Jul 31, 2018
In January of this year, Amazon shook up the retail space by introducing their own brick-and-mortar retail space, but they added a twist. The entire store is checkout-free. Customers walk in, grab their products, and go. With the use of an app, a combination of sensors and cameras, the store tracks a consumer’s purchases and charges their Amazon card when they walk out. It’s the epitome of quick and convenient, and it’s got a lot of traditional retailers on edge.
But with every new innovation, there are other companies who are quick to redesign the reinvented wheel. Now, Microsoft is designing a rebuttal to Amazon Go. While Microsoft has no interest in creating its own ecommerce platform or running a retail store, the tech giant is investing in creating cashier-less shopping technology and expanding its commercial cloud services to more retailers and businesses.
Microsoft isn’t the only company that’s hopping on the Amazon bandwagon. Retailers across the globe are trying to implement Amazon-like qualities into their digital and physical marketplaces. But should they? In today’s episode, I’ll once again be joined by Dave Kuchenski and we’ll discuss how the Amazon Effect has feverishly gripped retailers, and whether or not that’s a good thing.
DN website: www.dieboldnixdorf.com
COMMERCE NOW website: www.commercenow.libsyn.com
Amy Lombardo: 00:01
In January of this year, Amazon shook up the retail space by introducing their own brick and mortar retail space, but did you know they added a twist? The entire store is check-out free. Consumers walk in, grab their products and go.
With the use of an app, a combination of sensors and cameras, the store tracks the consumer's purchasers and charges their Amazon card when they walk out. It's the epitome of quick-and-convenient, and it's got a lot of retailers on edge.
But, with every new innovation, there are other companies who are quick to reinvent the wheel. Now, Microsoft is designing a rebuttal to Amazon Go. While Microsoft has no interest in creating its own eCommerce platform or running a retail store, the tech giant is investing in creating cashier-less shopping technology and expanding its commercial cloud services to more retailers and businesses.
Microsoft isn't the only company that's hopping on the Amazon bandwagon. Retailers across the globe are trying to implement Amazon-like qualities into their digital and physical marketplaces, but should they?
In today's episode, I'll once again be joined by Dave Kuchenski, Diebold Nixdorf's Director of Retail Strategy and we'll discuss how the Amazon effect has feverishly gripped retailers and whether or not that's a good thing. I'm Amy Lombardo and this is COMMERCE NOW.
Amy Lombardo: 01:54
So, hello to our listeners. I am joined once again by Dave Kuchenski, the Director of Retail Strategy here at Diebold Nixdorf. He has also shared with me that he is a self-proclaimed Sonic the Hedgehog video game expert. Hi, Dave. Welcome back.
Dave Kuchenski: 01:53
Hi Amy. I'm glad to be back. I don't know if I'd call myself a video expert. My four-year-old kind of beats me every single time we play, but thanks for sharing that with everybody.
Amy Lombardo: 02:04
Yeah, no problem. That's what you can depend on me for. All right. In our last conversation, we talked a lot about the in-store shopping experience and the idea of having this connected consumer. I want to follow up with that discussion today and give some more specific examples, but to refresh the listeners' memory, we left off talking about this idea of the blind spot.
I think of the blind spot as that spot you can't see in your rear view mirror or even a movie that was popular a couple of years ago, but when it comes to the retail world, can you talk to me about what the blind spot is?
Dave Kuchenski: 02:47
Yeah. There's this blind spot that physical retailers have that online retailers do not. If you think about online retailers and how they market to their consumers, they have visibility to me, as a consumer, a lot of times, we have profiles that are set up. They know how many times I've come back to a site looking at a specific item.
There's personalized ads offers loyalty and they know who I am basically while I'm shopping on their site. They know my shopping history, what I've bought before, things that I like. There's this advantage that online shoppers have that physical retailers don't.
When I step into a physical retail store, the customer's activity is unknown. The shopping history is not visible until after I check out. I've bought some item and I'm out the door. There's a little bit of an opportunity there to capture me by the mobile app, based on the purchased history at point-of-sale, but it's a vast difference between what online shoppers are actually able to do.
The idea is what if we could change that blind spot and help recognize customers when they're coming into the store, help provide a more immersive experience that's personalized and make that interaction inside the physical store more valuable to the consumer.
Amy Lombardo: 04:07
Yeah, that's a good point, Dave, because think about your weekly grocery store ad that you get or like your home repair store. The same things are on sale to every single consumer, no matter age, demographics, whatever that might be, and that's a good point, if there could be a little more personalized.
On that thought, talk to me a little bit more about how the physical retail world itself is changing and how retailers can look at ways to overcome this idea of the blind spot.
Dave Kuchenski: 04:38
We see retailers innovating in several different ways around their customer's journeys. We've kind of outlined this framework of five areas that our customers, retailers are innovating. The first being, experiential. Improved in-store experiences. They generate more satisfaction in the shopping journey. It's purely about customer enjoying their time in the store. Expertise, customer store alliance, subject matter experts to provide guidance on products. We see some innovation there happening with retailers enabling their in-store associates with technology. Showrooming. We see different store formats happening.
Groceries are a great example. If they're not just necessarily doing these giant grocery stores anymore with thousands of products in them. They're doing these smaller format-type showrooms with more frequently purchased items, so that's one example. Then, we have store intelligence. Consumers generate data within the store, things that they look at, things that they buy. Retailers are constantly trying to find ways to collect different data points, become more intelligent about the activity that's happening in their store, and then utilize that to create better experiences, offer better products for the consumers.
Then, the last one is supply chain and fulfillment. We see all these new fulfillment models. It started with Amazon and Amazon created all these warehouses. They were able to create two-day delivery. Now, we're starting to see these physical retailers come up with creative fulfillment models to be able to deliver more products, more efficiently to customers.
Amy Lombardo: 06:15
Dave, that last example about supply chain and fulfillment, are you saying that some retailers, if they can't meet that shipping quota, they're using some of their hub-to-warehouses to actually ship product out of versus standard warehouses?
Dave Kuchenski: 06:29
Yeah, they're actually viewing their physical stores as this network of warehouses, mini-warehouses. Things like ship-from-store. They'll get drivers to come pick up items that have been bought online, in the store, and then deliver them to locations.
They're also thinking of things like buy online and pick up in store. Buy in store and ship to home. There's a lot of different ways that they can think about how products actually get delivered to-and-from the different retail locations.
Amy Lombardo: 06:59
Well, I guess that could be a good example, if you're buying something that's very heavy or very large and it wouldn't make sense to maybe put it on a truck or what that may be. Talk to me about some of the advantages of having ship to a store or pick up in a store, because to me, it almost would seem that it would be less convenient then. Like, what's the advantage to the consumer?
Dave Kuchenski: 07:24
Yeah, there are various reasons why consumers may want to pick something up at the store. Maybe I'd buy something online and indicate that I'm going to pay with cash in the store, so consumers come in and pay with cash, so that's kind of like the last mild problem that Amazon deals with. Amazon today, if I want to buy something with cash, I have to go purchase an Amazon gift card or fund it at different locations with the cash.
Retailers have that ability. They have the cash ecosystem already in place, so that's kind of one advantage they have there, but there's various reasons why customers may want to come into the store. Maybe I need something that day, so I buy it online and I need to pick it up immediately. There's a lot of reasons why, I think consumers may want to utilize different fulfillment models.
Amy Lombardo: 08:10
But Dave, you had talked about the Amazon model and you're not able to pay with cash. Does that speak to the whole unbanked and underbanked story line? Is there research that shows that Amazon is losing out and needs to figure out something else different for their delivery model?
Dave Kuchenski: 08:29
Well, I don't know that it's Amazon losing out. I think Amazon is trying to capture those customers, that's maybe it's had difficulties in the past with. For instance, Latin America. Latin America's a very cash-based society. Amazon has traditionally had difficulty capturing those customers in that market.
Utilizing different fulfillment models, collect on delivery. I have, say a UPS guy show up at a house and that UPS guy is then collecting the cash for the retailer.
Amy Lombardo: 09:06
Oh, okay. That's a good example. Yeah. That makes sense.
Dave Kuchenski: 09:11
Yeah, it's well-documented that Amazon has had difficulty capturing those unbanked consumers. I really think that's one area that physical retailers kind of have an advantage, especially ones with large footprints for consumers that are cash-based to come in and pay for their goods, using cash.
Amy Lombardo: 09:30
Right, right. Let's talk a little bit about loyalty. With nowadays, just all the options available on how you want to shop and when and where, is loyalty increasing for a retailer or could it possibly be decreasing based on that experience?
Dave Kuchenski: 09:48
Yeah. Loyalty's a difficult thing for retailers to achieve today. Many times, we see consumers being more loyal to brands than to the retailers themselves. Probably has a lot to do with Amazon offering such a massive breadth of product offerings.
If I find a brand I like and their shirts fit me well, I'm going to continue to buy that brand for simplicity's sake, because I know it's going to fit and I know I'm probably going to get a great price from Amazon. Additionally, Amazon's able to offer me a significant selection of a given item and potentially brands that I've never heard of before.
But, they're well-rated by other buyers, so I know they're going to be quality items. The curation of products is something that is changing and retailers are going to have to excel at and find the best products at the best prices to keep up with the Amazons of the world.
So, we've all had that experience where trying to find some off-the-wall item that I have nowhere to buy that's around me, so I go on Amazon and you find 20 different types of that given item. That's a difficult thing for physical retailers to keep up with.
I think providing product data to consumers, it's unbiased is a great place to start. If you think about the ways that retailers have approached their eCommerce in the past, a lot of time you get these review ecosystems and you kind of question whether or not they're completely unbiased and whether they're providing me data that is actually relevant.
You kind of get that sense with Amazon. That the reviews are pretty much unbiased. You'll get occasions where the retailer, whoever's selling on Amazon may try to skew those reviews, but Amazon sorts through those pretty quickly. As a consumer, you kind of feel like the data that you get off Amazon, the product reviews, are pretty unbiased and reliable.
Amy Lombardo: 11:37
Okay. If I'm reading between the lines, I'm thinking you're going on Amazon and trying to find your son that cool Sonic the Hedgehog action figure because he wants to play the game with you.
Dave Kuchenski: 11:50
You're right, and they do. For whatever reason, they've kind of restarted the whole Sonic the Hedgehog TV series. But, they haven't put out the toys, so the only toys left for me to buy him are the $40 pack of collectible of Sonic the Hedgehogs that are extremely fragile and he just breaks on a monthly basis and I'm left with buying another $40 pack.
Amy Lombardo: 12:16
Find a game that is a little more like the characters a little more universally known.
Dave Kuchenski: 12:22
Amy Lombardo: 12:24
All right. In your role, you spend time looking to leaders in the retail space and what they're doing and how they're innovating and how these answers can lead us to our own business model, here at Diebold Nixdorf. Let's talk about some examples of these companies that are doing it right.
Dave Kuchenski: 12:43
The first example's I'll give is Kroger. They're really do a lot of innovative things. They're the largest, I believe the largest grocer, if not one of the top three in the United States.
They've done a couple of things. We talked about store formats and showrooms. They've created their Fresh Eats market. It's small, convenience store. Smaller than their normal format. They offer a wide assortment of goods. Made-to-order food.
They have comprehensive produce area, bakery in bulk section. These smaller formats. They offer a wider assortment of traditional, convenient store goods. That's one thing they've done.
The other thing that Kroger's doing is we talked about product fulfillment. They've partnered with a company called ... I believe I have the name right. Ocado. Ocado's a fulfillment technology. They utilize technology to basically provide better store inventories to be able to enable Kroger to do their order online, deliver to my house, type of fulfillment models.
Kroger's moving towards a model where you can order your stuff online and get it delivered to your house the same day. I think Kroger's doing an excellent job of innovating for traditional grocer.
Amy Lombardo: 14:02
Those smaller convenience stores that you were talking about, are those in lieu of or is it closing down the larger locations or are these new locations that are popping up to help with drive time or just traffic patterns?
Dave Kuchenski: 14:18
Yeah, it's a trend we've seen where supermarkets are downsizing their fleet of larger stores for these smaller footprints that are potentially a little bit easier to manage, more popular, and create that competitive advantage to be able to deliver the most common goods the same day, so doing same day delivery.
I think it's something that is definitely going to be a trend with other grocers to help keep up. McDonald's is an interesting one. They've rolled out some new food kiosks. It's a really interesting change to a quick service restaurant model that has been around forever. It hasn't changed in my lifetime.
You walk up to the countertop. You order your food. You stand there and wait until they bring it out and you go sit down at your table or you take it home, but they've adopted these kiosks.
Now, you can walk in and order your food by that kiosk. You don't necessarily have to feel like your lack of decision-making is causing frustration on the person behind you because they have four to six kiosks in every location, so you don't feel rushed as a consumer.
Chances are, you may end up buying more because you don't feel rushed and you can kind of browse the menu at your own pace. Once you make your payment at the kiosk, you pick up a table card and then go sit down and then, somebody brings you your food. There's Bluetooth built into those table cards so they know where you're saying.
It's just a really interesting take on the traditional quick service model. I think it's something that really enhances that consumer journey for McDonald's customers.
Amy Lombardo: 15:56
Yeah, like upselling. The other day when I was using the kiosk and my daughter saw the slushy instead of the healthy juice box, I ended up having to get a slushy because it wasn't worth the complaining.
Dave Kuchenski: 16:09
Yeah, that's right. There's probably reasons that those kind of products are down at the bottom of the kiosk where kids can see.
Amy Lombardo: 16:17
I know, I know. That's smart marketing, smart marketing. How about an example about expertise? Is there one that lies in that portion?
Dave Kuchenski: 16:25
Yes. Several of the beauty retailers are doing an excellent job with this. Companies like Ulta, Sephora. They have these beauty technicians. They're enabling them with technology about me as a consumer, what I like, what I need. They're enabling their associates with things to be able to allow the consumer to virtually try on different products and see how it looks.
I think Sephora and Ulta are great examples of enabling those subject matter experts in the stores to be able to better help serve their consumers.
Amy Lombardo: 17:01
Dave Kuchenski: 17:03
I think Domino's is an interesting one. Domino's came out with great market earnings. Business models don't always have to be difficult. Things can be simple to make money. I don't know if you guys have ordered with Domino's lately, but they're basically an eCommerce company that delivers pizza or makes pizza.
They know ... They capture me on my mobile device. They capture me online. The ordering process is really simple. When I place an order, you, as a consumer, get a time that your order goes in. You get a time that your order is finished cooking. You can see when your driver has left the store, when they're on route to your house, when exactly they're going to be there.
I think that Domino's is an excellent example of a pretty simple business model. They make pizzas and they deliver them to their consumers, but they really transform themselves into an eCommerce company that utilizes things like data analytics and mobile to really drive a better experience for their consumer.
Amy Lombardo: 18:06
That seems interesting to go through all of that for a pizza, or salad, whatever it might be, for something that's a low dollar amount type item, but if earnings are well, then obviously, it's working, right?
Dave Kuchenski: 18:22
Yeah, yeah. Absolutely. I think they've done an excellent job of surpassing their competitors. Little pizza shops, they have difficulty keeping up with that because they can't invest in that technology to kind of really, I'll call it Uberize the pizza business.
Amy Lombardo: 18:40
Right. I want to keep going on this for a minute because you brought up something interesting, these mom-and-pop pizza shops. Within the small-to-medium business size market, are there maybe less costly or less time invasive-type things that those SMB market can look at reinvent themselves, based on what we've talked about here today?
Dave Kuchenski: 19:06
Well, I think what the small-to-medium businesses can do is, they can identify their pain points, because there's nothing that gets a consumer to stop interacting with your business like some significant pain point. Maybe it's a payment, maybe it's your menu and how you interact with your consumer by that menu. Are products difficult to find on your menu? Is your ordering difficult?
I think that focusing on those little pain points and identifying them first off and then coming up with some creative way to solve that pain point is something that the small-to-medium businesses can do to really just create a positive interaction because that's going to keep customers coming back. That's going to create this word-of-mouth that is going to help your customer base grow.
I think that the biggest piece of advice is just focus on those pain points and get rid of them. Utilize the things that are available to you. Your past customer shopping history is a good one that every retailer has small or large. I think that's good advice for SMBs.
Amy Lombardo: 20:13
Okay. That makes sense. How about store intelligence? Is there an example of store intelligence being used?
Dave Kuchenski: 20:19
Coop Italia is a great example. They created the store of the future. I think they launched it several years back. You can go actually and use it and people use it every single day. It's blending the digital and physical into one experience in stores. The products that are on their shelves, they use this technology to see what consumers are reaching for.
Say, I pick up an apple or I pick up a banana. The digital signage within the store is changing based on what I touch and what I put in my cart. I may pick up a banana. I look at the digital signage. It tells me where that banana is from. It tells me the price, the nutritional information. They're really trying to blend the digital and physical space into one experience that is creating this more immersive-type of grocery experience. They can potentially utilize that data of what I've touched and felt. We talked about that blind spot and not being able to recognize consumers and what they're looking at, or what they're touching and feeling in stores.
Coop Italia's doing a great example of collecting all those data points that consumers are generating and then utilizing that data to then potentially upsell or just create a better experience in general.
Amy Lombardo: 21:36
How else is store intelligence used? Is there other examples of that or is it just the idea of you're picking up a product? Like, are cameras being used to see what the consumer shopping or maybe the pattern of which they walk throughout the store?
Dave Kuchenski: 21:53
Yeah, there's several ways. Consumer tracking via cameras is one way to see where there's hot spots throughout the store. Consumers stand in this area more often than over here in this area. There could be various reasons why. It could be which signage is up, which products. It could be that people don't linger very long in the frozen section.
There's various ways to capture that. There's actually some technology out there too that's utilizing lighting to be able to interact with the cameras on our phones. If I've got my phone out, they can actually track where consumers are moving to.
It's evolving technology, but again, I think it all comes down to identifying a consumer, anonymously or not, watching them walk through the store, seeing what they're collecting, seeing what they're picking up, utilizing the different data points that are available to the retailer, and then that enables you to help remove that blind spot and potentially increase your conversion rate in store, raise your basket size, and then just increase your revenue in general.
Amy Lombardo: 23:02
Let's close out the conversation with just some best practices. Is there a sweet spot? Is there a secret sauce here that retailers need to be taking away from this conversation?
Dave Kuchenski: 23:15
I think the first thing is, retailers have an imperative to adopt to changing consumer expectations. Don't sit back and hope your loyal customers are going to continue to visit your stores. Delight them with new experiences and information they don't expect.
You may wake up tomorrow and find that some other retailer has provided a unique enough experience to lure them away. It's really competitive out there. Physical retailers need to take a design thinking approach to solve consumers' needs.
Consider your customer journeys. Evaluate their pain points they experience every day. What are the best products available to me? Am I getting the best price? Where do I find these items in store? How can we get customers in-and-out as quickly as possible? How can I utilize data about my customers to curate products and provide a better experience?
I think there's a lot of different ways if you just think about the consumer and their needs, you can achieve a lot. Repurposing the physical space to kind of create a greater value to the consumer is just good business. Times are changing. Consumers' expectations are getting bigger, so it's important to evaluate what is valuable to your consumer and deliver on those expectations.
It's going to be different for each retail vertical and each retailer in those spaces. So, begin with your customers' journeys and I think that's going to get you started down the right path.
Amy Lombardo: 24:29
Okay. Thanks, Dave, for being with me here today and to our listeners for tuning into this episode of COMMERCE NOW. To find out more on this topic, go to dieboldnixdorf.com and click on the link in the podcast show notes. Until next time, keep checking back on iTunes or however you listen to your podcasts for new topics from COMMERCE NOW.