My conversation about the future of retail with expert Jon Bird
Jon Bird is CEO at VMLY&R Australia and New Zealand as well as Senior Advisor Retail and Commerce at VMLY&R Global. He’s one of my top favourite experts on the future of retail whom we’ve visited him many times with our nexxworks Innovation Tours. I interviewed him for my Steven’s Weekly Podcast (you can listen to the whole conversation here), but as always, I’m sharing the highlights on my blog platform as well.
We obviously talked about the highly transformative times we’re experiencing today and how – in an incredibly short period of time – the corona crisis proved to be a really interesting trigger for behaviour change in how we work, live and shop. This has been a challenge for retail, but it is just as much an opportunity, with the statistics to prove it. Jon told me that for instance e-commerce penetration in the States rose from 16% to 27% post-COVID. The Australian numbers were even more dramatic, rising from 10% pre-COVID to 24% today.
One of the great things of our conversation was how Jon clustered the insights and opportunities in retail into three recognizable areas: the hands, heads and hearts of retail.
The hands point of view looks into how physical retail will evolve into something different, particularly around touch. This is a challenging one as physical retail had been under a lot of stress already, as we all know. The concept that was supposed to ‘save’ retail shops was that of “experience”, which has become so much harder today as customers might want to keep their distance and touch as little as they can, even in a post-COVID world. Even if things go ‘back’ (whatever that is), concerns around hygiene and safety will remain.
As Jon pointed out about the future of retail stores, quoting William Gibson: “the future’s already here, it’s just unevenly distributed”. “Just look at the experiences in the Amazon Go stores where people can enter and leave without touching anything except for the groceries they want to take home thanks to a mobile app. Here in Australia, the leading supermarket retailer Woolworth’s is talking about rolling out a similar technology.”
When I asked him if the role of stores might shift to logistics centres, as I had seen on one of nexxworks’ Innovation programs in China, he indeed gave the example of Hema, which I too had had the chance to visit. “Alibaba’s Hema supermarkets are a really great example”, he started. “They are not only shops but distribution and logistics centres as well, centred on a local population in an area of about five kilometres around the store, so that they can guarantee delivery below 29 minutes. In-store, they offer a fantastically frictionless and transparent experience. You can for instance scan any item and receive the complete backstory about where it was raised and processed which is doubly appreciated in a post-COVID world. And if you eat in their restaurant, you order via your mobile phone and the food is delivered via a robot. And once Hema customers are used to this fast and frictionless experience, they are quickly trained to interact with the store from home. That’s why – except for Hema employees – you see so little people inside the stores, which are distribution and logistics centres above all.”
Jon’s “Heads” perspective investigates how the digital “smarts” around retail are rapidly changing. “The COVID experience was a fantastic test to see if retailers’ cloud-based business systems could rapidly accelerate around logistics and technology. Lots of them were caught out during COVID times because suddenly there was such a load on the system.” It’s essential that they can scale technology and logistics as demand goes up. A clear “how-not-to” example in this case was Kmart which was unable to follow the rising demand on their online shop because of the corona crisis and then put people in virtual queues.
When I talk about this importance of technology helping the customer experience and removing friction to companies, I get this standard example from the medium-sized to smaller ones: “Steven we would love to do that but we don’t have the capabilities nor the budget.” Just like me, Jon feels that that’s just a bad excuse: “do what the best players, think about the customer experience perspective and then just utilize the available systems that are affordable. You really have to be creative and think laterally in this case. But not looking into the opportunities of technology is simply ridiculously dangerous.”
“The heart perspective, then”, explained Jon, “tunes in on how the emotions around shopping and consumption are shifting.” We’ve obviously seen big changes in that aspect since COVID-19. “Consumers, for instance, are becoming more internally focused around the home, family, wellness. And there has been a rise in mindful consumption, where they really consider what they purchase and where it comes from.” The latter is of course what I’ve been talking and writing (in my new book The Offer You Can’t Refuse coming up in September) about quite a while, about consumers expecting that companies will need to act and produce in a manner that is not harmful to the world and its inhabitants.
Jon added to that that we are experiencing a shift in consumers looking more locally, too, which also fits in this idea: “Of course we will see the Amazons, Walmarts and large retailers strengthened during these pandemic times. But I think at the other end of the spectrum too, we will see really interesting small retailers that will purely focus on the local community.” And that’s absolutely how I see it as well: there will be top class of convenient digital players like Amazon and then the smaller engaging players that will offer an interesting personal experience on the other had. The grey mass in the middle, that’s just good enough but not flawlessly cheap or convenient or ultrapersonal and unique? Well, they will simple disappear one by one.
We ended the conversation by discussing how long the impact of COVID-19 would last. Would it be long enough for people to start a new habit, or would we just go back to our old ways. Jon added something really interesting to that: “In many ways, the Sars epidemic was really the birth of digital commerce in China and really accelerated everything around that. That’s when Alibaba first came up with Tao Bao for instance. So many changes from back then stuck around, and I believe that we will see some COVID-driven changes stick here in the West as well.”