Tony D’Onofrio (RTS 14)
Guest: Tony D’Onofrio
Topics: Digital transformation,
Chris Ressa 0:01
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Welcome to retail retold everyone. Today we have Tony D’Onofrio. Tony is the CEO of TD insights, a consulting firm for the private equity industry that focuses on retail technologies. Tony is a top 100 global retail influencer. And we are excited to have him today. Welcome to the show, Tony.
Tony D’Onofrio 1:20
Thank you very much for it’s a great pleasure to be with you today.
So Tony, why don’t you tell us a little bit about who you are, where you’re from your work experience and what you’re up to these days.
Well, thank you. So let me start. I’m actually Italian. So you’re going to hear a slight accent. I was born in Italy and came here as a child. So I grew up here. My career has been all in retail, I started actually working for a retailer and then ended up in retail information technology and security in terms of professional roles. And that actually had a very successful career on multiple, large companies. And then a few years ago, five or six years ago, I decided that one day, we’re all going to be brand, even people. So five, six years ago, I created this personal brand around the future of retail in terms of my thoughts where the future of retail was going and I built that brand over time. So for example, on LinkedIn, I have 160,000 plus followers, plus I,
yeah, I work another different channels. And so that personal brand really was designed to give me something to do when I eventually retire. And unfortunately, or fortunately, I got received a lot of requests from private equity companies to get engaged. Now don’t wait years for nado, because the action is now especially in technology evolution of retail. So I decided to retire very early and focus on private equity companies. But today, I’m focused on private equity companies working with our portfolio solutions, and helping them with retailers and strategies and directions so they grow fast. Let’s back up. So
who were the retailers you worked for?
So the retailer that I work for is actually taking pay what’s the name of the chain, it was actually eventually acquired by our home in Cleveland, Ohio. So that was actually my college. And my high school job. I did everything from being a product manager to being very manager night crew. I was doing all kind of individual that led me to joining NCR the new point of sale area. And that’s how I made the transition to technology. So but yeah, I started out in the grocery industry. I spend a lot of time in the grocery.
And where was most of your career on the on the retail Information Technology front?
It was with NCR where I had different roles in industry marketing, and also in sales successful roles. I also worked for an IBM integrator, a very large IBM integrator when IBM really was the dominant leader in Point of Sale work with naturally their largest integrator or software solutions. And in Greenville, South Carolina so that was the the two areas where I spent time around technology inside store.
NCR that’s subsidiary of Johnson Controls.
No, no, NCR is an independent company. They own a lot of different software solutions are based out of Atlanta, is used to stand for the national cash register. So yeah, Johnson control is really more on the security side. So Johnson control acquired Sensormatic. They also had, they also initially were Tyco. They were Tyco and Johnson control mergers companies. And Sensormatic was the retail division that I worked for and I spent a lot of time there that was primarily focused on
got it that’s where Johnson control makes I got from Got it, okay. Got it. And that was on the security front.
Correct. Okay. But even there, what I established my reputational as being very, very close to retailers. So for example, my last position was Chief Customer Officer. So I spent a lot of time flying around the world, spending time with major retailers, understanding what was going on in their operation. But I established a reputation early on, of doing a lot of research on trends and where the industry was going. So I got invited a lot in terms of presenting technology and so on, I actually started a presentation many years ago that I still continue today to update, which I call the disruptive future or retail. And I’ve delivered that presentation on stages on every continent around the world.
That’s a great jumping off point. What is gonna happen in this future of retail, from a technology front, what’s going to happen in the store? What are some things that are going to happen that are going to really make retail exciting and are going to be good for retail?
So retail, essentially, so let me stop, I’m gonna give it to pre COVID 19 in the post COVID-19 Do
it, let’s do it.
So let’s do pre COVID-19, pre COVID-19, retail went through three, what I call megatrend, three Metro informational stages. And they really were based on information. So whoever had the information had the power. And they really got going after the World War Two, were really manufacturers, establishing very productive supply chains and understanding what stores were, were selling. So they that they had the power. It changed in the 1970s, when the barcode was adopted by retailers, where they actually can measure exactly what was selling, they started telling the manufacturers No, no, we’re going to start what we think is selling. And we’re going to planogram, exactly how we want. So that was the second megatrend the barcode. And really, it was exactly 1974. When that happened, suddenly, the barcode moves the power from the manufacturer to the retail, the next mega trend we all went through, it really didn’t understand it. And that was really the introduction to the smartphone. The funny story about the smartphone is IBM invented it, but never really commercialize, they actually gave up on it too early, Apple put around the map 2007 and really became a mega trend when the consumer with that smartphone could walk into any store and decide how to shape their shopping journey, including standing in front of an item and say, You know what, I can buy cheaper online, I don’t want to buy it in that store. That’s a third mega trend, the retail was living with this digitization of the industry driven by the internet, and smartphones in terms of that term, mega trend, and we haven’t looked back since. So that’s a little bit of the pre COVID-19.
And so what’s the post COVID-19.
So COVID-19 is actually has been an accelerator I call it a Bleuler brutal accelerator of digital transformation trends that were already underway, retail was going to go online that was destined to happen. One of the challenges that US has is that it is indeed over store. So a few years ago, just last year, I think that seemed so far away, based on COVID-19, we were talking about the retail apocalypse, all the stores were going to close, we’re all going to go shopping online. And that was going to be the end though. And that’s not really what’s going to happen. But as he said that COVID-19 has accelerated this rebalancing of how much we do online, versus how much we do in physical stores. And what’s happening because us is over stored. So for example, we have only 3x the amount of square footage of a place like Germany, you have weak retailers going out of business.
I always I always say so I think it’s an interesting point, we talk about that we have more stores proportionately than other countries. But what I find interesting is, I find that number a bit arbitrary, because how does anyone know what the right number of stores is? So in order in order in order to know in order to make that 23x, Germany and say that’s over stored, you have to have a a vision of what the right number is. So what do you think is the right number?
So there is no right number? Exactly. What’s change is the importance of branding and the importance of creating these digital immersive experiences that keep the consumer engaged. What’s happening to us retailers, you have too many what I call boring retailers that are just not evolved. And COVID-19 again is Excel. already?
For sure that I agree with I, but I always say is someone someone says the over stored? I always go, why? Why do you think we’re over stored? Because we have more than Germany? Because we have more than Canada, that makes us over
the multiply times 10x.
But what does that make that over stored? And I think, because if you look at the amount of retail sales in the United States, that are done in brick and mortar stores, and you divide that out over the square footage of retail stores, it would make a very healthy store on average, but you have some that are, the average really isn’t the way to go, you’d have to take the median of that. But I always say, I’m not disputing that we’re over stored. I’m suggesting to the world that to say we’re over stored because we have more on a percentage basis per capita than the other countries that doesn’t correlate 100% to being over stored. I think, you know, that gets a little too much press on the per capita between countries. But that doesn’t necessarily mean you’re overstating it, it just means you have more than the others.
I totally agree with you, I just think that there’s a series a sector of retail in, especially in the apparel, and even in department store, that have fallen out of favor with the consumers in terms of how they want to share, the importance of branding is validated. So those retailers that did not keep up and or get ahead of the digitization of the industry are the ones that are probably agreed. And so
it is this transformation now post COVID. And so what happens next, Tony, tell me what happens next.
So what happens not first of all, the online could go on online is going to continue to increase, but it’s not going to take over the industry online is still most forecasts that I’ve seen will end up anywhere from a sim forecast and 20% to 25% of total, resales will be online, versus where we’re at today. And again, and 1510 to 15% range. In the US, there are some countries that are much higher, like the UK, they’re gonna they’re gonna get to 30% of retail sales online, but so that portion is going to get bigger, but it is not going to be the overwhelming way that consumers will engage in the shopping. Partly because rushing to online is actually expensive. Retailers actually don’t make as much money.
There you go. I’m so happy. You said that, Tony, I’m so happy you said that. That is the myth. I love it.
Correct. They didn’t know they think it’s great that we can ship and when every time you listen to an app to a call, even from Amazon, you gotta listen to the other side in terms of how much money they’re spending. on the cost side, Ken’s not being very, very profitable in just the
way it was billions for Amazon in q1 billion, 4 billion in q4 billion. So it can’t make money on that.
Correct. And that’s the challenge. So first of all, it’s expensive, and you lose margin by offering other services. Secondly, we’re all social, we like to him to spend time go go look, we’d want to touch and feel tech apparel, we buy a lot of pair online. But the dirty secret, we return out to 50% of it back, because it doesn’t fit. I didn’t like that when I actually put it on. So as a result, it’s an extreme expense that our retailers got to deal with. It’s really not made even worse with COVID-19. Because now you got to quarantine all those products, and do all those kinds of things. So, so their physical stores are still going to become very, very important in this new world that we’re going to, but it’s not business as usual. Consumers want to have fun. And the example that I’ve used a lot is the Nike house of innovation in New York. I don’t know if you’ve ever been there. But it’s really a digital to physical experience to the mat. So I think
it’s a great one. I know the store very well. The and I think you you said a lot there. That was awesome. And I do know that store very well. I think one of the things though, that’s a little perplexing to me is that’s an awesome store. You know, they got the lockers and they send you the code and they don’t have the person behind the counter to go bring you the shoes. It’s it’s really unique. That’s I don’t think that’s going to be the everyday store across the world. That’s a special store. Is that going to be the everyday store in your opinion?
No. So and actually for Nike that’s a flagship store, right flagship store where they go test ideas for which should be commercialized on a broader basis. Because ultimate again, it’s that balance I go back to So what is it
Digital Transformation look like in the, in the everyday normal store that’s not a New York City flagship for a multinational retailer.
So the digital transformation stories, again, leveraging the smartphone as a key device to engage with the store. And that could be getting coupons, engaging with a conversation with an expert, as you’re looking at things. So the smartphone or the digital devices, or the interface to a store, and they’re all over the, for example, the sorts of innovations that will continue, they’re still a struggle to figure out how much to let you lose in a store with a smartphone. For example, multiple retailers, Walmart, Nike have tried letting you shop with your phone, scan the barcode with your phone, never talk to anybody, and walk out with the product that you just bought with the smartphone. In some segments that will work in some segment of a longboard. There’ll be a ton of experimentation in terms of driving you to do more inside of a store. There’s a retailer called Zara out of Spain, they’re part of Intertek, 7000 plus stores, they’re putting self checkout in fitting rooms. So if you come out of the fitting room, you love that garment, you see a line, you don’t want to stand in a line, you can check itself out, right there in the fitting room. So there’s different experiences that are coming to the store to allow consumers to take more of their control on the shopping journey, using digital devices. Wow, I’m using those digital devices to communicate with the stores what you liked online.
Wow, that that I didn’t know that about Zara. That’s really, that’s really interesting. So here’s what I want to do. What are, I don’t know, the top three digital transformations we’re going to see that are going to change the landscape of retail over the next three years.
So the three that I’m focused on one is artificial intelligence applied to video. So the video camera that started out is really just looking at things. And then it went into streets and under store for prime is now data gathering device. It’s now analyzing what you’re doing inside physical stores. So I’ll give you an example of Walmart, and what they’re able to do. So Walmart just opened a store where the entire store is self checkout. There are no cashiers in there. This is a an experiment in Fayetteville near their headquarters. But they’ve also redrawn a lot of their stores where they shrunk the main lines. And gone to these bullpens where there’s a lot of self checkout. The reason they’re able to do that, and they’ve gone public with this I can talk about it is they have deployed artificial intelligence applied the video that analyzes each one of those transactions, happiness, so check out to see if to figure out whether you’re stealing or not. And if the the artificial intelligence figures out that you’re stealing, they will stop the transaction and call somebody to come and help you. And the video will tell them exactly what is happening, that the technology is deployed and in most of their stores. And I don’t want to get into gangs, because I don’t remember what a Walmart made that public. But it’s those types of Walmart a client ears. So I’ve worked for Walmart a lot. And I’ve worked actually in this artificial intelligence applied to video technologies. And so to me, those so artificial intelligence by the video, I think is is one of those key technologies, the whole digitization around the smartphone. That’s another transformation technology. I think that’s just getting started. Part of that, and it’s controversial. So I mentioned earlier on focused on three technology, one of the ones that I’m focused on is facial recognition. Very controversial. I know, especially now that Amazon, Microsoft, and an IBM that basically put it on hold for law enforcement. But to me facial recognition is one of those technology that will continue to progress, partly because Apple made it so normal for us to pick up the phone and open the phone with it. So it’s been normalized by other technologies. So you’re going to see almost not the Minority Report. If you’ve seen the movie, we’re not going to go down that far, where we’re going to be playing with eyeballs and although cannot those kinds of things, but facial recognition is another one of those technologies that I think will increase his presence inside stores. And then the third technology that I’m focused on is actually GPS inside stores. Because to me tracking and being able to know exactly where products are. And there’s two variations. There’s GPS, and also RFID. Those technologies are both being increased in terms of usage in tracking and telling you exactly where different things are. That becomes extremely important, especially as you do an online and offline business. need to be able to know exactly where your products are. If you make something available online to sell, you actually know what you have
Wow That’s really fascinating stuff. This has been really, really interesting, Tony, so do you have one? What’s the one thing that you’re like super excited about about retail, like you think is really going to be really impactful and good for retail.
So, to me, the digitization that everybody’s afraid of, I think it’s a positive, I think it’s almost going back to my mom and pop stores that retail started with where the personnel across the underside of the country who knew and they knew your name, or actually give you a personal service, and actually understood what your needs were actually understood what to order ahead of time. So this, the world that we’re going into, is actually the ability to actually engage on a more personal level, to actually understand your needs, and actually fulfill those needs. Yes, we’re going to give up that privacy. To me, the world we’re headed to is how much privacy are we going to give up to the balance how much value we’re going to get. And I do think we get to that right. Mix as digitisation world evolves. So I think we’re headed. And you see this in terms of how brands are evolving. You see that the reason department stores are struggling, because they’re a house of brands, they’re trying to be all things to all people, that model is starting to fail because the brands have figured out in that store, they have to tell a story, they have to engage directly with that consumer on a personal level, because a Macy’s or word or a JC Penney cannot tell all the different brands story that they have inside their store. So you see Nike Under Armour, all these retailers really starting to their journey. One of the reasons why Sports Authority went out of business is because of that trend. So digitization to me, is the thing that excites me, because it points to a much stronger retail industry going forward because it personalizes the experience and the engagement
with the consumer. Well said, The we read a lot about on headline news, the the big companies, and I’ll call it you know, the targets of Walmart’s to Amazon’s and their constant innovation in tech. Who are some companies that you know, have a significant amount of stores that are not those big headline news worthy that are doing digital really well right now.
So Nikes one, Kroger’s one, Zara is one. So in the text, so I can tell you in the text announced RFID in 2014, and they announced it after they had deployed in 700 stores. And they’ve they’ve gone down to mobile pay the self checkout example that I gave you, they just they just announced they’re gonna close 1200 stores and spend over a billion dollars on further digitization. So there’s a lot of good examples out there in terms of models. So for example, in the text is a fast fashion model, their goal is to take a concept that they see on a fashion runway and get it to you in less than a month. So fast fashion, the idea of getting you the last and the best and an aggressive price. And then having digitalization to back that up Nike in terms of some of the things that we talked about earlier, progress in terms of progress working with Microsoft on retail as a service model. So there’s a lot of different example but it three you mentioned, were actually very good example, in terms of what they were doing three COVID-19, that actually made it even more successful. Post COVID-19. Amazon spends over $15 billion a year on innovation. To think Amazon Google just released our smart shopping cart. So as you put it in, right, they have Alexa, they have all these different ways that they’re looking to evolve their model. Walmart, they were investing heavily in buy online, pick up in stores before COVID-19. And that was actually bring in Walmart, back versus Amazon. So and Walmart has been doing extremely well, because again, the heavy investment that we talked about, including a few minutes ago into the self checkout, and artificial intelligence applied a video, Target, same thing they were migrating the services. So there’s a lot of good examples out there in terms of what the world looks like as we balance in terms our investment in technology, and also deeper consumer engagement.
Awesome. You work with private equity groups a lot, and we spent a lot of time talking about the retailers What are the private equity groups doing as it relates to retail today? A lot of what we hear about in headline news is a private equity group that’s buying a retailer. But that’s not what you really work with. Right? So why don’t you explain you know what the private equity groups you work with, they’re doing?
Well, I’m interested in in private equity groups that invest in then we’re the next generation tech debt, where I see the next generation technology taking place. And I actually mentioned some of that earlier. So I’m looking for, where are those next waves that retailers are gonna adopt in terms of innovation, that will make the retailer more successful, and will make the technology company more successful, and of course, make the private equity more accessible. And so there are some very good ones, I’d stay away from private equity companies that buy distressed retailers, that’s not really my model, partly because my passion is really trying to figure out where that disruptive future of retail is going on a go forward basis. Got it?
Well, listen, Tony, this has been fascinating. You really gave us a lot to think about. And I think the listeners, this is a unique one for my show. And I think the listeners are gonna love this spin and the excitement around the digitization that’s happening and how that’s good for physical retail on a go forward. I want to bring us to the last part of the show, which is retail wisdom. The first question is, what is your best piece of retail advice for everyone out there?
So right now, my best piece of advice, especially to God, don’t feel like you are alone. And by that I mean, make sure you are talking to your peers, even in non competitive, competitive, but talk to your peers in terms of how you come out of this brighter, stronger. One of the things that I’m facilitating is actually an international exchange between European and EU and US retailers talk about where are we at? And what is it going to look like? What’s working for you? What’s not working for you, let’s eliminate what’s not working, and focus on the best practices. So reach out, this is the most important time to actually reach out to, to your to your community reach out to industry groups, and actually understand what’s working to prepare for what a new normal, it takes about 66 days to create a new habit, roughly before it becomes permanent. We’ve been in lockup and all this kind of disruption for quite a while, there’s gonna be a ton of new consumer habits. So right now spend a lot of time understanding what others are doing, especially the industry leaders to prepare yourself for that new normal and actually get ahead of it.
sage advice, awesome answer. Thank you. Second question. Here we go. What extinct retailer, do you wish would come back from the dead? And I will tell you this is a fan favorite. Everyone loves this question. So I’ll
tell you because I like toys. So I’m gonna say Toys R Us and one of your podcasts. And I actually became a fan of your podcast as a result of getting on this one with you. And I actually listened to the last one of the last ones or so that you did and. And Toys R Us is indeed my favorite when I think about it. That was you know, bringing a child inside of a Toys R Us and seeing the face light up as they ran from toys to toys, including myself when I was young. I do miss that physical experience has really he’s gone from that category. And I do think there was a bright future in terms of the digitization of that model and what you could do inside store. And I hope somebody actually picks up that mantle and brings it back.
Great. Last question. I am on Walmart’s website. And I have two young children. They love swing sets. Right now I’m looking at the kid craft Ainsley wooden swing set. What does that retail for on Walmart’s website? And I can get it to my house by Friday or I can pick it up in their store by Friday.
Oh, that’s a tough question, because probably much don’t buy swingsets anymore. thivim But what are those in a long time? Okay, I’m gonna guess
$200 $399 But thank you for playing it looks like the price of swingsets has gone up over the years.
Thank you very much for catching me. Goodbye more. swingsets
Well, listen, Tony, this has been great. Thank you so much. And your insights are really interesting. And I love your passion about this part of the industry and I think everyone’s gonna love this. So thanks Smith,
thank you very much I totally enjoyed it’s a pleasure to be with you.
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