The retail futurist weighs in on how COVID transformed his industry, the big question brands should ask themselves and why physical stores could be more important than ever
If you call your consulting company Retail Prophet, you’d better have something useful to say.
Doug Stephens doesn’t disappoint with his third book, Resurrecting Retail: The Future of Business in a Post-Pandemic World, which drops on April 13.
The Toronto-based retail futurist, who’s advised players ranging from BMW to Disney to Walmart, argues that the COVID shock has completely changed his industry. We asked Stephens how brands can survive and thrive in this hypercompetitive new landscape—and which B.C. retailers are ahead of the game.
For the complete interview, check out the BCBusiness Podcast.
As we saw in 2019, retail was already in big trouble before the pandemic. But you were feeling hopeful pre-COVID, right? You saw a revolution starting to take hold?
Yeah, there was a groundswell. As you say, retail was not without its problems. There were certain brands that were falling by the wayside. There were channels that were really under siege, like the department store channel.
But from my standpoint, there was at least a growing consensus around the idea that all of the tricks of the trade that had gotten retail to where it was were increasingly irrelevant as we faced this digital frontier. And a lot of the themes we had been talking about—by we, I mean Retail Prophet, my consultancy—and espousing over the last 10 years were starting to make their way into the consciousness of the retail industry. So yeah, I was hopeful. I felt like we were pointed in the right direction, and then we all know what happened next.
No one knows how the pandemic will shake out. But if predicting the future is futile, we can prepare for it. You point out that when business leaders try to build strategy for tomorrow, there are quite a few pitfalls. Why do we get the future so wrong so often?
One of the primary things, I think, is we tend to extrapolate what we see today. We internalize the things that we’re seeing happening around us. And so the easiest way for us to project the future in a comfortable way is to make it an extrapolation of what we already know.
The future for a lot of organizations looks a lot like today, only more. It’s, Yeah, consumers are shopping online today, and the numbers are increasing, so we expect that’s just going to be more going forward. Or consumers are using their mobile devices increasingly for shopping trips, so we expect that’s going to be more.
What we don’t look at is, what about the divergent things that come out of nowhere at us? Sure, we’re using our mobile devices more and more to execute not just shopping but also buying. But that doesn’t necessarily negate the idea that there can be a new device of some kind that we begin to migrate toward, that takes that narrative of “The future is today, only more,” and throws a wrench in it.
We also as business leaders have to be scanning the horizon constantly to try and find those non-sequiturs, those things that are not part of our consciousness but could be directionally important to the future. Not enough organizations charge somebody with that function.
It’s become accepted wisdom that the pandemic has simply accelerated existing trends in retail. But you couldn’t agree less with that statement. Why?
That’s the easy way of describing the movie we’re watching here, and I don’t think it addresses the totality of this crisis. And again, people point to the idea that, well, consumers were shopping more online pre-pandemic, and so now we’re seeing 10 years of growth in online retail in 14 months or whatever.
One of the points I try to make in the book is that there are things that have happened to us politically, socially, economically and technologically that could not have happened had we not had this cataclysmic event. And what it’s doing, in my opinion, is not just furthering the direction we had all seen coming, it’s also putting companies in a different competitive space.
Amazon, for example. A surprising, little-known statistic is that Amazon has actually lost market share during the pandemic. Their sales have been astronomical, their profitability has been phenomenal, but they lost market share because the rest of the world woke up one day and said, My God, we have to do a better job now vis-à-vis Amazon and others in terms of our online capabilities. So Amazon has watched the rest of the retail industry catch up.
They’re also both the beneficiary of the massive sales increase that they’ve experienced and the victim of that. Because that creates entirely new shareholder expectations going forward, for more of this robust growth that the company has experienced.
And so my thesis that we are now going to see Amazon move into new level of its own evolution where the company will realize that just selling more running shoes, more electronics, more Prime subscriptions will not be enough to continue this inordinate growth.
So we’re going to start to see them jump the tracks and go into more categories that are both vulnerable to disruption and tremendously lucrative relative to the petty margins that one might make on selling apparel or electronics. I’m thinking of things like education, finance, banking, transportation and health care, a huge category that’s obviously become more prevalent during the pandemic.
I believe that Amazon is now in the business of creating a life ecosystem like a glass dome that they want to put directly over the consumer, so the consumer has no need to ever leave the Amazon bubble to get anything they want.
That changes the competitive equation for every other retailer. Could that have happened without a pandemic? I suspect not. I think this was a unique circumstance that changed the chemical composition of the retail atmosphere.
You describe Amazon, Alibaba and their fellow giants as the apex predators of retail.
Up to now, they’ve been fierce competitors, and there’s open debate in the industry about the degree to which Amazon has been directly responsible for the death of certain retailers.
When I use the term “apex predator,” I don’t mean that as a pejorative against these companies. It’s really the highest compliment, because they are now moving to a level of evolution where they just don’t have any natural enemies anymore, apart from themselves. It’s sort of like when a star becomes so large that it implodes on itself. That, perhaps, is a greater risk to Amazon than any single competitor in the landscape right now.
You say that we’re headed for a level of competition unlike anything in modern retail history. Given this state of affairs, a retail brand has only one competitive angle, you argue: ensure that customers’ time and money are well spent. What are a few ways retailers can do that?
We’re seeing large national retailers—brands like Costco, Target and Kroger, and even Loblaws here in Canada—starting to move into the creation of third-party marketplaces. Because the gravitational pull of an Amazon is becoming so great, just by virtue of the breadth and depth of the product selection they have, that to be a single-purpose retailer of any kind…is not a very stable, competitive place to be.
All of this puts tremendous pressure on the rest of the industry now because all of your competitors are becoming that much larger, that much more all-encompassing in terms of their selection and convenience.
The rest of the companies out there that don’t happen to be lucky enough to be Amazon or Walmart, they have to start thinking in terms of, how can we create experiences that are so valued and so remarkable that every consumer believes that time with us was time well spent—that they had an experience that was tangibly better and unique relative to what they could get at one of other major marketplaces? It’s the only competitive route.
You suggest that retailers ask themselves: If your brand is the answer, what’s the question? To help them, you’ve created 10 retail archetypes. What are a couple of examples?
We used to think about brand positioning in dynamic terms. Is my brand luxury? Is my brand discount? Is my brand convenience-based, or am I more service-based?
But I think the litmus test for a brand is becoming more absolute, given this heightened landscape of competition. Because the fact of the matter is, anything we want, we can get. There’s virtually nothing that I can’t pull out my phone, find somewhere in some corner of the Earth and have that thing sent to me.
Product is no longer the issue. It’s really about, is it worth it for me to visit a particular brand or a particular store? Purpose is the new positioning. And what I mean by purpose is not what’s your corporate mission or your values statement. What utility do you have for a consumer? If a consumer somewhere is asking a question, what’s the question, and why are you the answer?
To assist retailers in understanding that geography, I thought, Well, what are the consumer questions out there? What is it that people are looking for? And so we assembled 10 fundamental questions on the minds of consumers and built retail archetypes around them.
For example, Nike has been a tremendously successful global brand. They’ve done phenomenally well, even through the pandemic, relative to their competitors. Their market cap has gone up by about 300 percent just over the last four or five years. The question is, why? What is it that Nike sells that’s so remarkable? Are their shoes really that much different? Is their pricing structure really that much different? The answer is no, and yet they’re more successful than competitors in their sphere.
My belief is it’s because what Nike is really selling is not running shoes or sweatshirts. What Nike sells are stories. They are stories that appeal to people’s emotional sensibility, stories about…persevering through failure on the route to success. They’re human stories that people connect to, and it’s the story that we’re buying into. The Nike swoosh is just an emblem that says, I align philosophically with this brand. And Nike does a tremendous job of investing in telling those stories, both online through conventional media and in their physical spaces.
So there’s an example of a brand that we call a Storyteller brand: a brand that focuses a lot of their time and resources on telling these really deep human stories in an effort to win people over emotionally and cognitively from a values standpoint.
That’s a completely different proposition than, say, Patagonia. Pagatonia is what we would call an Activist brand. It puts a cause at the core of the business, and that cause energizes everything inside the business. For Patagonia, it’s all about environmental activism. So when the consumer shops at Patagonia, what they’re saying is, I align to the values of this business.
Every brand needs to find that question and be the answer to it, if they want to survive in this post-pandemic future.
You’re tired of hearing the platitudes that tomorrow, every company must become a data, media or tech company. Why is every company an experience company?
If you have a customer, and the customer has an experience, you’re an experience company. You’re in the experience business. I don’t think that a lot of companies recognize that. And yes, we do hear these familiar tropes.
But the truth is, you can’t be all those things, and there are companies that do those things for a living. Should you be conversant in those aspects of business? Of course. Your whole organization should have a level of acumen in each of those areas. But no, you don’t need to be an expert in those. You do need to be an expert in your own customer experience.
What I always find amazing is that if you put six retail executives in a conference room and put a new piece of creative in front of them for an ad campaign, they would sit and debate that for hours—the colour and the logo and the storyline. You’d get no shortage of opinions.
But if you take the same half a dozen retail executives and ask them to describe in detail their proprietary customer experience and the unique attributes of that experience, you get a lot of silence in most cases. Most companies do not design their customer experience in a deliberate way. It is pretty much a thing that is left to chance. And so we have to get back to being the expert in what really matters, and that is the customer experience.
Consumers don’t want to be advertised to, you maintain. Why is media the new store?
If we go back only 25 or 30 years, convention was that a brand would go out onto the open market, they would buy media, and the purpose of that media was only to drive people to retail, to a point of distribution, whether that was a physical store or, more recently, a website.
But now we live in a world where the consumer’s base expectation is that every form of media that is put in front of them by a brand is the distribution channel. It is no longer a callout to go somewhere or to do something after we see the media. The media is the store, and the consumer’s expectation is that they can buy from it. And increasingly, that expectation is being met. We can buy from TikTok, from Facebook, soon from Twitter—every media channel is becoming a channel for commerce.
And so what does that mean for physical stores? Some would say that it negates their value. If everything I touch is a store, then why do I need physical stores? I don’t buy into that. I think that the value of the physical store may even be greater than it was 20 years ago, but for a different reason. And that is that stores have now been proven to be an incredibly great means of acquiring new customers. Bringing them into your brand ecosystem, really galvanizing a relationship with the customer that’s based on more than just a 15-second pre-roll ad on YouTube or a banner ad on Facebook—really bringing them into your brand experience.
What B.C.-based retailers are well positioned to thrive in the new landscape?
Lululemon is legendary from the standpoint of doing everything that we just described. Creating a very powerful organizational culture. Creating a store design and experience that was unique relative to their competitors. Their hiring procedure and process, and the goals of who they wanted to bring into the organization to work for them, again, were best-in-class. And they’ve also done a great job of translating their proposition over to different channels.
The investment on the part of Lululemon recently in Mirror, the technology that allows people to work out as part of a class and get feedback directly from a mirror, is a great way that the brand is trying to translate itself through a different means of communicating with customers.
In the apparel category, as tough as it has been, Aritzia also has a good jumping-off platform for the post-pandemic era.
As people all over the world lose faith in government institutions and desert organized religion, what opportunity do you see for retail brands?
I see the opportunity for brands to lead bigger discussions. Virtually every survey that you look at shows a rapid decline in trust among both Canadians and Americans in terms of their trust in religious institutions, their trust in government, and it has been a tremendously slippery slope all away from about the 1960s to today.
And yet we see brands like Nike that are pioneering some tough conversations among their own consumers and in society at large. Whether it’s about police violence, whether it’s about equality, all of these issues now are being brought to the public by brands—brands that are taking a stand on these things and potentially changing people’s discussions.
I’m not suggesting that every brand needs to become an activist, and I’m certainly not suggesting that every brand should chase causes like passing cars.
But I think there is an opportunity for brands to reflect on their culture, on their own values—what they stand for—and to align with social or environmental causes that fit those values. And in doing so, become a bright light for consumers that are feeling disenfranchised, that are feeling lost and looking for a community of like-minded people. And so in a weird way, brands are becoming a bit like nation-states.