At the beginning of 2019, 16,000 retailers from 3,500 brands gathered in New York City for the the National Retail Federation’s annual Big Show. Innovation Leader traveled to the conference to find out, “Can the retail industry stay relevant with today’s consumers?”

Listen to the full episode or read the transcript below. You can listen to past episodes of Innovation Answered on StitcherSpotifyApple Podcast, and our website. Special thanks to our friends at Techstars for sponsoring this episode.

Additional Resources:

[THEME MUSIC]

Joe Pine: The problem is you’re competing with the Amazons and the Walmarts of the World.

Kambiz Hemati: I’d like the store not to be about the hard sell, but more about the soft power of our brand.

Nicole Leinbach Reyhle: Retail of the future is going to consist of commerce everywhere.

Kaitlin Milliken: Hey, you’re listening to Innovation Answered, the podcast for corporate innovators. In each episode, we ask a central question about the things that make change hard at large companies. Then, we get answers from experts about how businesses can overcome these challenges and make an impact. I’m Kaitlin Milliken from Innovation Leader.

Today’s big question: Can the retail industry stay relevant with today’s consumers?

Amazon and other online retailers have shifted shopper expectations in the past decade. Now, fewer people are coming to brick and mortar stores. Instead, customers expect to buy from multiple channels, using their computers [LAPTOP KEYBOARD CLICKING], mobile devices [PHONE KEYBOARD CLICKING], and even their voice.

Amazon Alexa: You have one item in your Amazon cart. And one item in your Prime Now cart.

Joe Pine, author of The Experience Economy.

Kaitlin Milliken: To top it all of, consumers expect their packages in two days or less, without a shipping fee. So anything you need can be ordered from your couch. That creates a challenge for brick-and-mortar retail.

Joe Pine

Joe Pine, author of The Experience Economy.

Joe Pine: The problem is you’re competing against the Amazons and the Walmarts of the world, and it’s incredibly difficult to do that over time. And if you just look at the statistics of the growth of internet based retail, you know, in 20 years or so we’re gonna hit to where its 50 percent of retail is that way, if you continue down a straight line.

Kaitlin Milliken: That was Joseph Pine. joe is the co-founder of the consultancy strategic horizons. He also wrote the book The Experience Economy.

According to Joe, stores fall into two categories. The first, time well saved, encapsulates utilitarian shopping. That’s when you go to the store on a mission and cross items off your list. The second, time well spent, provides entertainment and a memorable experience worth repeating.

Joe Pine: Companies need to really think about which part of that divide do you want to be on. It’s going to be increasingly difficult to compete as a commodity when providing time well saved without giving people a reason to come into your store beyond the product itself. And that is, the experience that they get in there, that they come to value the time that they spend in the place and view that as time well spent.

Kaitlin Milliken: So stores want to create experiences to stay relevant with consumers. That could mean hosting a speaker series, providing excellent customer service, or hiring a DJ to play on busy shopping days.

[POP SONG PLAYS]

So how are physical stores evolving?

The Innovation Stage at the National Retail Federation’s Big Show. (Photo courtesy of the National Retail Federation.)

To find out how brands are keeping up with changing demands, I went to New York for the National Retail Federation’s Big Show. Held annually, an estimated 16,000 retailers gathered under the Javits Center’s glass roof in January of 2019. Attendees talked about how their companies were stepping into the future: from cashier-less, grab and go shopping, to creating theme-based concept stores.

The Innovation Stage at the National Retail Federation

The Innovation Stage at the National Retail Federation’s Big Show. (Photo courtesy of the National Retail Federation.)

At the even, I grabbed a table on the conference floor with Kambiz Hemati, Footlocker’s Vice President of Global Retail Design. We’ll be back with Kambiz after this break.

[ADVERTISING JINGLE]

So you’re listening to this podcast on retail, and you love it, and you rate it, and you compliment me, and you subscribe. But you still want to know, “What other trends are shaping corporate innovation?” Well, if you head over to innovationleader.com, you can find more insights from industry leaders. We interview folks from brands like lulu-lemon, the Home Depot, Hasbro, and so many other companies to gather advice you can’t get anywhere else.

But don’t take it from me, I pulled Adam Perri, our membership guru, into the studio to tell me the three biggest benefits of membership. Adam?

Adam Perri: Thanks Katie. So there are a number of different benefits to joining Innovation Leader as a member. First you have access to all of our quarterly research reports, which includes an archive of over a dozen topics like metrics, governance, hiring, tech scouting, innovation and risk and a lot more.

Secondly, you have instant access to over a hundred different downloadable tools and templates for all of your different corporate innovation programs. So some of them have been created by your peers at other large companies and others have been designed by our staff here at Innovation Leader with a lot of different input from corporate innovation executives.

And lastly, you get these awesome discounts to our in person events. These include our field studies, our one day deep dives, and our annual Impact conference that we hold every October. And these discounts average anywhere from $250 to $500 dollars on the average ticket price.

Kaitlin Milliken: Thanks, Adam. And don’t forget three, five, or ten user memberships get the best value. So be sure that you head over to our website or email Adam atadam@innovationleader.com for more information.

[MUSIC]

And we’re back with Kambiz Hemati. Kambiz focuses on the brick and mortar customer experience and new retail concepts for footlocker stores. He also participated in a panel on AR and VR at NRF’s big show.

Starting with a big question, fewer people are going to malls and shopping at brick and mortar stores. Online is becoming the way a lot of people prefer to shop. How does that affect brands like footlocker that are really based in malls and those physical locations?

Kambiz Hemati during an NRF Big Show panel on augmented reality. (Photo courtesy of the National Retail Federation.)

Kambiz Hemati: Yes, I have a lot of friends in retail, and I’ve been in retail, retail design, for now about 20 years and every company is slightly different obviously, and the conditions are different.

Kambiz Hemati

Kambiz Hemati during an NRF Big Show panel on augmented reality. (Photo courtesy of the National Retail Federation.)

With Footlocker, our stores are really busy even in some of the dying malls our stores do pretty good business because obviously everybody buys sneakers, our customers are young customers, and a lot of people are so passionate about our products so we don’t really have that issues that a few retailers have had in the past few years. But what we want to do is we want to be proactive. We want to make sure that our stores and the formats that we have work well, not necessarily for really now because our business is pretty good, but how do we do business in a year? In two? In five? So we are really looking into all of the formats, our store experience. We want to elevate all the different parts of our business but really looking more towards the future?

Kaitlin Milliken: Thinking two, three years down the line helps companies avoid disruption. What are the big forces in retail that are creating that need to innovate?

Kambiz Hemati: Our stores need to be very experiential. And we feel that there is a place for technology but we want to make sure its not just technology for technology’s sake. But more about how it enhances the experience.

So my focus, personally, and I started a Footlocker about seven, eight months ago, is going to be more about the experience, the customer journey, and how to incorporate technology in a way that makes sense. The main customers that we have are very tech savvy. They’re young. They all have smartphones. And they already use the technology on their own on their own in our stores. A lot of time I see the younger kids doing FaceTime in the store, sharing what they see in the store with their friends, trying on footwear, taking pictures, sending it, putting it on social media. There’s a lot of that is organically already happening. What we want to do with our technology is figure out how to actually help them do more of that.

Kaitlin Milliken: So how does the design of the store and store design help bridge those organic factors?

Kambiz Hemati: Make the store more experiential and less about just a transaction. We want to make our stores more a part of the communities that they serve. So in essence, we want to have events at the store. We want to bring in speakers. We want to bring in products that relate to sneaker culture and youth culture. But really, ultimately, I’d like the store not to be about a hard sell and more about the soft power of our brand. So I’d like to have people hang out at our store, and look, and see things. Maybe take pictures and maybe try on shoes. Maybe they won’t purchase it there. Maybe they’ll go back and purchase it online. Maybe they’ll purchase it the next time they come. But we want to make our stores again less about a hard sell, less about transactions and more about experiences. And more about what our customers want.

Kaitlin Milliken: So you mention the idea of people coming into the store to have a brand experience and then shopping online later. How are physical stores and those brick and mortar locations working with the online aspect of the company?

Kambiz Hemati: We’re working on a new app. We want to make the app more, you know, have more interactions between the app and the customer at the store level. The app then connects you to the store but it also connects you to online shopping. We have a loyalty program that we want to expand on. So there’s a lot of those tools that allow us to close the circle between online and inline shopping.

A lot of the people who come to our stores, they know what they want. They’ve seen the picture on Instagram, on Twitter, on Snapchat. They come to the store. They know already what they’re looking for, and many times they walk away with some aspirational other items that they may not purchase at the moment but they will purchase later. We want to have a relationship with our customers.

Kaitlin Milliken: Digital sales really helped Footlocker after a rough revenue year in 2017. Do you find as we move to the future the physical location becoming more of an initial introduction for the brand?

Kambiz Hemati: We’re retailers. We’ve always been retailers. We just want to be better retailers. We want to be, we want to change with all the changes that are going on. And we want to improve again our experience in store. So I think our store will always have a big space for our business because that’s an advantage that other brands don’t have.

Kaitlin Milliken: You mention a few things that we might see at Footlocker in the future, like events and having speakers come in, and more technology. When it comes to finding those ideas, testing them, and then rolling them out, what does that process look like?

Kambiz Hemati: We started to already test, for example, we opened a store in London over the summer. And we had sort of an Xbox section so people could come and actually play with the Xboxes. We had for example haircuts in some of our location that we introduced in Liverpool, we introduced in London as well, so people could come in and actually get free haircut while they’re shopping.

So there are lots of those kind of events that we want to introduce, and play with, and experiment with, and learn from. Then see how we can scale those events into the rest of our fleet. So I guess the way we look at it is experimentation. It’s at a smaller scale, and then taking the learnings, and then figuring out how to then deploy whatever wins and whatever works and whatever connects to our customers on a larger scale. So really its about experimentation trials and really getting more involved in that, rather then not try anything or not do anything or you know. So I think we have a whole culture now of being more experiential than experimental.

Kaitlin Milliken: When it comes to being experiential and experimental, the metrics might be different than what companies might traditionally think of. For example, hard dollars spent in the stores may not be the best type of way to measure whether these events are increasing brand awareness. What metrics is your team looking at when you’re running these tests?

Kambiz Hemati: The way we look at is, is we want to look at really customer satisfaction. So I think that it’s the best way to, its the metrics of wether people are happy with their experience at the store. Because those particular experiences that we are introducing, its hard to put an ROI on those right now. But we like to look at them more in terms of, “Of course we’re gonna look at the ROI, and how that helps our bottom line. But the way we want to look at it is how it helps the customers satisfaction and those metrics.”

And I think it’s important for companies to always experiment, knowing that a lot of things that you try that you do will not work, will not maybe be successful. But I think there is a much bigger cost to not try anything or not change. And I think the way footlockers leadership is actually geared right now is being more open to experimentation, and be more open to trying different ideas, and being more opening to understanding that hey some of them may not work. So we’re in a good place. It’s hard sometimes for legacy companies to be at that place. But I think our leadership is really in tune with that idea of becoming more nimble and operating more as a startup or as a newer company, rather than a legacy old company.

Kaitlin Milliken: Transitioning gears to a new topic, your panel at NRF talked a lot about AR and VR. What is you team working in that space?

Kambiz Hemati: Looking at AR in order to better see the product, better understand the product. But also being able to potentially see different types. Like if you see one shoe and its red, you can also see it in pink, and yellow, and blue, and green, in other colors as well. So we want to be able to offer the catalogue or products in an easier way to our customers.

Kaitlin Milliken: So this is my final question, and it ties back to one of the big themes were seeing at NRF which is the future of the store. So what does the store of the future look like and what is its purpose?

Kambiz Hemati: I think the store of the future for us is about building a community. It’s about finding products and services that are complementary to the products that we offer. And creating an environment where our shoppers want to hang out, be apart of the community bring their friends, and really that to us is the most important. At the end of the day I think if you bring the people if there’s a reason for our young customers to come in, even if they don’t purchase every day, they always come back, and they’ll remember, and they’ll know that we’re the source for the best product and the best services. So that’s really for us to…that’s the way we look at it.

Kaitlin Milliken: In 2019, shopping at a brick and mortar store isn’t just about putting items in a cart. Instead, physical locations should act as a source of community and entertainment. Interactions with the customer should be memorable experiences that encourage them to come back.

[MUSIC]

So we heard about Footlocker’s approach to innovation, but what are other brands working on? To find out, I talked to Nicole Leinbach Reyhle. Nicole is the founder of Retail Minded, a publication that provides news and education for retailers. She moderated a panel on building better retail experiences at NRF.

So you’ve been at NRF’s Big Show All Weekend. So what are the big trends that you’ve seen so far, especially in regards to the future of retail?

Nicole Leinbach Reyhle: One of the things I’m really loving is what’s taking place in the fulfillment category. So all, the last few years, have been about personalization. How do we create dynamic experiences for customers? And we’ve seen that happen and come to life in so many ways. But what I’m seeing here at NRF if fulfillment really taking the lead on this.

Customers want what they want, when they want it, right? So through fulfillment, I’m seeing a lot of fantastic brands such as IBM for example that delivers an order management system that allows the customer to be in control of that, their fulfillment of order, wether they order it online or pick it up in store. What are retailers needing to react to? They need to react to customers. What do customers want? They want what they want when they want it. How do you meet those expectations? Through fulfillment.

Kaitlin Milliken: How are companies reacting to that, especially those more traditional brands that may have come from a brick and mortar background?

Nicole Leinbach Reyhle: Brick and mortar, obviously is changing. By 2021, Amazon is supposed to have over 3,000 physical stores, and so we’re seeing so much happen with online and offline starting to blend together that we need to make sure as retailers that we’re reacting to that customer demand. And they’re doing that by logistics, they’re doing it through fulfillment. They’re doing that through marketing and also through accessibility. So what does that really look like? Be where your customers are.

You know instagram recently rolled out some opportunities for their audience to make purchases direct through instagram. And they’ve made some variations to that, and so many customers shop that way now. So as a retailer or brand, they need to be able to react to that as well. So that happens at the touch point, typically on mobile with Instagram for example. That said, it touches and influences the fulfillment, and the logistics, and so many different processes along the way. So for me right now, I really feel as if online and offline are really blending. It’s no longer about multi-channel. It’s absolutely omni-channel. You can’t be separated. You have to all connect the dots.

Kaitlin Milliken: In terms of having that digital channel as well as the in-person, physical locations, how do those two things relate to each other? Do they serve different purposes? Do they have different audiences? What’s the connection there?

Nicole Leinbach Reyhle: Customers have different expectations. So the way I choose to shop may be very different then how you choose to shop. So by having physical locations in combination with an online experience, you’re meeting the demands of your multiple customers, right? And so it’s super important that retailers and brands are recognizing that no two customers are alike.

That personalization piece we talked about earlier really comes down to the customer defining what they want. And what I want is wildly different than what my 10-year-old wants is wildly different than what my next door neighbor wants and you know certainly different than all the people here today. Because our lives are different. So having a physical store front in addition to that online place is really important, because without the combination you’re not going to meet all your customers, right? Now granted you could totally have one or the other and still have a healthy business. But that business is going to be based on very specific, targeted audience that you’ve hopefully defined and understand.

Kaitlin Milliken: So recently our publication did a story on Platform in LA, which is sort of this mall-like thing. It’s different popups, and they rotate out. And one of their founders was really talking about the idea of the brick and mortar location as an introduction point to the brand, and then people start shopping for the physical things they want to own online. Is that something you’re seeing happen a lot in the space?

Nicole Leinbach Reyhle: I love that because the physical store is no longer about just buying. it’s about being entertained. And often that entertainment happens in store but the purchase happens online. And that’s why omni-channel is so important. You want to make sure that your branding is cohesive across all touch points. And I definitely think that retailers are turning into engagement based experiences.

So let’s take a look at Hershey’s, okay? I had the opportunity to interview their chief digital commerce officer at NRF yesterday at a moderated panel. And prior to that interview I went to their Time Square store. And so here’s Hershey’s, you know the Hershey Company, all the great candy that they have. And in their store they had digital experiences, but also personalized experiences, but also very classic old fashioned customer experiences as well. And they’ve merged all these great things into this great experience. But one of the things they also do is say, you don’t want to bring it with you? You don’t live here. Maybe you’re a tourist. Just order it online. They offer you that opportunity right there in the store as well.

So it looks different for everyone, but I would say for sure customers are using physical store fronts as experiences. Those insta-worthy moments. Things they want to show their friends, take pictures, post about online, talk about over the dinner table. But then, yeah, maybe buy later.

Kaitlin Milliken: With the experience being so important, what advice do you have for companies where maybe having it be an experiential process maybe less authentic to the brand? Like the folks that are really utilitarian in nature in terms of shopping. What would the future look like for them?

Nicole Leinbach Reyhle: It might now look super bright if they’re not adjusting to the consumers, right? So the consumers are all of our bosses. We are fools to believe that we are defining what the future looks like. The customers really are, because even though, for example, there are so many great technologies here an innovative ways or retailers to engage their audiences and to strengthen their path to purchase and ultimately their profit, right is if the customers react to it.

And, you know, over the last few days I’ve listened to some great sessions here at NRF and one of the things that repeatedly keeps getting said, and I’ve been saying it as well and would reinforce, is that it comes back to the customer always. And those brands that are choosing to not look ahead and move forward with some of this change in innovation, really do risk losing customers.

Kaitlin Milliken: Are more traditional companies, like the Macys and the retailers of the world that have been around for 100 years, 50 plus years, are they finding ways to be innovative? Are there any examples in that space?

Nicole Leinbach Reyhle: I think Macy’s, like these legendary retailers like you’re referencing, I believe that they definitely have a struggle ahead of them — an uphill battle. Not so much because they’re not trying to reinvent themselves, but the younger customer isn’t reacting to them, right? So their consumers are maturing and these younger generations are not necessarily reacting to some of these changes. And I think that’s really the bigger struggle.

What I do see happening is that they’re making change, and they’re bringing in, you know, branding and marketing efforts that are resonating with customers to help keep the more exciting process of their hopefully future history. But what that looks like is still a little blurry. I hate to say it. I mean, I don’t think they’ve done…I don’t think anyone has super defined it yet as a winning strategy. I think it’s a constant journey for these legendary businesses.

Kaitlin Milliken: Are there anything these companies should be doing to forge those connections and really reach those audiences they’re not resonating with anymore?

Nicole Leinbach Reyhle: I think that they have to go smaller. It’s funny because you look at Target, right? And it’s like a one stop shop. And not everybody, but so to speak everybody loves Target, right? Or that type of shopping. But when you look at brands like Dillards and Macy’s and Bloomingdales, Neiman Marcus, Saks Fifth Avenue, having a more niche experience is being desired. And I think the biggest thing they can do is create those experiences in the store so rather than just go shop there, they’re being entertained.

I call it “shoppertainment,” right? So my good buddies, Kizer and Bender, who do a lot of speaking about retail, they’ve really coined that “shoppertainment.” And I believe that that’s exactly what these legendary brands have to do in order to keep up with the growing generation of consumers. You have to give them moments — and more niche moments by the way. You want to have them hit pause while they’re shopping. You want them to say, “I want to take a picture of this.”

So you know, even Target has selfie stations now within their stores, and there’s a reason for that. Because people do hit pause, and they do use their hashtag, and they do share it on their social feeds, and that’s a great organic marketing strategy to boost visibility for Target. These legendary brands are doing those types of things too. But they really need to create experiences more so than I’ve seen yet. I’ve seem some, of course, but mostly it’s in major markets. But we need to look outside our major markets. We need to look at like middle America, middle of nowhere, for that matter where these brands exist, these retailers. And give all consumers everywhere a fair opportunity to grow with these legendary businesses.

Kaitlin Milliken: One final questions. So we covered a lot of ground during the course of this interview, and just to tie it all together, what do you see retail of the future actually looking like?

Nicole Leinbach Reyhle: I think retail of the future is going to consist of commerce everywhere. And what I mean by that is, you know, I think for example, if I’m walking down Fifth Avenue in New York City, I could go into a store. But I could also go to a vending machine, like a savvy, sophisticated vending machine to get what I want too. Because there’s certain items that that might make sense for.

Even in LaGuardia Airport in New York City, you get off a plane, there’s a vending machine for puffy coats, right? And I think that as, and by the way, it’s half the size of a classic 8-by-10 paper. The actual box of it is so small, but it’s a big puffy coat for cold New York. I think you’re gonna see vending in apartments, in luxury buildings, on streets, and commercial buildings. So you’re gonna see vending get enhanced, not in a cheesy way, but rather a cool, savvy, convenience accessible way for customers to shop. And I think retail itself is going to be everywhere.

So I use vending as one example, but retail commerce, purchasing opportunities will be at all touch points of our day. Because, here’s why: Customers don’t like to wait, right? And so with that, you can’t just say, I want something, I have to go get it. You want to be able to like turn and find it there. So the smartest brands are going to make sure that their hottest products are available no matter where you are. And we’re already seeing that but we’re gonna see it across all categories. Not just certain things, but rather all things.

Kaitlin Milliken: In order to reach consumers, brands are going to have to be available to customers at all times. So rev up your web servers, load up your vending machines, and open the store doors. It’s time to brace yourselves for the next round of innovation.

[ACKNOWLEDGEMENTS]

You’ve been listening to Innovation Answered. This episode was written and produced by me, Kaitlin Milliken. Special thanks to Kambiz Hemati and Nicole Leinbach Reyhle for chatting. To join the Innovation Leader community, sign up for a membership on our website. You can get more coverage from the Big Show at innovationleader.com/podcast.

If you loved this episode, rate and review us on Apple Podcast. That helps other innovators find the show. Thanks for listening, and see you next time.

[SPONSORED MESSAGE]

Special thanks to Techstars for sponsoring this episode. Innovators know the importance of tapping into the startup ecosystem to see what new technology can transform their businesses. But it’s difficult to both find and forge meaningful relationships with the startups that will go on to disrupt industries. That’s where Techstars comes in to support corporate partners.

With more than $18 billion in equity from thousands of startups in their portfolio, Techstarsattracts the best and the brightest entrepreneurs from every tech vertical from around the globe. Techstars has worked with hundreds of corporations from fin-tech to energy to retail to healthcare. By matching industries with the right entrepreneurs, they are accelerating innovation across every industry. So no matter how much experience you have in the sandbox, Techstars has something for you. For more information visit techstars.com