Interview with Karl Haller of IBM Global Business Services discussing retail trends and technologies
Interview with Karl Haller Partner Consumer Center of Competency (CoC) Leader at IBM
Karl Haller is a retail industry expert for IBM Global Business Services. Karl leads IBM's Consumer Center of Competency, where he works with retailers and brands to digitally reinvent their business. Karl has 25 years' experience in the industry and has served in senior positions in strategy and customer engagement at Brooks Brothers, Tommy Hilfiger, and The Limited. Karl Haller currently serves as a Partner, Consumer Center of Competency (CoC) Leader at IBM. The IBM Consumer Center of Competency (CoC) is a team of industry experts who develop transformational solutions and programs for leading retailers and consumer goods companies across the globe. The team has expertise in: Analytics and Insights, Business and IT Strategy, Customer Experience and Engagement, Enterprise Architecture, Merchandising, Omnichannel and Ecommerce, Program Management, Sales and Marketing, and Supply Chain.
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Darius 0:01 Welcome to the retail tech podcast. My name is Darius Vasefi the host and this interview is being recorded on cop house and will be published on retail tech podcast. After the first set of questions, questions will be allowing a bringing up audience. So if you have any questions for for our guests, please stay on and raise your hand and we'll love to bring you on. Today I'm speaking with Carl Haller from IBM. And we're going to be talking about what is happening to the consumers after getting vaccinated and how people are, I guess, trying to get back into a normal life in and start shopping, hopefully, and going to work after that. So welcome to the show car.
Karl 0:50 Thanks very much, darious. It's great to be here.
Darius 0:52 Thank you. So yeah, if we can probably start from a brief overview of just your yourself. And I don't think we need to explain about IBM, but maybe the specific group that you're in. Sure.
Unknown Speaker 1:09 So as Barry said, my name is Carl Howler, and I'm a partner with IBM Global Business Services. And I lead a team called the consumer industry center of competency. So there's a bunch of different words in there, all of which have specific meanings to IBM. Essentially, what it is, is that my team and I all come out of the consumer industry. So we've all either worked at retailers, or worked at consumer products, brands, or worked in the fashion industry. We've all had what I'll call real jobs in addition to our consulting jobs.
Darius 1:49 Okay, so what does this group actually do?
Unknown Speaker 1:54 We work with our core consulting practice, really to help all of our clients digitally transform their business, whether that's in the front of house around customer experience, and customer engagement, whether that's in product and product innovation, product development and supply chain, whether that's in back office capabilities, new business models, innovation, automation, analytics, next gen technology, architecture, really anything, anything that anything that requires a higher degree of industry specialization or industry functional expertise, then that lifelong consultant might have
Darius 2:50 Okay, are your is your focus mostly on retail and e commerce, for example, or anything consumer related.
Unknown Speaker 3:00 So across the team, we cover anything consumer related. My background, I spent a fair amount of time in the retail and fashion industry, I worked at Tommy Hilfiger at Brooks Brothers at the limited, you know, so the areas that I know best are in the apparel and fashion space, as well as vertical retail. So personally, I get a little bit more engaged with clients in that space. But you know, across the team, you know, we can work with large retailers, you know, in, in grocery or in home improvement, we can work with mall based retailers, or we work with, you know, any types of consumer brands, you know, large consumer products companies, or fresh foods companies. Some of the companies in the scene categories, you know, the the beer, wine, alcohol, tobacco, you know, really any, any of those across the team, we cover the breadth.
Darius 4:04 Okay, great. Thank you for that. Let's go into talking about this survey. That was just I think recently published, correct.
Unknown Speaker 4:16 Yes, it was just published last month. And an IBM we survey consumers regularly. And we've been since COVID. Going out and surveying them on a variety of topics, really, every about two or three months, you know, the consumer situation is very fluid. So, this survey was 15,000 consumers across nine countries. There were about 2500 people in the US and somewhere between 1020 500 in each of the other eight countries. And it was really to understand, you know, how is consumer sentiment changing? What are the views on vaccine And what will what what are consumers anticipating doing once vaccinated? And, you know, really the main takeaways from the study, and I'll preface this part with it that I've, I've kind of focused this on the the US respondents. You know, once vaccinated, you know, over half of Americans say they are definitely or very likely planning to engage in, really every activity we asked about, we asked about going to restaurants, going to movies, going to sporting events, going to beaches, parks, amusement parks, and we also ask about going to shopping malls and shopping centers. And, you know, the rates vary a bit. But last fall, the last time we asked about this same set of categories, we had, across the board, over 50% of consumers had a what I'll call a not yet perspective, they said, Yeah, I might do these things at some point in the future, but I'm not doing them this year. And now just you know, six months later, to have a turnaround, where over half say that, once they're vaccinated, they are definitely are very likely going back into this year, that's a that's a really big, it's a really big turnaround and a really optimistic sign for the consumer economy. And that includes travel as well travel and vacation. So that's one big finding. The second big finding is that we are seeing a bit of a resurgence to in store shopping, versus some of the behaviors that digital behaviors that got adopted during COVID. So depending on the category, roughly 50 to 70% of consumers are planning to primarily shop in store once once they're vaccinated. Now that's, that's a little higher in groceries and household supplies. And it's a little lower in apparel and personal beauty and personal care. But in general, there is a bit of a resurgence, to store shopping. And I'm sure if you've been out in stores like I have, you're starting to see the traffic comeback. They're livelier than they were, you know, two months ago, four months ago, six months ago, in general, at least from what I'm seeing in New York City, still not back to pre COVID levels. But coming back. And then the third point, and this really does relate to the the in store shopping, is that we would say there is a new baseline being said, in terms of the primary method people are shopping. So you know, while 50 to 70% are planning to primarily shop in store once vaccinated, well, that leaves 30 to 50%, who will primarily shop either online or in a hybrid model, which you know, curbside pickup boat, best local delivery, using pickup depot, you know, any of those things that kind of blend physical space and digital shopping. There's a new baseline that, frankly, has a lot more digital in it than it did two years ago, you know, 15 1415 months ago, you know, the, it was really either online or in store, you know, and now that we've got a lot more hybrid shopping out there. You know, there there is a there is a bit of a new baseline and digital customer experience digital shopping, at least parts of the journey will continue in a big way.
Darius 8:52 Yeah, that baseline is very interesting. And I think what I'm seeing myself is probably sort of like a pendulum effect where we went really down, and we're gonna come back out and probably swing a little bit too high on the other side for a short time. But eventually, it'll probably go back to the same trends we were seeing before the pandemic happened. Is that, does that make sense for you?
Unknown Speaker 9:24 I think, you know, I would say it depends on what type of trend we're talking about. You know, I think there's been a definite like Time Warp or an acceleration in things around digital shopping. You know, so, you know, if you think if you go back, you know, to the fall of 2019 or even let's go two years ago to spring spring 2019. You know, we had digital shopping again, it varied a lot by category but you would see things like e commerce percent of sale Were by getting grocery, you know, two 3%, you know, and now we're seeing them more like 10 1011 12%. So even if that drops back, and maybe that only becomes, you know, 8%, that's still a pretty hefty growth from where we were just a couple of years ago. And I think, now that we've been shopping in different in different methods using different touch points. People are, are realizing that the shopping process, which was largely a bundle process, you know, for most of our lives, you get in your car, you drive to a store, you browse your shop, you buy, you know, you get your goods, you take them home, you know, even online, it was very similar, just involved either going on a phone or flipping open a laptop, you know, but you did all of that. And then you receive the goods, consumers are recognizing that there's a lot of shopping that is kind of jumping back and forth, and not all of it has to be bundled together. So something that we're seeing is that we're seeing happening is that, that there's going to be an unbundling, of our fragmenting of the kind of research shopping, buying and fulfillment processes. And consumers will do whichever one, they'll use whatever means makes the most sense for them, you know, in that moment for that product category and or that need state.
Darius 11:42 Okay. Yeah, I think what the, the trend that I was talking about was more on the physical retail side, where we were seeing a decreasing number of people actually going to retail stores. And now, after the via, you know, the, the vaccine, maybe people are so deprived from, you know, being, you know, jailed at home, pretty much they're going to run out, but then it'll probably go back to the same trends of like, going, you know, less trips, necessarily to the retail store, unless there is such a distinct and interesting experience, that they will make a special occasion. But, yeah, I mean, that mixture is really interesting. Like, the mix, you have, you know, touch points is really interesting.
Unknown Speaker 12:39 Yeah, I agree. I think that is going to continue. I agree with you completely, I think we are going to see a surge, especially in the non essential retail categories. The places that were, you know, all a one year ago, all closed, you know, all the malls, all the apparel, specialty department stores, you know, electronic stores, really everything outside of, you know, grocery, some big ball of a hand, you know, Home Improvement drugstores and a handful of others. We're seeing a real resurgence in shopping, and sales, and spending in those categories. In particular, at least from the march data we've seen. From the people I talked to in the industry, everyone is optimistic through the balance of the spring, summer season. So you know, in a retail calendar, say getting through July, people are still cautious for fall winter. There's more optimism than there was a few months ago. But it's it's it's a cautious optimism. because like you said, we're, you know, once the euphoria of going back out. And you know, the euphoria of Hey, I can go on vacation this year, and I couldn't last year. So I'm going to go do some spending around that. I think we're still not sure what the consumer behavior post Labor Day is going to look like. I think that, you know, really the jury's still out on that.
Darius 14:27 Yeah, I think, I mean, it just makes sense that, you know, after summer, people are really going to, I mean, unless something else happens that we just don't expect right now. People are just going to go back to the same convenience being really the top of mind as far as how to optimize their available time during the day to find what they're looking for. So, and that's I think we're you know, it's So, so the question here is that what, what are retailers? What do you see retailers innovating in, to kind of like keep up or even catch up to the consumers.
Unknown Speaker 15:17 So
Unknown Speaker 15:19 probably four or five things, just just off the top of my head. So one is we continue to see a ton of innovation, in what I'll just call everything digital, related to customer experience and customer engagement, everything related to marketing, sales and service. And that's, you know, continuing to build out and scale out their, their digital capabilities. And now to start to integrate the stores into that in a bigger way. You know, I've been amazed at how quickly retailers and how successfully retailers pivoted last year, and you know, all of a sudden started doing ship from store if their stores were closed, the second they could get an associate in or, you know, launching curbside pickup in days rather than, you know, months. I think what we'll see this year is the need to scale out those capabilities. You know, one of the themes I've thought about for this years that is called scale the pivot. You know, it's like you pivoted last year, and you pivoted and a bunch of ways really fast. Now, how do you actually scale those things out? How do you operationalize it, organizationally, putting the right metrics in the right KPIs, you know, what you're measuring, and you know, what you're rewarding and incenting incentivizing, as well as building out the processes and workflows, and, and the technology, you know, to make this stuff work on an ongoing basis. And some of that's related in store, some of that's related to mobile. Some of thats related to, you know, social commerce and live stream. Some of that, you know, an area that we've seen a ton of growth in is cognitive virtual agents. So AI enabled virtual agents for to enable, you know, high quality self service for customers.
Darius 17:29 So you mean, chat? Is that chat? Like, Chat Chat agents?
Unknown Speaker 17:37 Yeah, so we can be what we will do, in general RV project differs. But in general, what we will do is we'll put a virtual agent, overtop of chat, phone, and, you know, some type of SMS, they could, it could be, you know, WhatsApp, it could be Facebook Messenger, it could be, you know, iMessage, or just straight SMS. And, by building that capability, separate from the messaging application, again, whether it's chat or voice or SMS, you get the ability for someone really to channel Hall. So you can, you know, start something, you know, in a phone, and then answer, answer an SMS and respond via SMS, let's say, if you have to enter in a number and you're not comfortable, you don't want to do it on the phone talking to a chatbot. You know, or you can go back and forth, you can get sent, you know, say you want to see, you know, package tracking data. You know, you could just speak that over voice, do the validation, you're the customer verification, and then we can message you back a tracking data. Well, not not we IBM, IBM will build the system. So that the cost that that retailer can message the customer the package tracking data. So that's something that's been, you know, has been growing gangbusters because not surprisingly, when when COVID hit last year, and really continued on through last year and end of this year, call volumes everywhere surged.
Darius 19:18 Right. Yeah. I think that that's very interesting, actually, the mixture of chat and SMS and apps into the same virtual agent solution. Is that an IBM product?
Unknown Speaker 19:38 Yeah, leverage is IBM Watson virtualization. So that's, that's an IBM Watson product. So that's
Darius 19:45 a Watson on a on the consulting
Unknown Speaker 19:47 side, you know, we do all of the setup. It's already been pre trained for most use cases, but we'll do the setup and we do the integration into You know, the e commerce system, whatever the chat or communication system, the contact center, and whatever other and usually the order management system as well. And that's actually a second area that we're seeing a ton of activity in, is everything related to order management. Because for the most part pre pandemic, most goods, I would say, most retailer with most retailers, and for most goods, the inventory still was largely segregated by channel, you know, there were some that that had, you know, pooled inventory and, you know, would use an, you know, I can fulfill any order anywhere, with any product anywhere. But there were, there were, it was not the majority of retailers that were able to do that. And now that's becoming, you know, a baseline skill. Because as consumers are, you know, increasingly shopping, you know, say just ordering on an app for a local store, curbside pickup or a local delivery, you know, not coming through a FedEx box, but you know, someone actually bringing something over on a, you know, in a, in a car or in a cart, in Manhattan, everything is just on a cart or a bike, you're that you really have to have a much more accurate view of your inventory, you know, in real time, at store level, with up to date planter grams, so that the picking process becomes so much more efficient. So we see a lot of activity in the the integration of Peel POS. e commerce, order management systems, sometimes Wm s warehouse management systems, and then you know, core er p or merchandising systems.
Darius 22:04 Okay, so that's the second innovation that you see at scale.
Unknown Speaker 22:10 Yeah, that's another one that we're seeing, in a big way.
Darius 22:15 Okay. Do you see customers or retailers actually engaging in large projects or smaller projects? What's the, the I mean, that's really what the key is, like, How fast can you experiment with something correct?
Unknown Speaker 22:31 Yeah, and it's a great question. For the most part, you know, outside of the very large er, p types of projects, you know, whether that's, you know, a big Oracle project, or a big SAP project, or sometimes even a big, like, core retail merchandising project, which are still, you know, large, some, you know, sometimes multi year efforts, because those are those systems are very complex, they touch everything, I would say, in general, we're seeing a much smaller, faster, get to MVP quickly, you know, then get to MVP to then scale, you know, projects, projects moving at that type of pace, rather than, you know, the, the, you know, whatever, two months of requirements gathering, and then you document all the requirements, and then you go build something for, you know, six to 18 months. But there aren't as many of those happening now, as I would say, there were three years ago, five years ago, certainly, you know, 1010 plus years ago, you know, and, and we're seeing a lot more I would say experimentation, but it's really going beyond and experimentation, it's getting to, I've done the P OC, or the MVP. Now, how do I scale it with things like automation, you know, integration of either AI or machine learning, building new algorithms to, you know, say help with localized demand forecasting. And, and putting in a new putting in a new algorithm that is, you know, integrating into the core merchandising systems and maybe in some cases, overriding you know, the core merchandising algorithm, because maybe that isn't used to ingesting a new algorithm. So there's, that's another area that we're seeing growth in. Especially as for for retailers and brands who are global, because the in the macro environment, especially at a global level, is still really uneven. You know, where and I should go back because we talked about this in a study where we are in the US, you know, is not the same situation COVID wise as the UK, as Western Europe as Eastern Europe, as India, and I talked to colleagues, and yet almost every day, and my heart goes out to what they're going through right now. Yeah, you know, and certainly also Latin America. You know, we hear a lot about India right now, but the situation in Latin America, in, in Brazil and some other countries, you know, is also, it's also quite, quite challenging. And there are all the health concerns of that. And I think for companies, that's first and foremost, but at some point, those companies also have to figure out what's the situation on the ground? And what does that mean for demand? And how do I get, you know, how do I get the right goods in the right place at the right time, you know, to meet to meet the demand patterns that are there, and sometimes to anticipate what demand patterns are going to be coming up. And so there's, that need to go beyond historical based forecasting is one that I'd say some of the more advanced companies are definitely on. It's not pervasive yet, but but probably within, you know, 18 to 36 months, that's going to be a baseline capability that everyone's going to need to have.
Darius 26:44 Okay, that's, that's pretty interesting. Now, what do you think about shopping malls or shopping centers? Do you work with any of those customers to or
Unknown Speaker 26:56 I don't directly work with those customers. I know, across IBM, we work with some of the some of the large shopping mall companies, and some of the large conglomerates, that especially in the Middle East, and in Asia, that you know, may own some consumer brands, they may be the licensee or the joint venture partner for some retail companies, they may own malls, they may have other property development in place. So, you know, we we do a lot of work in those in those type of mixed use facilities. I think in shopping malls, you really have to look at it on a country by country basis, the US has been over mauled and over stored. Gosh, since I first got into this business in the 90s, you know, I could, I could probably go somewhere and dig out reports about, you know, how we were over mauled and over stored back in 1995, or 1997. And we've kept building since then. And so there, I think there's going to be a bigger reckoning in the US than there is just about everywhere else. I think there's still need, there's still a need and a purpose for bringing multiple stores together, you know, under one roofer in one convenient shopping area. But we just have a we have way too many of them in the US.
Darius 28:25 It also depends on the class of the mall, too, right. Like I you know, Class A malls are doing better than the ones below it.
Unknown Speaker 28:36 Yeah, you're definitely right. The and, and we didn't talk as much about this in the beginning. But one thing that I think we have to take into account whenever we're talking about consumers is some of the behavioral patterns are driven by, you know, who's done well, during the pandemic and who has not, you know, and I've seen, we've probably all seen data on the K shaped recovery. And the way we've been looking at them and IBM is, you know, there there are the splurge jurors and then there are the strugglers and, and the brands and retailers serving the splurge ORS, and that's definitely the luxury level, but even also at the premium level, I would say, in general, those brands and those retailers are doing better. Because their customer base, you know, has been able to shift to work from home and for the most part was while certain honor about for the most part, but was certainly less affected than some of the households at the on the kind of the bottom leg of the K shaped recovery, which is still very challenging, you know, and that's it. That's another area where it'll be interesting to see how things progress as we go through the rest of the year. Because a lot of you know, some of the spring shopping certainly is driven has been driven or the some of the springs spending has been driven by the stimulus checks. And it will be interesting to know, you know, have those been the jumpstart needed? Kind of to get the economy moving again? Or will the economy you know, slow a bit, as, you know, as the as, you know, those 14 $100 checks, you know, kind of go away as those all get spent out, either in, you know, in purchases and experiences, or sometimes maybe just in rent?
Darius 30:52 Yeah, I mean, I hear a lot of people talk about, you know, the stimulus checks are going to make people rich and happy and everything. And yeah, I mean, ultimately, what is it like to 14 $100 checks or something like, that's not like, life? I mean, for most people, especially on the luxury and the premium levels, and the people that actually are at a lower income, you know, brackets, they are, like you said, they're either going to catch up with their expenses, or they're going to save maybe for the rainy day. So I don't know, personally, how much of a difference. This specifically I mean, unemployment itself is probably more important, that extension of unemployment is probably more of a factor than just a 14 $100 check.
Karl 31:48 Yeah, I agree. And I think,
Unknown Speaker 31:51 you know, the, the stimulus checks are meant to, you know, tide people over and hopefully, kind of get the economy moving. So if you get, you know, when you put when you push out 14 $100, that spending starts to happen somewhere. You know, it didn't all go into savings. So whether it's spent on, you know, rent, so that's now people that can maybe be hired, that were furloughed, if it's going into retailers or into restaurants or into experiences. You know, now those can be, you know, potentially people that can be brought off of furlough or rehired. Because, you know, because they were let go or put on furlough for the last, you know, 12 months. And then those are now jobs that exist. And so that helps to drive down unemployment, you know, so hopefully, you know, the idea is it kind of becomes more of a virtuous cycle. But I think we're, you know, we're still, we're still a ways away from seeing the full impact of that, you know, I think we have to get through the balance of spring, we have to kind of get through the summer mindset. And I think we'll really start to see where the economy is headed. This fall?
Darius 33:08 Yeah, yeah, I think that's, there's still too many unknowns.
Unknown Speaker 33:15 Yeah, definitely.
Darius 33:18 So what is the so when, when IBM works with a retailer, what's the typical, I guess, tool stack that IBM? Try, you know, can help retailers with, and I'm familiar with some of the, you know, software that IBM has. But, you know, one of the things that is obvious right now is that, for the most part, no one software vendor, even IBM, is probably going to be able to provide everything that a modern retailer needs. So I'm interested to see how you look at that process of looking at what the customer might need, and how to put a mix together of IBM products and non IBM products.
Unknown Speaker 34:16 Yeah, that's, it's a, it's a very astute point. And, and a great question. And like, I've actually got a couple of retail enterprise architects on my team, who could certainly talk to you about this and much, much more detail than I can. But we're seeing the same thing we're seeing that we've been in a you know, I'll call it maybe a 20 year cycle of building vertically integrated application stacks, and those can be really really big things like SAP or like, you know, a full Oracle er P and merchandising platform, or they can be very focused You know, around something like, you know, sales force in the, you know, in the CRM starting in the CRM space than in the e commerce space now in the service space, Adobe, in the digital marketing space, work day in the HR space. And those applications, you know, it was very application centric, and the application would kind of control everything from the user experience, all the way down to the infrastructure, you know, so user experience, the application itself, any of the, you know, connecting integration points, the data, as well as the infra was all kind of in these vertical stacks. And you'd realize that you've now you know, most retailers would have, you know, five or six of these vertical stacks sitting next to each other. And it would come to a head when they want to do a unified experience for their customers say, or they want to do a unified experience for their sales associate, or they want to take data from, you know, one tool, and put it into an advanced analytics platform, or an advanced analytics, you know, set of tools, and then leverage it somewhere else, those those things were challenges in that vertical model. And so what we're seeing is an a bit of an emergence of some horizontal layers, you know, one would be around managing your compute, you know, we we talk at IBM, we talk a lot about open hybrid cloud. And, you know, a couple of years ago, we went and acquired Red Hat made really, that was about creating the layer to manage your underlying compute, you know, your infra, whether that was on prem, whether that was in a private cloud, whether that was in any one of the public clouds, or now we're also seeing, you know, an increased move of compute kind of toward the edge, whether that's mobile edge, or, frankly, for retail, or whether that's, you know, what we used to call a store server, we see another horizontal layer, in the data side, you know, Where, where, you know, whether it's, its data management platforms, or data lakes, to be able to bring data from multiple systems together for use by data scientists and analytics teams, and then fed back into systems of execution. We're gonna see other vertical layers around things like, around, you know, ai capabilities, you know, I talked about that example, with a virtual agent. You know, imagine if you had that, that same, you know, another type of AI capability
Unknown Speaker 38:03 that sat, you know, not within an application, but over and above all of your enterprise applications. So, you know, if I'm a merchant, and I want to, and I want to know, you know, how did my sales do in my top 20 stores last week, compared to the same week in 2018, and 19, and be able to actually ask that spoken in voice, and have, you know, the AI layer, go find that and pull that information out of all of the requisite systems, you know, and bring that back into a report. So we're gonna see an API layer that stretches horizontally across, you know, providing things like in, you know, voice or, or text or chat interface to access multiple systems. And then we're seeing the same on the customer side, the customer experience side, you know, where associates probably the average store associate right now probably logs into four to 10 apps on a regular basis, whether they're doing clienteling, or whether they're doing scheduling, or whether they're doing payroll or HR, you know, they're a bunch of different apps that they log into. And we're seeing retailers move to create a, you know, horik, common horizontal common layer that accesses all those apps. So that that's kind of an emerging view that gets you know, I'd say it kind of gets the best of both worlds, the, you know, the integrated experience, that's the promise of the VRP, you know, with the best of breed at the application level. So I realized that was probably way too long of an answer for that question.
Darius 39:50 No, it's a good really good information. One of the other things that I just actually heard about today and I've So we you know, we have a startup ourselves, which is in the private lifestream shoppings space. And we work with shopping malls and retail stores. And the the question of attribution of sale sale is becoming a bigger question, as digital is becoming a bigger part of the revenues of retailers. So now, this has two different parts from what I, you know, what I've seen is, one is the fact that a lot of shopping malls have a formula to get a percentage of the revenues of the store as a part of that lease. The other part of it is that retail employees get commissions based on what they sell. And both of these are getting, like the store is getting left behind on sales that they are made online but fulfilled in the store. What do you think about that?
Unknown Speaker 41:11 I think it was. So first of all, there is actually a third, you will find out if you haven't gotten to this already, you will find there is also a third horse in that game in that race, which is state and local sales tax authorities.
Unknown Speaker 41:25 Oh, yeah. Because they also point yeah,
Unknown Speaker 41:28 they also have a vested interest in knowing where that sale took place. Because despite the fact that everyone in the country is supposed to be self reporting and paying sales tax on e commerce shipments from out of state, I know I do it. And I'm not just saying that because I'm on a recorded line. But I don't think everyone does it.
Unknown Speaker 41:52 The the
Unknown Speaker 41:55 I've have I haven't I have a number of views on this. I think, on one hand, I think this arbitrary delineation of what's a store sale and once an eecom sale is, is ridiculous. It's a it's an idea that was necessary in the beginning. But that time has come and gone.
Unknown Speaker 42:23 And
Unknown Speaker 42:25 I think there are there are probably good debates about what you should consider as what but I think ultimately, most, most brands today, at least the newest brands, they will focus on, you know, getting that sale, and how they're capturing, you know, the most sales volume from their target customers, for the target things that they sell, you know, the whatever their their, you know, core product mixes or the things they offer. without regard to channel. And, and, you know, I think where this is going to start to head is ultimately, you know, each of us individually or in our households, you know, we'll start to become a p&l unit. And then rather than building up p&l is at the channel level, where a lot of companies still do this. p&l is will be built up, you know, household by household, neighborhood by neighborhood. And retailers will measure, you know, they'll they'll almost take an idea from startups and start to look at kind of the idea of a Tam. And, you know, what's the, what's the total addressable market? You know, in? I'm from Columbus, Ohio, originally. So, you know, what's the total addressable market in Columbus, Ohio, out of the one and a half million people in the metropolitan area? You know, how many of them would I say, Are my target customers that I really want to drive business from? What's the approximate spend in the categories that I sell or the mix of goods and services that I may offer to those people in Columbus, you know, and then that can give you a that can give you an idea of what should you be driving toward? And what should you be investing, whether that's with stores, whether that's with sales associates, whether that's with other associates who are live streaming to those customers, whether it's distribution facilities, whether it's marketing efforts, you know, whatever a company or a brand may invest in a market, you know, you have to understand what's my actual market potential, you know, and then you should measure your return toward that market potential of whatever you're investing. And it shouldn't be this argument about whether that's you know, whether it's a store sale or an online sale.
Darius 45:02 Okay, but how does so that's, I mean, that's a very interesting viewpoint. How does? How do you actually take advantage of like, you know, I mean, how do you handle the formulas that are already in place? For example, like on the lease side of shopping center? Do you know if you have historically a certain percentage coming from the sales at that store? And you know, another thing on top of it, I would say it's probably to be not a different thing is that retailers are actually taking returns in the store and applying those as a reduced income for the actual store in a mall. So, yes, so. So how do you handle that,
Unknown Speaker 45:51 and some of them are doing that for the store, p&l, but not doing it for the sales associates and the store manager bonus? You know, I i've,
Unknown Speaker 46:01 okay,
Unknown Speaker 46:02 I've had when when, I mean, we were looking at this when I was back in retail, you know, we were looking at let's, let's measure, you know, let's measure sales, in terms of what we're reporting to the landlords, and let's measure sales, we might measure sales differently. For what, for how we're incentivizing our store managers and our sales associates?
Darius 46:31 Well, that's pretty interesting. So you have first first hand knowledge of this.
Unknown Speaker 46:37 Yeah, this was five years ago, this was going on, man, these discussions were happening now, you know, you have the part of this is you have to, you know, you have to record your sales volume, in line with accounting, you know, with the accounting standards, and the individual leases. The individual leases, some, I believe, also have language in terms of what constitutes a sale. Those are probably different now than they were certainly five years ago, probably even more different than they were two years ago, because there's been such a shift. Since COVID, toward percentage rent, it was less of an issue, when most mall based retailers were on, you know, more of a per square foot rent, with maybe some, you know, accelerators or discounts based on volume. But But as everyone moves to percentage rent, yes, it's going to be it's going to continue to be a battle. The landlord wants to leverage, you know, every sale, the retailer has a vested interest in making that number as small as possible.
Darius 48:06 Yeah, I think that's the, that's a balancing act, which is going to be interesting. So I'm, like, you know, it's this is one of the conversations we have ourselves with, with our, you know, our customers is, like, being able to track that attribution to the store, in each mall, online online sale, attribution. So. So this is, I mean, you know, really good conversation. I don't want to take too much of your time. If anybody in the audience would like to ask Carl, Carl is from IBM, and a lot of really good information. As far as you know what retailers are innovating, please raise your hand. Otherwise, we will slowly wind it down. I'm interested to hear what you think as to some of the really interesting touch points that are becoming more popular right now. In in, you know, for for consumers. And I'm talking about like you mentioned something about AR and VR and live streaming. What do you think is going to be like, let's say in the next 12 to 24 months, the most impactful of these new technologies in real revenue drivers.
Unknown Speaker 49:43 I think,
Karl 49:45 in in
Unknown Speaker 49:49 in terms of real revenue drivers, I would say the opportunities in order it's hard to know which ones are going to actually hit, I'd say the biggest potential one is probably invoice. And I'll say that's the biggest mostly because that's probably the most natural interface for grocery and grocery is, you know, us very large piece of the overall us retail economy. And to be able to, you know, add things to basket by voice, whether that's through your phone, or whether that's through your, you know, your Google Home, your Apple Smart Home device, or your, your, your Amazon Alexa device, you know, that that's a great, that's a great potential, and it's a matter of time till some of the large retailers start to really get some adoption from consumers on that. I think that we will continue to see some growth in the, you know, the augmented reality space, I don't think there'll be that much in the virtual reality space yet, I think, you know, we'll continue to see things like, you know, apparel being overlaid on a body, and that will get better over time, you know, where you'll start to, you'll start to be able to start to see fits. I frankly, think live streaming has the potential to be bigger than that, in the near term, because that's not a that doesn't require a lot of technology adoption. You know, it's really, it's a different medium, for, you know, what a lot of people did through home shopping network, and QVC, 2030 years ago. And I just had another one on the top of my head. Oh, and I do think we will continue to see growth in social commerce, especially in more ego intensive categories. And that's not always just apparel that can be apparel that could be food, that could be home. Could be a lot of things. But where you have a personal ego involvement, and where you're maybe doing social activity, I think we'll see a lot more adoption of social.
Darius 52:23 Alright, great. So Hi, arhaan. Welcome.
Unknown Speaker 52:30 Hi, there's it's a really good conversation. But I'm sorry, I'm driving right now,
Unknown Speaker 52:35 a car last
Unknown Speaker 52:36 meeting. I follow you. I will join your speeches. Maybe next time, I was a couple of questions about the consumer. And the retail industry, which we are right now focusing on the retail in store customer experience and data collection. Thank you for organizing this room. I follow the globe. And hope to see you because I'm not able to talk a lot because I'm driving. So. Nice video,
Darius 53:04 guys. Appreciate it. Yeah, Han has a very interesting company. It's called shop and pick, I believe, right? Yeah, so pick your watch or pick and wash. Sorry, right.
Unknown Speaker 53:15 We have some old chips.
Darius 53:18 What, what, what does fall? I think we're gonna be in some additional rooms. And we definitely want to learn more about your pecan watch. I think we're losing your audio. Yeah. Okay. Well, we'll catch on later, Carl. Thank you so much. Just looking up I
Unknown Speaker 53:42 didn't know picking watch. But I just quickly, because we live in the age of the matrix, where once you do see someone's name, you can look them up on LinkedIn. So I'm looking at picking a watch right now. And I imagine where he's going, you know, that the company focuses on bringing digital into the store, and, you know, offering a much more interactive experience around, you know, demoing products as soon as they touch, you know, touch an item. And I think those are those. I think those have great opportunities. And those can give people a reason to come into the store, and potentially a reason to buy something, once they're in a store or to you know, to trial, a new brand or the you know, shift a brand. I think those like any new technology, those will start to take time to adopt. Because it's a new behavior and anytime there's a new consumer behavior, we tend it tends to take some time to drive, you know, widespread adoption.
Darius 54:54 Yes, I mean, but I think the key is that we do need the innovations so that people start testing and using them. And, you know, find the ultimate fit into their, I guess their, their, their behaviors. Yeah, yeah,
Unknown Speaker 55:17 yeah, what makes what, what it's got to be, and we were talking about this a little bit with stores and malls, you know, for as long as I've been in this business, it's been kind of a field of dreams strategy for the store, you know, very build it, and they will come. And you, you've got to give people a reason to go to a store now. And if you can do, you know, a great interactive demo, you know, something that you can get that you can't get on your phone, or on your, your tablet, or your laptop sitting at home, you know, that's something that can get can can compel people to come to a store. So, you know, I think there's a, there's a lot of opportunity for delivering more digital more interactive experiences in stores.
Darius 56:10 Yeah, and I mean, the The other thing that you also mentioned, which is top of my mind, personally, is they Tam, total addressable market for a local store, or a hyperlocal. So I think that's one of the biggest missed opportunities for retail is to not capture the local market properly. And try to sell things from LA to New York, instead of catching Santa Monica first, for example,
Unknown Speaker 56:47 I agree. I agree completely. And that should that should tailor the merchandise, the merchandise assortment, the look and feel of the store, the types of sales associates you need. You know, that if you're going to put a store somewhere, you know, again, let's say, you know, flagships you know, whether that's Rodeo Drive in LA, or whether that's, you know, Fifth Avenue or Madison Avenue in New York, or, you know, whatever, you know, Oxford Street in London, etc, etc. Outside of those high traffic flagships, if you're gonna put a store somewhere, its primary role is to serve that neighborhood, you know, that local community or trading area. And so, we, it's, it's, it's a core capability for every retailer to understand the unique dynamics of the people who live in that neighborhood. And then, you know, tailor your business there. And that's, that's something historically, you know, we weren't able to do once we started going, you know, from individual mom and pop stores to chain stores, you know, now we're able to actually, we've got, you know, we've got the insight, we've got the means to collect the data, we've got the analytical tools, we've got the computing power, to be able to actually run, you know, a chain of 1000 individual stores, rather than, you know, 1000. store chain.
Darius 58:30 Yeah, that's a really good point. I mean, even even on a local level, as store that's in Manhattan, doesn't necessarily have to look and feel the same as it does in I say, again, Santa Monica, the clientele are different. So why should the store be the same?
Unknown Speaker 58:53 Right, it has to represent the brand. So you still have to you know,
Darius 58:57 some commonalities
Unknown Speaker 58:59 represent the brand, right. But the, the brand can live, you know, if the brand can work in Santa Monica, then, you know, it should reflect the customers in Santa Monica. And those are probably different customers than you know, Dallas, Denver, Chicago, Pittsburgh, New York.
Darius 59:25 Yeah, yeah. I think that's that's, that's a that's one of the things that I haven't seen really stores innovating or, you know, really testing with keeping the same brand. But like localizing the experience.
Unknown Speaker 59:43 Yeah, I've seen that. Like Nike is trying to do that with some of their I think it's Nike rise. It's their their local store, but actually Santa Monica was one of the first ones they they rolled out and now they're they're kind of rolling though. stores out. But you know, again, it's not 1000 store chain. I think it's, you know, it's, it will be interesting to see how tailored the assortments get in a, you know, a national mall chain or a national big box chain. Where, where they'll do more than, you know, just tailor the 20%. You know, because that's where that's where a lot of retailers where they were, you know, they would have it would be a, you know, 70 or 80%, common and 20 or 30%. tailored. And, you know, that may flip over time.
Darius 1:00:39 Yeah, one thing, that's for sure, is that there is a ton of opportunity, and a lot of challenges. So, yeah, I think we, your services will be in demand for the foreseeable future.
Unknown Speaker 1:00:55 Gotcha.
Darius 1:00:58 We all hope so. And I think all indications are that consumers are definitely, you know, have to buy, they have to shop. Question is, where are they going to shop? How are they going to shop? And how do we learn to serve them at the right place? In the right time? So
Unknown Speaker 1:01:18 it's pretty interesting age old age old question or retail. We just have a lot of new tools now to do it.
Darius 1:01:23 Yeah. Yeah. I mean, we can't even predict like, what it's going to look like in five years. Right. I mean, we have some ideas, but we can't really have a lot of precise predictions like we used to have. Yeah,
Unknown Speaker 1:01:39 I talked to someone Friday, who was wondering if if I would kind of contribute some thoughts to something. I think it was retailed 2042. And I'm like, all right. Like, is that is that you know, the Minority Report version of the future? Is that Ready Player One version of the future? Like, like, what, what are we trying to accomplish? Here?
Darius 1:02:06 It's the expense version? Yeah. Yeah,
Unknown Speaker 1:02:09 it's like, you just, you just, you just don't know, is it? Is it like Star Trek replicator? where everything's just kind of produced behind the wall of your house? because everything's, you know, 3d printed in 10? seconds?
Darius 1:02:21 Yeah. You just need a 3d printer. And it'll print anything you want.
Unknown Speaker 1:02:26 Right. Right. Will all our food be in pill form? You know, there. It's like, at some point, at some point, like, I think those are interesting, because those do establish potential visions for the future. But they're not. They're not always practical in terms of helping to set an agenda, you know, for for the vast majority of companies.
Darius 1:02:55 Yeah, I mean, ultimately, life really needs to have some fun and joy and experience in it. I mean, I say this right now, maybe in 20 years, things will be different or 40 years, but it's like, yes, shopping, other than just the fact that you need something there is there is some kind of a satisfaction in going out and just walking through a mall or something. It's, it's it's a psychological effect as well. Yeah,
Unknown Speaker 1:03:29 I agree. So I definitely agree. And I think that's, there's at least some of that, and what's going on this spring, you know, as we were talking about earlier, we've all been cooped up for so long, you know, we want to feel normal. And, and, you know, seem like, like we're getting back out. And, you know, so we're seeing, I'm sure you're seeing this in LA as well. You know, you're seeing people back out or seeing people in restaurants or seeing people, you know, in shopping malls on the streets again, because we we want to do that, you know, some of it is a social aspect. And some of it is Hey, I'm showing that, you know, I'm getting my life back to normal. And that's one of those things we do in this country. is we shop.
Darius 1:04:16 That is correct. So well. Thank you so much, Carl, it's been a fascinating conversation. Learned a lot of new things from you, and I appreciate you coming on the podcast.
Unknown Speaker 1:04:30 Of course darious has a great, great conversation as well. Hope to do it again sometime.
Darius 1:04:34 Yeah. So we have a I have a club. It's called a retail Tech Club. I don't know if anybody is a member or if you become a member you'll get I do about maybe five or six different rooms. We are actually starting a new one about shopping centers. The first one is going to be tomorrow with there is also a shopping center club that we are partnering with And I also have a Friday morning 7:30am pacific time. Like what happened in retail this week. And we have, it's a really free fall, anybody come and talk and say what you enjoy, and you want to talk about? So I think it's great. Yeah, check him out. Yeah. If you, you know, love to see you if you ever get a chance, and you have time to come in. And, you know, tell us about more of what you're doing and what IBM is doing.
Unknown Speaker 1:05:34 Sounds awesome.
Darius 1:05:35 Thank you part of it. Our site. Thanks, Ron, you're going to be in the in the one tomorrow, right around?
Unknown Speaker 1:05:43 Sure. Sure. Definitely. Before closing, Carl came, please tell me a little bit about what what you're doing. And what's your and your consumer central?
Unknown Speaker 1:05:57 Yeah, sure.
Unknown Speaker 1:05:58 So maybe you mentioned that, but I missed it. I'm so sorry.
Unknown Speaker 1:06:02 That's okay. So we we work with, you know, very large retailers and consumer products, companies, you know, essentially at the intersection of Business and Technology, you know, so how can you know, new or next gen technologies or capabilities, you know, around AI around hybrid cloud, around IoT, mobile,