Real Talk Series 10 – Chris Walton
Guest: Chris Walton
Topics: Omni Talk, supply chain
Transcript:
Chris Ressa 0:02
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management. I’d like to thank one of our sponsors, retail openings and closings.com. In today’s dynamic retail landscape, tracking openings and closings before they take place has never been more important. Having this intelligence is an undeniable competitive advantage, retail openings and closings.com also known as Rock Tracks, future openings and future closings, comprehensive, accurate and reliable the rock is your crystal ball and the key to making well informed decisions with confidence in today’s evolving retail climate.
Everyone, welcome to retail retold. This past weekend, I had an incredible shopping experience at Target. For me, it was an amazing experience because how they have now combined the digital and the physical and provided so many different convenient ways for me to shop them. On Sunday, on Father’s Day, I could have had the athletic socks. And yes, that was the product I was in search for new fresh socks that I wanted. At were at the store, I could have had them delivered to me same day. I could have had them, bring it to my car, I could have walked in the store and picked it up right away. Or I could have went in the store and shopped. I chose the latter because I wanted to see what was going on in the world and being a retail nerd. I wanted to see what consumer behavior was like. But to me, that’s not the story. The story is that I’m here two days later, and I’m continuing to talk about it. Word of mouth marketing is free. In a world where everyone is continuing to try to increase sales. I would ask you if two three days to three weeks later, after an experience? Are your customers still talking about you in a positive way? If they are you probably have a good word of mouth marketing strategy. If not, probably should think about that. And what could you do to enhance your word of mouth marketing? On today’s episode, we have Chris Walton. He is fascinating, has a really cool look as to what’s going on. And I hope you enjoy it. Thanks everyone.
Welcome to retail retold everyone today we have Chris Walton. Chris is a co CEO of AMI talk. Welcome to the show, Chris.
Chris Walton 3:30
Hey, Chris, thanks so much for having me. It’s great to be here.
Ressa 3:33
Yeah, man, I’m excited to have you. I think the listeners probably have seen you writing for Forbes and some other things. So tell us a little bit about Omni talk and what you guys do?
Walton 3:46
Yeah, so AMI talk is a blog, my partner, Amazon and I started about that it’s been about three years ago now. And we started it after we finished what at the time we were heading up Target store the future project. And so that was an exploration of say, hey, five to 10 years out why are people still coming to physical stores to shop? And for us? It was how do you conceive of the target brand and trying to answer that question. And so when that project came to an end, my partner decided and I decided to go out on our own and we started AMI talk and we thought you know what, we’ve got a really unique set of experiences. And let’s talk about that subject, Omni channel retailing. It’s something that’s passionate, passionate to us. It’s funny when we started the blog, Omni was kind of a word people weren’t using as much or they’re going away from but now with COVID It seems like it’s making quite a resurgence. But that’s what we do. We love and and I love retail, and all we talk about is what is the future of retail, how is it changing? How do you think of the right blend of human physical and technological design to make it all happen? And so that’s what we do on a regular basis. You mentioned I write for Forbes, I’m a senior contributor for them. As you write for them about five or six times a month I write for the robin report regularly. And then on our own blog. Army talk army talk dot blog, we produce weekly podcasts. We on a regular basis will produce spotlight podcast interviews of upcoming tech companies or people that are we think are making a pretty big impact on how retail is going to play out. And then we send that out to our subscribers and put it on social media. And we’ve been doing it for about three years and I’ve made a business out of it. And I got great advice. As long as you follow your interests, you always be interested. And that’s kind of what led us to do it right from
Ressa 5:27
the get go. I haven’t heard it put that way. If you follow your interests, you’ll always be interested. That’s a that’s a good way to put it. I’ve heard many variations of that. That proverb, let’s say but I haven’t heard that one. Right. And so tell everybody, what did you do at Target?
Walton 5:45
Yeah, so at Target I did, I did a number of things. So I have a pretty long background in retail. I’ve spent over 20 years in retail, started my career actually in San Francisco at the gap in the late 90s. Right at the height of the khaki swing craze. When Mickey Drexler was heading that up spent about four years there, like I said, and
Ressa 6:03
what what role What did you do with the gap? Yeah,
Walton 6:05
great question. So mostly actually an inventory and supply chain. So as inventory planning and allocation, for those that are, you know, more familiar with retail, but basically, how do you get product from the factories into the stores. That’s what I did day in and day out. And at the time, I was really, you know, pretty good at doing that. I knew a lot about men’s and women’s denim, and how to order different sizes, but I really knew nothing about business. So I ended up going to business school. After my time there and following business school, I linked up with target so I came to target no five and a target. I did a lot of different things. And I think that’s what makes me unique. I think that’s what makes my perspective different from a lot of what you’ll read out there in the marketplace, but started my career traditional merchandising stores merchandising a lot of time in home furnishings, even ran frozen food for a period of time the baby area. But what was really interesting about me in 2000 CAD bonus at 2011, I moved to Colorado for personal reasons, and at the time made the decision to actually stay with target and go learn how to run stores. So I ran my own Super Target for a period of time I ended up running about 12 stores spread across northern Colorado, Wyoming, Nebraska and South Dakota. So I was in my car about 30,000 miles a year. And there are many times I was a leader, I was a 30 I had graduated from the Harvard Business School I was 3435 years old, and I was bagging groceries and throwing freight off the truck many days of the week. And my family thought it was crazy at the time. But had I not done it I wouldn’t be talking to you today, that’s for sure. And then from there as luck would have it, my wife and I moved back to Minneapolis, we just had our first son, and target asked us to move back and I became the vice president of home furnishings for target.com. I had no ecommerce experience at the time targeted just come off the Amazon platform. They brought in a lot of great people who were mentors to me actually the same gentleman who gave me the advice Jason Goldberger, about following your interests, and just fell in love with it loved how fast paced it was, how close to consumer ecommerce is day in and day out. And probably the most financial success I’ve ever had in any single job to terms of how we’re able to grow the business very quickly over a short period of time. Yeah. And then from there, I graduated into the store the future role, which was a two year exploration, you know, at a very large scale of, you know, what works and what doesn’t for the future of omni channel retailing. So we have a really candid point of view, based on all of that collective work that I’ve done over the past 20 years of, you know, these are the technologies that can work for scale. These are what consumers really want, because we’ve spent time trying to understand that and we keep pretty close tabs on it week in and week out
Ressa 8:43
as well. So that’s a lot. Let’s unpack that a little bit. Yeah, absolutely. So first, from a retail perspective, you spent a ton of time in inventory supply chain logistics. And, you know, that’s about how to get the product from the factories to the stores most efficiently cost effectively. Make sure you have the right product in the store all that good stuff. Then you move into merchandising, you’re in the corporate office, corporate office. Yep. And so what are you doing in merchandising? Yeah, in merchandising mean, essentially
Walton 9:15
your job there was to pick the product, you’re picking the products that go on the shelves, and then I would say also you’re deciding how to price the product, and also how to market the product. I think at the core somebody asked me last week, that’s probably at the core of what I am as a merchant at heart. You know, and it’s about, you know, what is the product you’re trying to sell? How do you market it and you know, what makes people gravitate to one thing over another, you know, a lot of it is just, you know, you have a certain amount of shelf space and the shelf space in the store, excuse me, and a lot of it is just portfolio optimization and marketing and that’s really essentially what a merchants job
Ressa 9:48
is day in and day out. We’re gonna get back to that because I have a theory that’s concerning me on on merchandising,
Walton 9:55
okay, I’d love to talk about that.
Ressa 9:57
And then the then you Move, and you got your first foray into the field. Yeah, now you’re in the field and you’re running stores. How has that shaped you? Oh, incredibly,
Walton 10:11
I mean, that was, like I said, is the single best decision I’ve ever made in my career. Because you got to see retail from a different point of view that not everyone gets to see. And I had to time, there was no one in merchandising at target that had ever done that I was the first one to do that. And I don’t know if anyone’s done that, since there have been some other people within the company in different roles. But
Ressa 10:29
there’s people that go from the field to corporate,
Walton 10:31
lots of that logic. Yeah, there are some examples of maybe like supply chain guys going in and running warehouses and things of that nature. But I was the first true merchant to go in and run a store. And I gotta tell you, Chris, I had no idea what the hell I was doing. And, you know, fortunately, targets really smart. I think in terms of how they set me up for success, too. They gave me time to learn. And I had a ton of great mentors out in the field as well that to this day are still some of my absolute best friends. There was a guy named Buddy metode, who I piled around with on his hip every single day for about three months, you know, before they handed that store over to me that for the first time. And so the training is immense. It’s like you’re drinking from a firehose, I mean, people forget what you’re, you know, what you’re dealing with on the HR side of things is so different than what you’re facing, you know, up at a headquarters, so to speak.
Ressa 11:23
Yeah. So you, you were you managing people in merchandising? I was, yeah, yeah. Many people managing merchandising.
Walton 11:30
At that time, when I probably left for the field, I probably had it, I would say, somewhere in the range of like, 60 to 70 people under my charge, but you move out to the field. And suddenly that number, I was trying to do the math the other day, it was probably depending on the season, you know, 1200 to 2000 people at any given time. Wow.
Ressa 11:45
I I’m surprised I didn’t realize you had 6070 people under your charge in, in, in corporate as well.
Walton 11:52
Yeah. Yeah. Early on in the career, and then later, it got even bigger. But But yeah, exactly. So it was, you know, so, you know, managing that dynamics from an HR perspective of how you hire, how do you recruit? How do you fire when necessary, not just at your own location. But you know, as a district manager, how you doing that across four states, that teaches you how to manage from afar, and that teaches you a lot of different skills, and you probably had heading into that job.
Ressa 12:17
Totally. And so you go back target likes you they grew pretty fast from the inventory, logistics guy in the gap to, you know, charged with managing 6070 people and picking product. And then you get over to Colorado, you go in the field, then you come back to Minneapolis. And when you come back to Minneapolis, you’re working on what?
Unknown Speaker 12:49
Yes, I was told that I was in
Walton 12:50
charge of home furnishings on target.com. With no experience, that was probably the scariest moment in my career. Even though I’d never done stores, it wasn’t as scary because like I had shocked I knew what that was like I had a lot of merchandising background supply chain background. So there’s a lot of things that you could pick up more easily. I can remember sitting in my first Monday morning meeting where the team is telling me about the performance of each of how things did you know on target.com, and I didn’t even know the language they were speaking, like, the conversation is different. The topics are different. And I turned to somebody next to me and said, like, my boss had time, I’m like, Man, I’m gonna need some help, because I have no idea what anybody say. But fortunately, you know, you’re a quick study. And I found through a thought through my career, probably one lesson I’ve taken is like, you know, if, again, if you’re interested, that’s important, but jump in and try to figure it out. Because I think that’s what that’s where you get the growth experiences, right? Like, I think it was Lionel Richie, who said Life begins at the edge of your comfort zone. At shop talk, and I ever since I heard him say that, I totally believe that. And that was one of those experiences. I knew nothing. But you just learn it. And retails detail. That’s the other expression now is here. And so you just try to understand what are the details that matter to ecommerce and you go from there. And it’s conditionals each when
Ressa 14:08
you say running the home furnishings? What does that mean? Yeah, so
Walton 14:12
I was basically in charge of all merchants for target.com, which was back cash at that time, probably roughly about the same number. And so we were in charge of picking all the product for the website. We were at that time in charge of pricing all the products for the website, the marketing, the promotions, everything, getting it to the customer at
Ressa 14:33
all of it. And then you and then you have this cool project that they want you to be a part of, which is the Store of the Future. Tell me, what were you doing there? How big is this team?
Walton 14:47
That’s a great question. So the team actually it started just my partner and I and she was actually technically first and then I was brought in who liked the project who picked you to do that. So I reported at the time to the Chief Strategy Officer. And and collectively I think the organization said, Look, Chris, at the time myself, I had a very unique background. So as a mass merchant to have merchandising, field experience and E commerce experience that was that’s hard to find. And so, you know, my resume was kind of built for this type of thing. And so they said, Hey, why don’t you come in and lead this project? And it was simply that question, I reported the chief strategy officer and actually the chief creative officer as well. And I was charged with that question five to 10 years out, why are people still come to a target to shop? And how would you conceive of Target’s omni channel answer to that question. And so it started just the two of us. And then from there basically acted as a CEO inside of a company. So it was a perfect example of intrapreneurship. So we started building out the team, just like you would a startup. So I had a head of engineering, you know, you had an entire product team stood up around the total store concept, we thought of the store almost as a product like you would in the digital space. And so that’s how we built and constructed the team around it, you know, had somebody in charge of merchandising had somebody who’s in charge of, you know, in store labor, but all within the construct of you know, how to use kind of the product model to bring this to market, which was very different than you typically see in retail, is that
Ressa 16:15
what led to all that led to the the big capex remodel of the stores that happened, where the street what didn’t like it, and then it worked. And they loved it.
Walton 16:29
I can’t take I can’t take credit for that I can’t edit. There’s only so much I can speak about, but I can say I think you know, the ideas definitely helped inform where target was going in the future. And there are definitely specific spots where if you look at how things have been implemented, you can see some of the roots in the work that we were doing.
Ressa 16:44
Awesome. And, and so then you decided to go out on your own. Yeah. After spending a long career target. Good terms leave on good terms. The target?
Walton 16:57
Yeah, I did the so the project ended. I think it was the IGN cash one was a January 2017. We both both my partner and I she actually had her second son, and we stayed around for another six to seven months, doing just doing various projects around the company.
Ressa 17:14
Did you miss merchandising and being a merchant? Did you miss the EECOM?
Walton 17:18
No, I didn’t. And here’s why. Because I done it. Yeah. And so when you get a taste of a project like that, and also having the autonomy, we were working as a blackbox operation, we were not in the headquarters. We’re actually in our own warehouse. We had full purview over a lot of interesting
Ressa 17:35
stuff. Last box operation. That’s amazing. Yeah, it was great. And so you know, it was just
Walton 17:39
hard to go back and say, You know what, I’m gonna do something I’ve done before. And, and for me, my my father actually died on a commercial airline crash when he was 38. Oh, my God. Sorry to hear that. Oh, thanks. Yeah. And so at the time, I had just turned 40. And so I said to myself, you know, what I’ve always said, even in business class, taking a lot of entrepreneurial classes, but I never tried it. And so, you know, I just made the decision. I said, you know, what, now’s the time. Retail retail in general, at that time to Chris was kind of in a weird place where people weren’t exactly sure where to go. And there was still a lot of just gravitating towards the general mean of how things should be done. And so I ultimately made the decision to say, you know, I’ve got a lot to offer in a different way. Let’s try this. And so far, I’ve never regretted that decision
Ressa 18:24
at all. You still connect with a lot of people at Target?
Walton 18:27
Yeah, as much as I can. And I think at now, given what I do in terms of reporting on the industry, I think, you know, a lot of people throughout the industry, I try not to connect too much with target and Best Buy overly. So just because I make a deliberate effort actually rarely write about them, or comment on them, just because I think it’s important to stay out of the own echo chamber that we’re in here in Minneapolis, and try
Ressa 18:49
to broaden our horizons. Got it, but they’re both doing really well. So yeah, they’re doing
Walton 18:54
right. Yeah. Minneapolis was always the epicenter of retail. You know, it was only until Amazon that Minneapolis really wasn’t always in the foreground. When you think about it. You had one of the Sears guys was from Sears and Roebuck guys was from Minnesota and then you have target Best Buy Dayton, Hudson’s all kinds of stuff.
Ressa 19:14
So, one of my concerns about retail is, I think some of the guys like one of the reasons the DTC that I find interesting with DTC forget about the economics because some of the economics is DTC companies don’t work I speak a lot about that on the on this podcast. But the fact that you they have a product that you might not be able to find anywhere else, right. I think right now, I’m not sure but I remember Nike took off Amazon there. You can’t find it on Amazon or I don’t know. I don’t know if you can anymore, but I know they did that it was on point they did. Yeah, they did. Yeah. Right. And so people are protecting their channel, right. There’s a company at Wisconsin Duluth Trading their public Right. And I don’t know if you can find their stuff anywhere else now, but at one point, I think it was in their stores or on their website. And I think and there’s, and there’s companies that are protecting their channel and one of the things and so if you have a unique offering, that you can’t find anywhere else, it’s going to draw people to the store. Right, if you have that unique offering that people crave, right, and, you know, I worry that a lot of mass merchants and you know, general retail folks have merchandise folks comped on how product does and so you end up with all these stores that are right, and the example I use is everyone selling pampers and Pepsi. And there’s a lot not a lot of differentiation because there’s some merchandising person who’s like, oh, Pampers and Pepsi is crushing it right now. Let’s get pampers and Pepsi out on the shelves. And how that is total guessing on my point. Yeah, on my part, is that real? No,
Walton 20:54
I think I think you’re hitting on something. I think there’s some nuances that I would add to it. But I think you’re absolutely hitting on something, I think, you know, there is there is this tendency to believe that you know, I can pick and that’s it goes back throughout retail, that if I can pick product better than the next guy and I talked about portfolio optimization, if I can just portfolio optimize my shelves better than the next guy people will come? Well, that’s not really true in a in a couple of ways. First thing is we’re all gravitating towards online, especially right now. I mean, look at this, look at the E commerce statistics over the last few months, they’re they’re going through the roof. And so even if I can find it on your shelves, chances are I might want to start buying it online. And so that has economic implications in terms of it’s more expensive. So what are you gonna do about that retailer, you’ve got to figure out some way to alter your business model
Ressa 21:41
and make up for that.
Walton 21:43
And then the second piece is like, you’ve got to be really careful about how much you weigh into that strategy. Because some of it to a degree might be differentiating, but to your point, there’s a lot of products that aren’t. And that’s where you see a lot of companies in in quite a one of the hurt in my opinion. So the best example I like to use is Macy. Like to me, Macy’s is no different than blockbuster or toys r us that came before it, or the deployment. Let’s even broaden that out the department store in general, like the department store was great. It was by default, the most convenient way to go find all kinds of different apparel that quite frankly, especially now with E commerce are available everywhere, not just from a Macy’s or department. And so in reality, they’re just they’re just sitting there right now, like the toys superstore or the video superstore of yesteryear. It was just e commerce hasn’t hit or the consumer hasn’t hit that business model to its fullest extent yet, but it sure as hell it looks like it’s going to come at some point in the future. So I think you’re right. And the bigger question to me now is actually, I would make the argument that the buyers are almost being disintermediate, that at some point, the buyers or the merchants, quote unquote, are no longer I talked about mixing Mickey Drexler the merchant prince, I don’t know that it’s So the future is going to be so much about the merchant princes as it’s going to be about the other people that hold the role of authority. And I think the role of authority is, as you’re saying, somewhat the direct to consumer brands, but also, more importantly, it’s the influencers, the influencers in a lot of ways now are starting to act like the merchants, when we only could go into stores. That was our only option. And so the merchants were the gatekeepers. Well, now the influencers that people look up to can be those gatekeepers for many, many different types of products. And I think that’s going to be something really that’s
Ressa 23:32
interesting. The influences are the Mert new merchants. That’s interesting. You know, it, I talked to a lot of people that, you know, in retail, and when there’s a merchant at the helm, that’s a leader. Yep. It feels like the people that work in the retail feel better about the company. Everyone wants to work for a merchant, you know, yeah, not some Wall Street guy, right? They want to work for a merchant. So I’ve always been a believer that the merchant matters, but, um, but yeah, it’s an interesting point that the,
Walton 24:08
I think that used to be the case, Chris, and I think you’re right. I think in general, the retail industry probably feels more comfortable with that when they say something like the CFO running the company. But I think what is clear now more than ever, is that the merchants role is not just about picking product, the merchant, whoever’s leading that company, under whatever title it is, has to have a good omni channel understanding of the total product that’s offered under that brand. So previously, it used to be the products you’d pick on the shelves. But now I think as we’re moving forward, and Jeff Bezos is probably the best at this of anyone, it is what is the console? What is the full omni channel conception of what’s your target or a Walmart means Walmart’s doing a great job of it right now to in terms of what are all the technical pieces I need to bring into it? What are all the physical design elements I need to bring into it? The service complements to it that’s what the new Do merchants of the 21st century need to be about? It’s not just about picking products? Because quite honestly, in the online universe, every products available, so you’re gonna have to bring something else to the table?
Ressa 25:10
When? Is there still getting the right product in the store matters? Yeah,
Walton 25:17
I think you still have to optimize it, for whomever is making that trip for whatever reasons why 100%, you still have to have something compelling for them to purchase, whether they’re visiting your website, or whether you’re visiting the store. But to think that that alone is going to be answered is no, in no way shape, or form at work.
Ressa 25:36
So that that’s really fascinating stuff. The you know, and the other piece I was getting to was, is a lot of the, you know, in places where there’s lack of differentiation in stores, because you can find the same product that a lot of places, you know, is is that, you know, merchandising teams that are being told what to put on in the store is that merchandising teams, feeling, you know, being conservative as to I know, Pampers and Pepsi sell. People need pampers and Pepsi. And so that’s not putting on the shelf. What is that? Oh, I
Walton 26:15
mean, I think that can be a combination of a lot of different things. You know, I think it could be, you know, that is generally speaking what pampers and Pepsi using as an example, that could be generally speaking what people want. It also could be the outgrowth of what I think is a potential problem is always looking back on history, and saying, Okay, here’s what sold before. So here’s what I’m going to put in again, but if you continue to do that approach, which is what does he bring a lot of MBAs and you see that a lot in retail, that approach doesn’t work either, because you start to siphon, you know, a certain amount of business off the.com every year. So while it looks like it would work, the past isn’t a good indicator of the future. And so that’s where I again, go back to what merchants always used to be and what the role of the influencer is now, there used to be an art to retail. And the good retailers are the one who are the ones who understand both sides of the brain and can appeal to why someone is either in that store on that ecommerce portal at a certain time. And Captivate can capture their man imagination and doing it and that’s what I think influencers you see them doing so well, you know, in social media, and as they get up to speed with different tools, whether it’s, you know, what Instagram is doing, or shopping or Facebook’s doing shopping, or even what, like tick tock and platforms like that end up doing the shopping. That’s where they start bringing the art to that in a different more powerful way. I’d say some, some buyer at a retailer looking at a spreadsheet from the days
Ressa 27:37
gone before. Really interesting. I’m still stuck on this the influencers, the new merchant?
Walton 27:45
That’s why I came back to it. Yeah,
Ressa 27:47
it’s really interesting. And so, you know, what’s your take now, in the pivoting a little bit, you know, where we are today? What’s going on? You know, you mentioned? You know, before you answer that, you mentioned the acceleration of retail on, you know, to ecommerce, one of the things that I think is fascinating, and I don’t know if it’s formal yet what the numbers are. But the amount of those the the increment incremental increase online that was actually fulfilled by a store, right? So really the buy online pick up in store, right? Is buy online pick up in store, and you being a supply chain guy by training, in answer to the last mile.
Walton 28:34
Yeah, I think I would actually pivot I think, yes, in some ways, but actually said, I think there’s a more I think there’s probably a better way to think about it. Because I think the best would always is to think about it from a consumer perspective. It’s sometimes a better answer for convenience. And by default, the retailer’s benefit from the fact that that actually saves on last mile delivery. And the reason I say that is if you look and Yuki COVID made it very clear. There are just some times we’re waiting for a delivery just doesn’t work for everything.
Speaker 1 29:03
I went, I went on to, you know, one of the largest companies out there as website and my Pampers. I have a three year old and a 21 month old my pampers said three weeks and I’m like, this is not gonna work. And so I went on Walmart’s website. They told me what store had it I went in there, there was a ton of boxes of it. I bet I bought as many as they let me buy during that panic writing phase. And we’re good. Yeah, right. Good. And it was very convenient. And I loved it.
Walton 29:37
Exactly. I mean, I think about groceries like that, too, is endemic to that. So you don’t always know what you want to eat ahead of time. And so sometimes you may just want to bring it up on the way home and I’ll pick it up as I’m driving home or maybe on my lunch break or whatever it is there’s there’s still moments where physicality matter in the conversation of convenience that haven’t been fully explored by retailers. And the cool thing about COVID is that it’s pushing that experimentation I always like to say another thing that I’ve kind of written down is, I think this period of time is the greatest Hall Pass for experimentation in the history of retail, because it’s forcing you to say now what do consumers really need given all the constraints and dynamics that I have? And what would I invest the most
Ressa 30:15
for them? So it’s fun to watch. So yeah, curbside pickup.
Walton 30:21
You know, buy online pick up in store, even concierge services, like Sam’s Club has begun experimenting with all these quote unquote, forms of contactless payment in some ways, that’s all really interesting and ultimately, end the day helps the consumer but also does help the retailer’s financially, depending on how it all maxes out and every retailer is going to be
Ressa 30:39
different. Right now, we’re reading a lot about some of the the Fallen brick and mortar retailers that aren’t making it, there’s bankruptcy headline news, I don’t read a lot about the the digitally only brands who are going into the pandemic unprofitable. And their outlook probably looks pretty bleak right now, given they went into this unprofitable, they’re just buying market share. You know, you’ve got a couple that are given a hall pass Wayfair is one of them, they’re given a hall pass, because they’re you know, and they announced, I think, you know, I was told they they said on their last call if they stopped investing into the supply chain, and they would have been profitable, but it’s still big losses, and a lot of these digitally only are just piling up losses VC back. Do we? You know, it doesn’t seem and someone wants told me that for Chris and Chris to open up a t shirt shop and do it online only? Right? Yeah, it’s, it’s, it’s profitable. The minute you start to scale, and typically maybe about over $10 million in revenue, which is probably when you’re going to multiple markets. If you don’t have a brick and mortar presence, it’s very hard to get profitable. You need huge infrastructure, huge capex. And we don’t talk about that enough. It’s just like everyone to consumers going online. But at some point, if it’s not profitable, the retailers one may not be able to offer it, because there’s just there’s it’s just the economics don’t make sense or two there. There really has to be this omni channel. Yep. Yeah. And
Walton 32:27
I think that’s where I think that’s where you’re seeing a lot of the rubs, I think the other layer I put into it, too, is like, what are you as a brand? Right, you know, are you are you a brand? Or are you a retailer and I think that’s still a space, it’s not as well understood by kind of the DTC community as can be. Just putting up a store doesn’t necessarily answer. provide answers to the questions that I think you’re inherently asking.
Ressa 32:53
You know, so like, just because you want
Walton 32:56
to do physical retail, it doesn’t always make sense. Like, why does it and why does it matter for you for the consumer you’re trying to reach so I always say this, like, stores exist for five reasons whether they’re digital or physical, I always talk about this. One, they can be a place of immediate gratification, to a place of convenience, three, a place of inspiration. And then fourth, and fifth, which are really the physical differentiators, at least right now, this idea of taxation, which is the ability to touch and feel product, but to do that in a way that gives you confidence in your purchase. That’s why people want to touch and feel their avocados, for example. And then lastly, the sheer experience of being somewhere. So if you’re a DTC and you get to that point of scale, then you have to ask what matters for my end consumer within the context of that conversation and well, I better going wholesale, am I better going as a standalone retailer, but fundamentally, whatever choice you make you have to be if especially if you decide to go retail, why am I coming there to begin with when I could still just shop online? And that’s a fundamentally really hard thing to answer. And so I always tell people, you got to make sure that you really understand who you are conceptually before you take those steps. Yeah, there’s a lot of people playing in and around that space that I think somewhat are questionable too, in terms of how they’re trying to think about aiding people in
Ressa 34:15
answering that Yeah, the one other piece to that is I made a LinkedIn Post recently about this is what is convenient Yeah, I don’t convenience you know 100% To some the the the example I used as I started with what is lazy mean? Are you the person in the that that drives around the parking lot? Looking waiting for the first spot in front of the entrance to open up? Or are you not that leaves you’re the other lazy which is you don’t want to wait around for that. So you just park in the first spot that’s available. And I find the same Are you the lazy that doesn’t want to go to the store? and ordered online or do you not want to wait and you want it right now. And you’re gonna go to the store and get it. And which is more convenient now not Lazy, Lazy, rumoured which is more convenient to you to have that which is more convenient have the ability to buy it online. Yep, right now and get it shipped and you’ll get it. Or that’s not convenient, because I don’t want to wait till tomorrow, I don’t want to wait for three hours. If we get to that point, I want to go and pick up right now. What’s more convenient. And that to me, that kind of piggybacks off what you said as far as really that, you know, understanding your consumer that you’re selling to.
Walton 35:40
And it also depends on I think, also to the psychology of Do you know, the other thing too, about whether what convenience means also matters in terms of Do you know, what you want or not? So like, are you in a search mode? Which ecommerce is beautiful for?
Ressa 35:53
Where are you in a browse mode?
Walton 35:54
You know, so that also depends or discovery mode as a consumer? And so that also depends on as a product? Where do you play in that psychology? Like if you’re tied and people know all about you? Well, then chances are you need to be distributed in places where people can hunt and peck and find you very quickly and easily. Because they’re not going to go to a lot of effort. They’re not going to go to any more effort to get that product and they have. But if you’re say a product category or brand that you know plays to that different psychology, then yeah, people might be willing to go to experience that or to to invest more time and trying to figure out what it is that they ultimately
Ressa 36:33
unless you need clean clothes, and you have no detergent. Yeah, and then you just got shot,
Walton 36:37
then you just got a shot. Or you look like you and I had a podcast right?
Ressa 36:47
So if you were to put the state of retail today, what you know, give me an inner Twitter message of 280 characters or less what is where’s the state of retail?
Walton 36:58
I think retail is in a reckoning. So that’s the word I always use. It’s not a retail apocalypse. That phrase was it was far overused, but in reality, what it was prior to COVID. And what it is now is it’s a retail reckoning. And the virus is now just exposing where business models quite frankly, are exposed for the long term. And it’s just going to be a matter of time before we see some more retailers, I think fall by the wayside or get their reckoning, so
Ressa 37:22
to speak. What’s the positive of retail?
Walton 37:27
The positive is I think you’ll see it reborn, I mean, we have to shop we have to consume. And so I think and you’re starting to see this from companies like a like a Walmart or Target, you know, again, even a Best Buy Costco and throw in there, you’re seeing and then and then you’ve got all the small players who are just starting out I’d even throw wafer in this to wafer doesn’t even have stores yet. So they’ve got nothing but room to grow in that respect. And so you’re starting to see how companies are going to refashion themselves around this omni channel conception of how do I flexibly meet the needs of my consumer day in and day out. And so you’ll have kind of a Phoenix rebirth of retail so to speak. But the players will be different, the piles will be the pie, but two slices of the pie will be different. That’s why I thought you put a great post on on on LinkedIn last week where it was talking about just like the further my what I almost would call the microtas ation of of a small space like, yes, maybe the anchors aren’t there the way we used to know it. But those will be replaced by smaller, more distinct versions that cater to what people need day in and day out. Think about it. We’ve already seen that pattern. You’ve seen that in how we consume media in terms of Netflix and streaming, how we you know, like, even ride hailing is an example of almost like my crystallization of, you know, how do we meet our needs at different times, given what we do accomplish all again, because we are pressed for time. So I think that’s what is really inspiring to me is to see how coffees are going to come to the fore to fill that space for
Ressa 38:53
that back. But it’s gonna take time. Do we need stores? Yeah, absolutely. I
Walton 39:01
think it goes back. I think it goes back to the question we had before. And you can see it under. And there are certain segments of the population as of right now that absolutely needs stores, like for example, food stamps, you can’t use those online except in a handful of states. Those people need to eat, right, like people in those situations need to eat elderly not going to be as affluent with technology, we still need stores. And like we said, there’s just still times where a physical experience is more convenient, or more enjoyable for the consumer, given the psychological dimensions I talked about. So yes, they will always exist. But in terms of what is the final end road I just wrote about this in Forbes two, what is the final end road of E commerce penetration? We haven’t gotten there yet. And we definitely haven’t gotten there yet. In many categories. I would, you could argue almost all the categories, but some have more to go than others. So yes, stores will exist, but the balance ultimately still has a long way
Ressa 39:56
to go to settle. How long does it have to go?
Walton 40:00
Oh cheese. I think it depends on the categories. I think you’re closer to it in, say things like apparel and electronics. But the degrees of penetration are higher. Home Furnishings is probably sitting there right in the middle. But I think you’ve probably got at least another, you know, 10 to 15%. To go here over the next I’d say three to five year period. Grocery grocery and healthcare, though, of course, are the real big battlegrounds. And there’s still a lot of dynamics there that have to be figured out. But, hey, we’ve only been at this for about 20 years. So to say, you know, that it’s going to happen overnight, I think is probably foolish. But you know, still again, over the next five to 10 years, there could be massive changes in those industries do.
Ressa 40:37
Do you see? With the demise of some retailers? Do you see new retailers coming out brick and mortar first versus, you know, versus a Warby Parker starts online and then goes to brick and mortar? Do you see we’re good? You know, you know, I was fascinated. I was fascinated that when Toys R Us filed, they were like fortune 300 company, they had 11 and a half billion dollars in retail sales of toys, most of which was done in the store. I am surprised no one tried to go in and gobble up some of that market share with brick and mortar presence that to me see 11 half billion dollars, it didn’t all go to Amazon Target and Walmart, there was market share to be had, I was surprised no one will people start to fill the voids in a brick and mortar presence.
Walton 41:35
That is an awesome question that no one’s ever asked me. Like, I think you’re onto something like I’ve been kind of dumbfounded by that as well, because you’ll see the VC PCs throw hundreds. I mean, I can think of like brandless as an example. Well, the rumor was 100 to $200 million thrown at that company. And I think there’s this idea that these DTC brands are somehow technically, you know, technology companies by nature, but in reality, they’re not at the end of the day, they’re still retailers. But you’re right, there is this huge opportunity, in my opinion to reconceptualize how physical retail works from the ground up with a different tech stack than has existed before. It’s hard for a Walmart or a Target or Costco to spin on a dime because of the legacy tech stack that they have. But coming in and refashioning that in a different way, is a huge opportunity. And God knows you could do it for those for that same amount of dollars. And then when you start thinking about the proportion of retail that still is physical versus digital, and the profit that comes with it, that’s not a bad VC investment, especially when you know, at the end of the day, those are high risk investments to try to see if you could get it to pay off. Why not to reinvent right now? Yeah, why not reinvent the warehouse? Why not reinvent Target or Walmart? That hasn’t happened? Why not? It doesn’t make any sense. But the issue is, you’ve got to have usually entrepreneurs are young, you have to show that background. It’s like, you’re gonna go and be like, I need $50 million to reinvent Walmart. And people are. That’s it. It’s just I think it’s a tough sell inherently. But I think there’s
Ressa 43:02
something there. It’s, I think Headline News has made it challenging. Right. But yeah, so I think, right now, it’s very contrarian. And you need the right, the right people, because people, you know, it looks like when you look at the numbers, the growth online is, is is more compelling to a VC, it’s just not profitable.
Speaker 1 43:33
Whereas the store is profitable. Right. And so I think that you will, I think there’s, we’re onto something and we should start the conversation, because there’s obviously, you know, stores that and concepts that should be happening based on the market share left on the table. And we’re not seeing it as much as we did. But I think at some point, it will. And your point about the VCs and why they should I think was well said, and hopefully we will start to see some of that.
Walton 44:09
Yeah, absolutely. Well, thanks, man. Yeah, absolutely. I it’s a it’s a fun topic to think through, because every category has probably that opportunity.
Ressa 44:16
Yeah. Well, listen, man. That’s what I got for today. The end of the show, we typically do three questions for retail wisdom, we’re just going to ask you one question.
Walton 44:30
Oh, boy,
Ressa 44:31
I get one all right. Extinct retailer, you wish would come back from the dead?
Walton 44:36
That’s a good question. Yeah, I think we I think we talked about it already. But I think for me, it’s actually it was a rough. I mean, I think you as we talked about the dimensions for why a store exists, and you have young kids, I have young kids minor five and seven. There’s still something about that experience that isn’t nearly interesting to them. And so how do you really create a toy I would say quote unquote, kind of superstore feeling With all the omni channel capabilities you would expect, but also give people a reason to go there beyond just the product. You know, and I don’t think they tried to recreate themselves, but when you try to do it in 3000 square feet that like they did this past fall that doesn’t have the imagination required to captivate. And then I’ve seen some other instances like say, like camp in New York, where they’ve gone fully experiential, but that doesn’t have enough product to last for the long haul either, nor the omni channel capabilities you would expect that’s just more like an entertainment. So there’s a way to blend those two along the ethos of everything we’ve been talking about that I think will be fast.
Ressa 45:39
Awesome. Well, listen, man. That’s what I have for today. Awesome. Thanks so much. Great conversation, man. You enjoyed it.
Walton 45:45
Thank you. I did. That was awesome. Thanks for having me.
Ressa 45:49
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