Q&A with Ben Running, Director of Innovation at Jet.com
Technology has, and increasingly continues to, drastically change the way consumers interact with brands and products. No industry has been more impacted than retail. The “death of brick and mortar” is a hot button topic and we continue to see brands, both big and small, place their bets on digital. Additionally, nascent technology- AR, AI, VR- is a curiosity that brands are furiously trying to tackle with, unsurprisingly, the major tech players such as Amazon and Google ahead at the forefront. If you’re a brand these days, how are you supposed to keep up? If you don’t have the access or capital like the big guys, what do you need to be thinking about in order to remain relevant and competitive?
In gearing up for our second #StraightTalk event with Ben Running, Director of Innovation at Jet.com (Are you coming? Feel free to RSVP here), we decided to tackle a few questions in advance. Here are his thoughts on the future of the retail landscape:
1. The current retail landscape is one that looks vastly different from that of ten years ago or even five years ago. What is your take on what’s currently happening and why people are so perplexed about it?
Ben: There is so much happening, and the pace is not slowing down. The big trends for me are the shaping up of the Amazon vs. Walmart fight, the store of the future and the experiences it provides, changes in logistics and delivery, the rise of private label and D2C and what it means for big brands, and finally, capturing bigger lifetime value of customers through great services. I’ll discuss each topic briefly:
Amazon vs. Walmart
“Amazon racing to become Walmart before Walmart can become Amazon” is a great headline, but I don’t think we’re going to end up with two identical e-com giants with B&M retail outlets across the country. Amazon has an undeniable digital advantage in almost every way. You see it in the Echo, AWS, drones, just about everything they do. Walmart needs to catch up, but also leverage (and not destroy) their human advantage. 94% of Americans live within 15 miles of a Walmart and this means very real and emotional human connections for many. Walmart’s challenge is going to be moving these shoppers online, especially lower-income shoppers. Their push to buy groceries online and pick up in-store is a big step in the right direction.
Store of the Future
There are great opportunities for brick & mortar retail stores ahead, and we’re starting to see some interesting stuff. Retailers know that people are just going to buy the products online anyway, so instead of stores packed with products, you’re seeing brands using their physical presence to truly impress the experience of their brand upon visitors.
It’s often a fun, aspirational experience where the products are center-stage, but they’re demonstrated in the context of the wonderful life they’ll surely create for you. Bonobos Guideshops, Rent The Runway, Warby Parker, Sonos, and popups by Snap and Casper do a great job at creating spaces where you want to spend time.
Apple was an early leader 15 years ago, and they are still advancing. I think calling their stores “town squares” is a bit of a pretentious masquerade, but the core idea is great. It’s not shelves full of iPhones, it’s an aspirational, creative space where you can get a coffee, have fun, hear a talk by an interesting professional, and become immersed in the ethos of the brand for a time (and hopefully buy a $1000 phone!).
These are all brands driven by a why (see Simon Sinek’s TED talk “How Great Leaders Inspire Action”), and they are using their physical presence to showcase that why, instead of the what they would have traditionally shown.
Logistics and Delivery
Shipping is everyone’s #1 expense, so it’s a big area of focus for Walmart, Amazon and everyone else.
Fast delivery (2 day or less) has become table stakes, shaken up fulfillment and logistics, and is driving retailers outside of traditional fulfillment channels. Look at what Walmart is doing with employee delivery, essentially repurposing available resources in a more consumer-centric manner. Amazon is building and contracting out delivery services with Prime Now, and even leased 40 Boeing 767s for Prime Air service. They claim they this helps them reduce cross-country delivery time from 48 hours to 36 hours.
Last mile delivery is really coming into focus. It accounts for around 30% of the cost of a delivery and is an area every company wants to innovate around. Drones may not become a thing any time soon (at least not in dense metropolitan areas), but you’re going to see a big push for in-store pickup at Walmart and Whole Foods location, and more deals like the Amazon/Kohl’s in-store returns arrangement.
Private label & D2C
Private label is a huge initiative for Aldi/Trader Joe’s, Lidl, Kroger, Whole Foods, Walmart, Costco and just about everyone else. The quality of the products has increased, with natural and organic products commonly available to meet changing consumer demand. Lots of these brands have tremendous consumer loyalty, with retailers now acting more like D2C companies, and posing a big threat to FMCG and CPG companies like P&G, Unilever, Pepsico, Mondelez, etc.
Retailers (e-com or B&M) controlling the display space have an upper hand in getting to decide what customers see. Amazon is well-known for diverting traffic away from hot-selling items on their marketplace in favor of 1P or Amazon Basics versions of the same product. This tactic can be used by anyone selling a private label, forcing traditional manufacturers to pay an increasingly high placement fee for space on the shelf.
I think what we saw a few weeks ago at the P&G shareholders meeting was interesting. Activist shareholder Nelson Peltz very narrowly lost a vote for a seat on the P&G board. He advocates a break-up of the company into more agile units that can better compete and innovate faster. This action is being driven in part by D2C companies like Dollar Shave Club, and their acquisition by Unilever to directly compete against P&G’s Gillette.
Capturing Lifetime Customer Value
This is about creating customer loyalty and bringing the user back again and again, making your store their obvious and default choice for future purchases. It manifests through service design, and is an idea that really originated in marketing some 30+ years ago – an ongoing conversation with the user. Companies give customers a seat at the table, customers do the same in return.
Today, it happens through smart services that get you what you want, when you want it, at the location you want it. Listening to your experiences with products and services, iterating and evolving based on the needs of the customer, conceiving the entire service as a whole so everything works well together, and ensuring that the brand is always present, by providing some kind of value even when a consumer transaction isn’t taking place.
For retailers, it means more design thinking and innovation process, customer research, and rapid prototyping. Ways to move faster while mitigating risk.
2. In terms of these beliefs, do you feel your diverse professional background- coming from publishing and digital- has anything to do with it? Do you believe those who’ve consistently worked in retail come with a different vantage point?
Ben: I think there are parallels in publishing and retail. Both industries were heavily disrupted by digital technologies over the last 15 years. New upstarts thrived, some old guard giants couldn’t figure out how to make the transition, some big players made the move a little late but are now re-gaining ground.
A Pew Research study last year found young respondents generally preferred reading the news, rather than watching video or listening to audio. Though BuzzFeed rose to fame on lists and memes and GIFs, during my time there, we also saw that people really do spend a lot of time reading, so we developed long-form editorial content formats that performed well.
Both sectors have transformed radically, so if you’ve been in the industry for 30 years, you’ve obviously had to learn and evolve. In fact, I think there’s a “do or die” attitude in both retail and publishing that is driving change. If you don’t want to deal with it, you get out, otherwise, you accept the challenge and innovate.
Of course there are fundamentals that continue to apply – operating retail supply chains and complex logistics operations takes tremendous experience, but don’t think there’s anyone working in retail with a “same as it ever was” attitude.
3. In order to meet today’s changing landscape and consumer tastes, how should brands proceed?
Ben: In short, it’s about customer centricity. Consumers, especially younger generations, expect a premium feel and a bespoke experience. They are accustomed to the slick UI and perfect functionality of social and entertainment apps. They want brands that listen and interact via social media, act responsibly and ethically, and tailor their products to the needs of their customers.
Is that your customer? Do you know?
The most important thing brands can do to understand their customers, and also one of the easiest, is to talk to them. Do it regularly, and talk to lots of them. The early Jet product leadership recognized this was important and invested in hiring a great team of researchers.
Jet researchers do in-home interviews with customers, email surveys, phone calls to follow up on issues, talk to customer support workers, listening in on customer support call, and two days every week, they host actual customers in the office.
Those customers sit with a researcher and look at Jet products, competitors products, and just about anything else from physical packaging to design prototypes. Research sessions are streamed live internally and findings are shared company-wide.
I also recommend Google’s Zero Moment of Truth work to anyone in product or marketing. There’s probably a discussion happening around your brand and if you’re not part of it, you need to be.
4. What role does digital and technology need to play in all of this?
Ben: It’s everything. Though every touch point in your experience may not be a digital touch point, the mobile device is the frame through which it’s viewed. Even if you view yourself as an “offline” business that only sells a physical widget for cash in a physical store, it’s likely that most of the transaction happens digitally.
Your user probably sees some stimulus or advertising online. They take part in research and discussions online, watch videos, read blogs, check ratings and reviews. They find information on your store on Google and navigate there via Google Maps. When in the store, they price check, do competitive research, or inform themselves on unfamiliar terms or technologies. The user then (hopefully) buys and becomes an advocate for your brand, telling their friends about it on social, reviewing your store on Yelp, maybe making an unboxing video on YouTube.
Customer journey mapping is a hugely useful tool for uncovering all of these points. It won’t solve your problems, but it can help uncover user behaviors and sentiment that never even occurred to you.
5. In the big name retail wars, it is Walmart vs. Amazon with other brands far behind. What companies (or types of companies) do you see being able to catch up and truly compete with these titans and why do you believe so?
Ben: It’s hard to say, and predicting is generally only a way to look wrong in the future.
There are a lot of players out there, and I think we’re due for some consolidation or mergers. Will Target or Costco make a Jet-esque acquisition in an effort to compete? Alibaba is a huge business that doesn’t really operate in the US. The QVC/HSN merger is ostensibly designed to compete with bigger players, but I’m not really seeing that one happening yet. eBay is kind of still there doing its thing, it’s a huge marketplace that is more like an Amazon that people realize.
Another interesting idea is a decentralized blockchain based marketplace, but that’s a ways off.
I’m interested in lower income and rural markets. It’s not a sexy problem, but I think there’s huge potential there. Amazon clearly wants this market, but they are having trouble breaking into it. They’ve cut the cost of Prime by half for Americans who receive government assistance and in September of 2017, Morgan Stanley Research said dollar stores were the sector that it would take Amazon longest to disrupt.
In addition to competing for the Prime customer, companies like Walmart should be working to win the dollar store customers, offering competitive products, and converting them to e-commerce and in-store pickup.
6. What are you most excited for brands to explore and consumers to experience?
Ben: I’m a bit of an emerging tech geek and I’m really excited by augmented reality. It’s got the potential to be far more than another clever gadget, and actually add real value to the shopping experience.
AR will help you conquer trust issues – when you shop online, you’re effectively buying a tiny picture on a white background. This is fine for CPG and some electronics, but makes it really hard to buy home decor, fashion, or clothing. Using AR to visual a couch in your living room, a new pair of sunglasses on your face, or comparing a 46” TV vs a 55” TV on your actual wall is going to close some of those trust gaps. You’ll be sure that you are going to like what you buy, and seeing (albeit virtually) a product in your living room can create a tempting incentive for customers.
Wayfair and Ikea are already doing great work with AR furniture previews. Amazon made a cool Google Tango-based app that lets you preview TVs of various sizes on your wall.
VR is a less accessible technology, but also offers some great possibilities. You can sell a coffee machine by inviting a user to sit with a skilled barista while she personally demonstrates an espresso machine in a San Francisco coffee shop, or ride with a skilled mountain biker while he shows off features of a new bike on the red rocks of Moab.
Apple’s ARKit and Google’s ARCore software are making these things much easier to do. You used to need expensive hardware, but now it’s all on your phone, using AI-powered interpretations of standard camera data, paired with accelerometer data. This takes the hard, technical part out of AR development and clears the way for the designers and artists to shine.
AI is also a technology that is changing things in ways we can’t really grasp yet. However, I think the practical implications are going to be needing to shop less (let the machines do it for you), and only concentrate on the shopping you want to do. Of course this has huge implications for brands (would the AI buy a private label instead of brands?), retailers, privacy, and our identity as providers for our family (turns out, many people like to shop, even for basics!), but those will be fun questions we can grapple with in the coming years.
This Thursday, November 8, we are hosting Ben at the New York office for our second #StraightTalk, you can RSVP here- https://www.eventbrite.com/e/straight-talk-with-jetcom-tickets-38847195006