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Roundtable

Roundtable: Pandemic-Inspired Store Designs

Walmart announced new store designs this week. Fast Company said "Walmart’s new store design proves browsing is dead. Get in and get out." Rob and Peter dig into a few of these new designs, and the takeaways for brands are different than you might think. 

TRANSCRIPT

 

Peter:

Peter Crosby, coming to you from the digital shelf Institute, Cape Cod office as always these days. And I believe Rob you're back in the Berkshires. Yeah. Fled the coast of Maine?

Rob:

It was getting cold and windy. Couldn't take it anymore.

Peter:

Uh, well dive in right in today, we're gonna talk about pandemic influenced store redesigns. Now, earlier this year in the midst of things, I was lucky enough to talk to Jay Walker Smith at Kantar. Amazing speaker, chief knowledge officer there about the role of brands and retailers in signaling a recovery that they have filled that role in prior recessions. And that signaling this time is going to be about signaling safety first and foremost. So making shoppers know that you'll be safe if, and when you choose to come back in again. But I think we all knew that that shift in design and experience wouldn't happen overnight. That takes thought, and trial. Um, but we are now starting to see some of that thinking coming to life. And I thought it'd be fun to dig into some of these and then what that might mean to brand manufacturers. So on September 30th, Walmart announced their new pandemic era store design. That's my words, not theirs. Um, but in the headlining words of Mark Wilson at fast company, Walmart's new store design proves browsing is dead, get in and get out. Don't stick around. It's great, but also some truth to that. Um, but I actually, as we dig into this and we'll talk through some of that design, I thought the sort of underneath the headlines of, you know, people, people don't want to stick around is part of the way that that's enabled. And part of the way that these experiences are still made is the integration of digital into that store design more than ever before, which is super exciting.

Peter:

Now at glance, when you look at things, the new Walmart stores may not really look that different. You know, they're still gonna have close aisles and it'll still be a warehouse, but what changes is how you navigate that space. So they're rearranging a lot of the store consolidating categories to put like electronic toys, baby products in their own sections, rather than sort of being scattered around. And they're just loading the store with so much clear signage. And the signage matches up with the categories and icons, you find inside the Walmart app. So if you go in and it says like cheese or seafood, those big signs will also have the icon from the multilingual apps so that anyone coming in we'll be able to quickly identify and translate and know where they want to go in the store. Those sort, what Janey Whiteside, the EVP and chief customer officer at Walmart called navigational efficiencies. You know, she acknowledged a quote in the article from a fast company. People walk around the store with a phone in their hand, looking down, looking up, and we wanted to integrate those things so that when they look at their phone, they can look up at exactly the same thing in the store. So it will actually direct customers faster to where they want to go. I just think this is clearly what, um, what retailers particularly big box stores need to be doing right now.

Rob:

Yeah. I mean, kudos to Walmart for finally really integrating online and offline in an experience. And it took redesigning the store to do it. And, uh, I mean, I can't wait to go into one of these things myself and, and, and experience it. Um, I think of, you know, the Amazon versions of this, like the four star store, four star store is, is not, it's not great. I don't know what the hell is even in there. Why does this thing even exist? What, like, you don't know what's going to be in there, so you can't really find anything you're looking for. It's like going into one of those, um, you know, fancy Brookstone stores where you're like, you know, you're just looking for a gift for somebody maybe, you know, maybe, but yeah, so, so kudos to Walmart for this. Um, I, this is what's needed here. This is basically Walmart saying the customer journey in the digital shelf era is an online, offline mix. It's omni-channel by default. So let's not pretend otherwise let's make sure that the app experience and the website experience and the store experience all work together to get the customer what they want. The other thing that I that's kind of buried in here, which is pretty interesting is companies like Walmart have spent a lot of time and store design and I'll design and impulse. And that's why, you know, to your point on, or maybe electronics products being in a few different places in the store, part of that is to drive you to have to walk from a to B and pass by other things and maybe maybe buy on impulse, other things, part of it's because, you know, you're not really sure where to look to begin with for certain types of products that they put a product, a few different places, you're more likely to find it part, you know, there's like a lot of reasons for the way that the stores have broken categories into multiple different locations.

Rob:

And, you know, Walmart is making a bold stance here by saying, let's, let's just simplify. This is actually maybe not the best customer experience in this age where they've got their phone, they can use their phone to find products within the store. Um, may you know, maybe we're going to downplay pulse or treat impulse a little bit differently than we have previously. This is not, this is not about a browse. This is about getting out. I mean, I, I think it's awesome. I think of, uh, if I, if I may let me just make a comparison to a delay, another delightful store experience that really does a good job with journey, which is stew Leonard's grocery store chain in Connecticut. Have you ever been in one of the stew Leonard's? No. All right. So stew Leonard's as a kid was the greatest place to go in the universe because the first thing that Leonard tasks on the entrance is a soft serve ice cream store. And parents love this, give their kids, the ice cream, and the kids shuts up on their kids in the groceries,

Peter:

The ice cream that was dripped all over those stores. They must have had moppers the entire time.

Rob:

Oh man. Yeah, but there was the delight of it, right? It was a super cute, there was like a petting zoo out on the outside. I mean, it was, it was this place that kids love to go. So parents love to bring their kids there and it was set up like an Ikea is today where you go in and you have to go through this winding maze of the store and you basically have to go through the entire store before you get to check out. And, and like, that's a, that's another type of consumer experience where it was very deliberately designed. And it's, it's a very different perspective and very different opinion on what shopping should be. And I loved it. I think a lot of people are very loyal to that chain. It's a small chain. Um, what I love about the Walmart view here is they, they really are starting from scratch. They're saying, let's think about the customer journey. Let's be intentional about the design of the store. Let's not just have this store be the same damn store that people have been walking into regardless of category like linens and things, bed bath, and beyond the Home Depot Walmart. Kroger's like, you know, at some level they follow a very similar formula. Um, let's, let's do this differently. So hats, hats off to them. Can't wait to try it.

Peter:

Well. And it literally can't be that anymore. If in fact, we're going to start to signal safety and therefore draw people back into stores, you have to give them a reason. And one reason is I know I can get in and get out. So if I'm concerned about my health, um, I know I'll know where to find things. I won't have to spend time wandering around. And, and then over time as people get more comfortable, then, um, Walmart will still also have areas to experience products. They're going to have these special places called beacons and that'll, you can test strollers and gadgets probably won't be the old, like here have some cheese, you know, I think that's going to be a little tough during the pandemic, but actually testing sort of items that can then be sterilized afterwards. You know, it's not as experiential as, you know, an Apple store or something like that. But I think those things are going to get challenging for a little while, while this thing works.

Rob:

Yeah. So I'm gonna, I, I've got two things to say, first is the failure mode for Walmart here is that with a new store design where they're not to start off with, they don't have as deep an understanding of the customer flow through the store. I mean, they're making a lot of reason, reason guesses, because it hasn't been tested in the market. You know, it's like the old, uh, the old German general saying from world war II, no battle plan survives contact with the enemy. The enemy is the customer now. So, uh, so once they get this thing live, it's very likely that the profitability per square foot is going to be lower than a traditional Walmart. And so the failure mode here is that they look at this at the C suite and they say, this was an expensive boondoggle. Let's cut it. But you know that, but instead if they treat it more, more like Amazon treats these things as an experiment experience where they have to iterate on it and they just keep at it. And they say like, I know I can get the profitability per square foot better and better and better and better and better. And they don't give up on it. Then, you know, then they could avoid the failure mode. But the failure mode is one that we talk a lot about for the digital shelf. The economics, when you do something new, are not going to look like the economics of the old way of doing things. And if you, if you, you know, make, find yourself making decisions based on comparables like that, you will give up before you find success.

Peter:

Yeah. I do know, you know, and I know this is true in grocery. I'm not sure whether it's true at Walmart sort of writ large, but in this pandemic time you have seen basket size be larger. So there is the opportunity maybe to, by bringing more people into the store, feeling more safe that maybe there'll be taking more home with them. But you know, like you said, you're just going to have to see how that

Rob:

Just going to have to see how it plays out, you know, and then, and then change from there. And then this, this, the, the, so the second point I wanna make is about your signaling. And I don't, re signaling is really interesting. So everyone has gone to an airport and has been through TSA security and the Israelis look at the American TSA security system. And they think it's a joke, right? And they write about it. They write about it all the time. There's a lot of what we do in security. That's just silly. It doesn't make any sense. The shoe thing is stupid. It's overreacting to one thing and so on and so forth. Um, and a lot of those policies like the no liquids, the shoes, they don't exist because they make you safer. They exist because the news stories got everyone freaked out. So by having a policy that says, we have to take the shoes off, it makes people feel more secure. And similarly in this COBIT era, you know, earlier in COVID, I think some places are still doing this, where they take the alcohol wipe and they wipe down the belt where you're putting your groceries on the belt between customers. Like that's, that's not going to prevent the spread of COVID. You know what I mean? Like that, that is not a useful,

Peter:

That's a, that's a leftover from the early days where it seemed that it was more worrying on surfaces than an aerosol, but we now know, um, that that's not true.

Rob:

Yeah. But people are still, we're still wiping life and everything down. Right. So there's, there's a lot of theater that goes into that goes into this. And I think, I think that stuff will matter beyond the vaccine for a while for some people. I mean, people's anxiety levels on, on, on this are quite high. And, uh, so yeah, so I think that there is, there is a question Jay Walker Smith calls us out. There is a question on what's the theater that you're going to have to have on a go forward basis, um, in retail to get people to come back as fast as possible and keep coming back and so forth, so on and so forth. So I think there is a really interesting, interesting, uh, uh, addition to the redesigning of the experience that, that, you know, I think it's probably be more durable than just coven.

Peter:

Yeah. I mean, Target has added more front of store team members. They're disinfecting cards. They're providing master shoppers, encouraging social distancing. Target employees have completed more than 400,000 hours of safety training this year. Like that's a, that's an enormous investment. You know, they've been renovating their stores for awhile since 2017, they've spent $7 billion to make it more browsable, but, uh, create those moments of serendipity. But now that's, that's made more tough. So a lot of their investment has now become in, you know, buy online pickup in store curbside pickup expanded by 734% earlier this year. And so Target has made those changes to adapt to that. It doubled the staff doing that stuff. Um, they say that more than 90% of their digital orders are fulfilled by store teams. So that, just, that, that makes it more of a I'm coming to you to pick up what I asked for. I'm not going to be spending a lot of time wandering through your store looking at

Rob:

Yeah. And of course, Target's acquisition of Shipt is looking pretty smart too with ship now providing the same day delivery for bed bath and beyond and bye bye baby. And, um, yeah, I mean, target, Target's doing a lot of good things here. I think, I think it's worth tying this back to you brand manufacturer strategy. And what do these new storefronts mean in store designs? My view on this is, you know, the same train I've been riding for quite a while, which is that Walmart and Target, as innovative as they are, don't know the solution that's going to work for the future. Everyone's experimenting here every week. Everyone's learning together and manufacturers that come to the table with ideas and with plans find receptive audiences, even for the world's largest retailers that maybe traditionally have been more difficult to work with. You know, manufacturers that know Walmart from 2005 and how Walmart got Walmart's way in 2005, our finding that Walmart in 2020 is open to new ideas from any, any angle in order to, in order to grow and succeed and deliver a better customer experience. So, you know, one of the, one of the great examples that I like, I like talking about because it's, it's so public are the Coca Cola experiments with Amazon and with Kroger now, Coca Cola ran that experiment with, uh, with Amazon where Amazon has these Amazon on college campuses. And as a student is going to pick up his or her packages in the locker, Amazon will pop up a question, Hey, do you want an ice cold? Coca-Cola waiting for you in your locker. And if the answer is yes, then a Coke employee gets a code. That's a temporary code to open the locker and put a Coke in there and close the locker so that when the student arrives that Coke will have been in the locker, you know, 30 seconds is ice cold just came out of the cooler and can enjoy it.

Rob:

And it just adds impulse to it. With Kroger, they did something similar for clicking collect you're on your way to pick up your groceries. Boom. You know, Hey, do you want a Coke waiting for you at the, at the pickup? Right? And, and so, and those were ideas that were brought to the retailers. They said, let's try this thing. You know, we'll, we've got money to spend on it. We'll spend money on an employee sitting on a college campus on top of a cooler, waiting for the cleaning for the button to do for the delivery, just to see if it works, you know? And so I look at these new store layouts in particular, Walmart's where they're so intentionally blending the online and the offline. There's a lot of room in there for creative thinkers to come to the table with ideas for Walmart and say, let's, let's do, let's try something together. Let's figure out something that will be great for the customer. I've got this idea.

Peter:

And yeah, one of the, one of the, one of the most powerful things there, one is content because as they integrate, they, I mean, the, the executive from Walmart said it, people are looking down at their phones, looking at their phones, like what shows up about the product that they're searching for on that app, uh, will have an influence on whether that sale happens or not both in store and off. And also, I think that, you know, one of our main tenants of winning on the digital shelf, uh, I swear to God, it's on our website to be your customer's best partner. And so the, the secret weapon, particularly as more and more brands go, uh, go direct is data. The things that brands are starting to learn from their consumers through these new direct experiences can be immediately turned around and wielded to influence how they show up in both e-commerce and in store environments at retailers.

Peter:

And so I encourage brands to make sure they have the digital, the data capabilities to be able to take those lessons. And then the connection with their, um, with their merchant teams, to the connection, to their, to their teams that are about our channel focused teams to turn that into action with each of their accounts you're here. So I think there's opportunities across categories to do this. It's not just, you know, the targets and the Walmarts of the world Levi's has opened, uh, a new to 2,650 square foot store, uh, in North America, uh, with their new next gen experience. And they've already tested it, uh, in Shanghai. And they're bringing that to life here. And the interesting thing here is, you know, apparel is just different. People need to try things on them, but what Levi's is doing in this next gen thing is they are trying to maximize the personalization feel of that experience so that, um, so they're having personal shopping appointments. They're having a store and curbside pickups. They're having line queuing digital tools. They're having contactless returns, Katie checker, corn at Vogue business wrote about this, a great article, you know, talking and talking about their ability to use customer local data, to set the inventory assortment at each store, a tailoring service, larger fitting rooms, digital in store tools. And it's all about customization fit and style guidance. It seems super smart to me.

Rob:

Yeah. I think, I think it's really smart. I mean, uh, personalization and customization is a way that a brand can compete in a world of Amazon, but you want to not be a commodity. And Levi's is basically offering an experience that will not be a commodity experience. Converse has done this previously. You know, the converse has those stores in Manhattan, for example, where you can customize your kicks and make them look awesome. And, um, it's a strategy that works at Britt. It builds loyalty to the brand. If a Levi's, I think that experience for Chinese buyers and experience for American buyers need to be different. So, you know, there's risks in simply transplanting an experiment over there. Um, like the markets are so different. Consumer expectations are so different and experience and service levels so different. So, you know, I think there's work to, to get that right.

Rob:

Um, the other, the other thing too, that that's worth calling out is on the data angle here. Uh, Nike bought a company called select C E L E C T. That was a tech company in Boston that did exactly the type of data analytics that, that you're referring to here, which is if you've got a night, if you've got like a Levi's in Manhattan, and then you've got a Levi's and Kansas city, and you've got to Levi's in San Francisco and you got to Levi's in Chicago, those are four distinct cities with distinct personalities and the shopping habits are going to be different and what you might have on in stock and the experience in each of those cities might be different. And the question is different in what way, and how can you use data to locally optimize each of those experiences while still having them be consistent with each other and consistent with Levi's brand. So, that sort of that data plays becoming part of the zeitgeists, you know, Victoria secret spends a lot of money and it has really great cut public case studies I'm working with select before select was acquired. And so there's, you know, there's, there's places that have done work here. Uh, I'm excited to see what Levi's is able to do, with this new generation of technology and approach and customization. I think there's, I think there's a lot to like about it.

Peter:

Well, and I think, uh, whether Katie wrote about this in the business, but she talks about this, um, these efforts on the part of Levi's and others to build up the direct retail business as wholesale becomes a less reliable and discount driven channel. I think that's what we're seeing is that for w for all, for all of the reasons that are happening right now, the reliance on wholesale for your business as a manufacturer, you just have to be constantly relooking at that. I mean, whether you're being disrupted by the fact that Amazon can even take stuff off of their, their docks into inventory at this time, and ups telling, um, telling brands is as Bob LAN talked about on our webinar, the other day ups has said to them, well, I know you're shipping 1700 strollers a day, but I can only take 900. So good luck as we're heading into the holiday season, getting more and more control over your own destiny is going to be the watchword for brands over the next several years. And it's time to start.

Rob:

Yup, absolutely. And I will echo what you said in there, which is, um, you can't rely on wholesale, but, but also these direct to consumer brand building experiences bolster your wholesale. If you're, Levi's, you've got to continue to differentiate in denim, right. And, and, and in style in general. And so how do you, how do you do that effectively? And you could imagine that somebody goes into one of these Levi's customization stores and has a great experience, and the next time they're shopping for jeans or whatever, if they happen to be in, let's say Macy's, you know, pick a store that Levi's sells to. And, um, and there's Levi's, and there's maybe other brands of jeans there. They're more likely to buy the Levi's, even if Levi's is more expensive, because they've built some brand loyalty from the previous experience, right? So there's a strategy here where the direct to consumer experiences really actually support your wholesale experiences. You know, we've, we've told the story on the podcast a couple of times about McCormick launching old Bay, hot sauce, direct to consumer on their website, selling out almost immediately using that in order to basically get on every shelf in America with a product, um, as like a negotiating tactic, uh, you know, these D to C experiences themselves can make wholesale more profitable for you and more effective for you and differentiate your brand versus people who aren't doing as good, a job building brand and direct consumer relationship.

Peter:

Yeah, Hilding Anderson in the article and vote business, uh, is the head of retail strategy at publicists in North America. She said, uh, brands need to have a much more robust, digital and direct relationship with consumers, because you can understand your customers better as we've been saying. But you said, it goes on to say, the profitability is also better, and you need that profitability to make a great product. And at the same time you were talking about cost structures needing to be rethought because of this McKinsey said in a recent report, retailers may find that they need to deliver 20 to 30% improvement in store productivity to compensate for the channel shift away from physical stores to achieve this. They will need to relentlessly simplify store operations and rebalance the allocation of store costs to support the increasing volume of in store omni-channel activities. So, I mean, the, the, the, the roadmap is there. The opportunity is there. And, and excitingly enough, I think, particularly in apparel, the drive towards increased personalization, tailoring something that makes it worth it to pay a premium. And also frankly from a safety position, kind of makes it worth it for me to be in the store as long as I'm, no, there's not going to be 400 people there, but I've made an appointment to come in and do this. And I feel safe. It's, it's where opportunity is gonna, is gonna come from

Rob:

Here here. And, uh, know another train that I'll ride is. I mean, you said that it's more profitable to go direct to consumers. Um, sometimes it's less profitable to go direct to the consumer. It just depends on the category. And there's D there's different ways to make that money up and CA in Canada, like in Levi's, for example, right now retail space might be a lot cheaper given all the closings and, you know, coven and all this sort of stuff. So maybe they can get some great leases out there, but it's expensive to have store space and it's expensive to maintain it and have him hire employees that manage it and, you know, and so on and so forth. Right. And so it's in a lot of cases, these experiences are going to be less profitable on a unit basis. If you include all of the costs associated with it, then if you're simply selling a ton of jeans to Macy's who then sells them for you. Right. So I don't know it, the, the, the, the margin is not the reason to do it always the reason to do it is as part of the overall brand experience and overall strategy. And I like it, I'm a big believer. Every single brand out there needs to have a customer relationship that's direct, or they're just going to be commodity, right. And it's going to be raced to the bottom against private-label against upstarts. And that's no place to be the way you got to build the brand is direct these days.

Peter:

And that's why we, uh, you know, one of the places that, uh, at the DSI Executive Forum we're spending our investigation time is on this topic of what's the new PNL in for brand manufacturers to, to sort of work their way through these omni-channel investments that they're going to need to make. And, um, I think we're going to have some stuff on that, uh, in this quarter early next, and I can't wait to bring it cause I think it's going to be helpful for the entire industry. Rob, that is it for today. We've got a whole series. As I said, coming up on digital-first omnichannel strategy. It begins October 29th at 1:00 PM with a conversation with Chris Parsons, President of Americas at the Mayborn Group, he's going to outline the moves. They have been taking to speed up their Omnichannel strategy with learnings from the traditional retail team and the digital teams inspiring each other. It's a fascinating approach. Can't wait to have that conversation, Rob and I will both be on that to get an invite, make sure you're registered @digitalshelfinstitute.org through the "become a member button" or email me directly if you want it, Peter, at digital shelf institute.org, and I'll make sure you get an invite. In the meantime, thanks for being part of our community.