Retail Rundown: Special Report – The Retail Renaissance with The Economist’s Henry Tricks

Julia Raymond Hare:
Today we are joined by my guest, Henry Tricks. You may know Henry from The Economist where he’s been covering global business, finance, capital markets, and energy and commodities since 2007.

Julia Raymond Hare:
Prior to joining The Economist, Henry wrote for the Financial Times in London. He was their Bureau chief in Mexico and worked for Reuters in America, Mexico, and Central America. Thank you for joining the show today, Henry, I’m super excited to have you on.

Henry Tricks:
I’m absolutely delighted to be here. Thanks very much for having me.

Julia Raymond Hare:
So you’re celebrating something a little bit fun. The Economist released a very special report just last Thursday. Henry, can you tell me a little bit about the report?

Henry Tricks:
Yeah, of course. I mean the report is called “The Retail Renaissance: The Future of Shopping” and I guess it goes back to the Middle Ages. And if you don’t mind, maybe I can begin by giving you a bit of a sweep of history to try and understand why shopping is today, where it’s at now. And the reason why I started in the Middle Ages is basically because that was a time when shopping was very much one-to-one. If you were a knight and you wanted a suit of armor or whatever, you would go to your blacksmith or your armorer, and you’d say fit me up with my suit of armor, please, my man. And the craftsmen would do that for you. There weren’t middlemen there, wasn’t a kind of, the equivalent of a shopping center for suits of armor.

Henry Tricks:
It was a very one-on-one relationship. And that lasted for a while, but over basically the last four or 500 years, the emergent shops have emerged. And these shops basically have been ways of wholesaling those goods, right? So bringing lots of different goods together and selling them to people so less one-on-one and more an array of things that are being sold to people. So then we get to the Industrial Revolution, which is where shopping as we’ve known it for the last 150 years started. So what you basically had was a factory system. The emergence of mass production, in which goods were produced in factories. The workers there were getting salaries for the first time and with those salaries they wanted to shop. And so you had the beginning of not just mass production, but also mass consumption. And advertising blitz that was aimed at the masses and a kind of retail environment, an array of shops and supermarkets and department stores and whatever that was all there to distribute goods to the shopper.

Henry Tricks:
This was supposedly the consumer society, the Age of Consumer call it what you will. At the end of the day, the shopper did a lot of the hard work. We were forced to take the, we weren’t forced, but we were encouraged to take the goods that were advertised to us. We were the ones who had to drive or walk to the store. We had to carry our own bags. We had to search the aisles we had to bring that stuff home with us.

Henry Tricks:
And so to a certain extent, it was a system in which the producer and the retailer through advertising pushed goods at the consumer. The way I describe it now within this Renaissance that I’m talking about is as a kind of a consumer pull. The fact that we now have the internet on which to shop, and we have the emergence of a digital shopping experience. Online shopping has widened the choice and given much more power back to the consumer to decide what we’re going to buy. Not just what we’re going to buy, but where are we going to buy and how are we going to buy? Are we going to buy on Amazon? Are we going to buy direct to the consumer on individual websites?

Henry Tricks:
And so this has thrown up huge new challenges to the retail industry, and these challenges will continue to grow, I think. Because first of all, it means that the retailers themselves have to put more emphasis on basically supplying to us how we want it, not how they want it. That means that they’ll have to sell to us through stores, through online that they might have to pay for delivery to us, all these kinds of things. So the burden on retailers has grown and in a sense, the consumer has become much more central to the whole operation, more so at least than we were in the past.

Henry Tricks:
That’s, in a nutshell, the report. And of course, there’s one other aspect to it, which is absolutely central, which is the way that the consumer has evolved geographically for at least the decades. The consumer has been basically American and European. The one driving the retail revolution has been typically American. I would say even in Europe we get more American goods and our advertising is very American style. And so it’s been an American-led consumer system that is now moving to Asia and we can discuss this more, but yes, the shopping experience of the future is as much about Asia as it is about America.

Julia Raymond Hare:
And it’s incredible Henry, how you outlined from almost the beginning of time, how did commerce evolve to what it is today. I wanted to ask, the old relationship between mass production and mass consumption, are you suggesting that that’s being turned upside down, that that’s going back to the roots of one-to-one consumption?

Henry Tricks:
Yes. I think one-to-one is a good kind of handle, if you like, for this shopping revolution. And that is basically because the internet and online shopping and our data trail, the amount of data that we’re putting out, is basically making it easier for producers and retailers to know exactly what it is that we want and to craft a more individualized shopping experience for us. And I’ll you a little anecdote here that really brought this home to me. So I was talking to Nike, and I’d been reading Phil Knight’s book Shoe Dog, which is about the birth of Nike and the struggles that that company went through in order to succeed. And at the very beginning, they were literally going to track meets and whatever, and finding their customers one runner at a time in order to put their trainers on them.

Henry Tricks:
And when I told this to one of the Nike executives, I said it was really a kind of a time when each individual customer mattered. And she told me, Henry, just telling me that story gives me goosebumps, because that’s exactly what we’re trying to recreate. We’re trying to recreate the one-to-one experience in which basically we have a relationship with every single one of our consumers. And that can be through the store, obviously, but it can also be through apps. If you take Nike, again, they have all these running apps and stuff that we sign up to, and they know as a result much more about what they’re doing and they’re able to kind of tailor their products more towards us. And so yes, in a sense, it’s a more intimate experience and it puts a lot of pressure, I think, on the traditional retailers to rethink very much this idea that they can sell to us en masse, and they’d have to become much more focused on how to serve us in a way that we take as being a kind of personalized approach.

Julia Raymond Hare:
And so Henry you said, great word by the way, about rethinking how they’re approaching customers. And what would you say is the impact on marketing in a traditional sense to today to five years from now?

Henry Tricks:
Yeah, it’s been one of the fascinating evolutions, I guess, over the last 20 years is to see how the use of personalized ads and data trackers and other ways of marketing via the internet have really transformed the way goods are advertised and presented to us. So I think that certainly marketing has become more about the feel of a thing, what it represents, as well as the thing itself, because marketers are more aware of the fact that our identities are shaped by what we buy. So we want things that fit with our identities, whether that’s an identity of someone who’s concerned about climate change or veganism, or I don’t know, guns or whatever. We have identities that are reflected in what we buy. So marketers have getting much cleverer at identifying those because they have much more data on what we, the consumer, is.

Henry Tricks:
I mean, there’s obviously also the question about how much we want our data to be tracked and how much we want to be bombarded by ads as we go on our social media and whatever. But it’s interesting to see right now how Apple through iOS and Google through Android is beginning to explore the possibility of turning some of these data trackers off, or at least giving us the option to turn some of these data trackers off. So marketers also have the challenge now of trying to work out how they reach us without necessarily being able to follow our every move on Facebook.

Julia Raymond Hare:
And Henry, you talked a little bit about Nike, you said you read, or you were reading the book that they put out called Shoe Dog. And then you were also talking a little bit about your conversations directly with Nike. And my question to you is, the report mentions the middleman being squeezed out. Do you think that Nike’s move to pull away from the Amazon channel is something that other brands can follow or is that reflective of Nike’s brand value and the fact that they do have such a cult following?

Henry Tricks:
Yeah, that’s a great question because I mean it obviously helps having already acquired your customer. One of the things that I find as I was doing the report, talking to some other companies like Nike, I spoke, for example, to the boss of Allbirds, they make the wooly shoes, and he was interesting. He was actually very pessimistic about aspects of retail, because he was saying that for small companies, it’s getting harder and harder to basically to get your message out because it costs more to do that on Facebook, or it costs more to do that on Google. And so the deck is stacked, if you like, towards the big players. But I’m not sure if I fully buy that. I spoke, for example, to ZARA, the Spanish clothing retailer, and they’ve made a huge success about selling directly to consumers, but that’s basically because they’re already an incredibly well-known brand.

Henry Tricks:
Then again, if you talk to Shopify, which has clearly built a business about trying to provide a platform for those that don’t want to go onto Amazon. They’re incredibly bullish about the opportunity of even very small, direct to consumer or D2C brands, getting their message across, acquiring customers, and then retaining them. I don’t know if you’ve seen this statistic, but they have this lovely statistic that every, every 28 seconds a new retailer makes their first sale on Shopify. So that suggests that there is a tremendous effervescence. I mean, how many of those actually go on to make a sale in a year’s time? There might be a lot of companies that get started, but don’t succeed longer term.

Henry Tricks:
That said, I just think it’s great to think that there is the possibility of quite an effervescent and innovative retail sector out there. Really small brands with really great ideas at finding new ways of basically getting to us, because the big challenge is for us to discover them, right? That’s what we used to do when we browse through the supermarket or through the department store. Now somehow they have to get to us through this massive universe of social media and whatever else that we’re looking at.

Julia Raymond Hare:
Sure. That’s huge, discovery and expertise, two of the biggest things shoppers go in store for. If you don’t know what you want just yet, Amazon probably isn’t the place to search. And that brings me to another point because Amazon and Alibaba have really been running the e-commerce gauntlet, but you say that there’s another player to look out for, and that’s China’s Pinduoduo AKA PDD. Can you tell us a little bit about more and can we jump a little bit into the discussion around Asia and how that is trends across Europe and the Americas?

Henry Tricks:
PDD is absolutely fascinating and it’s fascinating both from a Chinese perspective, but it’s also fascinating for us here in the West. And the reason for that is because it shows that there is no such thing as a guaranteed winner in e-commerce. So China was an e-commerce duopoly. It was a two horse race, basically. Everyone knew it was either going to be Alibaba was going to be JD.com. And Pinduoduo only started in 2015, so that’s less than six years ago. And they started off as this kind of strange e-commerce platform that operated mostly in the grocery space and mostly in the provinces in sort of rural China.

Henry Tricks:
But what they did was they came up with this idea of group buying, which was basically like, if you can get a group of your friends or your fellow villagers or whatever together online, you can actually almost like purchasing wholesale rather than retail. You can actually convince producers to sell stuff to you cheaper because for the producer, they get a bulk purchase. So this is what happened. It’s called a community group buy and it started off very much under the radar. Now, PDD, so remember this is only five years old, it’s worth more than $200 billion. It’s listed in New York. This year, it’s expected that it’s number of users may even eclipse Alibaba. It’s not as big as Alibaba, but it certainly, in terms of numbers of users, it’s growing incredibly fast.

Henry Tricks:
And not just that, but it’s basically caused Alibaba and JD to realize that there’s a whole load of territory out there that they hadn’t even been thinking about, which is sort of the rural hinterland of China, where, you got to remember, there is also hundreds of millions of people, albeit people with less income maybe than in Beijing or Shanghai, but a lot of people.

Henry Tricks:
So everyone has started to go deeper into China with more offerings. And it gives me hope, I think that there is no such thing as a one horse race, or even a two horse race in e-commerce. We in the West, we’re very used to sort of thinking, okay, well, this has been won by Amazon, but I guess the story of Pinduoduo is that it opens the possibility that within five years there may be a completely different company with a different business model and a different approach that sort of brings in new competition, a new excitement. And that’s the thing that sort of attracts me about the Chinese market is just the level of innovation that there is there and the sort of the level of fun. So in the last year, one of the things that’s just gone bonkers in China is live streaming. I’m sure you’ve covered it, but it’s fun to watch. It’s a bit crazy in itself.

Julia Raymond Hare:
It’s crazy. And Henry, I wanted to just say, hearing you speak about what’s happening in China and with PDD, it immediately connected the dots for me because we’re all inundated constantly with things online. And I know that in passing, I’ve seen live streaming where they’re showing vegetables and agricultural goods and I thought, wow, that’s odd. And now it makes sense that that was probably through the PDD platform.

Henry Tricks:
Yes, that’s right. In fact, PDD told me about a program that they’ve been involved in, which is basically they put some strawberry farmers against a team of people backed by artificial intelligence to see who could create the sweetest strawberries. That’s the sort of thing where you kind of feel like this is really cool retail. Sadly, the AI won. I really wanted the veteran strawberry farmers to beat the AI, but they didn’t.

Henry Tricks:
There’s lots of innovation there. And I guess it’s fair to say that it’s not just in China either. It’s certainly led by China, but across Southeast Asia, you have to remember as well the importance of smartphones. I don’t know about you. I still shop online on my PC and I’m hoping that you’re much more switched on and young and kind of tech-savvy than me.

Julia Raymond Hare:
Oh, I use all the above. Sometimes I’m on desktop, sometimes it’s phone, definitely switch.

Henry Tricks:
Great. Well, the thing about smartphones is basically, what does that mean? It means that you’ve got your shopping, you’ve got the shop, your pocket. And you can use it for all sorts of different things in China and in Asia. And in India even, clearly the smartphone is going to be the main gateway for shopping. So that’s something too that in the West we have to really start thinking about is how do we create a shopping experience on a phone? And this is why you see companies like TikTok and Snapchat and Instagram, or whatever, all putting buy features on their channels, because they realize that we’ll be shopping on our phones pretty soon.

Julia Raymond Hare:
It’s hard to keep up with. There’s a lot that goes into it. I think we touched a little bit on this question about consumer to manufacturer but is that any different than D2C from your point of view?

Henry Tricks:
Yes. Yes. Consumer to manufacturer is something that, again, has been kind of pioneered in China. We can see echoes of it here. Funnily enough, PDD, again, is one of the pioneers of this. It’s not a very familiar concept in the West, so shall I just explain briefly what it is?

Henry Tricks:
The idea is basically that a platform, whether it’s Alibaba or PDD, it can see what people are looking for. So, a good example of this is in the early days of the pandemic in China, in January and February of last year, Alibaba realized that many people on its platform were looking for handheld sprays to put in their cars so that whenever anyone got in their car, they could spray the steering wheel and whatever. And that just didn’t exist, but the searches existed.

Henry Tricks:
So they went to a company that manufactured products for the inside of a car and they basically said to them if you switch and within a couple of days, you start manufacturing this, we can tell you that you will have X amount of customers right now on the first day that you produce this. And so within two weeks, they’ve managed to basically get companies to start mass producing this stuff and shipping it directly to the people who’d be looking for it. So that’s consumer to manufacturer, in a sense. We were talking earlier about sort of the way that mass production led to mass consumption. In this sense, it’s like consumption pulling along production. As I say, there’s sort of echoes of it here in the sense that, to go back to Nike, which I mentioned earlier. So Nike were telling me that they noticed during the pandemic, or even before the pandemic, that there was a rise in the number of people who were doing yoga rather than say going out running.

Henry Tricks:
So that enabled them to think, okay, what we need to do is we need to really switch towards producing more yoga gear. So I think we’ll see more of this, we’ll see the fact that this data trail that we leave behind, which basically shows our preferences in everything we do, will become much more meaningful to manufacturers in terms of telling them what to produce. And also, they know what kind of income level we are, right? They know whether we’ve got lots of money or whether we don’t have any money or whatever. So if they see that people who don’t have a lot of money are looking for things that are particularly costly, then they can start thinking about how to produce much more frugal versions of these things. In China, for example, PDD started to produce robot vacuum cleaners that would clean your house without you having to push them around at a fraction of the price that you would pay for them in Shanghai or Beijing. And that I think is really fascinating.

Julia Raymond Hare:
That is fascinating. And I would love to have a nice discounted Roomba. They’re very expensive. As I reflect on what you were saying, it makes a lot of sense because when brands like Nike are able to flip quickly and respond to consumers needs because they see that they’re searching for these things, they can tell because they’re searching directly with Nike, but then also on other platforms and through lookalike models and all of the data side of things. But that really is where Amazon still, and Alibaba still, has a big upper hand because they can see mass searches where people are looking for things with intent. And I think that’s the biggest challenge, right? For brands that are trying to compete with people like Amazon and Alibaba.

Henry Tricks:
Yeah. I think that’s right. But again, I am sort of slightly optimistic that the giants won’t have it all their way. And the reason for that is because I think that you’re already seeing evidence that other tech giants and even not necessarily the giants, but other tech firms are moving into having multiple channels where they can have more sort of lateral vision if you like, of what people want. And obviously the Chinese, sort of, service that everyone talks about is WeChat, right, the super app that is able to see across everything that you do on your phone. So it’s you’re ride hailing, you’re looking at entertainment, you’re shopping, you’re using finance, and that sort of thing. I think that it’s possible that we’ll see more of that kind of super app emerging here. If you think of Facebook and Facebook’s got Instagram, it’s got WhatsApp. It doesn’t seem a huge stretch to think that pretty soon Facebook could be rivaling Amazon in terms of at least knowing what we want and then if it develops it’s own shopping service, then why shouldn’t it eventually be able to compete? I don’t know.

Julia Raymond Hare:
I could buy into it. I could buy into it, definitely. Especially with the services they’ve been rolling out on Instagram. So I could definitely see how that could happen. So you think there’ll be somewhat of a consolidation of apps?

Henry Tricks:
Yes, I think I do. I mean, it’s not fashionable particularly to say so. I’ve talked to Amazon about this and in the past, and I’ve talked to Facebook too, and there’s a sort of sense there that, I think it’s a slightly snooty sentence that, if you don’t mind me saying, kind of like things in China, we don’t need to copy what they’re doing in China over here. We do things our own way over here. I don’t know. I feel like there’s a lot to learn from China and these guys should be looking more closely at what’s going on over there because there’s no reason why it shouldn’t come over here.

Julia Raymond Hare:
I would agree with the latter. And as we close up this amazing conversation, I wanted to ask in a broad sense, are there any things that are on your mind in terms of what we’ll see in the future, like society changes because of how retail is changing?

Henry Tricks:
Yeah, thanks for asking that question. I think that it’s a very significant one. I mean, the retail, well, the consumer has been such a powerful force, in a sense, in our society. I mean from the point of view of driving the economy, shaping politics, but also just like a geography. It’s like the growth of suburban shopping centers and downtown department stores and all that kind of thing. So I do feel as though we need to follow the consumer in order to get a sense of how society will evolve. And of course, there’s a lot of concern at the moment, for example, about jobs, right? And very real worries that many retail jobs, particularly the low skilled retail jobs, the job of ringing up a till, is actually, I think, going to become much less significant in the future because so many more transactions will be done online.

Henry Tricks:
The question for retailers is basically, it will be what can you provide shoppers to get them to come into stores if they’re able to transact online? And in order to do that, you have to basically provide them with more experience, more entertainment. And for that, I think you need a different type of shop assistant, rather you need a shop assistant that does a different job. As someone put it to me, it used to be kind of like showing the customer where the pasta was, on what aisle the pasta was, right? And now it’ll be telling the customer how to prepare the best type of pasta carbonara or something like that, right? So there will be a challenge there to change the workforce.

Henry Tricks:
There’s also a really interesting kind of part of this, which relates to property. And that is, I mean, think about all of the physical retail that there is, right? Especially in America, it’s hugely more than anywhere else on a per person basis. So all of these shopping malls and whatever, what’s going to happen to them. And as someone put it to me, it used to be that you had to have a really big tenant in there, the anchor tenants, the Brooks Brothers, or whatever it was that was going to, basically enabled bankers to lend you enough money to build that center. But now it’s not so much having the bankable retailer, it’s having the cool retailer, right? Who really attracts the kids? That’s the question. And so there are definitely some retail property companies that are thinking about how to change the nature of the store and to create places with more popups and a more kind of ephemeral type of store where people come in for three months and then go or whatever. That sort of thing I think is going to be really exciting to see in the future.

Julia Raymond Hare:
Both great points. And I love how you talked about taking it a step further, offering experience, not just where to find the pasta, but how to cook the best carbonara, and all of the things you talked about having the coolest retailer, not the biggest retailer as anchor tenants and things like that. So, excellent conversation. Thank you so much, Henry Tricks from The Economist and Henry, where can our listeners go to find the report that you guys just released?

Henry Tricks:
Yes. If you go to economist.com, you look for a special report called The Future of Shopping. And yeah, I hope everyone enjoys it. It’s been absolutely delightful to have an opportunity to talk to your listeners about the subjects, which I know is very close to their hearts. And I hope that anyone who wants to can get back in touch.

Julia Raymond Hare:
Near and dear to their hearts for sure. Thank you, Henry.

Henry Tricks:
Thanks very much, indeed.