Talking Shop with Venky Shankar

Guest: Venky Shankar
Topics: Marketing, consumer behavior

Transcript:

Chris Ressa 0:00
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. Welcome to retail retold everyone. Today I am joined by Venky Shankar Venky is Coleman chair professor of marketing and Director of Research Center for retailing studies, may business school at Texas a&m University. His areas of expertise are innovation, retailing, artificial intelligence, digital business, marketing, strategy, b2b marketing, international marketing, and pricing. He recently put out a article that I found fascinating on NLP, and its application in retail. So welcome to the show. Venky.

Venky Shankar 0:59
Thank you, Chris. Pleasure to be here.

Ressa 1:02
Yes, I don’t get a ton of professors. I’ll be it. We have some professors on the show from time to time. And today, you’re teaching and doing research at Texas a&m.

Shankar 1:15
That’s right. That’s right.

Ressa 1:18
Very cool. And what else do you what? Well, let’s back up. Tell us about you. Well, who’s who is Venky? And how did you get into this and tell us a little story about

Shankar 1:31
Thank you. Thank you so much, Chris, for the opportunity to be on your show. As you nicely introduce myself, my title, I started my retail journey. Way back in my undergrad days, where I was an engineer, I was to look at retailing and saying these is a an area where technology could really disrupt and make a lot of changes. So from engineering, I went into business. And then I got my PhD in marketing from the Kellogg Graduate School of Management at Northwestern. And then I started focusing in that time, there was the turn of the internet. And Amazon was launched at that time. So I got really interested in analyzing online offline behavior, and trying to understand what retailers should do. So I was like a kid in the candy store. You know how it is right? He started with video games, he started looking at retailing opportunities, and you’ll look at these evolution online, offline digital. And then I started researching this areas a lot. Pretty soon, I started moving very much deeply into research in most recently in artificial intelligence, machine learning and all technology. But in the retail space, I’ve been watching that as a shopper as a researcher. And I was fortunate to work with a multitude of retailers in terms of consulting, executive education, and also research opportunities that informed me a lot. And today I sit in a very enviable position where we’re seeing a lot of disruptions in retailing. And we’re also able to see the role of technology making those changes happen. And it’s been a very good journey. And I’d be learning and continue to learn even as I speak as of today.

Ressa 3:31
Fantastic. So you got your PhD in 95. And then Amazon kind of takes off. And in 2012, you wrote a book, shopper marketing, that’s really what that book was about.

Shankar 3:46
Yeah, I think we were witnessing a paradigm change, if you will, in consumer packaged goods, starting with that to all areas of retailing. And that was the fact that marketers who used to spend a lot on mass media advertising, you know, to TV advertising, they were shifting all their promotion efforts into the retail. So the point of purchase, being the store and also into digital and so consumers marketing, marketing to consumers started changing right and now you started calling them shoppers rather than consumers because a shopper is somebody who necessarily does not become a consumer immediately right a shopper We all shop for a lot of good things, whether it’s window shopping, or whether it’s shopping in the store online shopping for others. So we are in the mode of looking at things and evaluating things. So that then we started looking at how we can influence those shoppers as marketers both retailers and brand manufacturers. And we wanted to better understand shopper behavior how do shopper behave when faced with a ring set of technologies channels to checkpoints are sort of 360 degree view of how a shopper looks at multiple options, right. And that meant that a lot of research was being done at that point in time, so consolidated all the research, including my own, and then came up with this book on shopper marketing, which informs any manager about how shoppers go about their shopping, behavior, starting from problem recognition, pre purchase, all the way to post purchase, and recommendation, the use of social media and so on. So that created the opportunity for us to better understand how to market in this new land where, you know, kids, shoppers are constantly being touched by multiple messages from all over the place, and how do we compete in this marketplace?

Ressa 5:52
If you were to sum up that answer to that question, in like your Twitter message of 280 characters or less, how would you sum up the answer to that question,

Shankar 6:03
the way to look at it it, shopper marketing is evolved considerably and is continuing to evolve with the acceleration in digital disruption and technologies in social and mobile media, in marketers have to pivot very quickly, to really address these issues.

Ressa 6:24
And, and when you say pivot? What are some places they should be pivoting to?

Shankar 6:29
Yeah, that’s a great question. One of the movements that we seeing is omni channel marketing, right, which is trying to look at everything from a shoppers point of view, and try and see, if I’m a marketer, if I’m a retailer, or brand manufacturers, how do I stand out? In the minds of the consumers? Where do I Where do I figure in their purchase journey, right? pre purchase, post purchase all of the different steps. And we need to pivot to where we are top of the mind in terms of awareness. And we are also very useful to the shopper at the right time. So today, after the pandemic, Chris, we all are used to shopping from our home. So curbside assistance or, you know, delivery, all the different modes we are now used to right. And that’s the pivot that retailers and marketers had to do. And that was accelerated by COVID crisis. However, in general retailers and smart marketers, brand, marketers have to be thinking constantly about how to do it on a continuing basis and not be doing this when you’re forced to do it. And that’s the pivot that I’m talking about being constantly, you know, being ahead of what shoppers are anticipating. So that brings us to the emergence of Metaverse, right? So Metaverse is poised to become a new playground. And do we as marketers have a presence there? Have you? Are you planning because shoppers are thinking about or shoppers are going there? So are we pivoting to that? So that will be one area for us to think about? That makes sense to you? It makes sense.

Ressa 8:15
I think one of the things so you said a lot there. So we’ll go to a bunch of things. People keep saying and I’d love your take on this that the the pandemic changed how consumers shopped and new new mentioned from home. And no doubt, consumers shop from home a little bit because we were in a place where we weren’t supposed to leave our houses yet. I don’t know it depends on the numbers and the quarter. But I don’t know somewhere north of 80% of all retail sales are still taking place in store Scott in a store. So so did the consumer really change? Yes, the consumer seemed like they did.

Shankar 9:00
Yes, they did. The key to understand is that a lot of people think that you know, it is one way or the other people think oh, everything is shifting to online versus everything staying in store. The reality is that’s what is omni channel. It’s not, you know, extremes. It’s a balance, right. So if you think about the balance in 2012, by 2025, it’ll be 7525 75% of all the sales will still occur in bricks and mortar locations. But 25% will be online, but the point is that they’re all intertwined. So today our shopping behavior is very different from shopping behavior 20 years ago, where we used to go to shore store and buy our, you know, few of us used to buy online now we search things online, we already make up our mind sometimes. And then we basically come to the store to experience things look at the DTC brands direct to consumers, right? You go to a store to experience so if you think about it, Warby Parker, or bonobos, or Casper, you do it all online, but you want to come to the store to experience it or you, you go to a stylish shop in bonobos and you do all the fitting, but then you get the product shipped. So the role of the stores is very, very important. Now, people don’t understand very clearly that it’s not just to sell products in the store itself, store is a very important element of this omni channel mix. But stores role is not just to sell products, stores got experience role stores got in information role, and stores got a role to play in exciting the shopper. So those are all the roles that will still be there. So you will consequently will see store being a very important part of the future of shopping.

Ressa 10:48
I’m, I’m so intrigued by what will happen with this because you mentioned some brands, in these DTC brands, if you take in today, and we talked about 8020, the thing that I I kind of squint my eyes out a bit, is if you take some of these brands that I think are great, and I love seeing what they’re doing, you know, whether it’s Warby untuckit, whomever, they’re a very, very small piece of overall retail spend the direct to consumer as we know it, right? I think direct to consumer is interesting, because brands like Apple and Nike have gone direct to consumer forever. And we just started talking about this not long ago, this this word. But I don’t know, you take brands like Warby and untuckit, and you add up all of them, not all of them, you add up a bunch of them. And they they don’t even equal the market share of Pampers one brand by Procter and Gamble. And so I get a little concern that we take some of these niche DTC models that represent a small share of the overall market. And then say, this is the changing landscape.

Shankar 12:19
Right, I understand your concern. And I’m saying the same thing, I’m not trying to say that these are the dominant part of the landscape, what what they are, even they are going into physical stores. That’s what I’m trying to emphasize. They started out online, but they are going into stores. What I’m emphasizing is the role of the store is getting changed even the conventional, you know, Pampers being sold through multitude of physical stores, the role of the stores in that process itself is changing. So for example, a lot of people who buy pampers are in the store could buy it in multiple ways, they could go to the store, and you know, take the whole item which is bulky in stock, or they could still buy it from the same store, but order online and get it delivered. Or they could still, you know, go and pick it up in a curbside, somebody loads it onto their car, so they don’t have to lug it around. So a lot of these, we need to better understand how these scenarios changing so that the role of the store is adequately done. If you look at, you know, traditional, very strong retailers target Walmart, Costco, they were going really strong, why are they doing very well because there’s an important role for them. Right. And, and that’s not just physical, they are also omni channel, they are also able to understand customer needs and they are also pivoting lots of their customers want curbside pickup. So they are now very agile now, they are able to cater to the needs better some of the customers want to be in store only so they are able to cater to that it is understanding how your different market segments are behaving are anticipating and pivoting to the different channels becomes very critical. And store is that it absolutely crucial role to play on this.

Ressa 14:22
Totally agree on on that last point and I am with you on the omni channel. I’ll be in certain scenarios. I can tell you in March of 2020 there were very few diapers in my stats that are being sold online because I went online and they said like two weeks and if you’ve ever been in the purchase of diapers, you can’t wait two weeks for

Shankar 14:50
it’s like a turn.

Ressa 14:54
That is an eternity. Even next day doesn’t work. I know it’s

Shankar 14:58
too late, but we are Also remember that was a there was a panic mode, people stocked up on diapers, for excessively, and that also led to supply chain shortages. But then you saw after that there was a lull in that demand for that. So these cycles happen, this happened because of the pandemic. But what is interesting is the role of technology press, because if you look at Lowe’s today, you know, very in store physical hardware retailer, but they have now used technology and fabulous ways to really enhance that shop these shopping that takes place in the store. So you can basically have robots that greet you and then take you to the right location, right? It remember how many times we’ve gone to Lowe’s or Home Depot and got lost, right. So this is where I think the role of the store has gotten very different right? Now you can use the technology to make people go to the right aisles to also interest people give them more guided tours, you can use augmented reality, for example, to overlay, you know how E, an item might look in your kitchen or your bathroom so that you can make better decisions in shock oil shopping in the store. Right? This is what I mean is really the changes are the pivoting that the retailers have to do. And it retailers senators really market the same way as they used to in the past, they will be losing a lot of shoppers, because let’s face it, you know, 1/3 or more are millennials and Gen Z’s now, right, and they’re used to technology. So retailers will have to really understand that they want to use technologies to shop in even while they’re in the store. Right? And that’s where I think the pivoting has to happen. That makes sense to you.

Ressa 16:58
It does it makes a lot of sense. All right. Let’s go to something that that you said not so new that people are talking about a lot that you were you didn’t write the article, but you were interviewed about it, which is the storm store concept. And you were interviewed about the Lowe’s and Petco scenario. So why don’t you give us some take on what’s going on with store and store and how you see that playing out in the future? And what’d you just think of the concept of store in store?

Shankar 17:26
Absolutely. So Chris, store in store is not a new concept, to be honest with you. It’s been around forever, you think of department stores, you know, they used to house all the big brands, the designer brands and the luxury brands. And all of them are counters. You know, if you think about going to even today to Macy’s store, and then go to the beauty department, you can see that different brands, Christian Dr. You know, Calvin Klein, all of them will have their own so called boots, or small retail spaces, right. And so the idea was that at that time, people could get a sample of different set of brands, each exclusively marketed dedicated by salesperson or sales staff. And that is how they promoted it. But what didn’t happen in the past, which is happening now is an entirely new store that used to market separately as a different store now being part of a bigger store concept. So Sephora, for example is a luxury brand. And that started you know, having it’s still within store within store in a lot of these outlets, like in JCPenney. Kohl’s, even, you know, not very big retailers. But yeah, it was even, you know, in strip mall locations, it’s smaller footprints. And the idea is that, you know, this, these retailers can have expanded traffic because of the new brand that they bring inside their real estate. So if Lowe’s gets Petco and it gets a lot of pet owners in the store, who might actually cross shop and buy some hardware products, and likewise, Petco can get some low shoppers back in, and also the demographics. So if you think about pet owners, most of them are majority of them are women 60 percenters. So, whereas it’s the opposite for hardware stores, right? The majority of them are male. So now you can get a mix of the genders to shop in the store. So that’s an advantage. The hard part is to working out the economics of it who gets what, and how do you distribute it? And that’s the thing that’s being worked out right now. BestBuy is a great example of store within store prep Best Buy had a hard time competing with Amazon because they were getting showrooms out in the showroom is thick concept that, you know, where shoppers used to go to Best Buy, learn about a new TV or stereo system or a new computer through all their sales force, and then go to Amazon buy it at the lowest price, right? So that concept was making them uncompetitive. So basically, I started saying, What can I do? How do I compete with Amazon? So one possibility is that I have this higher real estate cost, and I’m also paying my sales force. So my costs are higher, I can price match. But if I price match, my margins are lower. And I could go out of business pretty soon. But if I price match, I have to do the price matching, it became almost clear in the short term, but in the long term, how do I do? How do I, you know, transfer some of the costs to the brands themselves. So they create a store with this store where they could have a section of Apple brands, Samsung brands, Sony brands, and they undertake to manage the retail space, they have their own sales force, and they pay for that what is in the interest of Sony’s and Samsung’s and apples, because they know that they will have dedicated time of consumers and shoppers, right. And so they can build the brand within the store. So it made sense for BestBuy to have the store within store concept to defray the costs. And at the same time attract buyers who will get more knowledge of these technical or technological products, which require a more expertise in either buying, installation usage, and so on. And so the store within store has caught some momentum, because retailers now can share costs attract different mix of shoppers, and dendrite, they can actually increase and stimulate demand. Right. So that’s where that’s where store within store concept is headed. But it remains to be seen how the economics will be worked out, and how they make sure that, you know, some brands don’t step on each other’s terms which can happen if it just goes really beyond.

Ressa 22:04
I love those three things that you mentioned that are that makes storing store interesting or compelling defraying cost access to new consumers and demographics and, and potentially increasing demand. That is, those are three interesting points about store and store that you don’t hear about all too often. And I think it’s great insight. So thank you for sharing. You’re welcome. So the last piece, I think you’re spending a lot of time on artificial intelligence and its place in retail. Tell us about that.

Shankar 22:40
Oh, there’s a lot of excitement around that. Because now retail name of retail is, again, how do you really anticipate customer needs, and real cater to those needs? Right? Think about the old, very, very old days of retailing, where you said a corner store, the corner store owner is to know everybody who’s to come to the store. So Chris, if you went to your corner store, and the shop owner would know exactly what is Chris lot, right? What does he not like? And similarly for me, too. And there was the age of personalization, or customization which we took for granted. Then when we started scaling when we got to retailers, and then you know, we got huge, big box stores. All those scones have disappeared, right? Then retailing became more impersonal. And it’s all about low prices and masses and volumes, and so on. But now we are in an age where consumers are shoppers want personalization. We want the experiences we want the products, we want the services, we want the mix of items that we really care about. So we want retailers to cater to that. How best can we do that? Enter AI right. Ai now allows you on scale to really personalize things. So AI has a lot of role to play on the consumer shopper side trying to personalize recommendations and shopping experiences on the demand. The supply side also AI helps us a lot how does it help it helps inventory management it helps making sure that we’re managing the process efficiently. We don’t have stock outs, we have the right job, almost the right products at the right time. Almost sold on demand. So AI is helping in that because it’s doing real time forecasting and so on AI is helping with robotics, micro fulfillment, which is the idea that you are fulfilling on demand using automation, right. All these things are converging. Now the technologies much cheaper and faster because you can use all the data, the consumers giving you not sure As to the purchase data, but also the social media data, their behavioral data that we can now use to customize now you have also scaling in AI with voice, video, and, and data. So all of these things can be used now on real time basis to really meet customers where they want you to be met. And that’s where the power of AI is. Now the question is become commercially viable in a lot of places. And as it becomes more and more commercially viable AI will start to really make big impacts or influences the way marketers are marketing to shoppers, and how the omni channel mix is being managed. That makes sense to you.

Ressa 25:45
I mean, I am far from being an expert and understanding AI is not my world. But I encourage everyone to read the piece you just put out on NLP. And I think that is interesting.

So does it make sense? I understand what you said and the benefits, I think how it all starts to shake out will be interesting to see. Thank you. You want to tell everybody about the article you put out on?

Shankar 26:14
Sure? Yes, absolutely. Yes. Just completed a piece of research. It’s total personna is from Oracle Corporation. And we here I wrote a piece on the influence of NLP as natural language processing, in marketing, and how it is reshaped marketing. So we go into a technical deep dive and introduce what an NLP is and how it is being used. And we also showcase the more emerging class of NLP tools, or what we call auto encoders, which are being used systematically now to better understand customer needs, anticipate those needs, and then deliver on those needs by marketers. So it also ends with a set of future research directions and future areas of opportunity. So it’s published at the Journal of Academy of Marketing signs. It’s online went online two days ago, and it’ll be available. And those if you’re interested in reading this, can Google Journal of the Academy of Marketing signs, and my name that is think it says Shankar or Venky Shankar and they should be able to see it.

Ressa 27:24
Excellent. Okay, Venky want to take us to the last part of the show, we call this retail wisdom. I’ve got three questions for you. Are you ready? Yes.

Shankar 27:34
Go shoot away. Right.

Ressa 27:36
Question one. What extinct retailer Do you wish would come back from the dead?

Shankar 27:40
Toys R Us? Well, it’s not totally extinct. I know. They’re sound, toys or sections, ACS hearing. But I know as a kid, I’ve been in Toys R Us far too often for myself or my kids. I know that there used to be that glow in children’s faces when they went into the store that unfortunately, does not exist now. To add that extent. So that would be my my store that I’d love to see more of.

Ressa 28:11
Perfect. Question two. What is the last item? Over $20? You purchased in a store?

Shankar 28:20
I had to buy a new pair of shoes. So that was well over 20. So I’m a more? What would you call minimalistic person? I have only one pair of sneakers at any given time. Because I feel like the planet can do it. Uh, you know, conspicuous consumption? And I had to recently buy one because my old sneakers. Absolutely, you know, will not travel any further. So where’d you get them? I got I think I got them in online first, and then went to the store to make sure that I’m buying the right item. So I’m a true Omni tell shopper. Right? Yeah, got

Ressa 29:05
it. Okay. Last question. Thank you. If you and I were shopping at Target, and I lost you what I would I find you in

Shankar 29:16
the video game session. Right? The games and the technology and electronics. I know it’s very strange. I don’t play video games anymore. I’m too old. At least my son thinks that. You know, I’m I’m too slow and our things but I do a lot of research and video games, gaming. Metaverse, NF T and so on. So I’m always fascinated to find what is the latest on that. And I always like to check things out.

Ressa 29:42
Perfect. Okay. Well, Venky this was terrific. Thanks so much. Where can people find Thank

Shankar 29:49
you, Chris. It’s really my pleasure and delight. You do a great job with your podcast, and I certainly love listening to many of them and Our viewers and listeners can find me on my website, which is thankee shankar.com spelled VENKYSH a nkr.com. So you can go there and find connection to all my articles and my podcasts. I myself have a podcast where I interview a lot of academics so they can get access to that, and all my media appearances and so on. Thank you so much, Chris for for providing a great platform.

Ressa 30:37
Thank you. Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode