Retail Rundown – Nov 11, 2019 – with guests Nicole Leinbach Reyhle and Ricardo Belmar

Julia Raymond:
Today we’re joined by Nicole Leinbach Reyhle and Ricardo Belmar. Nicole is a retail and wholesale pendant, the founder of Retail Minded and the co-founder of the Independent Retailer Conference. She authored the book Retail 101, a guide to managing and marketing your retail business and is named one of Vend’s top retail influencers this year.

Julia Raymond:
Ricardo is the Senior Director of Global Enterprise Marketing at InfoVista and retail influencer with 20 years of industry experience focusing on digital transformation. He also serves on the RETHINK Retail Advisory Council. Nicole, Ricardo, thanks for joining the show today.

Nicole Leinbach Reyhle:
Happy to be here.

Ricardo Belmar:
Thanks for having me.

Julia Raymond:
Happy to have you guys. The first retailer we’re going to talk about today is Starbucks. They’re bringing their coffee and convenience to a whole new level. Just last week they opened up the Starbucks Pickup store and this is designed for the New Yorker on the go. It is in Penn Plaza. So this location does not have a cashier, it’s a pickup hub for customers who pre-order their drinks using the app. Upon arrival, you can track the progress in the Starbucks app, and there’s also a digital board with the signage showing your name for when your order’s ready.

Julia Raymond:
So this is their new Midtown concept and it’s based off Starbucks Now, which is very similar to a format in China that’s become wildly popular in recent years. Ricardo, I want to pass this to you first to ask, what do you think of Starbucks Mobile Pick up and this new Starbucks Now location and do you think we’ll see more popping up in cities across the US?

Ricardo Belmar:
Hey, thanks Julia. I think this is an inevitable extension of Starbucks’ own successful mobile ordering program as a whole. For many people, the Starbucks app, mobile ordering through it is probably their first experience with mobile wallets, mobile payments, or just ordering ahead through mobile in general. I think this really reflects this ultimate view of convenience. It’s not as if Starbucks is lacking for cafe locations throughout Manhattan. So the fact that they’re adding this, and I think it’s particularly noteworthy that it’s in the Penn Plaza location, because I know there are a couple of other Starbucks not too far away from this spot. It really speaks to how they’re trying to better serve customers in these in densely populated urban areas like Midtown Manhattan, especially based on the volume of mobile orders that they’re receiving.

Ricardo Belmar:
I think that just about everyone I know has had at least one experience at a Starbucks where they mobile ordered ahead and it just wasn’t the best experience once they got to the Starbucks restaurant. Either they were delayed, there were so many orders that the baristas were backed up. So I think trying to dedicate a space with a pickup only like location like this really helps Starbucks address a big segment of their customer base. Grab and go, on the run customer who would likely orders their coffee ahead in the app and just wants to grab it on the way to work in the morning or on their way to a meeting in the city somewhere. It’s not the same customer that would go to a Starbucks, sit down, open up their laptop and then start working there for an hour or two, maybe have a meeting with a client during that time. Myself and many people I know have made use of plenty of Starbucks location for just that kind of a purpose. That’s not what this location obviously is for, this is that grab and go type of customer.

Ricardo Belmar:
I think there are many Starbucks customers who, depending on what’s going on in their day, they could be both of those types of customers. They might be the one that sits down at Starbucks and spends some time there, they may be in a rush to get somewhere, but they really need that coffee to pick them up, and it’s a good centralized location for that. So it’s, in a way, it’s a different customer profile, but sometimes, again, the same customer. I think it just makes sense as an extension of that overall experience. There’s a broader trend I think we’re seeing here throughout retail segments, where one brand is going to develop multiple store formats, where each format is built to address a specific need of their customer base.

Ricardo Belmar:
It’s not limited just to restaurants or coffee shops like this. We could compare to Nordstrom, for example, with their very elaborate and well received new flagships in New York versus their main line department store as it mall locations or compared to their Nordstrom Local concept. So I think this is just something we’re going to continue to see throughout retail segments where there’s no one format fits all for their customers and Starbucks is smart to try to cater to different customer types and expand those locations of this type. I mean, I would not be surprised that after some amount of time, while they monitor the success of this location, we’ll see them open up more. Wouldn’t surprise me to see them open up additional ones in New York or to find other cities with a similar profile where they can benefit from this pickup only type of location.

Nicole Leinbach Reyhle:
Yeah, I absolutely agree with a lot of what Ricardo said and just expanding on that. I think that because it is a tech-based model, it’s dependent upon that digital connectivity between the customer and the actual retail pickup spot for their order, their Starbucks order. I think it really enhances customer service because as Ricardo pointed out, if you do that pickup in a traditional store, it’s often either backed up or it’s not as easy to navigate once you’re within the store space because it’s overwhelmed with customers who might be leisurely sitting there or whatnot. So I really think that Starbucks is going to benefit from this model.

Nicole Leinbach Reyhle:
It allows them to be nimble enough to open up more stores quickly to in places that would be responsive to this type of model as well and I don’t think they’re going to undercut customer service. I think instead they’ll enhance it because they’re giving the customers that want a quick grab and go experience and opportunity to do that and it’s robust and it’s exciting and it’s on demand, and I think that’s what a lot of customers are essentially pushing Starbucks to do in response to not only Luckin, which is the Asian-based retailer we were talking about in comparison earlier, but also just in response to general lifestyle that we’re seeing.

Julia Raymond:
Definitely. I love what you said there about Starbucks being nimble and the whole concept being really tech based and tech focus, and then what Ricardo said about not just Starbucks but a lot of brands rolling out multiple formats to meet their customers where they are. It could be the same customer, but different times of the day they want something new or different. So I want to ask though, Starbucks is really betting on China and it’s doing a lot of expansions worldwide plans to add 2000 stores, net new next year. Do you think they’ll have success or will run into roadblocks with Luckin as such a big competitor in China?

Nicole Leinbach Reyhle:
Well, let’s put it this way, Luckin has opened what I think it was nearly 2000 or over 2000 stores in two years. Okay?

Julia Raymond:
Wow.

Nicole Leinbach Reyhle:
Whereas Starbucks took two decades to open about 3000 stores. Now granted, Starbucks was the original trend center when it came to making coffee, not just coffee. Right? So there’s something to be said for that, but the strategy is clear. Customers want quick, on-demand, easy accessible tech-based beverages, right, and they want it at convenience and so it can be positioned within convenience location. So Starbucks and Luckin in China are very, very close to each other. Less than half a mile away when I was researching. They’re in tier one, tier two cities, are tactically neighbors within communities, right? So I don’t think Starbucks will necessarily thrive, but I think they’ll stay very competitive to Luckin there.

Julia Raymond:
Good points, especially on the expansion comparison between the two.

Nicole Leinbach Reyhle:
Exactly.

Ricardo Belmar:
I think one thing I’d add to that, because it is a good point, it’s something Nicole said earlier about it being a tech-based experienced. Some parts of the world and maybe this is something that would help them in China with this format, there’s consumers who like and seek out that more tech based experience for this and especially when it’s delivering a convenience factor. So I do think if they Starbucks is really good at the execution of this tech based experience at this location. I think that would tell us something about how much they made new expansion and other places. I think this format, at least in my mind, should give them an easier path to expand. So if that’s their goal is expansion, that is the success of this format, it’s probably going to be telling as to how quickly they ramp that up.

Ricardo Belmar:
I think when you have this kind of tech based experience, and the one particular thing I’m thinking of that I was reading about in this format, you don’t normally think of a lot of digital signage at many Starbucks locations, but this experience is very much based on relying on that signage to provide updates and status on your order. So if you get there ahead of when it’s ready, you can quickly at a glance should be able to see how long it’s going to take for you to get your coffee. So I think little things like that and the execution and their ability to quickly process the data from the mobile order. All those things, I think that flawless execution is going to be what makes or breaks the success of this format and if it works well, I think that’s going to tell us a lot about how quickly they may ramp it up in other areas, especially in places like China where you expect to be seeing a better reception to those tech based experiences.

Julia Raymond:
Definitely about the execution there. My one concern would just be about the walk-ins to make sure that they are servicing those people that just, “Oh there, I didn’t know there was a Starbucks pickup right here and I’m going to just order it instead of on my phone going to tell the person.” So, that might be a little bit hard to balance, but we’ll see.

Nicole Leinbach Reyhle:
Customers are easily trained though. Once this catches on, consumers will respond to it. So it might take a little bit of learning curve, but it will be picked up by consumers. They will understand it and with strategic marketing and communication, Starbucks can also identify where their local cafe is. So it typically isn’t going to be that much further away than where these pickup and delivery spots are.

Ricardo Belmar:
Right, and I think customers would kind of train themselves to self select, like do I… Am I looking for that quick pickup experience or did I just now I decided I really want a coffee but I’ve got time. I’m probably not going to go to the pickup spot. I’m going to find the nearest full cafe where I can sit down and enjoy it. So I think customers do kind of have that sort of automatic or almost self-training ability and I’m sure we’ll see that kind of that level of marketing execution from Starbucks. I looked at the app just yesterday to see how they were distinguishing this or if you’re in that area in New York, they do clearly tell you in the app that that’s a Starbucks pickup location versus the standard Starbucks spot. So I think they’ve already started down that proper path of training customers.

Julia Raymond:
Right. Letting them know it’s limited. Definitely and I think we see this with their loyalty program, the fact that they can train their customers because they have changed that program I think three times since it launched in 2009 and changed it pretty drastically as far as how you earn rewards or stars and so… But we just did a report recently with on analyst call, it is up 15% their loyalty program this year compared to last year at this time. So they’re doing well and they have a lot of people actively using their app already. Okay.

Julia Raymond:
The next retailer we will discuss is Penney’s. So JCPenney appears to be prepping for a makeover. It’s 117 year old department store and it just opened a new retail lab last month in Texas and they named it Penney’s and appropriately. But the reformatted space is basically an upgraded department store experience. It has 13% less inventory and more than a dozen lounge areas. They have a cafe, they have a fitness and yoga studio and a barbershop and the labs also home to a children’s play area, a video gaming center and a selfie studio. So this is a big reveal and it comes on the heels of troubled times for JCPenney in August. It was at risk of delisting by the New York stock exchange after its shares were trading just under a dollar and that was for a period of 30 consecutive days. So they are really trying to get above this hurdle. Nicole, what do you think of Penney’s taking on this experience focused retail in the new lab that they just opened?

Nicole Leinbach Reyhle:
So I think it’s pretty fascinating and one of the things I want to point out right away, especially coming off of our Starbucks conversation, is that Penney’s decided when they opened this, they were really going to look at the immediate community around them versus making it so cookie cutter that all 846 stores that they have would mimic it, right? So instead, they actually looked at their local community and they actually tapped on the door of a local coffee house to operate the cafe within their Penney’s location. Okay? So it’s called a pro-cup. So I found that first interesting because they’re looking at their local community and their local customer base and their local businesses and looking at how they can partner with them to bring in a new customer audience and also support their existing customers. So that was interesting to me, but how they’ve brought in a barbershop that of course is strategically placed next to the men’s apparel section and children’s play space.

Nicole Leinbach Reyhle:
This is really a lifestyle store. We’re seeing this more and more shopper-tainment. Customers want to be entertained with where they go and what they do. It’s not just about the inventory. So the fact that there isn’t that 13% inventory, shouldn’t scare a retailer or a customer from that perspective, but instead it should introduce to them that they’re giving them other experiences that are still engaging and informative and beyond what would be first have the traditional department store, right? It’s a look into the future of what retail probably will be a lot more of. I can’t say it’s going to mimic that exactly, but it still compliments the brand strategy. It’s a lab as they’ve said. Right, and so it’s really a learning opportunity to see what are the customers respond to and then from there, what do they do next. It’s definitely not going to be cookie cutter though and all the other stores that they roll out changes then. I definitely don’t think that.

Ricardo Belmar:
Yeah, I think there’s definitely something to be said for this rethink that JCPenney has done here in this store format. Because a lot to like about it and all the things that you’ve mentioned that I would kind of label as new service type offerings when they’re there. I almost feel like they kind of tried to take a page out of the Nordstrom playbook by adding all of these nice well merchandised areas, but then really focusing on what additional services can they bring that shoppers will want and will make them come back to the store that they didn’t really have before. I mean, if I just judge based on the images I’ve seen of this new story compared to the typical JCPenney that most people I know would go to, I mean it’s a night and day difference in my mind.

Ricardo Belmar:
I think you see a much better merchandise displays, even the overall look and feel. There’s more brighter colors, more white coloring. In fact, when you do use color, it’s more of an accent and it stands out to you. So it draws your attention as a shopper. They’ve focused on putting products together in a much more curated way. I think it’s telling that there’s less inventory. In my mind, will customers notice the fact that there’s less inventory? I think if they’ve done their job right in the displays and the merchandise, no one’s going to notice that. Now, certainly compared to a typical Penney’s experience that I remember the last time I walked into one where there’s just merchandise everywhere. As you were starting to kind of feel that Penney’s was becoming this discount location. In fact, I’ve even seen comments online of people when they talk about Penney’s that they tend to refer to it, “Oh, that’s where my parents shopped before.”

Ricardo Belmar:
So they kind of have sort of fallen into this brand image that needed a reboot so to speak, and I think that this is a really great concept for them to try out. I agree with Nicole that the fact that they’ve given it some local flair to it is important. I kind of feel that department stores in general, right, as a category they’re really suffering and there seem to be two camps that I would say are forming in how to modernize. One is this very services based approach that we now see Penney’s taking with this form as we saw towards from doing. Then the other camp is focused more on what I’m going to call third party conveniences. Like with the way Kohl’s has brought Amazon into their store or partnering with all of these and other third party brands to just increase that convenience factor so that it becomes a one stop shop for customers.

Ricardo Belmar:
It’s hard to say what the right approach is. I think that’s why we see all of these brands experimenting. I think for Penney’s in particular for me, one of their big challenges is how they are going to scale this experience. It’s great that they’ve got this location, but if it works well and if the indicators are that it should resonate with people, maybe bring foot traffic back to the store, how are they going to replicate it at other locations? I think Penney’s, maybe more so than other department stores does have a challenge with location. They have a lot of stores that are at a lower tiered malls that are really suffering for foot traffic. It would not surprise me that even with this kind of a reboot and upgraded format that they… We start to see them close some underperforming stores so that they can focus their capital on renovating the better performing stores to kind of match the look and feel of this format.

Ricardo Belmar:
Then other things that I’d love to see how they’re addressing in this particular format, it seems like product curation is really important and driven home here. Penney’s used to be known for a lot of their private line labels. Are they improving that? Is that going to be part of the improved experience? How are they introducing that to try to help their bottom line that way? So I think they still have a lot of room and a lot of places to go, but I think this is a great start to how they’re going to turn things around.

Julia Raymond:
Definitely and I like what both Nicole and you and Ricardo said about it does align with their brand strategy. It’s in offering that caters to the retailtainment, trend that we’re seeing and then it incorporates community and knowledgeable local market. But there are risks, risks involved like Ricardo said with even though it has a new look and feel and it’s really attractive, they do have existing location challenges and how will they scale this experience? I think it will be really interesting. I know that they in September, had some announcements with a new private label apparel line, St. John’s Bay. Then they’ve launched some store within a store concepts with their outdoor shop. So I know that they’re trying a lot, it will be interesting to see how they marry this idea of the retail lab with the existing stores, if at all.

Ricardo Belmar:
Yeah, I think it’s definitely an important factor. Like I said before, how are they going to scale this and in fact, should all of it that they’ve done here at this location, does it make sense to scale all of those things and every other location? I mean, you look at how Macy’s is approaching this, they seem to be very selective at when they have a new concept to introduce. They try it out at 15 on 30 locations and then wait and see where they should go and you can tell that they’re judging based on what the performance level of those locations are. So I would expect to see something similar to that approach with Penney’s. But I think it’s there’s a time factor because Penney’s is one of those brands that as much as we probably all don’t like to say, they’re bordering on that or teetering on the fence so to speak right of becoming the next Sears and we don’t want to see them, this longstanding brand go away, but they’ve got to really do something dramatic to change to bring customers back.

Nicole Leinbach Reyhle:
Dramatic is a good word to use. I absolutely agree with that because simple doesn’t pass customer standards anymore. There needs to be something to keep their attention.

Julia Raymond:
Absolutely. Great insights from you both. We’ll move on to the last topic now, which is about Black Friday. There was a new report just released by PwC indicating that Black Friday is, “Over.” So, released last week, there are 2019 hotter report showed only 35% of customers plan to shop on Black Friday this year and that’s a drop of nearly 39% compared to 2015. So they’re not saying that consumers won’t be spending on gifts this season. In fact, many already are with NRF just releasing their holiday forecast, they found 40% of consumers began their shopping before Halloween. PwC also pointed out there’s the ongoing E-Commerce sale events that we see are the spark behind why America’s consumers are increasingly shopping earlier and looking beyond Black Friday and Cyber Monday. So Ricardo, do you agree with PwCs assertion that the traditional start to the holiday shopping season is now more “symbolic than it is significant?”

Ricardo Belmar:
So I think I’m going to go with a very definitive yes and no on that one, and it’s not because I doubt the findings here. But I think when we start to look at how did we get to this point. I think there’s so many factors and variables that come into it and one of them is certainly going to be, at least for this season, the fact that we’ve got six fewer days from the retailer’s point of view of that shopping window between Thanksgiving and the holiday. So that always has an impact. I think every year it seems to motivate shoppers to start shopping earlier because they realize by looking at the calendar, “Oh, if I wait too long, I’m going to run out of time.” So that certainly has an impact. I think, yes, absolutely online has an impact because we’re at a stage where most shoppers start that buying journey online or through their mobile device.

Ricardo Belmar:
Now, the real question to me is, how are we attributing these types of sales? If we say 54% of the shopping is online, well, what if I start my journey online and I build the shopping cart, but I actually want to pick it up at the store? Do I… Do most retailers still want to count that as an online sale because it was E-Commerce that completed the purchase, but it’s being picked up in the store? You hope that that customer, when they come to the store, might buy something else while they’re there. A lot of these things are kind of interconnected now. So I personally feel that we don’t want to really focus on these kinds of metrics anymore. It’s probably more valuable to just focus on is it going to be a good shopping season or not.

Ricardo Belmar:
Last year, we talked quite a lot about how that buy online pickup in store concept just exploded. So many shoppers decided to take retailers up on that capability because they didn’t want to wait for packages to come to them. They wanted to get things now, but they still wanted to start that buying journey online. So I think these kinds of things are important factor here. Then I think you can’t discount the fact that retailers just can’t help themselves with this shopping season. I noticed in stores this season that so many different brands just could not wait to bring out the holiday decorations even before Halloween. So, were they influenced by the fact that it was a shorter shopping season? Probably, but when you start accounting for the number of retailers that are jumping into the season earlier and earlier, and they’re extending it, how are they extending it and what they typically are going to extend it with more discounts that in other years they might’ve waited until Black Friday to start offering some of these discounts.

Ricardo Belmar:
So I think there’s some validity there and the report by saying that Black Friday is not the landmark that it used to be. But do I think that we’re not going to see a record number of doorbuster deals at places like Walmart, Target and Best Buy? No, I think we’ll still see those. I think we’ll still see a mad rush of shoppers going to those stores to take advantage of those doorbusters. But I think people are just expanding the medium in which they use to shop and that’s why we are used to talk about this omni-channel shopper and what is that. I think that’s how it’s being reflected now. There’s obviously stores are not the only channel people want to shop in and Black Friday was squarely defined to be about shopping in the store.

Ricardo Belmar:
Cyber Monday sales have gone up so much year over year. I think is it useful to keep talking about it as a landmark moment and I think maybe that’s what PwC is really getting at here, that we don’t have to focus the analysis for the season as much as we used to on Black Friday. It’s really more valuable to talk about the whole shopping period in its entirety.

Julia Raymond:
Certainly. Nicole, what do you think?

Nicole Leinbach Reyhle:
I think at the end of the day, customers are getting savvier. Okay, and a lot of that is because of the digital convenience that has been introduced into our lives as consumers. But it’s also because to Ricardo’s point, Black Friday is no longer the kickoff to the holiday season. Right? We see stores decorating for the holidays and promoting sales and incentives to buy before Halloween even. So what do I think? I think that customers are savvy enough to know, “I can buy now and save my receipt, maybe return it and buy something else later.” Because customers are in control. They have the convenience, if you will, to make purchases where with 90 days return policies return policies for some stores, not all stores of course, and that is to their advantage. Because they know that there might be a sale in early November that might be a Black Friday sale. Okay? I mean, we just saw RetailMeNot try to launch a new day this past week called, Cash Back Day, right? Where you’re told of the customer, if you spend on this day with these select brands or retailers, you can get up to 20% cash back.

Nicole Leinbach Reyhle:
So that was just kicked off this year for the first time. But there’s also beyond Cyber Monday and Black Friday, there’s also Small Business Saturday, which is celebrating 10 years this year, which continues to gain momentum from a customer perspective as well as a retail participation perspective. So I do think that there’s a lot of value in celebrating the holidays with these exciting promotional activities, days experiences, and so forth because we’re seeing customers want that entertainment like we discussed before with JCPenney. They want to feel engaged part of an experience. But I definitely don’t think that Black Friday kicks off the season. I think that the season unintentionally or not has already been kicked off.

Julia Raymond:
Absolutely. It’ll be really interesting to see how the holiday season performs this year. We already have a lot of predictions rolling out, so we’ll have to stay tuned.

Nicole Leinbach Reyhle:
Absolutely. It’ll be very interesting for sure and I know, let’s see, it was reported in that report that you mentioned PwCs report that consumers are going to spend 2.7 more this holiday season. Just to point out, this is one of the most condensed traditional shopping seasons between Thanksgiving and Christmas day that we’ve seen in many years. There’s, I think 26 total days there versus typically have 30 plus.

Julia Raymond:
Well, good to see increases and it was really nice to hear insights from you both Nicole and Ricardo. Thank you for joining the Rundown today and I hope to have you again on the future.

Nicole Leinbach Reyhle:
Thank you. Always fun to have your talk.

Ricardo Belmar:
Thank you.