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1st-Ever Omni Bag Answers — What Does “Store of the Future” Mean?

Omni Talk presents Omni Bag — where Chris Walton answers monthly the questions on people’s minds about the future of omnichannel retailing, like what does the phrase “Store of the Future” mean?

It has been an exciting few weeks at Omni Talk. Some new business ventures have been gaining traction, I have been working closely with Retail DIVE on my first syndicated national article, and I even managed to catch a bit of a cold while traveling this week.

While delayed from my normal post schedule, I am not deterred. Today, I thought I would try out a new type of feature for you guys. Long-form posts and videos have all piqued your interests, so today I would like to continue to push for additional types of content and give you something a little bit different, something I like to call Omni Bag.

Omni Bag is my attempt to chronicle the questions I hear as I travel throughout the country that are on people’s minds. The name really says it all. It is one-part Peter King, zero parts leather (because that would be cruel to animals), and all omni (see the irony there?).

This first post is therefore clearly an experiment. If you hate it, let me know. If you love it, let me know that too. Don’t just let me know – tell everyone you know too by sharing your bitter distaste or your unbridled love vociferously within your networks and by liking and sharing the post, or by subscribing directly to Omni Talk.

If all goes well with this maiden voyage, I plan to make Omni Bag a regular month-end occurrence.

This past week I had the pleasure of speaking on a panel hosted by an exciting startup, Perch. Perch specializes in using technology to merge the digital and physical shopping worlds. Their solutions are truly omnichannel in design, enabling a celebration of the physical, through digital, while shopping. If you are not familiar with their work, I encourage you to check them out in the link above.

I thought it would interest you if I relayed some of the questions I received as a member of the panel as my first Omni Bag post. The event was attended by consumer products companies, retailers, and digital marketing and creative agencies, essentially groups that all have a keen interest in understanding how our future omnichannel retailing world will unfold. The questions posed were incredibly thoughtful.

Here is my rough cut sampling of the session, as well as of individual conversations I had before and after the event, from my travel-logged memory some 24 to 48 hours later:

August Omni Bag – Courtesy of Q&A Panel at Perch

For dramatic effect, assume the panel moderator is your visualization of a super-charismatic and intelligent tech CEO (which is 100% true) and that my voice sounds like Liev Schreiber reading you a bedtime story (which is 100% true only in my own mind).

Question: What is the purpose of the store of the future? And how do you decide what to rollout? What percent of investments make it out of store of the future? What are some examples of successful rollouts from store of the future?

Answer: Truth be told, “Store of the Future” is a terrible term. Absolutely terrible. I don’t know who first coined it, but I would put it right up there with Crystal Pepsi.

In practice, “Store of the Future” is a short-hand reference to the amalgamation of three separate ideas:

  • A retailer’s next iterative innovation on its current business model
  • A retailer’s completely new disruptive and potentially scalable idea built on top of a new business model
  • A retailer’s “concept” initiative, which is akin to a concept car initiative within the auto industry. The idea is to understand what works and what doesn’t before over committing resources to bullet point #1 or #2.

So, when I hear people say, “We need a store of the future initiative,” generally my first inclination is that they haven’t really thought through their intentions quite yet, and likely need some strategic help.

It sounds pedantic, but it really is important for retailers to go through the exercise of what they want to accomplish under each of the three headers mentioned above. How much they invest in or concentrate on each of them depends upon where they are in their product development lifecycle. But every company needs to place bets on how they will grow the business, improve the business, and transform the business. Some modicum of wagering should be placed across all efforts on an ongoing year-over-year basis.

In determining what to rollout from these said bets, there is no real rubric or percentage success rate to expect. It really comes down to having a clear understanding of the experiments, the data involved for understanding success, and the time horizon for evaluation and implementation. If those are well understood upfront, it is a straightforward process to know when, how, and to what degree “store of the future” experiments should roll out. If, over time, none of the experiments pay off in terms of real financial returns, then something is probably flawed within the process of deciding what ideas to try or flawed within how the operations are brought to trial.

For my money, the store of the future, or the next new creation that is different from the retail we know today (i.e. outcome #2 above) will be the bastard love child of a swingers party of Amazon, IKEA, Starbucks, and Bonobos, maybe even with a little love dust from Mailboxes, etc. and Instacart sprinkled in there as well.

The most immediately impactful investments will come from the areas of scan-and-go mobile technology, cloud point-of-sale, location tracking technology, experience retailing, operations automation, and new in-store digital operating hardware and software systems that are decidedly different from the shitty e-commerce browser kiosks you see proliferating and sitting idle in so many stores right now.

Question: Where do store of the future initiatives fail?

Answer: For a more in-depth review of this exact topic, you can see my previous Omni Talk post — An 8 Step Pregnancy Test to Indicate if a Retailer’s R&D is Really R&D — culled from many different points of view and studies.

Generally speaking though, Store of the Future initiatives fail because of 8 key reasons:

  • Strategic Alignment to a Retailer’s Given Business Flywheel and a Shared Understanding of Whether the Initiative is Purposed for Experimentation or for Scale (as also discussed in the first question above)
  • Budgetary Alignment – there needs to be alignment on the “floor” or the minimum amount of money that will be invested each year towards an umbrella of all planned portfolio initiatives. Innovation cannot be successful if funding waxes and wanes one year to the next.
  • Time Horizon Alignment – similarly to the budget floor, there needs to be agreement on how much time initiatives will be given to play out.
  • Governance Procedures – success has many siblings, while failure has many orphans. Hence, there needs to be alignment on exactly how and who will make decisions and when they will be made. The probability of an initiative’s success is inversely correlated with the amount of people who have a “right” to weigh in on a decision.
  • Secrecy – truly disruptive innovation requires making people feel uncomfortable in their day jobs, i.e. good innovation could make current processes, business models, etc. obsolete. So, people not working on innovation projects have perverse incentives to derail them if they can. The more information surrounding innovation projects is thrown around willy-nilly, the higher the likelihood that these duplicitous characters will attempt to set things back. Even if project leaders find ways to thwart these nefarious characters, it still takes up time and unnecessary resources to keep the wolves at bay.
  • Stand-Alone Autonomy – giving people autonomy and the ability to function like founders of small companies enables efforts to move faster. Corporate bureaucracy, on the flip side, is confusing and slows things down.
  • Incentives – hazard pay if initiatives fail and incentive rewards if initiatives do well are important. People leading innovation initiatives take on big personal risk to go dark within organizations, so they need to be compensated for this risk.
  • Andon Cord Procedures – a culture needs to be created around innovation teams that enables them to determine on their own accords if work needs to be stopped. If, instead, there is the impression that failed projects are always failures, then bad outcomes will ensue because teams and resources will over commit to trying to see things through for fear of repercussions rather than standing up confidently and urging that it is time to scrap things and start over.

Question: We’ve struggled with ROI focused campaigns and data with pilots and flagship deployments. Is omnichannel changing the alignment between digital (metrics driven) marketing and in-store (brand driven) marketing?

Answer: It is, but it is very slow and messy. It is particularly slow at legacy bricks-and-mortar retailers because they are so accustomed to riding their retail bike the same way. But now the handle bars have been reversed-engineered, and people are not sure what to make of it. E-commerce pure plays have an easier time making the context shift, but they too only know their one way of thinking.

The right data, attribution, and measurement are required. No one has cracked the code. The good news though is that the path to cracking the code is becoming more visible – the answer lies in developing complete omnichannel experiences from start to end, where data is constantly thought of as the center of the new flywheel of retail and the salesfloor of a physical store is thought of like an e-commerce browser.

I urge everyone, as they put forward new solutions or ideas, to be resolute in understanding how data will provide measurement and insight end-to-end in their product development. Otherwise, the designed solutions will fall short of their ultimate requirements.

Question: Which retailers do you think are forward-looking and making the right investments?

Answer: There are a few I particularly admire right now. I admire Amazon, of course, because they think about retail like product managers, like Steve Jobs would.

Of the legacy players, I admire Walmart and everything they are doing since Marc Lore came onboard. I find their recent planned partnership with Affirm even more interesting than everything we are currently reading in the newspapers about Whole Foods. Paying for household commodities on installment plans could be far more beneficial to average American household incomes than discounts on the ingredients for avocado toast at Whole Foods. I also admire Nordstom for investing in technology and working to go private to stay away from the vagaries and short-sightedness of Wall Street.

I would also give e-commerce players a leg up in the race too, simply because they don’t have the years and years of technical, architectural, operational, and cultural debt that the legacy players have. I find companies like Wayfair quite intriguing. They have smart leadership, they have carved out a nice niche for themselves, and they also have a strong stock price, which affords them the ability to think about omnichannel retailing differently and fresh from the ground up.

Question: Is “the store of the future” an anachronism? How far into the future are most retailers and brands really looking?

Answer: As I mentioned before, the term is easily misinterpreted and therefore fraught with potential pitfalls.

Most retailers are not thinking long-term about the variants on the term. If they were, we would hear them articulate all three layers of the Store of the Future equation much more frequently and deliberately within their press releases and earnings calls.

Wall-street is complicit in this short-sightedness too and so are boards. Wall-street is focused on one quarter vs. the next, while boards are generally comprised of specifically experienced individuals, who are so accustomed to seeing the world work a certain way, that I am not sure they really understand the magnitude of the potential of the changes that are looming, nor am I sure they really care about anything beyond the short-term return on the share price.

The solutions that retailers need now are not the solutions that worked in the past. Nor are the leaders that were successful before likely going to be the same leaders that will be successful in the future. Amazon has the right perspective – thinking in long-term horizons and thinking about retail like product managers, and not as merchants.

Question: Who is leading the horse here? Is it customers or companies?

Answer: It is always the customer. ALWAYS. The nuisance that is more palpable now is that technology has brought to light that the retail customer just does not always know what he or she wants. That is why thinking like a Product Manager is so important. It is important to understand the unmet needs in the market that people cannot articulate.

Places like Apple, Amazon, etc. are great at this. Their product development efforts are always led by the customer, even if research never would have led Apple to create the iPhone or iPad. These companies focus on finding the unmet needs of the consumer, of finding experiences or products that consumers “love.”

Smartly, they realize that the business economics surrounding an idea can come later. Love is the hardest thing to earn – profit can wait, like Ethan Embry waited for Jennifer Love Hewitt.

So, most importantly, like artists, these companies create. They create on behalf of the articulated and unarticulated desires of their consumers. They try things. They don’t always know what a trial will bring, but they know it will bring feedback.

While it may sometimes feel like these companies are leading the customer, the customer is still really the muse.

As Aaron Sorkin so beautifully penned in the movie Steve Jobs — “Artists create. Hacks ask for a show of hands.”

Question: To ask an age-old question, what do shoppers want? Have their wants changed? Is technology one of the things they want?

I don’t think what shoppers want has changed. I just think the expectations surrounding their wants have changed. There is a great old movie, Contact, with Jodie Foster and Matthew McConaughey, back when I thought Matthew was cool, that touches on this. McConaughey’s character believes that technology has never really made our lives better. Technology has just put new demands on us.

Regardless of where you come down on the technology argument (i.e. technology: good or bad for civilization?), the idea that technology could be forcing us into a never-ending cycle of reset expectations is worth contemplating further.

We can almost 100% agree that technology simplifies our lives and makes us more productive. Technology enables us to accomplish more with our time, but there is a rub. Over time the freedom of this productivity leads to an expectation that we should be able to accomplish and do more with our new free time as well, so we reinvest this time and ultimately get busy again. We then thirst for more technology to free us up to do more, and the cycle begins again. It is neverending, like this well-known Ace of Base song:

The impact this vicious cycle has on consumers is that they begin to consume or to shop with an “in the background” desire to do it more efficiently than ever before and to do it in a way that gives more economy to the value of their time. This efficiency and value can come from anywhere too – it isn’t just one-stop shopping convenience or 1-hr delivery. It could be what they do with their kids, with their spouses, how they validate their purchases with confidence, or even how they let the world know who they are via social media.

So, as marketers and retailers, this constant search for productive efficiency means the game has changed. The marketing channel and consumer touch points are now omni, ever-present, and perpetually in motion all the time.

Experiences, therefore, need to be designed from all angles for congruence, from end-to-end. The three most important ingredients to success are:

#1 The digital hook

#2 The digital activation of that hook – usually either via the landing page or Product Detail Page, replete with content

#3 An enticing at shelf retail presence that is tactile, memorable, informative, and shareable and that relates back entirely to #1 and #2.

Question: Is part of the issue with innovation initiatives that innovation is a means to an end, but it is treated like an end unto itself? Most people agree not to use technology for technology’s sake, but is that exactly what’s happening now?

Answer: 100% that is an issue right now. Innovation should never be a goal. It should be a step or a means to an end. It should be a thoughtful endeavor that helps you accomplish a determined set of objectives that are aligned to how a company believes it should make money.

When people invest in technology for technologies sake you can see it palpably. My favorite example is an e-commerce kiosk in a store. There is a reason no one ever sees anyone using these kiosks in store — because they are fucking stupid.

If I wanted an e-commerce experience I would rather sit on my couch at home and shop in between watching and crying along to This is Us than go to a store for it. This same rationale is also why I am not big fan of VR inside of a store too. If I am required to put the headset on in the store, couldn’t I also do that at home?

If instead we start to think of technology more as a material that permeates through the entire omnichannel shopping experience and not as layers bolted on, like kiosks, then we start to have something. If we start to think about digital interfaces from the perspective of what a consumer needs while immersed inside a “physical” experience, true innovation will sprout.

The holy grail lies in the answer to one specific question, “why do customers want to come to a physical place to shop?” Technology or “innovation” should never be the reason. Technology or innovation should be woven into the fabric of the answer to the question in such a way that the consumer doesn’t even realize it is there.

Question: We have a lot of agencies and partners in the crowd.  Where do you think they should be focusing to grow their business?

Answer: To me, it is all about end-to-end experience marketing. I would be thinking about the omnichannel end-to-end experience differently and partnering with people who understand technology as a material throughout the journey and who also understand the “through line” of implementation from Strategy through Concept and actual Operations.

None of this can be done in isolation either. It needs to be interconnected. Multi-disciplinary expertise and partnerships need to be formed. Great at shelf experiences can be killed by poor tech experiences. Great digital experiences can be rendered impotent by packaging that doesn’t move efficiently through a supply or by in store labor operations and incentives that are not congruent with the goals of a given campaign (note: that is my second use of the word “congruent.” How obtuse!).

Question: Seeing new models develop including the retail store as real estate. One example is Story. Another is Bulletin.

Answer: Love these. They are onto something. They bring back the “why” of a physical place, and they are fountains of potential content. They provide the potential platform for retail that is what I call “surround-sound synchronous.”

Question: I’m a new CEO in the retail technology space (Trevor Sumner). What one piece of advice would you give me?

Answer: I would tell you a combination of things: 1) Know what your customer segments are 2) Understand the business opportunity of each of these segments 3) Know if you are selling a pain reliever or something that helps you feel better 4) Know why what you sell is better than anything else in the world.

Question: I see so much opportunity. Where should I focus?

I would focus on two things.

First, I would make sure you have a firm articulation of the value proposition of the product you are selling.

Second, I would clearly define your customer targets, and then maintain the flexibility to scale up or scale down as the returns on your efforts come back.

I don’t believe on focusing on any one thing. Diversification in my mind is always a good strategy, but it should be done ultimately within the flywheel of how you, as a company, will make money with your Product. Success in one effort should improve the probability of success in other efforts. Efforts should never be disparate.

Be careful out there,

Chris

P.S. I just finished Love in the Time of Cholera. Without a doubt, it is now the best book I have ever read. If you are in the mood for beautiful prose that explains the meaning of love from yound adulthood all the way through old age, it is the book for you. Great weekend holiday reading.

P.P.S From the startup hustle travel notes of the week category . . .

  • Seat Assignments — Is it Murphy’s Law that I always get seated next to the guy dropping throat lozenges like the Guilty Remnant smoking cigarettes in The Leftovers?
  • La Guardia – how was I possibly confused that Gate C13 was not in Terminal C? Seems logical that Terminal B had gate C13. Couldn’t have used a mixed alpha/numeric system, huh? It was probably my fault though, even though six other people on the inter-terminal shuttle made the same mistake.
  • United (this one could hit close to home) – what happened? As a kid, I remember you being the classy, business preferred airline. Everything about my experience — plane cleanliness, check-in, etc. – just called to mind one word: apathy.

P.P.PS. The below is one of my favorite photos of all time. It showcases three generations in my family — my grandfather, my son, and me. The old SOB in the photo turns 90-years-old this month, so we are having a big family reunion this weekend to celebrate. So happy birthday to him, as Omni Talk takes a bit of a respite to spend time with the family and to recharge.

We will return soon with a video look at Amazon Pantry and one of its competitors — Instacart.

Stay tuned and subscribe so you don’t miss out!

Grandfather

Chris Walton View All

Chris Walton is an accomplished Senior Executive with nearly 20 years of success within the retail and retail technology industries. He is well-versed in merchandising, store operations, inventory management, product design, forecasting, e-commerce, pricing and promotions, and tech product development.

Chris was most recently a Vice President with Target, where he led the retailer’s Store of the Future project and also ran the Target’s home furnishing division for e-commerce. He previously worked for GAP, Inc., as a Distribution Analyst and Manager.

Chris holds a BA in Economics and History from Stanford University, and a MBA from Harvard Business School.

He likes to dress as Darth Vader for Halloween, and his wife also frequently asks him to ask Alexa, "to turn off the music."

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