Episode 22: Times of intense retail change offer opportunities – but not for boring brands

In our final episode of the Shoptalk Fall series, Amie sits down with Sarah Engel, President of January Digital to discuss the changing customer expectations of brands across multiple channels, changing shopper demographics, and the essential role of customer loyalty and retention, among other challenges.

Transcript

Intro:

Coming up, on this episode of Retail Untangled…

The technology leaders are saying I'm going to be decisive about what I'm building out and why. What is the actual end goal from a customer standpoint? What do I want my customer to experience and how can the technology enable that experience? Or what does this help with internally and how does it allow these really smart people that I have to do something different and better?

Amie:

Welcome to Retail Untangled. My name is Amie Larter and this is the podcast where we speak to retail industry experts and find our business hacks to help you succeed. You won't find these gems anywhere else and we have some superb stories from the coal face as well as helicopter insights from retail industry leaders. This week we're bringing you insights live from Shop Talk Fall in Chicago.

One of the overarching themes that emerged from main stage conversations at Shop Talk Fall this week was that despite the challenging and tough conditions retailers currently face, there's so much opportunity and growth potential.

Sarah Engel, president at January Digital, was on stage throughout the three days and joins me today to unpack those discussions and share what retailers need to focus on to grow, break through, and to really make that mission possible, the theme of this year's event, a reality. Thanks for joining me, Sarah.

 Sarah:

Absolutely. Well, thank you for having me. I really appreciate it. And it's been so far, it's been a fantastic week here in Chicago. The first Fall show that Shop Talk has done. It's been really interesting in the sense that yesterday I did a session with the founder of ThreadUp and CEO James Reinhart and then also with the co-founder of Pattern Brands. And so we were talking about change in the industry. This morning I did a session with the CIO of J.Crew and the co-founder and CEO of Fabletics. And so you look at those four brands, they are you know, completely different, but I think that some of the things that are coming about with each of those businesses as well as a lot of the other conversations I'm having, that it is a time of intense change. Many people are quite overwhelmed and also we're starting to see this kind of next phase of retail that has so much opportunity. Like I am an optimist and I love retail and so maybe I've always felt that there's opportunity.

It is very different right now than even nine, 12 months ago. And so there's a couple ways I'm seeing that come to life. One is that embracing change is starting at the very top. So the brands that I'm seeing do incredibly well, and I think that's why we had Pattern Brands and Thread Up on the stage yesterday. They have senior members who are saying, I am going to lead the change. We're not going to let change happen to us. You know technology shifts, consumer shifts, we're going to pay attention to every signal and then we're going to be very decisive about what that change is. 

Amie:

So not reacting. 

Sarah:

Right. And I think that certainly I feel like here on the show floor and then know brand leaders I talk to every day when they are reacting that is where there's a feeling of overwhelm or hopelessness in this industry. 

Amie:

You're learning because you don't have all the answers then and there and so you're learning about the change you're trying to formulate plans.

Sarah:

Right, and I think that, you know, I think about Thread Up yesterday in the conversation we had. I've known him for a very long time. Ten years ago, probably, we had this conversation of him saying, this is a tech company. I am building a tech platform. I want to monumentally shift sustainability in fashion, and I want other brands to white label this. Right? That was his plan. He acknowledged that over time, they started to follow retailers. They started to do things retailers did, and so he made a very decisive shift to become a technology brand again. 

They have launched some of the most forward thinking, I mean, honestly leapfrogged a lot of traditional retailers in terms of AI capabilities, customer facing AI capabilities, but that took a decisive change. And some of the people in the organisation no longer made sense. And he was willing to just say that on stage and really have a conversation about the decisive nature of a change like that and saying, we are not a retailer, we are a tech company. That is a major shift in mindset. So I appreciate that and I think that's what I'm hearing more than anything from the senior level leaders here. They are being very decisive about what the goal is, what that change is going to be and then they are from the top. They're not letting it happen to them. 

Amie:

Yeah, it's not the landscape or the environment, so to speak. You know, pulling and dragging them in a certain direction as them having a vision and or a strategy and taking the business on that journey. 

Sarah:

Absolutely and I think we have a lot of conversations about all the new technology capabilities and I'm sure AI has been said 4,000 times in the last two days. That said, the technology leaders are saying I'm going to be decisive about what I'm building out and why.

What is the actual end goal from a customer standpoint? What do I want my customer to experience and how can the technology enable that experience? Or what does this help with internally and how does it allow these really smart people that I have to do something different and better? Be more creative, be more strategic, utilise AI for those purposes. So again, you can let technology happen to you or you can go, is exactly how we're gonna go about it. This is exactly how we're gonna shift our organisation. I think the same thing's true for consumer behaviour. It's easy to go, know, Z and Gen Alpha, shop differently and this is happening to us versus we're going to understand them, we're going to understand that it's not one age demographic, we're talking about millions of psychographics and that those generations have immense impact on the two generations above them. 

Amie:

And I'm keen to understand from what you've seen because it is such a, you know, that it's a flexing environment and market across category. Leading is not new and managing change is not new. However, it does seem to be that for this environment, it is something that we're really having to talk through and kind of pinpoint as the outlier. What mindset, mind shift do retailers need to sort of embrace this and where are they going wrong? 

Sarah:

I think, gosh, Steve Dennis is here somewhere, I know he's been on stage as well and he'll say, you know, boring retail is what will die. And I think he's right, you know, that is, you know. If we are going to be, you know, offer products that aren't super exciting on a cadence that's not exciting and expect people to continue to buy, that's not the reality of how consumers take in information of the competitive environment, of everything that happened, especially during COVID with social commerce and the capabilities there. It's like you have to be decisive. I think that's the difference. 

Amie:

It sounds like decisiveness. 

Sarah:

Yes. You know, running a boring brand is no longer going to be good enough. I think that it was a little bit time for that to shift. It's like, what does my customer want? Not just I'm going to follow my competitors down the rabbit hole and whatever they do, I'm going to do. Whatever it's next day pick-up or whether it's product selection, being very clear on who you are and what that means and therefore how you show up in the marketplace, even all the way to your marketing efforts is more important than it's ever been because you can't live in a gray area and not be super clear on who you are and actually make gains right now. 

Amie:

And from that managing change piece, did you speak to Pattern? 

Sarah:

Yes, Pattern Brands. and Sue's is fantastic, she's the co-founder of Pattern Brands. They have a very interesting situation where a very different type of company than ThreadUp, which is public, Pattern is private, but they were originally a brand agency and they worked with a lot of smaller consumer brands. They then shifted their model to actually incubate those brands. They then shifted their model again to start acquiring those brands and had some VC funding. And so they've, you they now have seven brands in their portfolio, one which they incubated and six that they acquired. And so that conversation was very much about like, the change of any acquisition is difficult, right? 

Like, you have all these founders and you bought these companies for a reason and they built something really incredible, which is why you wanted to acquire them. They acquire companies that have not taken on funding. Yeah, and so you have that situation, but now it's like how do you get to a situation where you have shared services? Everybody has their own HR team, their own marketing team, right? And like just that change process. So they both were changing their own business model and shifting how they saw the market and what their capabilities were, which has been very successful, but they were also constantly bringing in new brands into their portfolio and having to go through that change management every single time. One of the conversations we had, we had a little laugh about, which is like, you love all your kids equally? Right? It was a moment of like, you can't, know, some of the brands have ROI right now and some need a lot of nurturing. And how do you actually do resource allocation? How to, you what does that look like? And so, but yeah, I think that's another situation where she...man it's so interesting if nothing else she is a phenomenal entrepreneurial mind and I was you know I was almost as interested in that as it was about the retail experience. 

Amie:

I was just about to say I'm sorry I missed it. It sounds really authentic. 

Sarah:

Yeah she's basically like I will ask anybody anything and I will like research and I will dig in and I will find find the answer and I I think there's so much power in that especially to the younger folks in the audience being like you make you make the path that you want to make so yeah.

We had some really, I think some decisive leaders, both in the sessions that I was involved with, but also a lot of the sessions on stage. It's like, you know, I think coming here in the fall right before the holiday season and saying, yeah, we're going to be customer centric. Like nobody has the patience for that. It's like, no, really, what are you doing and how are you making decisive changes to your business and what can I learn from that? 

Amie:

Okay. So Mission Possible number one is sort of lead, don't let the market lead you. Now number two we've spoken about just briefly is more so multi-channel and how that works in unified commerce. Unpack that for me. 

Sarah:

Okay, absolutely. Yeah, I did a session this morning with the CIO of J.Crew, his phenomenal Danielle, and the co-founder and CEO of Fabletics, Adam. And so we had a little bit of a laugh because unified commerce is a word that is used often here at Shop Talk out there in the marketplace as well as is Omnichannel, as is... 

Amie:

Omnichannel's been used for a little longer.

Sarah:

I know, there's like so many different ways. The point is, yes, we all know we need a unified experience. We need customers to experience our brands and purchase when and where they want, at the basic level, right? That doesn't sound like rocket science. That said, it is incredibly complicated. Especially as you add on, think about, okay, J.Crew's in a situation where...you have in-store, you have mobile, you have social commerce, you have site. Like that is all of the different places people can touch and buy their brands. Where you have Fabletics, which has not only all these different places that people can touch and buy their brands, they also have full price shoppers. They have a membership model, which is a significant portion of their business. And then they also have an online presence. 

So I just think it's an interesting, interesting scenario where unified commerce, omni-channel, whatever, however we want to refer to it, it is not just, in the past we would have said, great, from a mobile perspective, on your website and in your store, that's what needs to be all unified. That's not what it means anymore. It's like, yes, obviously it means that, and therefore you have to get your data together and therefore you have to know who the customer is and you have to be able to personalise in store and not just online. All of those elements are incredibly complicated.

But it also then layer on top of that every media channel that you're running in. Layer on top of that social commerce where they may be transacting and they never come to your site. It has gotten a lot more complicated and so we kind of had a laugh about the terminology changing, but the concept is incredibly complex. And I think those who have really embraced technology, two different situations, J. Crew, which they needed to kind of rebuild and re-establish some of their technology, they are a brand that's been around for a while versus Fabletics. They built all of it in-house from the ground up. 

And so two very different situations, but both incredibly complex of how you actually get there to have in any given customer interaction actually have it make sense and feel right and feel compelling. 

Amie:

And what would you say in terms of brands that are out there at the moment that are doing a good unified experience?

Sarah:

I mean gosh talking about Fabletics this morning it was funny and I had been a member in the past but I it's been a while since I had gone through the process so I logged out I went to their physical store at the King of Prussia mall near my house I logged out I went through their quiz process I don't know if you've used Fabletics but you have to go through a quiz before you hit the site and we had a good joke of like any senior level marketer that they interview is like, I have this brilliant idea, let's get rid of that and reduce the friction. 

Which they've run a million tests and it absolutely works better and they get first party data. But you run through that process to become a member and the price differential is significant. We're talking if I just purchased leggings, they're like $99 or $98 versus like $14. It's a massive difference in price. And so they have millions of members. And it was very interesting to kind of hear that perspective. I think what impressed me most, not that online connection is easy because it certainly isn't, store connection is incredibly difficult and to hear him say, yes when they walk in, even their customer service, if somebody has called in or chatted, all of that is fed to your store associates. They know what you've done online, they know how you've answered that quiz.

They know what you've bought in the past. They know your fit. They know all of that information. Like it is a truly unified experience. So that was interesting. I actually did it as a consumer this weekend just to see how well it worked. It worked. 

Amie:

Good on you. And I think that store piece is probably the last piece in many retailer’s sort of unified approach because for so long omnichannel kind of came with digital. And now we see and particularly in Australia see a lot of that connection with store, the last piece of the puzzle and one that's significantly missing. So good to see that they've been able to connect it in that way. 

Sarah:

Yeah, it is difficult especially, you look at any retailer that built their brand, you know, whether store first versus e-com first, often your systems aren't connected, they don't talk to each other, you can't share that data, you know, and so that is incredibly complicated. I also feel though that they're, what I heard from Adam this morning and I feel very strongly about myself is, there is a human element to it of like deep respect for store associates, deep respect for your customer service team, like all data points, not just ones and zeros, right? 

Not just the data points that you're getting from the machine, but also I've talked to my customer, so he actually has every core of employee work in the stores, including somebody who's doing their data analysis on the backend, or he said he had an engineer who's like, I can't believe it takes three extra clicks to get to a return.

The people who actually developed it work in the store and so I'm a big proponent of like every corporate employee to the store. 

Amie:

You need to.

Sarah:

Go work Black Friday and then see how see if you think that your processes are working. I've done it myself. 

Amie:

I love it. So we've got then to unpack that we've got the managing change. We've got the unified commerce and experience. Is there anything else that you think retailers really need to consider now that you're hearing here in terms of you know, making growth possible in the current climate. 

Sarah:

Oh gosh, there's two other things that are on my mind from here and in general. I've heard, talked about it a lot, but one of those is the reality of loyalty and retention. I'm going to say that and I don't mean like a loyalty scheme, a loyalty program. I mean, I'm having so many conversations with leaders who say I was able to acquire my way into growth for a really long time. It's getting more expensive, it's getting more difficult, and I have this leaky bucket. I'm actually not retaining people in the way I need to retain them. 

Some of the things seem basic, maybe to you or me, but they're kind of catching up in that regard. I think also there is so much conversation around first party data that having that relationship, I mean, loyalty programs and somebody receiving a benefit for having a relationship with your brand, it is an instant way to have that connection point without having to worry as much about privacy regulation. 

So, that is a big point of conversation right now. Again, have we talked about, you know, acquiring new customers and loyalty forever? Yes. It's just a, it's a very different conversation right now. It's a, we need to understand lifetime value. We need to get somebody to second, third purchase. We need to have deep respect for our current customers, not always just everybody wants to go seek, I think last year it was, everybody's seeking Gen Z, Gen Z, Gen Z. 

Certainly that's still a conversation, but I'm hearing a lot deeper respect for current customers. And those current customers might be any age demographic, any background, they might buy any products, but I'm glad to see that come around. I think a lot of times we want to chase the shiny object in some new group and in that process lose the kind of, I don't know, respect and consideration of our current customers. 

Amie:

And it's interesting because we do find ourselves and I know, you know, we've done quite a few podcasts here, also been here at Shop Talk and it does feel like we have asked or spoken about topics that we have spoken about before, but it's a new landscape, it's a new environment, it's new context and people really need to unpack that in terms of what loyalty actually means right now. And it is, you know, it's different. 

Sarah:

It really is. You know, another thing is a little bit of a side note, but I think it's very interesting. To me at least, I need to think through it. The last couple days, I've had so many conversations and also seen on stage, so many conversations about what influence really means. I'll put it that way. So it's conversations about celebrity endorsements and what that looks like and kind of people, the backlash from that, the expense of it, whether it works, whether they align with their values, you know.

There's a lot of conversation about influencers and how that works for people and whether it really makes sense and whether it's authentic and whether it's just oversaturated. And then I'm glad to see, back to the way it kind of ties in with the loyalty conversation, a lot of conversation about UGC, current customers, avid customers. Fabletics was saying this morning that when they launched scrubs, they actually launched a Facebook group of scrubs buyers basically. So they are like, these are nurses and doctors and people who wear scrubs, EMT, people who wear scrubs, talking with each other and they're a part of that community. 

There's something very interesting, I think, how we're shifting our understanding and acceptance of what really dictates influence. And I think there's a lot of power in the UGC factor. From a creative standpoint, at the most basic level, UGC that is powerful, they explain the benefits of your product, they care deeply.

There is so much power to that and I think people are really over the overproduced brand perfect creative that I think it's answering that need as well. yeah, that's been an interesting kind of conversation that I maybe didn't expect. I expected to talk about AI and hear the word, hear the letters 4,000 times. I absolutely expected that. And we have. Yeah, we have. I didn't expect the influence conversation to be as thoughtful and multifaceted as it has been. So I'm excited about that.

Amie:

Nice. Was there a fourth point or was Influence the fourth point? I think Influence was the fourth point. 

Sarah:

I was trying to think if there's anything else. I am hearing... It's funny. We had one of the four speakers who said, I'm the only one who thinks that AI is actually underhyped, which was James from Thread Up. But they also are doing a lot of customer facing. They have a really amazing visual search that AI generated where I could take a picture of your outfit.

We could post it right now in like four to six seconds. I would have thousands of results for every piece that you have on. It's really unbelievable. they are actually, mean, for them it probably does seem underhyped. I think for a lot of people here, it's, they're just trying to figure out how they're going to utilise it on the backend, how they're going to elevate their teams. They're not even to the point of thinking about what it means from a customer interaction perspective. Maybe customer service chat, you know what I mean? But they're really not, most people are not.

Amie:

It's not strategic yet. It's more so understanding each of the platforms and the technologies, even how you would use it and then how you can. 

Sarah:

Yes, absolutely. Yeah, I mean, the only other thing I would say, just if it gives your listeners any sense of peace, if they are struggling to both build a brand over time and drive sales overnight, so is everybody else.

I mean, whether it's a private company and they're trying to explain it to the board or whether it's a public company and they're trying to explain it to shareholders, everybody's trying to drive growth right now and also expected and being held at this level of growing brands again, like really building brands. And it's incredibly difficult. Like we have a lot of time educating how to explain those KPIs and the differences in those. And so I think that's a commonality that nobody's quite.

They're maybe talking to me about it but they're not really talking to each other about it. And I think that that, you know, hopefully lets people know that they're not alone in that and that there are, you know, ways to go about this and to explain those KPIs in different ways. It allows them to really lean in and grow a brand for the long term even though they have to drive short-term gains. 

Outro:

Thanks Sarah for joining us on this episode of Retail Untangled. If you have enjoyed listening, feel free to like and subscribe on your favourite podcast platform.