right, for a lot of larger retailers that size is not hindering them, because they can’t move quickly enough.

Julia Raymond:
Yeah. And I think that’s a great point because it seems like more of a long play. I actually, I got my degree in predictive analytics from Northwestern three years ago, and one of the things our professors always said was, “Guys, don’t forget how to speak in terms that is impacting the business. It’s great that you have all this analytics that you were able to come up with, but you need to translate it into a strategy. What does that mean? What are you recommending? That’s a huge challenge.”

Ricardo Belmar:
What are you going to change?

Julia Raymond:
Yeah. So, there’s a lot of things that, it’s a huge investment. And I like your example of how these younger startups that are doing really well, it’s probably because they can move so fast. They don’t have those old systems that they’re trying to consolidate. It’s crazy stuff.

Ricardo Belmar:
Yup, absolutely. I mean it makes for a really interesting time in the industry at least.

Julia Raymond:
Yeah. And a lot of pressure, right?

Ricardo Belmar:
Definitely there’s pressure. No doubt. Especially for brands who are kind of caught in the middle like some of the examples we talked about where there’s no path forward yet.

Julia Raymond:
Well, Ricardo, it was great having you on the show. I hope to maybe see you at some retail events or sometime in person.

Ricardo Belmar:
Yeah. Absolutely.

Julia Raymond:
Let’s keep in touch.

Ricardo Belmar:
My pleasure. Thanks very much. Yeah, I hope to do it again.

Julia Raymond:
Great, thanks.

Ricardo Belmar:
Thank you.