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Retail Rundown – May 11, 2020 – with Stacy DeBroff and Trevor Sumner

May 11, 2020: Major retailers file for bankruptcy, Walmart’s Express Delivery service, changes in consumer behavior.

No time for news? We’ve got you covered. Welcome to the Retail Rundown, your go-to weekly podcast where RETHINK Retail teams up with industry experts to deliver the top trending news stories in retail.

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Hosted by Julia Raymond

Researched, written and produced by Gabriella Bock

Edited by Trenton Waller

 

Post Transcript

Julia Raymond:
Today we’re joined by guest Stacy DeBroff and Trevor Sumner. Stacy is a social media strategist, bestselling author and the founder and CEO of Influence Central. Her expert advice and insights have been featured on CNN, Bloomberg News, Forbes, Good Morning America and now Rethink Retail. Trevor is the CEO of Perch Interactive a recognized leader in in-store product engagement marketing, interactive retail displays, and augmented reality. Stacy, Trevor, thank you both for joining today.

Stacy DeBroff:
Thank you, Julia.

Trevor Sumner:
Thanks for having us.

Julia Raymond:
Happy to have you. And I wish that the first topic here wasn’t so bleak, but we will talk about some breaking news, which is bankruptcies. Marking the first major bankruptcy since the onset of the pandemic, the preppy apparel retailer, J.Crew and US luxury retailer, Neiman Marcus filed for bankruptcy last week. So last Monday, J.Crew announced a deal with stakeholders to convert 1.6 billion of its debt into equity while Neiman Marcus hopes to flush its four billion in debt.

Julia Raymond:
J.Crew also secured 400 million in financing from existing lenders to help fund operations through the bankruptcy. And also bracing for the process, Lord and Taylor announced plans to liquidate inventory at its 38 department stores once the restrictions to slow the coronavirus spread are lifted. The US unit of the Canadian Outdoor Apparel brand group is also set to liquidate in bankruptcy. So with this news and focusing first on J.Crew, Trevor for a brand that was once worn almost ritualistically by former first lady Michelle Obama, why do you think J.Crew lost its edge in recent years?

Trevor Sumner:
Yeah, I think it’s an unfortunate story because J.Crew somehow has this identity that a lot of us relate to. We all had J.Crew in our closets and probably still do. However, it’s undergone a lot of changes. In 2017 when creative director, Jenna Lyons backed down, it seems to really kind of have lost its way. And Mickey Drexler also stepped down even as sales plummeted and debt mounted. And I think part of the challenge is they just lost their direction. They went luxury and outpriced their customer, so all of a sudden they realized that their price points were unsustainable and weren’t attractive to their customer. They reacted by going back to their budget routes, but they were kind of in this no man’s land of design and the customer had moved on.

Trevor Sumner:
So for example, J.Crew missed the athleisure trend entirely. And so we saw a lot of cannibalization of their customer base. And you mentioned that yourself, and you’ll see this as a story with almost every single bankruptcy, is the fact that they have large debt loads leftover from leveraged buyouts, from private equity firms, right? So they had just $26 million in cash versus their 1.7 billion in long-term debt. And so they’ve been negotiating deals to try and extend out the timeline. But J.Crew has been on a bankruptcy watch for years, this is just a convenient time to do it. And they were hoping that the IPO of Madewell could have helped that balance sheet position. But that being delayed, this was really kind of the only option.

Trevor Sumner:
So I think this is just an example of not really understanding your customer and creating too much fragility based upon taking on too much debt.

Julia Raymond:
So, Trevor, you said they lost touch with the customer, they outpriced their customers. Stacy, do you agree that these were the biggest mistakes that J.Crew made?

Stacy DeBroff:
I agree that there are mistakes, but I actually would highlight what I think was an even greater mistake on their part. In a time where we’ve seen a digital explosion in e-commerce and online purchasing, J.Crew instead focused primarily on a marketing strategy of getting foot traffic into their brick-and-mortar stores. And they have 440 of those locations between J.Crew, Madewell, and their factory stores. Also, as Trevor points out, J.Crew did try to go more upscale. Its sales declined by 4% but the thing that was growing for J.Crew was Madewell, which was a more casual, affordable line, more designed to younger consumers, which grew 14% last year.

Stacy DeBroff:
And in this e-commerce marketplace, younger consumers want to shop online. And when you have J.Crew with a strategy that’s primarily driving to brick-and-mortar, they have their catalogs, they have a website, but they’re not really engaged as an e-commerce brand, I think that that ended up proving along with their debt load and the points that Trevor made, in ultimately being their downfall and the reason they had to default into bankruptcy.

Julia Raymond:
So their digital presence wasn’t on par with the customers?

Stacy DeBroff:
Exactly.

Julia Raymond:
Those are great points. And I read in a recent Forbes article, Gautham Vadakkepatt, who was recently on our podcast, he is the retail center director at George Mason University. He was quoted in response to J.Crew’s diffusion brand Madewell, and he said they didn’t cause J.Crew to fail, but they failed to reposition the brand to go after a different segment and provide more value to the segment. Do you believe Madewell, are you in agreement with his statements on Madewell?

Stacy DeBroff:
I think, yes, I think that J.Crew, that you have a huge rising demographic of millennials coming into their parenting years. We have Gen Z that’s just entering and taking over the 20 somethings. And I think that this move overall to casual clothing, and when you look at COVID-19, we’re doing even more e-commerce shopping, We’re going even more casual, that de-formalization trend. And I think that they simply made a miscalculation about how to engage their customers and the price point that their customers are willing to pay vis-a-vis their offerings.

Stacy DeBroff:
And I think that in a moment where a lot of brands have been really challenged to hit the digital acceleration, one of the things we see in retail is this sluggishness. Whether it’s point of sale or this just slow to adapt to this social media explosion and what’s going on in the marketplace. And when you have a much more traditional marketing focus, you end up being at risk of being out-advanced by those competitors who have really gone direct-to-consumer and really understand what it means to play in digital marketing space.

Julia Raymond:
I really liked both of your points about the de-formalization trend, Stacy and then Trevor, to your point, they missed the Mark on the athleisure trend. So moving on from J.Crew a little bit, do you think that COVID-19 is accelerating the inevitable? Are there changes that retailers need to make in order to survive? Are your outlooks more positive or negative? I guess is the question.

Trevor Sumner:
Yeah, it’s, funny Stacy, when I think about J.Crew and their e-commerce strategy, certainly they could have focused a lot more on online marketing, which is a little bit different than focusing on e-commerce because you can use online marketing and private store sales. But I’m actually, when you look at e-commerce, it seems to be a panacea for a lot of these guys, but the reality is that e-commerce has higher cost of acquisition because of the greater competitiveness. The cost acquisition’s higher, the customer spends about 60% less. If you can get them to spend both in-store and online, then they spend about seven times more than just online only.

Trevor Sumner:
Returns are a massive problem. About half a trillion dollars of returns are expected with 30% return rates. So the notion that I think that e-commerce is going to generate a lot of free cash flow, I think it’s a nice idea, but I think it’s really about leveraging and basically talking about this, this kind of combination of both the in-store footprint and online. And I think the question is how does that happen in a post-COVID world? And the reality is there’s so much uncertainty about what the timeframes are. We don’t even know what it looks like. We know that Macy’s is opening up 60th store this week on their path to opening their full store footprint over the next six to eight weeks. It’s going to be really interesting to see what they see, they’ve predicted that sales will be down to 80%.

Trevor Sumner:
We’ve also heard from analysts looking at China and others that they expect Q3 to be off by 30 to 50%. And then Q4 the American consumer to come back and forth, but still see about five to 10% less kind of sale. I’m an entrepreneur, which means I’m an optimist. I believe in changing the world for the better. I think if we’re all cooped up in our homes and we’re really craving kind of human connection, we’re craving physical connection out there, there’s an empty desk to e-commerce. And I believe the American consumer will go back to shopping and it will be slow and we’ll have to get comfortable with it. But it also really depends on the macroeconomic and that and the kind of social health effects that we see over the next couple of months.

Trevor Sumner:
So it’s very difficult. And I think technology will help kind of ease that transition and provide ways for us to be safer, but there have to be massive changes in terms of how you rate your safety in store and how you publicize it, how you market to the consumer and mix online and physical stores together.

Julia Raymond:
Stacy, did you want to add anything to what Trevor said? Especially like what you said about customers who are shopping in-store and online tend to spend seven times more. So obviously there’s a space that can’t be filled right now because of the conditions.

Stacy DeBroff:
I guess the one overlay that I would add to what I thought was excellent trend-spotting by Trevor, is we recently fielded a survey to over 700 consumers on our Influence Central insights panel and 64% of consumers now have shifted their shopping for clothing online. And I think this is an example of a post-pandemic change in behavior where people are going to get more and more comfortable buying. I do think the issue of returns, but I think a lot of the traditional browsing of stores is not coming back anytime soon and there’s going to be some form of this merger between seeing things in person but also having a comfort…

Stacy DeBroff:
So for example, if I’m a J.Crew customer and I know I wear a size 10, then I’m going to feel a lot of comfort of just ordering their clothing. And so I think that this behavior change that’s woven into the very fabric of how we shop for things, especially as we expand the footprint of comfort outside of groceries and essentials is here to stay. And so in any reconfiguration that J.Crew does, I really think they need to bring alive their social media marketing, the engagement of influencers, their engagement of storytelling around their product line that will continue to drive.

Stacy DeBroff:
And also we see social media platforms that have opened up from Pinterest, Instagram, new ways to shop. So that you see a look and you can directly shop from that. And that is going to be a trend that is going to only strengthen and really embedded itself in a normative way that we go about shopping.

Julia Raymond:
Great point statement. You said 64% of consumers have shifted their apparel purchases online.

Stacy DeBroff:
Correct.

Trevor Sumner:
Yeah. I think it’s going to be interesting to see, people are predicting what is the long term shift of e-commerce. I think one of the things that I’ve found that’s a really helpful construct is the notion about the difference between shopping and buying. And that e-commerce is great when I’m trying to buy something. I know what I want to buy and it’s really about kind of ease, convenience, price, availability. And shopping is more about discovery and serendipity and really kind of engaging with products. And so I think the question is how do you start engaging with products online and in ways that are similar to the ways that you need to reduce the friction, similar to in-store. And I think things like shopping the look there are a bunch of interesting technology companies for bringing in like Curalate who take Instagram feeds and show different looks from actual people and help people kind of give a sense of what these things look like in the wild and on real people.

Trevor Sumner:
And so those tools are going to be critical to kind of replicate what is that discovery and serendipity that you find in store.

Julia Raymond:
Absolutely. It’s going to be a hard one to accommodate. I mean, just the discovery process. How does that look, like you said, online. Do you think retailers should consider an online-only model? Is that ever going to be something that is as profitable?

Stacy DeBroff:
Well, leading up to COVID, we saw a lot of traction of direct-to-consumer brands from clothing to mattresses, across different sectors. And the one thing that led explosive growth for direct to consumer brands was word of mouth. This powerful like could they get viral? But I also think that embedded in some of our, especially when it comes to clothing and apparel, there is this browsing sort of preference. And so I think that we’re going to see a mix. I think that upstart brands are not going to open locations, although you see the reverse where some brands have really made it online and then they start opening smaller retail locations of what they’re doing.

Stacy DeBroff:
So I think that we’re to see a phenomenal shift. If you look at a brand like J.Crew where 95% of its efforts is in brick-and-mortar retail, I think you’re going to see that go down to 15% and you’re going to see a rise of other ways they could do that. Or you might even start to see brands like that instead of having their own stores embedded in collections where it’s discoverable, but they’re not maintaining all these leases and rents and counting on foot traffic.

Trevor Sumner:
Yeah. I take the counter view and I’m always the defender of in-store commerce and brick and mortar. If you look at it, two-thirds of direct to consumer companies who’ve raised more than $6 million have open stores. You look at Casper on the mattress side of the house And the way that they’ve defended why they’re better than purple is that they’re opening stores. Warby Parker, who everybody thinks of is an online eyewear company, They sell more in-store by a lot. When they had 50 stores, they sold more in store than they do online. Now they have over a hundred stores. And so e-commerce is really great for building up your initial traction, but over time your cost of acquisition comes up in stores turn out to be more profitable. The customers spend more, the less returns. It has a bigger impact on your brand.

Trevor Sumner:
And so I think the question is, what is that right balance as Stacy was talking about? Is it 85/15? Whatever it might be. I tend to take the view that if you look at anybody who’s profitable at scale, stores are a really big part of it.

Stacy DeBroff:
I think that all the points you make, Trevor are really compelling. But I just am not sure that we’re going to feel comfortable going in and trying on clothes that other people have tried on had touched… I think that it’s going to be a long time until people feel or there are certain things that are going to have to take place that we feel comfortable just meandering and in dealing with merchandise that’s not for sale.

Julia Raymond:
To meet the sudden surging demand of grocery, Walmart has developed it’s speedy two-hour express delivery service. It was recently announced and piloted last month. So this month they’re rolling out to nearly 2000 stores across US and they are bringing 160,000 products ranging from groceries and also general merchandise and toys to customers within the two-hour window. It is a bit pricier. The express delivery is $10. There’s also a 9.95 delivery charge for people who are not Walmart Delivery Unlimited subscribers. And the order value must exceed $30. And then you have to factor in tips. So it is expensive but it’s two-hour window that they’re promising. Stacy, I’ll pass this to you first. What are your general thoughts on Walmart coming out with this competitive offering?

Stacy DeBroff:
I think it’s brilliant. I think that Walmart has been gunning for Amazon’s business. And particularly with the acquisition of Whole Foods and Amazon Prime and Pantry. I think we’re going to see a lot of AB testing and we have from Walmart about how to meet its consumer’s needs and also some of the changing demographics of their consumers when they start to offer online shopping and express delivery. So first of all, in our Influence Central consumer panel, 77% of consumers now feel comfortable ordering groceries online. And what’s striking about that is one of the barriers to online groceries was trusting somebody else to pick out things like fruits and vegetables and meat. You didn’t think that they were going to pick the best, that they may pick the worst of the bananas or some meat that had an expiration date that was farther back.

Stacy DeBroff:
And also being willing to live with product substitutions. If you didn’t get your favorite brand, would they give you something that you would like. And it turns out that not only are we comfortable, but with the economic uncertainty and the layoffs, 88% of consumers most want deals, discounts. And Walmart has always had a value premise that if whatever they’re selling, it’s going to be at the best price probably that you can find it for. And when we asked Amazon Prime subscribers if they were willing to do another subscription service that offer them some of that express fast-moving delivery, 58% are ready to sign up.

Stacy DeBroff:
And so I think that we’ve seen an evolution of Walmart investing first and online with jet.com which they bought for a huge purchase price. They’ve been really focused on online grocery pickup, which is one step where you order groceries, you drive up, somebody just drops them into your trunk and now they’re going a bit upscale. Like you pay a premium, but boy you’re going to find your stuff is going to arrive just in time for dinner. You can reload, if they have it online, they’re going to sort of grab and go for you. And I think that we are seeing Walmart stretch and flex its muscles about how it can continue to innovate and meet consumers needs. And as you start to look at the packaging they put together, yes this is a premium, but if you also look at the discounting that they do on the products they carry, it might add up to a really cool value premise for people looking not to go into the grocery store right now.

Julia Raymond:
So Stacy, cool value premise, the fact that they have lower price products might offset those premium costs for delivery. Trevor, do you agree that this is a brilliant move?

Trevor Sumner:
I think is a brilliant move from a marketing perspective. I do think it’s a double-edged sword. So from the marketing perspective, I think the positivity is really focusing on the logistical footprint that they have with local stores, local communities that really plugging into some of the community and local marketing aspect and ways that they can out-Amazon Amazon with two hour delivery in ways that they can offer not just more options. I personally think that the $20 plus tip on a minimum $30 purchase will be prohibitive for the Walmart shopper. The Walmart shopper is very discount focused and price-conscious. And in fact, the number one reason if you survey people regarding buy online, pickup in-store, the number one reason people do buy online pickup, in-store, which has surged about over 200% is because they want to avoid the delivery fee.

Trevor Sumner:
And in fact these days, that might include having some level of risk associated with it. But that amount is just too high. And they are focusing on their strengths, which is grocery, but also grocery is a razor thin margin category. So there’s not a lot to play with and not allowed to eat. So I think some of the stuff may be exception-based. I think if I have urgent needs, what we’re seeing is, alcoholic beverage delivery and grocery has surged 100 to 200% depending if it’s beer, wine or liquor. Certain categories that have higher margin are going to do better here.

Trevor Sumner:
But ultimately, I think this is really about dis-inter mediating Instacart and delivery guys who, once they start owning the customer become really, really problematic for Walmart. And I think Walmart really needs that first party data to own that experience. But I think the two-hour delivery is more of a marketing hook than what you’ll see in terms of mass usage.

Julia Raymond:
Interesting. More of a marketing hook. And I love that you brought up Instacart because I wanted to ask about that. They have zero inventory holding costs. They’ve seen rapid growth, especially because of the pandemic, but they just turned a profit and they’ve been around since 2012. So that’s a bit telling. However, I personally use the Instacart, I love the app. It’s really easy to use. I don’t know that I would switch, but do you guys think Walmart will overtake Instacart?

Stacy DeBroff:
I absolutely do. I think that they’re trying to digitally acquire customers and as Trevor pointed out, the express delivery is going after a much higher demographic. It’s going after a more Prime Whole Foods shopper than going after a very cost conscious budget watching, the overlay of those expenses. But with Instacart, I think that it has the big box retailers figure out how to make it more seamless. I think they’re also taking advantage of unemployment, which means they can find a lot of inexpensive labor to turn into delivery services. So they’re not relying on an established service. They’re picking up the out of work Uber drivers, they’re picking up people who have been laid off and can make some money on the side in addition to tips. So I think Instacart is not going to win in this battle.

Stacy DeBroff:
And also the other thing is Instacart offers a clean app that you were talking about Julia, and they offer convenience, but they do not offer discounting. So they are building in to the prices of every item. So not only are you paying their fee, but there’s padding on the pricing in where they’re going to get profit. And with Walmart and other retailers like Costco, BJ’s or Target, with Amazon, what they’re doing is, well Walmart in particular is going to make it around membership or delivery fees or other things, but they’re going to keep those rock bottom prices. And I think that will end up gouging Instacart if their technology catches up with the ease of use and the sort of sleek consumer interface. I think you’ll start to see that Instacart is going to dramatically decrease in their sales.

Trevor Sumner:
Yeah, I 100% agree. Walmart can’t afford to lose their shopper and have an intermediary between that relationship. They won’t let it happen. And look, they already have a bigger footprint than Instacart overall if you look at e-commerce. So whether it’s through discounting and if you look at a lot of the ways that either Target or Walmart have been encouraging shoppers to sign up, if it’s the Walmart subscription which lowers your delivery fees, there are all kinds of ways in which Walmart can attack and eat at the edges of Instacart. And Walmart is going to win. Walmart always wins. That’s just the way of the world.

Stacy DeBroff:
Yeah. And I also think that we’ve seen an experimentation phase when people suddenly, I didn’t feel comfortable going into the grocery stores and they wanted to, “We all are looking for ways to get items delivered.” There’s been a great churning of, “Well, how about if I try this? And how about…” There’s a lot of experimentation. And in our Influence Central survey, 56% are saying they’re open, just keep it coming like, what are my different options? So I don’t think people have locked down into patterns yet. And so there’s a lot of room for movement in terms of delivery options and what that’s going to look like over the course of this next year.

Trevor Sumner:
Yeah, I think that’s a great point. Over 80% of people who tried to order groceries have had issues. Either delays or orders that could not be fulfilled. I personally have a script that reloads the page on Amazon every minute. It tells me when there’s a free delivery window. And then when I get a free delivery window, I click it and it says it’s no longer there.

Stacy DeBroff:
Can you share that with me? What are you got going Trevor?

Trevor Sumner:
Yeah. It’s some students who built this script that reloads the page. If you search for ‘script reload Amazon groceries’ you should be able to find it. And it’s super simple and it just makes a noise. But even then it’s been such trouble. So what you’re seeing right now is a function of a very unique time and situation where I just need to get groceries. I’ve tried Instacart, I’ve tried Amazon, I’ve tried Fresh Direct, I mean, I’ve ordered from Target, I’ve ordered from Walmart and that does inflate the numbers. Everyone’s like our unique number of customers. So when you look at unique number of customers, that’s probably a false metric. You should be looking at spending loyalty and permanent shifts in behavior.

Trevor Sumner:
And we’ll make temporary shifts and spend more but again, like Walmart you mentioned, kind of their investment in Jet. You look at what they’ve done with Jet Black and tried to get into a higher price point customer and it’s largely failed, right? So Walmart customers are looking for the cheapest, inexpensive, not cheapest, most inexpensive products that they can get and value. Yeah, they’re value shoppers. So again, right now, when the anxiety is high, I’ll pay an extra 10, $20 because just to get it. But long term I’m looking for somebody who can provide it to me in an inexpensive way.

Julia Raymond:
And it’s good to note Trevor’s based in New York, so the hardest hit city, which explains probably why you’re having trouble getting the grocery delivery windows. But I think you both honed in on the point that this isn’t the traditional target customer of Walmart, this service that they’re offering. Maybe there’s a bit of a marketing play here. I’ve spoken with a lot of people in the supply chain arena who foresee a lot of issues with this, especially because Walmart says that they will include other general merchandise and toys even. So I think there’ll be some logistic issues that they’ll have to work out. But on the upside, maybe they’re trying to attract those new customers who are willing to pay the higher price.

Julia Raymond:
It seems like some of the survey data that you collected, you could infer that people will start subscribing to Amazon Prime and a Walmart Unlimited subscription.

Stacy DeBroff:
That was one of the most surprising takeaways that we found coming out of this Influence Central survey data, is that you think that once people find something working for them, that’s good enough. But I think that you see, and there’s been issues on Amazon of price gouging and issues with third-party vendors and sellers. So I think that people in the scope of things, when you think about Amazon Prime, it’s over a hundred dollars and it comes with entertainment, I mean there are lots of facets of it, right? Prime reading, of shopping. But I think that if you look at that being annualized, it ends up being not that very much for a month. And when you think about people’s willingness to pay for streaming entertainment for other things, I think that people are really open almost as Trevor was describing, going through different variations.

Stacy DeBroff:
Like what is it? It used to be that maybe you would pick a premium channel or two. Now people are like, okay, five sounds reasonable. Like I’m stuck at home. We’ve seen a big uptick in people willing to pay for premium content. And I think that this is the same thing, which is this willingness to explore convenience and to enable you to minimize… It’s not just the anxiety and the risk people feel just entering the grocery store now in the midst of COVID-19, it’s this understanding that you can actually offload a lot of these things. So it used to be in a city, people really understood grocery delivery because of heavy items, right? You didn’t have to track these things up to your apartment.

Stacy DeBroff:
But now that footprint’s expanded. And you think, somebody has toilet paper and I can get that delivered. If I can get big heavy cans delivered of my favorite drinks, alcohol, all these different categories, then people are willing to explore package deals where it might only be $9 a month, but it opens you up to that much less trekking about. And I think that we are very much cocooned in our own homes and people are starting to really appreciate the convenience of not having to run around and especially of going to a store and not finding what you want.

Stacy DeBroff:
So this way already in advance that you’re going to get the items that you are putting in your cart or a close substitution. So I think that this is not going away in terms of a fundamental change in the very fabric of consumer behavior.

Trevor Sumner:
I think of course the question is what does fundamental change equate to, right? Where e-commerce ordering of online groceries has been in like the two to 4% range. If we say it doubles and now it goes to four to 8%, is that meaningful? Or are we talking more on the 30 to 50% range. And so what’s going to be interesting to see, and Stacy hit on this earlier, is how much of this is going to be about habit forming, and then how much of the consumer behavior is a natural return to what we’ve seen before because that somehow has some innate value or a reason for existing, or is it really just about habit and adoption?

Trevor Sumner:
And I think it’s going to be a mix of both. And you’ve got pundits who will give estimates that are five, 10, times off other pundits, both of whom I very much respect. So a lot of us are, are really kind of looking to this and waiting to see data. I’m hopeful kind of looking in the China market about where we’re seeing the retail shopping behavior return to normal on the brick-and-mortar store, but if you look at restaurant behavior, it’s still very, very much often. So what is it about those behaviors of social optional versus retail being essential. Those are some of the dynamics that I think are really going to have to figure out how they play out.

Julia Raymond:
Those are good points. And you touched on China, which we’re about to discuss a little bit in this last segment. Because cashless payments and contact-free delivery were already standard practice in China before the Coronavirus hit. And mobile payments are largely underutilized and the rest of the Western world in comparison. But it appears to be shifting. So we spoke the other week about the growing increase of curbside and bogus orders with curbside surging as high as 208% recent weeks, which Trevor you noted as well. And Target also sells some of the highest numbers of its app downloads in the month of March. So Trevor, when it comes to technology, what are some of the long-lasting changes you’ll see in consumer behavior going forward?

Trevor Sumner:
Yeah, I think it’s really interesting. I mean, I’ve been a big fan of Apple Pay ever since I got it. I don’t understand why anybody uses a credit card if you have the option. Why go into your wallet, pull it out, put it in with the chip and now I got to wait. I mean, literally, a mobile phone is that most people can at all times, just double click and boom. And it gives pretty good benefits if you ask me. I’m sure that the points guy has a very firm opinion on Apple pay versus other optimal programs. So I’m a big fan of contact-less.

Trevor Sumner:
I think some of the challenges have been around security and first-party data. So retailers have been a little bit wary of enabling Apple Pay, they would rather have their own payment systems, which is why you saw Target initially not supported at Walmart coming up with their own payments scheme. And in fact right now, Walmart, I believe the only contactless payment is through their app because they want to use that to get their first-party data to be able to correlate in-store purchasing online. That’s how valuable it is. And so I think those adoptions are going to continue. I think contact-less payments is here because it’s the most convenient. It makes sense. And that’s the number one benefit in payments, is to reduce the friction.

Trevor Sumner:
In Europe, they’ve reduced the security restrictions associated with how big a transaction you can conduct and have seen huge increases. And then they’re putting people like Denmark where almost three-quarters of credit card transactions are done in a contact-less way. So I think these people get exposed to a technology that makes it simpler, easier, and has better reporting for them. I think they’re going to adopt it in that.

Julia Raymond:
Stacy, do you agree? Is there anything you want to add about some of the tech that people will adopt because of the pandemic?

Stacy DeBroff:
Well, I’ll build on that. I think that first of all, we have become incredibly comfortable with applications like Zoom. And you see a surge in telemedicine and this willingness to talk to people online. And also this desire, I think that the quality of the interactions goes up. So I can see where customer service might move to a Zoom-like connection where people are going to be more willing to engage in services that they would typically show up for. But if you can from a consumer standpoint, consult with somebody, maybe you could see somebody in a retail location saying, “Okay, so walk me through… zoom in your closet.” Okay. So I’m going to suggest, you could see the consultation where they’re holding up things and you’re talking. I mean, which never really, I think up til now video conferencing has always been plan F. Nobody liked it. It seemed off-putting. But it’s brought this ease of interactivity virtually and it’s going to be interesting to see what spills out of that and how that impacts the retail landscape.

Stacy DeBroff:
The next thing is that we’ve seen this explosion of ways to shop online and I think that we’re ever… Like just in the past week, Instagram has offered all sorts of different things, from Instagram live stories to Instagram feed. Their push on IGTV, which brands are experimenting with. Pinterest is sort of coming back alive and everyone, we see TikTok in its early evolution where it was just a gen Z platform and now all of a sudden my friends are sending me TikTok videos so I’m like, wow, we’ve wrecked it, just like baseball, it’s going down.

Stacy DeBroff:
So I think that there’s going to be this technology explosion of how we interact with each other and with items that affect actually our consumer behavior. So you could see with a beauty consultation, you could say, “Well, can you just show me how to apply my makeup?” And where you might go into Sephora to have somebody do that for you, you might be able to do it virtually and they’ll say, “Okay, watch, this is how I’m recommending it.” We’ve also seen a surge in people’s use of mobile devices. And so mobile marketing is here to stay. We’ve seen even on the social media platforms, a switch to vertical video because everyone’s watching it on handheld devices. And I think that’s going to be integrated into what’s going on.

Stacy DeBroff:
And I also think that retail has been the slowest category. As part of Influence Central, we work with about 300 brands a year. And they range from Amazon to King’s Hawaiian, from L’Oreal to a clothing store, like a campaign we did for Ralph Lauren. And at the end of the day, retail has been very sluggish to really understand how to utilize influencer marketing other than just showcasing pictures like fashion pictures. But I believe that there’s more storytelling. So if you think of going back to our conversation about J.Crew and they want to create a lifestyle. It’s more than just this is I’m wearing this outfit, but this is my lifestyle as a made well consumer. This is me going more casual. This is me in my daily lives.

Stacy DeBroff:
I think we’re going to see a real uptick in, in growing sophistication about how to leverage influence and not a celebrity, but influencer storytelling for the consumer demographic that they want to capture. And so in many ways this area of social media, digital geographic targeted marketing is very new in the retail landscape and they’ve dabbled in it, but they’ve been one of the vectors, in terms of a specialty, the brands have been very traditional in their approach to marketing and I think they’re going to find themselves in a brave new world in which technology has to be a fundamental base of everything they do.

Stacy DeBroff:
And I don’t think it’s off the shelf. I don’t think that they’re going to turn to it like an insta-solution that they just pick up and there’s a software, I think that they’re going to really be challenged to rethink the building blocks of what ladders up to how technology meets their consumer experience in sales.

Julia Raymond:
They need to rethink it. RETHINK Retail. I like the examples you provided with personal selling video consultations and some of the influencer marketing as it relates to lifestyle branding. Trevor, you too work in augmented reality. Do you think that the pandemic is going to drive more of that, being able to see furniture in your home? I think it’s been a bit slow to pick up, but in recent times, at least personally, I’ve seen more apps like Mayfair and Macy’s offering that.

Trevor Sumner:
Yeah, absolutely. I think it’s a huge benefit and the technology has been pretty limited in terms of categories where it makes sense. For example, if you try and do a virtual fitting of a garment, it just looks terrible on you, because it’s not the garment’s fault, it’s the technology being pretty limited. But increasingly these things are becoming more sophisticated as Stacy mentioned, being able to do a video zoom or some similar type of video conference with a makeup artist. Wouldn’t it be great if they could actually just put makeup on your face and using that kind of virtual try and technology that you’ll find from ModiFace or Youcam.

Trevor Sumner:
We work with Invisalign and we know that they’ve been doing dental consultations, including being able to do, they have a smile view technology so you can see your smile before and after Invisalign.

Trevor Sumner:
.So I think just the way that digital can enhance the way we browse and connect with products, again, with shopping being this kind of discovery and serendipity, whether it’s on social media and content or in-store, how do we bring all of that great content in store? I mean, that’s a lot what we do at Perch in terms of being able to bring every piece of content for every product on the shelf. But I think the other part about that is from a technology perspective is data. And we actually have a kind of webinar a little later today, but the data that’s being unlocked by all these systems from online to in-store to be able to track customers, their shopping behavior, what products they interact with, what they consume is really going to allow us to become much more efficient in every area of the business to reduce costs, to increase convenience, to increase joy.

Trevor Sumner:
And that to me is what’s really exciting, is that I feel that in-store retail has been technology phobic for quite some time. And now that eyes are wide open as to the possibilities and their existential threats if you don’t adopt technology and leverage these technology browsing behaviors and content browsing behaviors, I think we’re, we’re going to see kind of a new age of retail that really melds the best of both physical and digital shopping. And it’s going to be enjoyable and engaging and entertaining.

Julia Raymond:
Absolutely. And it’s good to end on a positive note there. As retailers reformat their stores and rethink how the consumer shopping experience will look in a few months from now. I think those elements are important and we will be back in stores eventually. So maybe not to as great of an extent, but I think there are elements of in-store that you just can’t replicate online. So great to talk with you both, Trevor and Stacy, I really loved hearing your expertise and insights and I hope you come back on the show again.

Stacy DeBroff:
Thank you.

Trevor Sumner:
Thanks for having us.