Retail Rundown – June 8, 2020 – with Sucharita Kodali and Shannon Ryan

Julia Raymond:
Today we’re joined by guests Sucharita Kodali and Shannon Ryan. Sucharita is a retail analyst at Forrester Research where she is an expert on eCommerce omnichannel retail, consumer behavior, and trends in the online shopping space. Shannon is the Executive Vice President of North America for Valtech, where he helps leadership teams map, understand and execute digital strategy mostly in the world of retail, CPG, and B2B. Sucharita, Shannon, thank you for joining again today.

Sucharita Kodali:
Thanks for having me, Julia.

Shannon Ryan:
Hello there, Julia. Thank you.

Julia Raymond:
Our first topic today, it’s a bit heavy, but we thought we definitely need to cover it here at RETHINK Retail, and it’s how are retailers approaching anti-racism? From D.C. to Seattle protests over the brutal killing of George Floyd by police in Minneapolis last month have rocked the United States, Canada, and parts of Europe as demonstrators take to the streets to demand justice for George and the many other black individuals who have lost their lives to excessive force. In response, scores of brands have published statements and social media posts in support of the protestors as they call for the end of racism, bigotry, and violent policing. Nike shared a video that captured a lot of attention online and it opened with, “For once don’t do it. Don’t pretend there’s not a problem in America.”

Julia Raymond:
Surprisingly on Twitter, adidas, their competitor, retweeted the message adding, “Together is how we move forward, together is how we make change.” Ben & Jerry’s received a lot of press with their candid retort stating that Floyd’s death was a predictable consequence of a racist and prejudice system. Target CEO made headlines when he said the company plans to face the pain with purpose. Sucharita, I’d like to turn this over to you first and ask, what do you think about the statements these brands are making in response to the protests? Do they seem genuine?

Sucharita Kodali:
Well, I think that they come from places of concern, but the challenge and the concern that I have is that they are just perceived to be piling on to be opportunistic, because they often have not been met with a history of action, they seem to be coming out of the blue, and we also saw similar messaging that came at the beginning of the pandemic that got a lot of negative backlash where consumers just didn’t feel like brands were being sincere. So I think that that hasn’t helped in these circumstances, and the sense of authenticity and truly putting action behind words is a valid concern that shoppers and consumers and fans even have when they see companies making these statements that don’t necessarily have actions behind them.

Julia Raymond:
Absolutely, and I think there is a lot of disingenuous statements because of how brands are responding in the past. Shannon, what’s your take?

Shannon Ryan:
Yeah. I’m always hesitant to try and generalize such a complex issue, but I absolutely would support the comments by Sucharita in terms of I think when you have a moment of unparalleled crisis like the COVID side, or like we’re dealing with here in Black Lives Matter and this systemic racism that has been just an impossible thing to completely overcome for all countries in a way that allows that conversation to progress. It feels a lot like the world has finally arrived at a point where the words aren’t going to be enough. I think that in the conversation … To answer your point just quickly on the idea of brands, I think what happens at times of crisis is the true authenticity of that brand is under a microscope.

Shannon Ryan:
I think that the brands that you mentioned such as Nike and Adidas and Ben & Jerry’s, who had a starting point and a starting place of credibility, are able to continue to build on that credibility. I would contrast that by … I saw a similar sort of statement of support from the NFL, and quite honestly, it just doesn’t ring true given the history of that organization and the side that they took leading up to these events. But specifically in the conversations I’ve been having with executive teams of my clients recently, really it’s come down to three things that I think they all need to look at. I think the first one is education. They need to use this as an opportunity to educate themselves, educate their teams, educate their customers, that that’s the onus, if you will, of a brand.

Shannon Ryan:
Then the other two are authenticity and action. You need to be authentic in the messaging that you’re putting out there. You need to be really seen as being credible. Then at the end of the day, words aren’t enough. “Thoughts and prayers, we’ve been there before,” folks. We need to move this conversation to action, and I think if we do that, then we’re along a path that is the right one as opposed to, I think, a loop that unfortunately we’ve been on up until this point.

Julia Raymond:
You said, Shannon, words aren’t enough. We’ve seen that before. I was speaking with someone a few days ago and she said a month ago retail stores were closed and now they’re boarded up. It’s almost like a coffin. What do you guys think about that statement? Do you think this current movement in combination with COVID will make it even clear who the winners and losers are?

Sucharita Kodali:
Oh, no question about that. There are two terrible things happening at the same time, and if it was hard enough for the companies that were struggling to make it through the pandemic than if you had storefronts in some of these urban areas that have been badly affected by the protests, then you’re just extending the timeline for recovery even further. Only those that have alternative means of generating revenue either because they’re more diversified or they may have a strong digital presence, or they may have a strong online fan base or whatever the mitigating factor may be, there will absolutely be those companies that will be able to weather that storm in this prolonging of getting back to normalcy. Those that can’t, they will unfortunately not have the financial cushion to make it much farther.

Shannon Ryan:
I think it’s interesting to think about how many executive teams at the end of 2019, when they were crafting their strategy for 2020, had the word security and safety of our customers in their playbook. I would argue that that word is probably the number one word that all of the leadership teams in the world of retail out there are thinking. How do we ensure demonstrate the appearance of safety and security for our consumers in our stores? It’s just it was not on anyone’s radar six months ago, and now is on everyone’s radar this minute.

Julia Raymond:
Good points on those words about safety. Sucharita, to your point, some retailers won’t have the financial cushion, as you said, to make it much further. One more question I have on this. Because some retailers really might not have the financial liquidity to donate in the form of cash right now to various organizations, but I think many would get backlash if they didn’t do actual things like donating. Are there other ways retailers can respond if it’s not purely in the form of donations?

Sucharita Kodali:
Oh, absolutely. I think that one of the things that is pretty well known about the retail industry is that it employs hundreds of thousands of people who are often relatively low wage workers who are disproportionately represented by minorities. What I think are absolutely options are that what retailers have to offer in the way of benefits to their own employees, whether it is educational tuition reimbursements or retraining programs, to help them either grow within a company or even grow into other careers after they may choose to leave an existing company. There are opportunities to offer childcare support to hourly workers. There are opportunities to provide more financial just even education to different customer segments and different employee segments.

Sucharita Kodali:
I think that there are a lot of things that retailers can be looking certainly within their communities and supporting nonprofits within their communities, but also even just supporting their own employees with the challenges that employees may have every day and even just showing up to work. Healthcare. I mean, one of the challenges has, for a number of hourly workers, particularly in the hourly worker world are still challenges associated with getting consistent healthcare benefits, and the more that retailers can support that, that would be a good thing. But at the same time, we know that retailers have actually lobbied against universal health care or better health care coverage. Whether we admit it or not, those are absolutely the challenges that minorities and the minority community faces, and that is as much of a challenge with systemic racism as some of the issues that we’re seeing now.

Julia Raymond:
Great points on the educational program, supporting their own employees, and re-examining what they can do in terms of healthcare. Shannon, did you have any last comments to add here before we hop to the next topic?

Julia Raymond:
The next topic shines a light on a new retail partnership. So last month eCommerce consignment retailer, thredUP, made headlines when it announced a new strategic partnership with the world’s biggest retailer, Walmart. Budget and environmentally conscious customers can now shop walmart.com/thredup to find thousands of pre-loved women’s and children’s clothing, footwear, and accessories. Customers have the added benefit of Walmart’s free shipping threshold on orders of $35 or more, and free returns to Walmart stores or Thredup, exclusive perks that have not been available to thredUP customers before.

Julia Raymond:
This was according to a statement released by Walmart, and the head of fashion for Walmart US, Denise Incandela, said the partnership is the company’s latest move to establish Walmart.com as a destination for fashion. Walmart is the latest retailer to partner with the consignment company. Last year, thredUP announced partnerships with JCPenney, Macy’s, and Nordstrom. And Gap hopped the bandwagon this February. Shannon, what do you think about thredUP’s new partnership with Walmart? Will they really become the destination for fashion?

Shannon Ryan:
Well, I think that’s going to depend on your definition of fashion.

Julia Raymond:
Yeah, that’s true.

Shannon Ryan:
It truly does. I mean, I think that it’s foolish to think that the word fashion is a monolithic understanding of that world. But there’s no doubt that we all understand the reasons why both organizations decided to strike that partnership, right? Walmart, again, is looking for opportunities to bring people to a physical store to allow them to experience what it’s like once they’re in that store for the opportunities for resells and add-on shopping. From thredUP’s standpoint, obviously, it gives them a footprint and access to a market that quite honestly is impressive. So I think we understand the drivers behind something like this. Whether or not it becomes the new shining light of fashion, I think that remains to be seen.

Julia Raymond:
Good points, and Sucharita, does this surprise you at all, this partnership?

Sucharita Kodali:
No. Walmart had been, over the last few years, embarked on a number of partnerships. There was the Lord & Taylor initiative, then there were a lot of acquisitions of companies ranging from ModCloth to, I think, Moosejaw and others, where it just was able to extend its brand presence and the variety of merchandise that was available on Walmart.com. So the idea of extending with yet another digitally native brand is not surprising. I do question how much it will actually generate in the way of volume. I do wonder if it makes sense that it is on the dot com site versus in physical stores, because some of the thredUP relationships, like with Macy’s for instance, were thredUP showing up in physical stores, whereas this is an online partnership.

Sucharita Kodali:
My concern with consignment is that I’ve always had questions around the economic viability and whether or not it really delivers the promise of being circular and green and all of that when you are shipping products in a package across the country versus being able to take advantage of local merchandise and being able to have it be a circular experience that has a much smaller carbon footprint. Though that’s really my question, is ultimately how much money is this going to generate for either side? Is this really truly a green initiative, and is this something that is going to extend Walmart’s presence in fashion? I think that what they’re potentially hoping for a lot of the Thredup merchandise is merchandise where people may have purchased it a few years ago or in the past, and they still have the tags on, they just never got around to using it.

Sucharita Kodali:
There is an opportunity to get exposure to brands that you wouldn’t get exposure to otherwise at Walmart. So I think that’s really the idea. I know that some of these consignment sites, some of their biggest brands are brands like Vera Bradley or could be a Nike, brands that are, for some consumers, aspirational brands and this is a way to get those brands on your site. We’ll see. I mean, a lot of it still depends on how much of the merchandise they can actually get their hands on.

Shannon Ryan:
Now, I was going to ask a question, actually Sucharita. Did they turn over their entire inventory in this case? Or is it sectioned off in a curated way? Do we know?

Sucharita Kodali:
That’s a good question. I don’t know that I had followed all of those details. I’d be surprised if it’s everything. My hunch is that it is probably a subset, but that’s actually a good question to look into.

Julia Raymond:
I don’t know that they released that information yet, from what I saw. But I think perhaps what the liquidation that might occur due to COVID and with past seasons where it might be a really good move for thredUP and Walmart. The other thing I wanted to ask while we’re on the topic of Walmart, just because this was an interesting thing I saw people debating on social recently, was the Jet.com acquisition. It was $3.3 billion for Walmart many years ago, and now they’re laying that to rest, and people are saying, “Well, it was still a well-spent $3 billion because it gave Walmart access to an incredibly talented team that ultimately helped them transform their digital initiatives.” Do you guys agree with that?

Sucharita Kodali:
I agree with it. When you look at the market cap of Walmart, it’s certainly grown substantially and a large part of the reason for that has been the strides that it’s made with its dot com and digital efforts, not just its own eCommerce site, but any omni-channel efforts as well. The fact that inventory is now much more visible online so that consumer’s shopping experience, whether they’re using a mobile device in a physical store, outside of a physical store, or whether a store associate is being asked for help and they need to call on the data that’s on their handheld mobile, all of that is so much better than it was a few years ago. I think a lot of that is due to the investments that have been made in digital. Whether or not you can draw a straight line to, oh, this was Jet IP, I don’t think that that’s even really relevant.

Sucharita Kodali:
I think that it’s just changed the culture of Walmart. They acquired a lot of talent that came with it and they still have Mark Laurie and a lot of the Jet team that continues to bolster the digital presence that is Walmart.com. Whether or not the industry knows it, we need Walmart as a player because Amazon is the single biggest player in eCommerce, and Amazon has not been a great friend of the rest of the retail industry. The more that Walmart is able to offset the growth of Amazon or give customers an alternative in their shopping journey, the better it is for consumers, the better it is for the retail landscape.

Shannon Ryan:
The only thing that I would add is if you go back to an interview that the CEO of Walmart gave in 2016 when they made the acquisition in terms of why they were doing it, for all of the reasons that Sucharita just outlined from executive talent through to this acceleration of the digital sales channel, all of those things are true and all of those things were really the drivers back then that are the outcomes for today. There’s no doubt that, I think if you’re an executive at Walmart, you would have liked to have seen a way where no one likes to have the associated negativity that a $3 billion purchase has fizzled, but I think you need to make sure to look at it through the proper lens before you actually use those words of fizzled or unsuccessful or whatever. Because quite honestly, the credit of the leadership team of Walmart, they knew exactly why they were doing that investment at the very beginning, and you can’t argue with the results that have happened since then because of that investment.

Julia Raymond:
Good points. You can’t argue with the results because they definitely have surprised a lot of people in recent years with how much they were able to innovate and keep up with Amazon’s growth, and Sucharita you said it’s better for consumers and for retailers if Walmart can offset some of Amazon’s growth. Just to point out about coming back to the threat of partnership, the apparel resale market has grown 21 times faster than new clothing sales over the past three years according to their annual resale report at thredUP, and 70% of consumers have now bought or are willing to buy secondhand. I personally have used thredUP and I love it, so I’m really excited personally for this partnership. But I think there will be some challenges with COVID.

Julia Raymond:
I would like to now move on to our last topic of the day, which is around digital initiatives, which I know you guys are both experts in. So while the retail industry at large has been thrown for a major loop since the onset of the pandemic, many brands are thinking big about how to make the most of dire straits. So some examples, Best Buy rolled out Curbside Pickup in just three days, Sam’s Club rolled out its concierge app in six days. In China, Alibaba owned department store, InTime, turned to live streaming and online sales during their coronavirus lockdown. During a recent episode of the Retail Transformation Show, retail strategists and our friend Carl Boutet told host Oliver Banks that in the past century we’ve witnessed a great depression, a great recession, and now we’re faced with the greatest of accelerations. Shannon, do you agree with Carl that retail is in a period of great acceleration?

Shannon Ryan:
Oh, how come you throw me the curveball? I think you can say yes to that almost unequivocally. I just don’t know the direction that it’s necessarily accelerating towards. I mean, I think that, and Sucharita and I have had numerous interactions in the past years over this idea of the COVID situation has essentially exposed the underbelly of the preexisting conditions that existed inside the world of retail for many years. I think what it has done has certainly accelerated the gap between those organizations that have not only the infrastructure, but also the executive leadership teams in place to be able to understand to how to capitalize in situations of uncertainty, and you see those enlightened organizations being able to either execute quickly, as you said in your intro, or be able to just double down on their strategy to be able to continue to add distance between their competitors. I think that there is no doubt that if you think about that word acceleration as a gap between leaders and laggards, then most assuredly, we are seeing a period of acceleration.

Julia Raymond:
And you said, Shannon, you’re not sure exactly what direction that acceleration is going in, but you agree there is an acceleration in terms of how it sounds?

Shannon Ryan:
To Sucharita’s earlier point about those organizations that have the means and ways and cashflow to be able to survive the uncertainty and ups and downs, I think you will see them accelerate. For those who don’t, I also think you’re going to see an acceleration of the demise of many of those retailers who have not been able to weather the storm. But historically in a world where there was no COVID, they might’ve been able to hang on for a year or two. But given the intensification of what’s happened, you’re seeing the acceleration the wrong way towards more bankruptcies and closures.

Julia Raymond:
Certainly. Sucharita, what is your take in terms of the great acceleration?

Sucharita Kodali:
Well, Julia, I think it’s a fascinating question because just a few years ago we were talking about an apocalypse, which was just the opposite of acceleration. I think that the root of the acceleration question is coming from changes in technology, the constant bombardment that retailers have, new technology solutions or press releases from Facebook and Google and Amazon about new things that they have to keep up with, and the fact that things are changing, consumers are changing, or one day your stores open, the next day a pandemic closes your entire chain and you have to be nimble and you can’t simply operate in the way that you were operating before. So in that regard, things are accelerating toward nimbleness, they’re accelerating toward being adaptable.

But I think that what has happened in the midst of this, and this is part of the reason that we continue to see shakeouts and you continue to see stores going into bankruptcy, is that a lot of these brands are not thinking from a customer-centric standpoint and they’re not thinking about how they can continue to be relevant in a world where their sector may be declining or permanently shrinking.

Sucharita Kodali:
I was just talking about an iconic denim brand recently. They were asking questions around things like their eCommerce site, and I think that it’s important for them to ask questions about how they can be a better eCommerce site, but if they hadn’t come to grips with the fact the denim at this moment in time is a declining category and they have leaned into the stores when stores are shrinking, they have bigger problems. What they do have, which is a huge asset in their favor, is that they are a beloved iconic global brand and they have permission because of the iconic nature and the decades of equity that they have built with their customers and with shoppers around the world to stretch even not just beyond denim, but beyond the apparel and shopping, if they choose. I mean, they could be a media company. They could be so much more than where they are. I mean, if Nokia had just stayed with rubber boots, nobody would have bought their phones 20 years ago.

Sucharita Kodali:
I mean, the entire industry needs to come to grips with what’s the next act. When I look at the large technology companies, whether it’s Facebook or Google or Apple or Amazon, and you look at where their revenues were coming from in 2000, they’ve all completely changed their revenue streams in just 20 years. Whereas if I were to go back to the year 2000 and look at how retailers revenue streams have changed, they’ve shrunk, but they have not changed their revenue mix, they haven’t changed their revenue base, and therein lies the challenge and therein lies the difference, is that you can’t still … I mean, if Amazon had just stayed in the business of selling books, where would it be today? I mean, that’s what retailers are complaining about, is that I’m still doing things the same way I did 20 years ago and I’m mad that the game has changed.

Shannon Ryan:
Yeah.

Julia Raymond:
Really powerful examples you brought in. I love how you said if Nokia would have stuck with rubber boots, no one would have bought their phones, and Google and some other huge players we know and love today have completely different revenue streams, you said than 20 years ago.

Shannon Ryan:
Well, I’m also happy to hear, Sucharita, that Wrangler has such a visionary leadership team to think about that.

Julia Raymond:
Did you see Levi’s new campaign where they said, “Come and find your new size after the quarantine 15?”

Shannon Ryan:
Yes.

Sucharita Kodali:
Your new size?

Shannon Ryan:
Your new size, yeah.

Julia Raymond:
Your new size.

Sucharita Kodali:
Right, because people have just been sitting at home eating?

Julia Raymond:
Uh-huh (affirmative)

Shannon Ryan:
The COVID-19, yes. Like the Freshman 15. I think you make a really valid point about being able to pivot and understand the changing nature of not only your market, but I think your customer. I think where I’ve had some really interesting discussions lately with different brands is really helping them understand and think through almost truly what business they’re in many ways, in terms of that shopping experience, whether or not they are serving a need of a customer or whether or not they’re trying to fulfill an aspiration of the customer. We’ve had a conversation before about just the different role of the physical store versus if you’re selling something that people know, then it’s a fulfillment type issue and it should be pretty straight forward. You can buy online, pick up [inaudible 00:32:12] All that stuff.

Shannon Ryan:
But if you’re selling something that is more of a wanderer type solution of something that is experiential, I think stores and retailers are still really, really struggling to figure out their value proposition in this new world. I think the enlightened ones are out there trying to run a colossal series of experiments to see what fits, and quite honestly, unless that is in the DNA of your leadership team, that is a really hard proposition to be able to manage and be successful at. But it is probably the only element of the playbook right now that I think we all can agree works, which is you need to be confident enough to experiment to be able to navigate your way in the new world, because both your market and your customers are going through a rapid period of evolution.

Julia Raymond:
It’s certainly rapid, and I like how you pointed out the focus on the customer. It’s really important. To ask you guys one last question, I’m just going to open the floor to whoever wants to jump in. But what are some digital initiatives or innovations that you’re expecting will change the game most for retail moving forward?

Sucharita Kodali:
Shannon, I’m going to let you have that pride.

Shannon Ryan:
I knew you would do that to me. Well, I think there’s almost a game that we’re playing here at Valtech, which is you take all this change and innovation that’s taking place and you line up on two sides of a scorecard. One is it’s a temporary situation that will probably last three months, six months, maybe even 12, but then we go back to preexisting behavior, and then there’s the permanent change. I think it’s going to be a matter of degrees. I think things like Curbside Pickup and things like … I don’t see that going away. I actually see the convenience of that specifically in certain verticals where it makes sense, will continue. I think it’s a little early, honestly, to say what’s going to stick. I mean, I read a great line of the week that we decided to start to open stores, we fled back.

Shannon Ryan:
It’s like collectively, we all failed the marshmallow experiment, if you’re familiar with that one, where we just couldn’t resist and we’d go back to these preexisting behaviors. While I think the customer has been quick to change, I’m not so sure I understand how lasting that change is going to be. So for example, if you are Starbucks and Starbucks is known as the third space, right? Work home, and then this other meeting place to get together for socially, are people going to want to spend three hours in a tiny Starbucks sitting two feet apart from each other, having a coffee? Or does Starbucks really need to think about completely reconfiguring their store layout, such that it’s more focused on a transient customer? If they are going to change that store footprint, that’s a major capital investment, that you want to be pretty darn sure that that’s lasting behavior.

Sucharita Kodali:
Shannon, I’m completely in agreement about some of these changes that the pandemic is driving, whether it’s Curbside or just the reconfiguration of physical spaces. I think that from a technology standpoint, there are certain terms that seem to elicit Pavlovian responses in retail. Every time the word voice or the expression AI is used, it just gets so many people excited. But my hunch is that the value is still very much TBBD, and that’s one of the biggest things that the pandemic has unveiled is that AI has such queer limitations when you don’t have the data and the history to suggest how something is actually going to work out. But I think that there continue to be … and where technology is important is in solving the big challenges we still have in retail. We have not solved the problem of inventory visibility in stores.

Sucharita Kodali:
Companies have gotten better at it, and they are improving. Some companies I would argue are pretty darn good. I would say the do it yourself retailers are pretty darn good. Walmart and Target, pretty good. But there’s still room for improvement and they’re not all … The stores are not always set to planogram, and there’s an opportunity to make that even better than where it is today, and of course, for everybody else to catch up. There are factors related to transparency, like where things may be in the supply chain or where things may be in the manufacturing process. We don’t have a ton of visibility into that type of information. There’s a lot of waste in retail, especially in the manufacturing process, and often even once inventory comes to the store, we have a significant percent of products that are returned that end up in landfills as an example.

Sucharita Kodali:
So there are a lot of opportunities that we have that are problems that hopefully technology will fix. I think that one of the biggest challenges, because I talked to hundreds of technology service providers every year, is that solutions are often driven by what technology is able to do. It’s not driven by what are the needs and let’s build a solution that solves those needs. That hopefully will change. Gradually it does change. There are some companies that are doing some really, really interesting things, whether it’s in the return space or the inventory disability space, and I hope that they continue to grow and there are more solutions like that that become more adapted by retailers and adopted by retailers in the months and years to come.

Shannon Ryan:
I just want to pick up quickly, Sucharita, on one of the comments you made which I think is really enlightening to hear, which is that far too often decisions around technology are driven by the capabilities of the product as opposed to the needs of the customer. I would also suggest that as someone who does a lot of implementation of that [inaudible 00:39:39], it’s still shockingly far too widespread to be in engagements where the customer says, “We’ve picked the technology. Now, we need to figure out what to do with it,” and where we’re going to let the technology essentially drive our discussion around the strategy even.

Shannon Ryan:
I think there was that great expression back in the world when we went to … we were all talking about Web 2.0, and somebody said that in order to get to Web 2.0 we’re going to need Management 2.0. I think that’s still apparent today, is that a lot of the critical abilities to be able to drive strategy come down to the people who are driving that strategy, and I think there’s still a significant amount of learning that needs to be done on how to effectively build, run, operate, scale increasingly digital businesses, and rightly so, it’s still in the corpus of business. It’s a pretty new thing still.

Julia Raymond:
Well, from social issues to new partnerships and retail and digital initiatives that we’re keeping an eye on right now, I think you guys did a great job of bringing your expertise to the table, and again, I really thank you, both. Shannon Ryan and Sucharita Kodali for joining today.

Shannon Ryan:
My pleasure. Thank you.

Sucharita Kodali:
My pleasure. Yeah. Thanks, Julia.