As an investor, adviser, and operator in spearheading tech for almost twenty years, Trevor Sumner is no stranger to tackling disruption and coming out alive. His current company, PERCH, has managed to innovate the in-store experience in a way that truly integrates digital. The omnichannel approach that Trevor and his team implement is the kind that takes consumers’ steps towards, touches of, and interactions with a product and transforms them into content- and data-driven experiences that fuel further discovery – and, of course, purchase. In fact, the resulting sales lifts land anywhere between 30% and 80%, a range that retailers such as Neiman Marcus, Kate Spade, and Estee Lauder are willing to bet on.
For all of the reasons above (and more), we decided to have a chat with Trevor and call upon his knowledge across 3D sensing technology, campaign management tools, and device management to see how magical in-store experiences can be built to surprise and delight customers for big and small brands alike.
Sidney Evans: Thus far, in 2018, retail bankruptcies are starting off the way they ended in 2017 with a battlefield of retailers no longer in business. In your opinion, what is happening in retail? Why do you think some brands were unable to survive this shift? Why do some embrace change and succeed? Give a few examples of brands that have capitalized on the shift and their keys of doing so?
Trevor Sumner: I think this retail apocalypse story is quite a bunch of hooey. There are a lot of bankruptcies and store closures, but there are just as many store openings. But you don’t hear that story, do you?
There are lots of metrics that show that retail is doing very well. There is a steady, expanding yearly growth of over 4% and it has remained the same for the past 10 years. What is actually happening here is that there is a lot of shift and churn within the market, and there are a couple of differences that stand out.
One of them is known as the barbell. At the high and low ends of the market, you see a lot of people doing well, while the middle is getting hollowed out. So, it looks kind of like a barbell. You’re seeing companies that used to rely on the fact that they had a selection of goods that was basically undifferentiated, the department stores that had the same brands as everybody else (that you can find online or at every other store). There’s no longer the convenience factor of shopping for those, you’re no longer the only place to get that brand, or a specific shirt, or have all designers in one place. So people are able to compete just on selection versus online. This gives the advantage to luxury brands, which are doing really well. Warby Parker, Allbirds, and all these digitally-first natives: the brands themselves are doing very well, but they’re doing it by developing relationships directly with consumers.
On the low end of the market, if you look at grocery stores, they are doing extremely well – certainly Amazon buying Whole Foods, which is a pretty big nod to brick and mortar being important to Amazon in the future. Why is that? Part of the reason is that the grocery store is a frequent touchpoint for the consumer. You go to the grocery store on a weekly basis (often even more), so owning that relationship is really critical. You’re seeing Aldi opening another 900 stores, you’re seeing Kroger and other grocery stores being inquisitive, you’re seeing Albertson’s buying Plated. There’s a lot of M&A activity in the grocery space. We’re also seeing a lot in the pharmacy space, whether it’s CVS and Aetna or Walmart partnering with Humana to vertically integrate health services. And, again, the pharmacy is a frequent touchpoint of the consumer, so owning that customer relationship is going to be extremely important.
So, I would say that the retail industry is doing quite well. There are a lot of companies who don’t get it and don’t realize that they have to provide some type of real value to the customer: either enhance convenience or an experience.
If you go into a Burberry or Gucci store, it’s an experience, but it’s not only because it’s a luxury space. Having to go to a store can either feel like a chore for the consumer (if it’s a hassle), or you can actually look forward to it.
For example, the beauty space is doing extremely well because they’ve adopted this mindset. If, for instance you finish your lipstick or nail polish, you never end up thinking, “Oh, my gosh, I don’t want to have to go to Sephora or Ulta.” People actually look forward to that visit because, when you walk into a Sephora store, you get greeted by lots of people who teach you about makeup, teach you about how to use it. With Perch, you can actually walk up to a kiosk and, when you touch a lipstick, it will virtually put that lipstick on your face – thereby helping you explore more colors of lipstick than you ever could before, without ever having to put them directly on your face. Ulta has approximately 28 million people in their loyalty program, and that’s huge!
Another example I like to use is Snkrs. And this is a pretty emblematic of the “retail dying” situation fostered by events such as Foot Locker’s closure of hundreds of stores (must be the “retail apocalypse,” right?). Snkrs. grew 12% YOY last year. So, it’s not that the retail industry is dead, it’s that people are changing. When walking into a Foot Locker, you observe just the same collection of shoes as everywhere else; there is no experience, no joy, no media. It’s not exciting. And it’s not something that you would expect from a sports or athletics store.
This is why Nike changed its vision and adopted the “I don’t want to sell my shoes in boring stores anymore” mindset. Because of this, Nike ended up getting rid of 99% of their distributors, descaling from 30.000 to just 300 partners, and they only want to sell their shoes in places that represent their brand well. As a consequence, Nike is investing in their stores: they bring in media, started a loyalty club (that already has 100 million subscribers), and created a mobile app that lets consumers customize their shoes. And what they’re finding is that people who adopt their app are spending four times as much, and now they (as a brand) get all of that great data from the consumer directly. That’s what it means to be exciting; it’s about logging into the excitement and joy of the shopping experience. A lot of people are just putting products on the shelf, and that’s just not going to work anymore.
SE: Recently, I attended Mobile World Congress in Barcelona and was intrigued by some brands’ major presence with pop-up stores. What are pop-up stores? Why are more and more brands utilizing them to engage with their target markets? And what are the most important factors for brands to consider when utilizing pop-up stores to promote themselves?
TS: One of the reasons that people don’t go to the stores serendipitously is because they can go tomorrow, next week, or the week after and it’s pretty much the same thing. Retailers like Zara, which are kind of fast fashion and turnover, ask you to go to them more often; otherwise, you might not see that coat this season because their season could be as little as two weeks. Part of creating joy in the shopping experience is anticipating that there’s something new and exciting. And that’s what pop-up stores do.
Effectively, a pop-up store is like a short-term store opening that usually lasts a couple of weeks and then disappears. There are two major types of pop-up stores: department stores usually bring specific brands in areas for a limited period of time (sometimes they even rent out the whole store, especially around the holidays) and then you have others that are opening stores within stores. Both of them share the same goal: to create excitement and a sense of urgency that drives consumers into the stores before “it goes away next week.” There is an immense marketing benefit to this strategy, and part of it is to make sure that you have a good relationship with the customer paired with good data, so that you can tell them about it and generate that level of excitement and social media word-of-mouth. If you have that store all year round, then you just don’t have that level of excitement. It’s about creating artificial levels of scarcity to create excitement and it’s working extremely well.
Now, the challenge of the model is that it’s pretty expensive to design a pop-up store only for it to go away after the set time period. Being able to balance the value that it brings from a marketing and scarcity perspective and excitement (whether it be word of mouth or just generally), along with the additional cost of not having a permanent structure that evolves over time, I think it’s a lot of the balance that people are trying to define. And there are a lot of interesting models. There is a company called B8ta that lets people put their products in store for short periods of time and market them, thus keeping everything pretty fresh and refreshed often. But pop-up stores are basically a way to create excitement and scarcity, so that consumers are more likely to come in.
SE: How has omnichannel marketing streamlined shopping habits, with AR and AI giving buyers the opportunity to customize their own experiences without requiring them to adapt to new practices? What are the top three things brands can do when creating these new experiences for customers?
TS: People talk about omnichannel in very general terms, which basically means engaging shoppers across whatever channels they want (digital, mobile, email, or in-store) and making sure that the shopper journey is consistent and effective, and that you transition from one channel to the other pretty seamlessly. This means that shoppers have to be able to buy online and pick up in store, or buy in-store and have it delivered online (from an ordering perspective). But that also means that the shopping experience, media, information that you see, marketing, pricing, all of that is consistent.
What we’re now seeing a lot of is that people are trying to figure out how to bring digital in-store. Traditionally, in retail, the in-store group and the digital group were completely separated; in fact, they were a little bit at odds and even enemies fighting over budget. With online growing at the rate that it is, the in-store departments have felt that in, some ways, they are the enemy. What that has resulted in is those experiences being very siloed. The brands that really understand omnichannel now realize that it’s not wise to break up your company into channels, but rather you must really think about the overall shopper journey across those different channels or in an omnichannel way. This is why we see so much digital being brought in-store.
As an example, I think of augmented reality (AR) as a tool – it can be used both correctly and incorrectly. The key, however, is that it solves real problems. At Sephora, for instance, trying on lipstick turns out to be a big challenge for women. If you have ten different lipsticks, what are you going to do? Put ten different lipsticks on your face? Most people put it on their hands and try to look at it near their face, but it’s a terrible, terrible experience. Using AR to project what makeup looks like on your face is a wonderful way to make exploration more enjoyable, test more colors and combinations, and create a certain level of serendipity.
We’re seeing a lot of AR in solving problems such as wanting to picture what furniture looks like in one’s apartment. And that’s something that’s often very hard to do. Will that really match my kitchen or my drapes or my dining room table? AR helps solve that problem because you can basically project that furniture directly into your living room or your home. The question is how do you make these experiences easy? If you have to download a lot of mobile apps, then it becomes very difficult. If you think about what percentage of consumers have your mobile app when they walk into your store, then it’s probably less than 10% and you, as a brand, have probably spent a lot of money just trying to get the 10%. This is why a lot of these experiences struggle: they only reach a small number of people.
One of the things that we have done at Perch is that as soon as you walk into a store and pick up a product, it naturally logs as digital information without you having to do a mobile app. And that includes product personalization. At Kate Spade, for example, they have this purse called Make It Mine and they let you customize different parts of it and accessorize it as you please, making about 1000 different combinations possible. Trying to configure a physical purse 1000 different ways would be way too onerous. So, when you pick up a purse, it naturally opens up and shows you all the options; you can explore and pick, and find the purse that’s right for you. A lot of this is about figuring out how to improve technology very naturally in the shopper journey and not force people to do something that’s unnatural like download an app, register, verify your email, and only then start using the app – that’s a lot to ask of people. By that time, you may have lost the consumer completely.
The other part of it is that there’s a tremendous amount of branding information that all of these products have invested in. Each of these products, if you think about it, have videos online, how to’s, ratings, and reviews, all of this great information that never makes it into the store. There’s a treasure trove of content designed to help educate, engage, and sway shoppers that never makes it in-store because you can’t detect which products people are interested in. Now, with Perch-like technology, you can provide that right piece of information at the right time to enforce the brand, enforce the product, and help shoppers as they discover and enjoy products.
SE: A recent Forbes article asked whether sales associates are becoming obsolete. In your opinion, are they? How is automation playing a role in the future of the sales associate? And what can brands do now to lean into this shift?
TS: I go back to that barbell. On the low end, there are all kinds of tools that help answer customers’ questions without a sales associate. Just over 80% of people think they know more about the product than sales associates because we are armed with Google, mobile phones, and all of the information online. To the extent that brands can bring that digital information in-store, you’ll need sales associates less and less.
With automatic checkout and some of the Amazon-Go-type functionality, we’ll see a lot less need for human intervention in the shopping process at the low end. And, from a convenience perspective, this is great because it removes a lot of friction, we get our questions answered, and we (as consumers) get what we need.
That said, at the higher end, part of the whole experience is that service aspect: when you go into Sephora, it’s because you’re excited to talk to a makeup artist. So, where automation is going to be really helpful is providing the sales associates access to that treasure trove of information that they can now leverage and provide more information to the customer. They can pull up your profile and say, “Hey, we know you purchased these pants and we just got this shirt in, so here’s how it would look when matched.” There’s going to be a lot more information for sales associate to enhance the shopper experience in-store and even be able to automate the relationship outside. Nowadays, when after leaving the store, I can still maintain a relationship with that sales associate because they may have my personal email, tell me when something’s back in stock, remind me to come back to the store because there’s a special event and they know that I care about Gucci sneakers – whatever it might be. We now have the tools for sales associates to build deeper relationships that are more informed.
And, so, you’re going to see both of those things happen. Again, on the low end of the market, automation will increase convenience and remove the need for sales associates, which is seen as somewhat of a hassle. And, on the high end, empowering super sales associates that provide even better experiences.
Saks Fifth Avenue is working with a company called Sales Floor to do this. You’ll go to Saks Fifth Avenue online and, based upon where you’re shopping, your chat might be answered by the sales associate who’s in your local store. So, even though you’re online and on the web and you think you’re somewhat anonymous, it’s your local sales associate right there online for you. They can say, “Come on in store! We got it if you want to try it on. I also have that great pair of Gucci sneakers that you were interested in 3 months ago.” The question is at what point will that become creepy versus helpful. I’m hoping it’s going to be much more helpful.
SE: What’s next for the retail industry?
TS: I think this is a tremendously interesting time where we are going to see a lot of chaos. We are going to see a lot more store closures and it’s going to freak a lot of people out. There’s going to be a lot of people saddled with debt; ultimately, I think of these people as committing suicide.
The most obvious example that comes to my mind is Toys ‘R’ Us. Everyone is talking about the way the brand is going under. And the only thing I can think is: how can you not create an amazing experience at a toy store? If you can imagine Perch in every aisle of a Toys ‘R’ Us, where you pick up the Frozen doll and Elsa starts singing. Or you pick up the Luke Skywalker figurine and, all of a sudden, lightsabers come out of the digital LCD screens. Or you have video and entertainment in every aisle. If you put a Chuck E Cheese in every Toys ‘R’ Us, so that everybody wants to have their birthday party there. It becomes a place for games, with Lego championships and chess tournaments, and the place where kids go to have fun – and, oh, by the way, you can buy toys. That, to me, was a no-brainer. But, saddled with debt and saddled with (I think) a lack of vision on how to change the store experience, Toys ‘R’ Us (ultimately) declared bankruptcy.
Sadly, we are going to see a lot of that, but brands who adapt experiences are going to be the ones who win. And you’re going to see this in big ways, especially from the malls. The malls are, basically, going to be gutted as retailers with boring experiences lose their square footage. Malls are going to put in bowling alleys, movie theaters, fashion runways, event spaces, and pop-ups. There’s always going to be some programming going up on the mall: some band playing or some educational events such as cooking classes. It will be reimagined as the community center that used to be centered around shopping, but now is centered around experience – and there will be shopping there, too.
I think that the future of retail is experiential. I think the future of retail is about discovering products, with the expectations of the people of the digital age where there are videos, how to’s, reviews, and recommendations. When I go and walk into a Best Buy, why are all of the products on 3×5 cards? That doesn’t make any sense. All of these products have videos and tremendous amounts of media that I should be able to explore. And, so, I think the future of retail is going to be really fascinating, interesting, media-rich, and interactive. It’s going to take some time to get there, and there will be winners and losers, but the people who understand that core experience – that core joy – in going shopping are the ones that are going to be successful.