What Will Commerce Look Like In 2025? | Alex Becker and Ricardo Belmar

Paul Lewis:
All right. Hello and welcome to the Retail Rundown podcast. I’m your host, Paul Lewis. Joining us today are my guests, Alex Becker and Ricardo Belmar. Alex is the vice president of sales at Linnworks, a total commerce solution that connects and manages an and automates commerce operations, powering businesses to sell wherever their customers are and capture every revenue opportunity. Ricardo is a rethink retail top influencer and advisor. He’s also the senior partner marketing advisor for retail at Microsoft, founder of Retail Razor, and advisor for George Mason University at its Center for Retail Transformation. Welcome to the show guys.

Alex Becker:
Oh, thanks for having us.

Ricardo Belmar:
Thanks, Paul. Happy to be here.

Paul Lewis:
So on today’s episode, we’re covering a few key takeaways from RETHINK Retail recently released commerce in 2025 report, which reveals the top 10 fastest growing areas that will reshape how we shop over the next three years. The first insight that I’d like to talk about is direct to consumer. It’s no secret that everyone is looking at and evaluating or growing their direct-to-consumer efforts initiatives. And it really, we’ve seen that these DTC brands are on the cutting edge of retail innovation, as well as traditional legacy brands have increasingly been moving into this space. For example, Adidas, Nike, and Levi’s have all integrated DTC as a key pillar in their sales strategy. So I’d like to dive a little deeper with the two of you and talk about, how do you see this trend evolving? And what’s going to impact commerce with direct to consumer in the years to come?

Alex Becker:
DTC is going to continue to grow. Obviously, COVID shed a very bright light on that need for a lot of different brands, across many different categories, but what’s interesting is the consumers were actually already there and looking for that. And so that awareness of the brands and the retailers to have to really emphasize and focus on it, I think may heightened, but the interest from the consumers were prevalent before COVID. The challenge that we see is probably not, does a brand do a d-to-c strategy, but how comprehensive is the strategy going to be? You mentioned obviously some very large brands that have put a lot of emphasis behind that strategy. But interestingly enough, Linnworks did a study last year of about a thousand consumers, both in North America and in the UK.

Alex Becker:
And one of the things that we recognized was how many different destinations people were going to during their DTC shopping journey. And that number was actually seven. So on average, the consumers that we surveyed were hitting seven different destinations as part of their buyer’s journey. And yet at the same time, the brands that we interviewed were struggling to keep up with three of them. So I think that the DTC strategy question then becomes, “if my consumers and the people I’m trying to interact with are going to a lot of different destinations yet I struggle with being able to maintain and manage that appropriately, how am I going to handle that?” And so I really think the question comes down to, how comprehensive is the DTC strategy? Not just, should we have a DTC strategy?

Ricardo Belmar:
Yeah. Something I would add to that, that I find most interesting when we talk to both retail and direct-to-consumer brand, it really has a lot to do with both the product category that you’re in and how consumers like to buy products in that category. So, for example, I think there’s a big difference between how consumers view buying a Nike sneaker, for example, versus a bag of potato chips. So this is particularly true. I think when you look at CPG products that most customers are used to just buying a big collection of them in one shopping trip at a grocery store, for example, or a mass merchant versus thinking, well, I want to buy Doritos. So do I go to one specific destination for Doritos? And then I go to another destination to buy potato chips? And that starts to add complexity, I think, to it rather than simplifying things, which really is what I think drives the emotional value for consumers to buy direct from a brand, because it’s perceived as easier, it’s perceived as a better value, even though that isn’t necessarily always the case.

Ricardo Belmar:
Sometimes, the strategy in direct-to-consumer for a brand is that they’ll get better margins for themselves going direct and then relying on wholesale relationships. But to the consumer, it’s seen as… I’m getting that value direct from the brand. So I must be getting more from them since I don’t have to go to anyone that sits between myself as the buyer and the brand. So I think those issues vary. So you see different results when we’re talking about apparel-related categories versus say, package consumer goods. And then I think there’s also a difference when we look at those digitally native or startup brands that are disrupting a particular product category. When you look at those brands, how do they get most of their customers to buy from them?

Ricardo Belmar:
They’re really good at telling their brand story. They usually stand for something that creates, that impact in that category, in the sense that they’re openly telling you that they view how they make their product very differently from perhaps how many of the legacy brands in that category create their product. And that drives more emotional value for consumers. Here, examples might be brands like in Allbirds, for example, or other digitally natives that either haven’t yet opened stores or are just starting to open a store to broaden their reach. Those disruptors have a difference or seen differently, I should say by those customers. And that’s why they buy from them. So there’s definitely, I think, an issue around, what category are you in? How are customers expecting to buy? If you think about categories like apparel, consumers have bought from specialty apparel retailers for years.

Ricardo Belmar:
So they’re, in some ways, already conditioned to have a willingness to buy direct from brands. Whereas, other product categories, they were used to going to mass merchandise retailers where they would see 20 different brands of the same category. And that alters how they perceive this relationship with the brands. I think for the brands themselves, there’s plenty of upside in having that direct relationship, not to mention all the value they’re going to get from collecting all this first party data around the customers that they’re engaging with, that they might not get by selling through other retailers. So I certainly expect we’ll see more of it, but I think I, I agree that consumers like this experience generally in most categories. I think the challenges are for those categories where consumers have this ingrained approach to how they buy that they might need to overcome in order to go direct.

Paul Lewis:
Yeah. I think those are great points, Ricardo. And I think that you’re exactly right. Brands need to think about, how am I perceived by my consumer? And my strategy is going to be different, maybe than other industry categories. And also, I may want to choose a different strategy to differentiate from my direct competitors. So I think there’s a lot to digest here. And Alex, I know you mentioned that there are maybe eight different sites that people go to in that experience. And I think that for many brands, kind of transition us to the next topic, which is marketplaces. I think that there is this direct-to-consumer where they’re looking at on their website, what they’re transacting, at least from an e-commerce perspective. But then there’s also, well, there are social channels.

Paul Lewis:
So then, how much of that is really part of their d-to-c strategy. And then there is marketplaces where increasingly in marketplaces, they’re able to set up the shop within a shop if you will, sometimes physically in these stores, Best Buy and Target have some of those models. But we’re seeing that inside of the online marketplace environments as well. And so I’d love to transition this discussion a little bit to marketplaces, because I think that’s a rising challenge for many brands as they’re looking at, how do they get their products out there? So, I know for example, Walmart has made huge gains from 2019 to 2020 and it has 90% of their product assortment on their online marketplace. Why are we seeing so much growth in marketplaces across the board?

Alex Becker:
Yeah, good question. And I think that trend is going to continue. In fact, some of the data that we had looked at in that previous research was that 90% of the actual transactions occurred or originated, I should say, on the marketplace when they were doing their research. So to your point, exactly, they might ultimately hit the .com, but they’re going to be doing some reviews. It could be on social media sites. It could be social transactions, ultimately. I mean, we’re starting to see a proliferation of Facebook, Instagram, Pinterest as part of that buyers journey. So there’s a couple of benefits. I mean, one, the marketplace is, and the Amazons, the Walmarts that you’ve referenced, the Etsys of the world, I mean, they command a large amount of traffic. So there’s a lot of awareness in the market about them to begin with.

Alex Becker:
They could argue their own brand already. The challenge then becomes, how do you have that differentiated strategy in that marketplace? And again, it can be noisy. You can have a lot of competitors buying for that same conversion and that same engagement process. So there’s a depth to that strategy as well. And I think the last part was, and again, goes back to the research that we looked at last year, which was, if people are hitting these different locations, marketplace is included, social included, dot-coms included, how am I going to get there? How am I going to support that consumer through their journey? And if I’m not there in supporting that consumer through their journey and missing that opportunity to engage with them and potentially missing that opportunity to have that ultimate conversion.

Ricardo Belmar:
Yeah. I think one way I like to look at the marketplace is particularly in that context that you just mentioned. It has to do with, how are you driving traffic for you as the brand right to the marketplaces that you expect customers are already buying at? And I think this is why we’re seeing the ad revenue rising so much in these larger marketplaces. We’ve all heard in the stats about how Amazon now is the third largest advertiser online after Google and Facebook because their marketplace, if you’re a brand selling there and you’re in a category that has hundreds, if not thousands of options or a customer that does a product search on the site, how are you going to get your brand to the top of that list, knowing that if you’re buried five pages deep in those search results, customers likely to never find you there, even though you know that customer is going to be on this marketplace?

Ricardo Belmar:
So the ad revenue potential I think, is pretty significant. The need for brands to actually buy that advertising in order to be successful, I think is also critical. And to me, this is partly what drives a number of retailers to want to transform their e-commerce site into another marketplace. So it’s not just about the big mass merchandise marketplaces like Amazon and Walmart or Etsy. Even Home Depot, for example, has turned their site into a marketplace type of offering where they have third party options and they’re generating ad revenue from their product pages as well. And they’re seeing an increase in conversion from manufacturers and brands that are buying these head units. So there’s definitely an advantage for retailers to do it. I do think there’s a limit though, in this and that’s, if you think about how many marketplaces does a consumer need to go to, to find what they want to buy.

Ricardo Belmar:
And this, I think speaks to having too many options. So not every retailer can turn into a marketplace. Not every website can be a marketplace. For example, we haven’t seen, I would argue as successful marketplace options in the luxury segment because the experience just isn’t quite what the customers are looking for. When you’re looking at categories where consumers have a pretty good idea of what they want, maybe it’s just down to a couple of small options they need to decide from, and by doing some quick searches on a marketplace and seeing a list of a few dozen products, they can make a decision. But when you’re shopping for very specific and unique things, particularly I think in the luxury space, that’s a different experience you’re looking or that a marketplace might not be optimized for because they’re really not optimized for that level of quality and I would argue, uniqueness that you expect to get from a luxury seller.

Ricardo Belmar:
Even in other categories, I think there are some differences that we could go into. And I think you could probably do a whole show on just talking about what types of categories work best in this scenario. But I do think it’s true that we’re going to see continued growth in these marketplaces, particularly the mass merchandise ones, if anything has come out of the pandemic from the consumer’s perspective. Everyone likes to talk about convenience capabilities, but I believe that one of the buying habits that are definitely won for me with consumers is they narrow down a lot of choices. They like the idea of having a one stop shop where they can buy an overwhelming majority of things that they know they need to buy from just one place all at once. And it is convenience-related, but I think it’s also a perception of value that comes from that. So these marketplaces are very good at demonstrating that value to the consumer that keeps them coming back.

Paul Lewis:
I’d like to flip the discussion into maybe a little bit of a boring direction. Well, it sounds like a boring direction, but was actually, one of the top areas, 90% of technology executives felt that supply chain was going to go through huge changes. So in a lot of ways, the supply chain is the new black. And we’ve seen a lot of challenges through the pandemic, through the ports being clogged up. It’s especially prevalent with consumer electronics right now, where everything from the manufacturing side of things, to getting things through to the ports and unloaded into their destinations is challenging. And then even, as we look at the increasing demand and consumer expectation for not only two day delivery, but one day delivery to one hour delivery to 15 minutes to pick up and store, understanding where your supply chain is at is absolutely critical to the new level of consumer expectations. What are some of the things that you see coming in the global supply chain solutions everywhere from the far back end, all the way through to that front end and having things ready for the last mile?

Alex Becker:
Yeah. So there’s a lot in that question. I actually saw an article the other day. I think it was John Lewis in the UK is actually chartering its own ships to be able to get goods in the stores for this holiday season, because to your point, they might be able to have the goods manufactured, but they can’t even get it transported. And so that’s a pretty drastic or dramatic approach that a retailer has to take. But I think if I look at [inaudible 00:15:10] in general, to your point, there’s a lot of demand right now and not enough supply to be able to support it. So what do I need to do as the retailer of the brand? First, to your point, at that customer engagement experience. So right at the beginning. Am I providing the information of when that product will be fulfilled?

Alex Becker:
Is it going to be this week? Is it going to be two days? Is it going to be in one hour? Is it going to be a month from now? If I look at categories like furniture, there’s a large backlog of that and has been for some time. One of the things that consumers always value as part of their purchase path is that clarity and visibility into what will that fulfillment look like. So I think on the front end, you got to make sure you’re disclosing that information and providing it cleanly, which means you actually have to have that information going all the way back through your supply chain, which means you’ve got to have systems that are connected. And now, again, that issue gets more complex across the various d-to-c channels that you’re engaging with.

Alex Becker:
And so you’ve got to be able to consolidate all of that into one central view. I do think to your point, at the end of the day, there are retailers that are trying to provide even part of their retail shopping experience as the e-commerce fulfillment center. You mentioned consumer electronics, very large consumer electronic retailer that is taking a portion of their stores to actually be the e-comm fulfillment center and to be able to do buy line pickup and store and so on. So it’s a complex problem. And to your point, it starts with even the raw materials and the manufacturer, but also then the distribution of the goods. And I think it also then goes into what’s the consumer understanding and expectation and trying to collect and provide all of that information is no easy task. And then being able to execute on the commitment that you’ve made is really the expectation of the consumer.

Ricardo Belmar:
Yeah, this really has become a complex area. I mean, I just last week came off finishing series of three different webcasts with some of our, the supply chain technology partners. And there’s a common theme across all of them. And that’s that, with all of these problems around shortages, port delays, factory capacity, none of this is short term. None of these things are going away in the near term, which means that all of the planning that goes into maintaining your inventory levels, forecasting your future purchases, just to maintain the supply that your customers want. All of that has to become much more detailed and even looking further out. So the tool sets, I think, is becoming a pretty significant area of investment now, not just in terms of overall managing your supply chain end to end, but you’re really looking at the details of, how am I making adjustments? How am I building resiliency and diversity into my supply chain?

Ricardo Belmar:
Those are becoming critical issues for retailers. In the past, most often they would optimize for just reducing cost in their supply chain so they could keep the overall cost down products they’re selling. But now, what everyone is realizing is that optimization has made everything so deeply single threaded, that any kind of disruption like we’ve seen over the past year and continue to see now just completely throws everything into havoc for them. And consumers see this. I think, we all know the stories over the past year of empty shelves and shortages, and sometimes in the most bizarre product categories that we never expected to see shortages. And there was often talk of how, sometimes people wanted to blame the AI tools that they were using because the models they had couldn’t predict this pandemic type event.

Ricardo Belmar:
But in fact, one of our partners had done some really interesting research into this themselves, their own data, and found that as many as 70% of the time, they saw that when there was human intervention that overrode a lot of the out output from these AI models actually made it worse, not better. And so there is this fine balance that retailers and and brands have to come to now between deciding how well is the predicted outcome that their AI systems are telling them versus what their own experience tells them. And there’s a significant amount of upleveling of skillsets that we’re seeing and people who are managing their supply chains around how they interpret data, how they derive insights from this data, so that they can not only better feed these AI systems, but also have more trust from the outcomes that they’re seeing from that.

Ricardo Belmar:
And it’s not a short term problem. And I think that anecdotally, I saw a note the other day that we’re now up to 72 ships waiting to get into the port of Los Angeles just to unload their containers. I’ve seen numerous data points saying that what used to cost $2,500 to get a container from Asia to north America is now as high, often as $6,500 or $8,000. So these costs are skyrocketing as a result from all these delays and retailers have to find ways to have multiple sources, have ways to add more diversity in that supply chain and get this resilience in there. That’s really been the keyword that I hear most often from everyone that we’re talking to is that they’re not just trying to build intelligence into their supply chain processes, but they need more resiliency.

Paul Lewis:
Yeah. I couldn’t agree more with that. And I would say, you hit on the last topic I wanted to jump onto, which is artificial intelligence. I don’t think we can get through a conversation about the future of commerce without taking a look at how AI is reshaping, literally everything. And I love your comment about, that AI actually had some of the predictions right and that the human choices was where there were some of the larger errors. And I think that’s a little bit what Elon Musk says about AI driving is that, it’s not that it doesn’t make mistake. It just makes mistakes less than the humans do.

Paul Lewis:
But AI is impacting everything. And I’d like to start with maybe on the data side, the way that it’s allowing brands and retailers to think about all of their data that has been siloed, separated in so many different ways, and it’s just such a sea of data that it’s humanly impossible to go through it, but with artificial intelligence, it can pick all the needles out of the haystack, not just even find one. What are your thoughts on how AI is going to reshape commerce in the coming years?

Alex Becker:
Wow. Obviously to your point, as the machine learns more and more of the data gets input, it gets smarter and better at what it’s doing. So I think the first piece is, if I just think about it from a personalization standpoint, and if you look at personalization, it’s its own topic. It’s how am I really going to make that a personalized experience for me in my moment while I’m there? That’s the ideal. And so I think it’s just going to continue to get better because there’s going to be more data points to pull from, and that are helping feed those models, to your point. I often wonder then to your point, how do you leverage some of that technology for what that customer experience is, not just in the shopping piece of it, but again, the transaction component and then the fulfillment side of it?

Alex Becker:
And I think, Ricardo was just hitting on a lot of the work that’s being done on the supply chain side with that, but looking at things like digital assistance, smart displays, what’s my experience like when I’m in the store or online? Are they aligning? And I just think there’s going to be a lot of continued growth and benefit from AI. Probably the responsibility is going to be, how far do you want to take that? Because you could probably make an argument that you can cross the line at some point between trying to provide a personal experience versus one that’s maybe too personal. So I don’t feel like I’m actually shopping, but it might get a little bit too personal. I think there’s a fine line in there.

Ricardo Belmar:
Yeah. That’s a good point as to, how far do you take AI-based technologies into the actual shopping experience versus the more backend processes like supply chain? I really like to look at computer vision as one of a positive example. So how are we seeing implementations of computer vision even today that I think we’re just going to continue to grow by 2025 in let’s say, the in-store experience? I mean, everyone’s favorite topic here has to do with cashierless checkout experiences to reduce that final friction point in the in-store experiences is when you’re ready to buy and now you have to wait to be able to complete that purchase. Amazon was first in this, but we’re seeing many other solutions now coming out that are accomplishing the same thing where you have this capability to just have whatever it is you pick up in the store detected by computer vision technologies so that you don’t have to go through a checkout process anymore.

Ricardo Belmar:
I think that’s one example that we’re going to see more and more of. I know there are a lot of skeptics and folks on both sides of this discussion where, how accurate can the system be when a store’s crowded, for example. I know that’s one question that comes up quite often. And I think the answer to that lies in how this technology scales over the year. There’s a reason why we’ve seen the implementations that are out there so far of this at a somewhat of a smaller scale. So we’ve seen it in convenience store formats first. We’ve seen Amazon grow at step by step into every larger store formats. And it’s the scaling factor that and processing power is really what determines how far you can take this. But there are other more localized examples. We’ve seen, even in years past, examples of really high-end technologically advanced fitting room type solutions or magic mirrors.

Ricardo Belmar:
We’ve seen where AI can help and computer vision can help things. Sephora has an example, where you can do essentially a virtual makeover in the store. We’ve seen fitting room examples where the mirror itself can help show you other options to what you’ve brought into the fitting room. You can use technology there to reach out to an assertion, to have them bring you something else. And these are things that are already possible. So if we look at where will this go in a few more years, what else can we do to interact with a product? You could see examples where a display where normally would be merchandise just to show off a particular product, or maybe three products in one display. But what if you now allowed for a model where customer can pick the product and interact with it and have that be a trigger event that allows either displays to show additional content, lighting could change, for example, to show different aspects of the particular piece of merchandise.

Ricardo Belmar:
And again, these are things we can do now, but they’re only going to get better as these technologies advance. When you look at other areas around the store, for example, one that I don’t think gets talked about enough, but I think AI is going to have a pretty significant role to play is going to be in security around stores, and reducing shrinkage in those environments. We’ve always had surveillance video in stores. We’ve always had human interaction, monitoring those systems to see if they’re trying to reduce still on merchandise, but we can expect to see AI get more and more plugged into this scenario to help automate some of these processes so they won’t have to be as human dependent. Of course, this is where all the controversial pieces around AI come to be. We see more of an acceptance for facial recognition I think, in Asia than we do here in the US.

Ricardo Belmar:
There’s a little bit more resistance in the west over what facial recognition systems can and can’t do. There’s more acceptance I think, in Asia that we’ve seen where facial recognition can be used as a form of payment. How much easier can you reduce the friction by relying on these sorts of AI systems? And then you get into areas with augmented reality and then virtual reality, where again, I think AI is the fuel that’s pouring the gasoline on those technologies to help make them more and more useful. Where today, the usefulness has been fairly limited I think, in these implementations. But I expect that in the next few years, we’re going to see more and more of them coming to fruition.

Paul Lewis:
Great. Wow. A lot to take in, for sure. Well, Alex and Ricardo, I want to thank you both for joining me on the show and talking a little bit about the future of commerce. Couple of points to the audience. One, is the future of commerce report is now out on the website. Please download. It’s the top 10 areas that are going to be impacted and a look from experts as to what’s going on in those areas. So please take a look at that. And then we’re also going to be discussing the future of commerce and the report in even more depth at the Linn Academy event. And that event is coming up on October 6th and 7th. You’ll hear from speakers representing Facebook, eBay, Forrester, and more. So register today at linnacademy.com. Again, thank you guys so much for joining me on this discussion.

Alex Becker:
Thank you.

Ricardo Belmar:
Thanks, Paul.