Bigeye recently released ENVISION 2022, an on-demand video exploring key findings from our report, Retail Disrupted. This week’s podcast is an extended interview with ENVISION guest Doug Stephens, a retail futurist, author, and CEO of Retail Prophet. During our interview, Doug shared his thoughts on luxury retail’s resilience among Asian consumers, Amazon’s experiments with physical store concepts, and social and sustainability issues around retailing in the metaverse.
Episode Transcript
Adrian Tennant: Coming up in this episode of IN CLEAR FOCUS.
Doug Stephens: There’s a lot of conversation today around the metaverse, obviously. A lot of people are talking about this, but the one thing that I am not hearing asked is: is it good for society?
Adrian Tennant: You’re listening to IN CLEAR FOCUS, fresh perspectives on the business of advertising, produced weekly by Bigeye: a strategy-led, full-service creative agency, growing brands for clients globally. Hello. I’m your host, Adrian Tennant, Chief Strategy Officer. Thank you for joining us today. Last October, Bigeye published a market research report entitled Retail Disrupted: What Shoppers Want From Brands Today. We recently released a video, ENVISION 2022, in which four experts discuss key findings from our study and explore some of the potential implications for retailers and brand marketers. Our podcast today is an extended interview with one of our guests for ENVISION 2022. Doug Stephens is one of the world’s foremost retail industry futurists. His thinking has influenced many of the world’s best-known retailers, agencies, and brands, including Walmart, Google, Home Depot, Disney, BMW, and Coca-Cola. Prior to founding his firm, Retail Prophet, Doug spent over 20 years in the retail industry, holding senior international roles. He’s also the author of three ground-breaking books on retail innovation, a nationally syndicated retail columnist for CBC Radio, as well as a featured contributor to The Business of Fashion. Doug’s perspectives on the business of retailing at the intersection of consumer behavior have been featured in many of the world’s leading publications and media outlets, and he speaks regularly to major brands and organizations. So let’s first revisit a conversation with Doug when he joined us on IN CLEAR FOCUS in August of 2021. To discuss his work and some of the ideas in his third book, Resurrecting Retail: the future of business in a post-pandemic world, Doug joined us from his home office in Toronto, Canada.
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Adrian Tennant: Doug, welcome to IN CLEAR FOCUS!
Doug Stephens: Thank you so much, Adrian. Thanks for having me.
Adrian Tennant: So, Doug, what is Retail Prophet and what services do you provide?
Doug Stephens: So Retail Prophet is a consultancy that focuses exclusively on the future of retail and consumer behavior. And we advise brands like, BMW, Walmart, L’Oreal, LVMH, and Google, and all focused on this issue of the five to 10-year horizon of retail. You know, what’s changing? How are consumer behaviors manifesting in different ways? How do retailers need to plan a strategy for that new environment? And certainly for an ever-changing competitive landscape, not the least of which have been many of the changes that we’ve seen in the last year or so.
Adrian Tennant: Doug, did you find retail or did retail find you? I’m curious, did you have any family members that worked in retail when you were growing up?
Doug Stephens: I did, actually, my elder sister spent many years working in department stores, and she worked with Macy’s. But that in no way, shape, or form influenced my decision to get into what many call, “the accidental profession”, retail. Uh, but it did turn out that it was one of my first, I’ll call it, real jobs after getting married. I got into retail very much on the ground floor of the industry as a young person, kind of working my way up through the ranks of retail companies in both Canada and the US. Starting on the sales floor and finishing, as the general manager of a relatively large US company. So that was the beginning. And then, in 2009, I founded Retail Prophet, having had the experience of working in the retail industry and experiencing firsthand how shortsighted an industry it tended to be. As you can appreciate around 2008, 2009, the whole world was sort of imploding. The economic landscape was changing. Technology was rapidly changing. Certainly a changing of the guard demographically in terms of consumer groups. And so it seemed to me at that point that, uh, the world needed a narrative that was looking out on this horizon with a little bit more, um, prescience perhaps than the usual reactive nature of retail.
Adrian Tennant: Your second book, published in 2017, is entitled Reengineering Retail: The Future of Retailing in a Post-Digital World. Doug, what did you mean by post-digital?
Doug Stephens: Yeah, the term was chosen very deliberately, because it was my feeling, Adrian, that by 2017, the presence of technology in a consumer experience was really no longer a novelty or a surprise. It was my belief, and I maintain that belief, that we live in a world where consumers, I think, are more surprised these days by the absence of technology than by its presence. You know, we’re sort of mystified when we find ourselves in a situation where we can’t benefit from the introduction or from the use of technology. Just to give you an example, I was In a big box store just this last week. And I asked a pretty simple question regarding a product that I believe that they might’ve had. And it was sort of reduced to guesswork on the part of the sales associate. I asked if they had a certain product and they said, “I think we do. And I think it’s over here.” And in the back of my mind, I’m thinking, “well, are you telling me that there isn’t a piece of handheld technology or some other piece of technology that can’t tell you exactly where that product is in your store?” So as again, I think as consumers, these days, we are more surprised when there’s an absence of technology to assist us than–than when there is. So I believed for that reason, we were really living, not in a digital world, but in a post-digital world.
Adrian Tennant: One of the themes you introduced in Reengineering Retail and expand upon in your new book, Resurrecting Retail, is the idea of store as media. Now, as you know, one of the fastest-growing areas of ad placement is in-store media, with retailers including Walmart, Target, and Kroger, creating in-house solutions to offer ad space to CPG brands that they sell. But that’s not what you mean, correct?
Doug Stephens: That’s correct. Yeah. That’s not what I’m referring to. What I mean is that the actual shopping experience itself is, to my mind, the most powerful and manageable, and frankly measurable form of media that a retailer or a brand possesses. The problem is most of them don’t treat it that way. They don’t treat the experience as a media experience. Historically, as retailers, we’ve gone out to the open market. We’ve bought media, we’ve bought advertising, in an effort to acquire customers, to gather brand recognition or brand awareness. And then if we’re successful in doing that, we move those consumers to a point of distribution or points of distribution to transact sales. The problem is stores are now the media itself and media in many ways is becoming the store. As a consumer now I don’t look at advertising as a mere call-out to go to a store. The advertising is the store. I can buy directly from TikTok, from Facebook, from Instagram, from any piece of media that falls within my grasp. So, many retailers would say, “well, if media is becoming the store, does that negate the necessity for stores?” And my argument is no, not at all, because it’s actually a trading of roles. Physical stores are becoming a very powerful media channel. And I’ll just explain very briefly what I mean by that. We have to sort of start from a place where we accept that the going in premise of effective media is that there is an audience for it. Obviously we want to try and create media experiences, wherever there’s an audience that can enjoy that. If we go back a thousand years ago, that point of gathering an audience was the marketplace. That was really the primary channel through which consumers got information, where they communed, where they connected with friends and family, and ultimately where they conducted commerce. Over time, that was displaced somewhat by other forms of media, whether it was print media, radio, television, and today, of course, digital is the campfire that we all gather around. But the problem is digital is actually becoming prohibitive as a means of acquiring customers. From a cost standpoint, there are brands today already that are saying, “look, we just cannot afford to acquire incremental customers using digital media. That cost is too high. And in many cases, it exceeds the lifetime value of that consumer.” So, when I refer to stores being media, I’m certainly not talking about the networks that, as you mentioned, many retailers are putting in their stores to just inundate us visually and audibly with more and more advertising. I’m suggesting that the experience that I have in a Kroger is actually the most important form of media that Kroger can execute. So it’s a different philosophy entirely.
Adrian Tennant: The Wall Street Journal recently reported that Amazon has plans to open several large physical retail locations in the US that will operate like smaller department stores. This could extend the company’s reach in its sales of clothing, household items, electronics, and other categories. So Doug, what’s your take on this latest development from Amazon?
Doug Stephens: Yeah, it’s a really interesting development. Um, it’s one of those that when you read it, is not surprising, but it’s certainly interesting and compelling. And in a weird sort of way, you know, one of the old credos in any investment community is that you try to determine where everyone is running to, and if you’re smart, then you run in the opposite direction. And right now, the retail industry as a whole is running away from physical retail and running toward digital. So what does Amazon do? Amazon takes exactly the opposite approach and they run toward the physical world. Now, this isn’t Amazon’s first foray into physical retail. Of course, they bought Whole Foods several years ago. They have opened, Amazon GO stores, Amazon Four-Star stores. And if we’re being completely honest, their track record in physical retail isn’t that extraordinary, really. Having said that, this makes a lot of sense. There are things that are simply difficult to buy on Amazon and difficult to buy on any retailer’s website, frankly, things that require more consideration, things that require touch and feel – complex products that really require more information or confidence before a consumer’s willing to make a purchase. And of course, apparel falls into that category as well. So that makes sense. This also provides a local logistics point, a point to distribute products from, a point to collect returns from, which would only add efficiency to Amazon’s bottom line. It also gives them an opportunity to collect more data about how consumers do shop in physical environments. Amazon knows full well how we behave online, but it gives them an opportunity to create yet another data point in the marketplace to begin to connect consumer behavior between the online world and the physical world. And then there’s the more sinister side. It also gives them the ability, as we know from past announcements, it gives Amazon the ability to absolutely tank the market caps of companies like Kohls, who could potentially even become acquisition targets. We know that anytime Amazon merely clears its throat and sort of fixes its gaze on a category, they have a tendency to really rock the market caps of incumbents in those categories. We’ve seen them do it in the pharmacy sector. We’ve seen them do it across various categories. So that could be potentially the play here as well. But I think the big message to the marketplace, Adrian, and my opinion is that this is a warning shot across the bow of all physical retailers. And most specifically, I’m thinking of categories that have sort of dodged the bullet up until now. Categories like home improvement. If Amazon can open a quote-unquote department store and sell in the physical world, well, that brings them one step closer to selling lumber and concrete and building supplies and maybe doing a much better job of it than the incumbents in that category. So, I think everyone has to take this very seriously. And above all, Amazon has the luxury to spend a tremendous amount of money doing this and sticking with it and experimenting. So, yeah, not a surprise, could have many, many strategic dimensions, but something that everyone in the retail industry should be taking note of, for sure.
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Adrian Tennant: That was Doug Stephens talking with me in August last year. In October 2021, Bigeye published Retail Disrupted: What Shoppers Want From Brands Today. Shortly after our report’s publication, Facebook changed its corporate name to Meta, reflecting its ambitions to build the metaverse. In November, the Metaverse Group, a subsidiary of the cryptocurrency investment company Tokens.com, purchased the virtual world Decentraland’s most expensive plot of land in its Fashion Street district for $2.4 million. So when Doug Stephens joined us for Bigeye’s ENVISION 2022 video event, we talked about the impact of the metaverse on retailing. I asked Doug if he thought we would see a real estate land grab in virtual worlds.
Doug Stephens: Yeah, I think we will. You know, just to sort of level set in terms of the metaverse and what it means, the metaverse in concept anyway, is the idea of a more immersive, real-time, persistent internet, if you will. A series of connected worlds that we as users can sort of transport across and Meta would be one of those worlds within the metaverse. Now in reality we’re at least, I would say, five to 10 years, perhaps even longer away from the full sort of vision of the metaverse actually coming to be. But in the meantime, as you point out, there’s a tremendous amount of speculation going on. And I think everyone sort of agrees that the metaverse is a logical sort of evolution of our relationship with online technology. You know, today we’re able to interact, but we’re not able to do so in a very real feeling way, uh, in a very connected way. We’re certainly able to shop online, but again, we have this barrier, where we can’t really experience things or interact with things before we buy them. And so I think there’s wide agreement that this is a logical evolution, but nobody really knows how or how quickly all of this is going to play out. So we’re seeing some early bets and I sort of liken it, Adrian, to you know, if we go all the way back to the early 1990s and the prospect of this thing called the internet, and we had companies finding themselves being shut out of having their own domain names in some cases, you know, People were out there on the open market, sort of these early adopters were out there buying up domain names and then selling them back to the brands that actually owned that IP, that owned that brand name. And so I think a lot of companies now are trying to get a jump on this. And I think the key thing about real estate in the metaverse, as it sounds like a ridiculous concept, you know, why would somebody buy virtual space in something that should be infinite really? But it isn’t. And I think that’s really the key idea here is that real estate within a place like Decentrand is not some infinite landscape of never-ending opportunities for real estate. This is literally a place that has finite assets and some of those assets are clearly more premium than others. And so, uh, we are definitely seeing brands say, “Look, we don’t wanna find ourselves once again being shut out. And so we’re going to make some early bets on things like this.”
Adrian Tennant: We’ve also seen a lot of coverage of non-fungible tokens or NFTs. Nike, Adidas, and Under Armor are all investing in this space. For example, Nike acquired RTFKT, a startup that creates NFTs of sneakers and other collectibles. Doug, what’s the strategy behind these investments?
Doug Stephens: Well again, I think there’s a lot of poking and prodding going on right now. I think that there are a lot of very early bets being placed by brands that can afford to do so, to at least experiment and iterate around some of these ideas and concepts. I mean, I don’t think anyone really understands at this point, how big a market virtual apparel, for example, might comprise. Certainly, I think that most would agree that it’s going to be for the foreseeable future anyway, a fraction, you know, a minute fraction of what the broader apparel market, the physical apparel market might be worth. But, and again, it’s logical to assume that as we see this metaverse constructed, as we, as individuals spend more and more time in these virtual worlds, the adoption of things like virtual apparel might start to make more and more sense. And so brands like Nike, again, don’t wanna be at the tail end of that wave. They want to be leading that wave. In the near term, what we also know is that there is a fairly robust market right now, just among people who are experimenting with buying NFTs, you know, making some early investments in the hope that, uh, some of these assets will actually, you know, exponentially increase in value. But, I came across a quote, about the gold rush and it was essentially that, uh, the businesses that really made money during the gold rush were those that sold picks and shovels. Uh, it wasn’t the miners that made the fortunes. And so I think that we are seeing a lot of brands now just riding this wave of novelty. If people are out there spending money on these assets as a novelty and they’re experimenting with them, then I think a lot of brands are saying, “why shouldn’t we capitalize on this while it lasts?”
Adrian Tennant: Let’s take a short break. We’ll be right back after these messages.
Adrian Tennant: Last October, Bigeye published a market research report, entitled Retail Disrupted: What Shoppers Want From Brands Today. We surveyed consumers across America to find out how their shopping behaviors had changed as a result of the pandemic. In a special Bigeye video event, we’re joined by four experts who reflect on the study’s findings and explore the implications for retailers and brand marketers in 2022.
Doug Stephens: It’s logical to assume that as we see this metaverse construct, as we as individuals spend more and more time in these virtual worlds, that the adoption of things like virtual apparel might start to make more and more sense.
Ingrid Milman-Cordy: I think being channel agnostic and just making sure that you are you know meeting your consumer, where they are is important. to not think about channels as competitive to each other, thinking about them as complementary.
Andy Sheldon: When you’re watching something as a live stream, that’s linear, there’s no choice, but to watch what’s going on at that moment on the shopping teller.
Syama Meagher: I see NFTs as an invitation for consumers to join brands on a digital journey and for brands to invite consumers to spend their cryptocurrencies and their time into building a relationship with the brand.
Adrian Tennant: For a lively discussion about the future of retail and marketing watch Bigeye’s Envision 2022. For details, go to bigeyeagency.com/insights.
Adrian Tennant: Each month, in partnership with our friends at Kogan Page, The Bigeye Book Club features interviews with authors who are experts in specific areas of marketing, consumer research, and customer experience. Our featured book for July is Future-Ready Retail: How to Reimagine the Customer Experience, Rebuild Retail Spaces, and Reignite our Shopping Malls and Streets, by Ibrahim Ibrahim, a futurist, retail strategist, and designer. IN CLEAR FOCUS listeners can save 20 percent on a print or electronic version of the book with exclusive promo code BIGEYE20. This code is valid for all products and pre-orders and applies to Kogan Page’s free e-book offer. To order your copy of Future-Ready Retail, go to KoganPage.com – that’s K O G A N P A G E dot com.
Adrian Tennant: Welcome back. You’re listening to an extended interview with the retail futurist Doug Stephens, who was recently a guest on Bigeye’s ENVISION 2022 video event.
Adrian Tennant: When we spoke previously, you characterized Amazon’s rumored plans to open department stores as yet another way in which the company can collect data about consumer preferences and potentially disrupt incumbents in categories such as home improvement. In December, it was announced that the high-end UK department store chain Selfridges would be acquired by a Thai retailer and an Austrian property firm in a deal worth around 5.4 billion dollars. Doug, what do you think this means for department stores in general, and luxury brand retailing in particular?
Doug Stephens: Yeah, it’s a good question and, you know, Adrian, I’m not sure how much we can really infer from the transaction about the broader landscape as it applies to department stores. I wouldn’t necessarily look at the Selfridges transaction and say, well, you know, maybe department stores as a channel or as a concept are sort of turning a new corner and maybe they’re on their way back to some sort of revival. I think, uh, if anything, I would say Selfridges is really a bit of an outlier in the department store category, in that I think they recognized very early on that the true power that they had as a brand and as a department store was in conveying experiences to consumers. It wasn’t about products necessarily. It was more about how do we wrap up all of our categories into an experience that consumers enjoy. And certainly, I think they led the way in that respect. And I’ve pointed to them many times over the years as being exemplary in terms of their ability to design and execute experiences. So I think if anything, it really speaks to that. It speaks to the idea that any brand, if you are able to, design, and construct, and execute brilliant customer experiences, and really pump equity into your brand through doing that you do add value. Regardless of channel, doesn’t matter if you’re a department store, a standalone, merchant, uh, a specialty merchant, or a hypermarket. It’s really about experiences. And as far as luxury goes, I think that the horizon is relatively optimistic for luxury. I think that the industry recognizes that we live in an extremely polarized retail market today, where it is really commodity goods on one side that are dominating. And on the other side, it is luxury. And I think everyone also is anticipating the return of the Asian consumer to the broader global market. Once things open up, I think there’s gonna be a huge appetite on the part of Chinese consumers to get back out on the road and enjoy some of those luxury experiences. So that’s sort of the way I interpret that transaction.
Adrian Tennant: What is the one aspect of retailing that you think is most likely to be disrupted or look completely different by the year 2030?
Doug Stephens: So I believe that what we have seen over the last decade or so is this progression toward stores, physical stores, ceasing to be a practical distribution mechanism for products. I think we would all agree that the inventory requirements, the space requirements, and the manpower requirements to use physical stores merely as a distribution vehicle for products is a really relatively inefficient use of that asset. What we are seeing is more and more stores really becoming mechanisms for customer acquisition. So whether we’re talking about Nike House of Innovation stores, or Canada Goose is another brand. Now that is sort of looking at their stores more as being this sort of open end of the funnel to receive new customers and acquire them and bring them into their ecosystem. I believe we’re gonna continue to see that progression going forward. And to the extent that I would say, with the exception of all but the most commodity-based items, you know, grocery, pharmacy, things of that nature. I really believe that the nature of physical retail is going to move over to becoming more of a media channel, where brands can tell their brand stories where they can treat customers to unique experiences. And then as they say, bring those customers into their ecosystem where they can shop across channels and certainly through more efficient channels for product delivery like online. So that is really, I think the progression that we’re gonna continue to see moving forward.
Adrian Tennant: Doug, what’s one question you wished I had asked you, but didn’t – and what would your answer be?
Doug Stephens: It’s a great question. I think that there’s a lot of conversation today around the metaverse, obviously. A lot of people are talking about this, but the one thing that I am not hearing asked is, what I think is a vitally important question about the metaverse. And I think with any new technological advancement, certainly one of this magnitude, we should be asking an important question about it. There are really three questions, I guess. The first is, is it possible? And I think we would all agree that the metaverse in concept is possible. You know, the idea of a more, immersive experiential internet is certainly possible. Is it probable? As I said earlier, I think it’s a logical extension of our online experiences and I don’t think many people would disagree with that. But the third question and probably the most important one is, is it preferable? Is it good for society? And when I look around today and I look at the internet that we have today, and I look at issues that we have around, young people suffering from anxiety and depression. From people feeling a sense of inadequacy, on social media, because they’re really looking at this sort of hyper version of their friends and their social networks, uh, lifestyles. When I look at the addiction to online technology, and things of that nature, uh, it really makes me wonder if we are prepared for the metaverse, or should we really be looking at the metaverse as a means of quelling some of those problems, of addressing those problems? Should we be looking at the metaverse as a means of making the internet a better, safer, and more responsible place? and even things like environmental issues, around the energy usage that would be required to power this connected, immersive, and persistent reality, it would be tremendous. And it really doesn’t get us much further, ahead than we are today, with environmental concerns. So I think these are the questions that we really need to be asking about the metaverse. It’s possible, it’s probable, but is it preferable? And can we make it so?
Adrian Tennant: Doug, thank you very much for sharing your insights with us for ENVISION.
Doug Stephens: It’s my pleasure, Adrian. Thanks so much for having me.
Adrian Tennant: You’ve been listening to an extended interview with Doug Stephens, retail futurist, author, and the CEO of Retail Prophet who was recently a guest on Bigeye’s ENVISION 2022 Retail Disrupted video event. You can still view the full video at bigeyeagency.com/insights. You’ll find a transcript of this podcast with links to the resources we discussed on the IN CLEAR FOCUS page at bigeyeagency.com – select Podcast from the menu. And if you enjoyed this episode, please consider following us wherever you get your podcasts. Thank you for listening to IN CLEAR FOCUS produced by Bigeye. I’ve been your host, Adrian Tennant. Until next week, goodbye.
