Predicting the Future of Retail in a Time of Wet Cement with Bryan Gildenberg | EP33
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In this episode:
Wendy Liebmann talks with Bryan Gildenberg, senior vice president of Commerce for the Omnicom Commerce Group about how to create a vision of the future when we are still living in a world of wet cement.
- Major pandemic shifts that will impact grocery retail, including Instacart
- How the physical store will be the replenishment arm of ecommerce and that an endless aisle is “silly”
- The role of partnerships and experiential retail
- How the reselling environment will be even more complex in three to five years, and the resulting implications for supply chain
- Gaming, Snapchat and the metaverse, and
- That there’s never been more opportunity than now to address behavioral changes
Don’t miss upcoming episodes, stay up-to-date by visiting the WSL Shopper Insights Library, or our Podcast page.
Hello, I'm Wendy Liebmann, CEO and chief shopper at WSL Strategic Retail and this is Future Shop. This is where I talk to innovators and disruptors about the future of retail. Today, my guest is Bryan Gildenberg, speaking of disruptors. He is the senior vice president of Commerce for the Omnicom Commerce Group. It's a global consultancy that specializes in retail, shopper and commerce marketing. Many of you will know Bryan from his previous life as well, where he led global retail research for Kantar’s retail practice. Welcome, Bryan.
It's great to be here. Wendy.
Great to have you too. Before we get started, here's what you need to know about, Bryan. Firstly he has one of the biggest brains in the insights world. So I'm really envious about that. He's at least a foot taller than me, which doesn't bother me except when I'm changing lightbulbs. He knows retailer and retailers from their loading docks to their digital front doors. And he talks more than I do, which is hard to imagine and why I will never present at a meeting after him. Oh, yes. But I dress better than he does. So for all those reasons, he is here today. Just jumping right in Bryan, late last year, you absolutely took my breath away, when we were both at the Emerson Group Industry Day, and you said, we can't predict the future now, that we are living in a time of wet cement. And I of course was outraged since we predict the future all the time at WSL. What did you really mean by that?
Um, I meant that your life's work is completely futile. Now, of course. Let's get right into it.
Like, it's like one of those terrible ESPN shows now. Wendy first of all, it's great to be here. And, and the exact inverse of everything you said, including the fact that your brain is way larger than mine on a lot of these topics. What I was saying was that the the analogy to the to the wet cement world is, is that I was I was addressing a concern that I've had with clients, which is that in their quest for certainty, they were irrationally drawing conclusions from things and then trying to build into sort of your built into sort of operating plans. this is exactly what's going to happen in the future. That's the part that I think is really problematic. I mean, and you know, that's problematic in the best of times. I thought it was borderline irresponsible to do it now. So I think predicting the future is probably more important than ever. My objection to the, the mechanics of it wasn't so much about the predictions, it's what people do with them, and the degree of wrench tightness versus finger tightness on the plans they build off of those predictions. I think I know you well enough to guess this, that you would that you would always say that future planning is scenarios and contingencies and likelys. And, and being nimble as you go into that is exactly the right thing to do. I think a lot of companies and I think this is going to be really acutely true next year, because the retailers are still doing really well this year, I don't think there's a chance that the retail industry is going to perform as well, in 2023, as it is now, just the numbers, it's comping are going to eventually get impossible, and no one's going to think that problem through. And I think you're going to end up with people that are trying to achieve growth plans that are irrational or not built on any real firm foundation. And that's where you start to get into real problems is when you take an idea of the future, overemphasize your certainty about it and then behave in kind of goofy ways. The other thing about the wet cement idea is that I do think you can certainly have a point of view on where we're going to end up in a quote, new normal, right. But I don't think any one individual today has a really clear idea of exactly what their life is going to be like a year from now
What you're saying is absolutely true. I actually understood what you were saying at the time I was just being controversial. The I think the thing that struck me about what you said there and what you're saying now is this It's this not only an urge, I think it's a fear, there's been so much disruption to use an overused word, that companies, clients are trying really hard to kind of get a hold of something. And you're absolutely right, instead of the, what you want is the scenario planning, the flexibility, the really the facileness, if that's a word, that people need. There's this sort of, Oh, come on, we can fix this right now. And that's really impacting the way they're thinking about the future. And they're planning
I think, for big companies, too. It's like that whole Kahneman system one versus system two thinking, and I can never remember which is which, right, but um, but the one, the one where you're using your conscious brain, there's a reason we don't do that all the time. It's exhausting. And big companies are a lot like people in that respect, I think and the bigger the company, the more the tendency is to want to get back to system two corporate thinking, which is I want to behave unconsciously, I want to do pattern recognition, I want to be able to auto pilot, a lot of stuff. And the problem is the last few years have been deep system one. Now Brian Cornell [Target CEO] said this at NRF. And I thought it was a really profound observation on his part. And he goes, look, all of the agility, all of the adaptability, all the flexibility that we needed over the last few years, we still need, we're gonna need that this year. We're gonna need it next year, because we're, we're still trying to figure out exactly where all this ends up.
so now we got that out of the way. What's the biggest surprise you've had coming out of retail over the last two years for good or for bad? So something that just like, never thought about that? Oh, wow, that's fabulous.
Um, I would say a couple of things, I think the retailers’ ability to respond to the sheer and unadulterated chaos of the last 24 months. And by the way, you're entering into a pricing environment right now, which is going to be as chaotic for a different part of the retailer's world, over the next probably six to nine months as inflation works its way through our system as well. But I think the retailers’ ability to pivot their business models into something deeply unknown and remain more or less highly functional was really admirable. I think some people have been surprised by the resilience of brick and mortar retail. And, if you look at eMarketers forecast around the world, brick and mortar retail this year is going to grow by more in dollar terms than ecommerce. Well, that wasn't surprising me. I think that was surprising to a lot of people.
I think the other side of that, but from a shoppers point of view, was I remember fairly early on maybe six months in, as we, you know, talk to shoppers on a national level, the number of people, 55%, I think, who said they were proud of how they were coping, they were proud of how they were managing. And from a shopper side of things it was really extraordinary when the world you know, sort of the underpinning of that routine of what I do as a shopper, and what I expect from my retailers, all went haywire. And that was quite reassuring to me. On the other hand, it said to me, as we move through this and as you talked about ecommerce and you talked about stores, the amount of places people can now shop and have chosen to shop, when they didn't, whether they were 80 year old somethings or 20 somethings, is extraordinary to me and the complexity of what that now brings in, in a in a retail landscape where retailers are trying to be very back to some degree of order. During a process and pragmatism, raises a lot of issues for retail retailers who say, wait a minute, where do I sell them, now? Everywhere, of course.
Yeah, the other thing that probably, I guess surprised me a little in nature isn't, isn't retail directly, but it does it will relate to retail, which is the ways in which the foodservice industry evolved. Both the ability of restaurants to be able to respond to a world in which they effectively turned into into drive-throughs rather than sit-down places, but the I think the degree of disruption that that's going to have on the food service industry, I do think it's going to have a significant impact on the grocery industry, because it's going to be way easier to get a wider variety of restaurant quality food to show up on your front door than it was pre COVID. And that I think is going to impact how people assess cooking at home, and how that plays itself out. I think there's some interesting things in there, which are as yet to be determined.
That's interesting, too, because I had Anne Fink who runs food service Pepsi on a couple of podcasts ago and
talking about someone with a big brain.
and yes, exactly. And, you know, obviously having come from the traditional retail side, previous to that, she had a very interesting lens on all of this. And the speed at which they had to think about food service was really extraordinary. And then the roles that the company is taking developing new concepts, new ideas, new community support, all of these things. It just felt like a real, I hate this word, because it was the word of the pandemic, aside from you’re on mute, the pivot that a company of that size had to deal with was was fascinating.
this idea that, you know, prepared food getting to people's homes, and that becoming a very, very normal thing to do, that's got some some implications for how stores are gonna have to evolve.
Yeah, well, let's go there, how's will stores evolve? We can certainly talk about lots of channels what about grocery? What are you seeing there?
I think you've got a couple of interesting dynamics on the grocery side one. I know for some reason, people seem to think that Instacart is going to go away and that the retailers aren't going to stand for having... Instacart solves a massive problem for most retailers. What Instacart did, in addition to being a really cool user interface to buy groceries on, and outsourcing an operational problem that retailers hate, is they fixed a problem which retailers have really struggled with, which is how do I charge people that are willing to pay money for home delivery, but not charge other people. Retailers are actually not great at this tiering, of a tiering of payment, really, unless you're a membership retailer, like Amazon or Costco, and you charge a membership fee, but you don't even they even for them, they're not tiering that they basically charge everybody. Walmart's trying to do this with Walmart, with Walmart+. But this is just hard for retailers to build radically different value propositions for different segments of shoppers. So what Instacart did is they solved that problem for the retailer by saying, look, there are people that are willing to pay for an extra level of convenience, but you're going to struggle to monetize that, we’ll do it and and will solve all the operational headaches for it as well. All this is a long-winded way of getting to the fact that you're going to have an enormous amount of ecommerce in the grocery space specifically, that's all going to go through existing stores and is going to get bought off of existing shelves. And I think this is the part where ecommerce teams really need to understand that this notion of the endless shelf, which was always kind of silly because nobody wants an endless shelf is ludicrous. Most American consumable ecommerce isn't going to be sold in an endless shelf environment. It's going to be picked by somebody that works for the retailer or Instacart off of a shelf that is needs to get stocked manually. And by the way, the item needs to get collected by a human buyer. So you're still going to need to do a lot of the stuff that you needed to do to get your item into a tier of items that are that are able to be assorted. I do you think you'll see stores start to create environments where more of their square footage is dedicated to being the replenishment arm of the ecommerce offer either through having dedicated sections where online shoppers can pick orders versus getting in the way of people shopping. So I think you'll have dedicated parts of the store somewhere between 10 and 20% of the square footage of the larger store will probably be dedicated to ecommerce in some way, shape, or form. That I think will be a shift. I do think for grocery stores, they are going to have to embrace this idea around what does their role look like in the foodservice world? Are they leasing capacity from restaurants that have gone out of business during during COVID? Are they building and opening kitchens that can act as centralized prepares of food for restaurants that may not be able to manage the extra capacity. I think partnerships will be huge for the retailers.I think there is an argument that the bigger the store, the more it's probably going to end up looking like a mall. Just with smaller stores. I mean, Kohl's is probably the retailer that's done more of this than anybody. Right? So now you've got the Sephora as you know, everything in there. I mean, Kohl's has been doing this for years. I think there's going to be more experiential retail. And it's like, sure, that's probably true. But most of the time for most of the products that are sold by most of the people, we know, shoppers, sometimes looking for an experience, but often the experience they want is to buy it really quickly and easily. And a lot of what a lot of what retail theater is just gets in the way of that. But I think there will be selected categories in which experience is pretty meaningful. I think you'll have some space dedicated to that. Sure. And clearly, there'll be more of a digital component to that.
Yeah. And it is interesting, because you do see that sort of fragmentation of, I've got all the stuff I just want to get off the list. And we've been seeing that for a long time. It's, and particularly now through COVID as people became more facile with ecommerce, what are the things I don't need to think about -- whether it's a subscription model or not, I just don't want to think about them again, paper towels, toilet paper, cleaning products, whatever it is, diapers, off the list. And then what am I going to do with the rest of my time? And there's this sense that oh, now I'm going to run in and, you know, flump through the aisles and spend all my time doing something when actually people saying no, no, thank you very much. Maybe in one category, maybe it is in beauty maybe shoes, maybe pets, but actually, I'm just going to take that time back and use it the way I want, not the way you want. So I think you know, you're absolutely right. The other thing we're seeing is that incredible fragmentation and it is about shoppers saying, anyway, I want it which we've heard for a thousand years, but now actually, there are many more ways they can want it and get it. And I think about issues like that the impact on supply chain of I'm selling my product in 53 different versions of one retailer or multiple retailers. And now it's not just about having tops and bottoms going together, now it's actually having the right pack to go to the right place at the right time so how do you make sense of all of that as you look across the retail landscape?
So, hold that thought, before Bryan and I continue our very fast and furious chat, just a reminder that we have much research on the subject of retail fragmentation on our website, wslstrategicretail.com. We also have lots of examples of retailers from around the world who are creating new and integrated models, and experimenting and testing new business models and much more. So take a look. But not before you hear the rest of my chat with Bryan.
I think supply chain is going to need a massive rethink and look. Right now no one's got the time to rethink supply chain, they're just trying to get it to work. I joke about this a lot. But you know, I was with a group of medium sized companies CEOs not that long ago and we were talking about supply chain I'm like, well how much time do you guys spend a supply chain. Like I have 40, 50 60% of my time so it's like why it's what do you what are you doing? Like you're not helping the problem, you're not, you're not fixing anything. Your job isn't to fix supply chain now that let the experts do that. Your job was to prevent this mess from ever happening again. And that's a harder job. But really thinking through the two big pieces for supply chain for me are one yes, I think you're absolutely right, which is that your your reselling environment is in all likelihood going to be more complex three to five years from now than it is today in terms of the case, pack configurations, the order quantities and all that stuff, I don't think there's much argument about that. So how do you think through where and how you introduce complexity into your model in the most cost-effective way. And usually, what that means is that you're going to have the capability to, to manage that variability closer to the end customer rather than further away, i.e., you're going to need some sort of packing or repacking facility somewhere within the continental United States. And then that changes everything that you would then think about about your relationship with offshore sourcing, you know, you know, geopolitical risks that get to where I don't think many people would contend right now that the next three to five years are going to be a calmer geopolitical time than the 2010s. Were, that doesn't really make sense, given where we are. And at the very least, you need us you need a scenario planning to be able to manage for geopolitical tension. I think there's a gravitational pole again, here towards supply chains that are shorter, safer, and smaller. And, then, what does that mean for me as a brand in terms of how I need to think about what my positioning and what my value proposition is. So I think that supply chain will push a lot of thinking that brands need to do around this. And I think the other key element that's going to kick in and look when oil is $122 a barrel, like I think it was this morning, there's no better time to think about sustainability and plastics than right now. And because you've got a window of opportunity to be able to run cost models on, you know, less plastic intensive solutions for things that are gonna look really good, take advantage of it do that now. Because I think sustainability has to be a bigger part of how brands go to market because consumers are going to demand it. You've got a real window with the economics right now. But I would take advantage of Yeah.
This sort of unintended consequences, which is why I get the wet cement scenario, that opens an opportunity to think about issues that shoppers are telling us, I really want but you've got to do more, I can only do so much myself, I can only recycle, how many plastic, you know, whatevers so that opportunity. So when I think about opportunities in the coming year, two years, that sounds like it's one of them. Are there others in this sort of melee of how we're living at the moment that you see for both brands and retailers?
There's never been more opportunity than right now. Because no one has no one's achieved behavioral permanence in anything. Like, as much as I would love to say that you and I will be producing content two years from now in which I am wearing sweatpants, that's probably not as likely as it is right this moment, so as I said, if you thought you dress better than me before,
this was something we would never get an argument. You have an argument about that one, Brian, that idea.
You've expanded your already formidable lead during COVID. There's so many behaviors right now that people are amorphous about that if you're, if you have an idea that required human beings to do something slightly differently than they've done it before, this is the once in a career opportunity you're gonna have to shift how people behave. And that's the way I would look at where we are right now. Most consumers that spend most of the money particularly in the US have more money than they used to because they've had two years of not spending money on lots of other things. They're going to go back to spending money on those other things at some point. You need to get in now and introduce the thing that you want them to spend money on that's different. So that actually that cement hardens back into something that resembles more unconscious habit, that you're there and you've placed it because this is it, this is your window that would say the opportunity to is to establish behavior change in ways that would have been impossible to think about as a marketer three or four years ago.
Yeah, that's really in many ways, kind of an uplifting call to action to people. That's encouraging to me. Always the optimist. When you think about who's the retailer you look at who's top of your list at the moment, who you say, gets it moving in the right direction? Great example of where the future is headed.
I think pound for pound Sephora has been the best retailer in the world for five or 10 years. And I think they I think they still remain so
What why is that? Why do you think so
they do a wide variety of things really well. So they, they have some of the virtue of the Apple Store, in that they've made merchandising choices that allow their stores to generate an economic model that allows them to pay people fairly well, which allows them to keep and retain fairly good people in store. So and that, at some basic level is always the trick as a retailer, right? If you don't have an economic model that permits you to pay enough dollars of labor per square foot, basically, you're either gonna end up with too few people, or people not making a ton of money. And that's other things being equal going to generate higher turnover. So you need an economic model that can basically allow you to pay for the right amount and type of labor. Sephora’s got that because of the way that they the categories that they've chosen to sell in. And to be honest, they've got some, pretty bad competition, that always helps. I think they do a great job of in store merchandising, I think their upsell, snap strategies are really clever, even just basic stuff. Like when you're in line on your you're in the queue looking to get out of it for and you don't have Snickers bars, or you have $25 bills, right? Like, I mean, you could fundamentally change the economics of that transaction in the two or three minutes, you're standing in the queue. They're really smart about how they use a rewards program. They're just their stores always look really good. They're just they do a nice job.
Yeah. And certainly, as areas of beauty evolve in terms of skincare and wellness integration and things like that. I have in my mind, you know, the Aldis of this world, they just keep adding a layer of whether it's fresh, or whether it's organic, all of those things. And no one
ever thinks about Aldi and Costco was being more similar stores, but they're very similar business models, and they are within the context of what they do. Yes, I would say that Costco and Aldi remain, you know, just but they're kind of boring answers, because they've been I've been doing this for 26 years now. And they've been the best retailers in the world at what they do since I started. The other retailer, I don't think gets enough credit is Best Buy for degree of difficulty what Best Buy's had to pull off over the years. I mean, Best Buy's got Apple as the vigorous and direct competitor, which is really hard because they're really good. Best Buy's had digital transformation of its the entirety of its store whereas grocery stores really haven't had that. Best Buy in the year 2000, 41% of their sales were physical music, like just thinking about all the transformation they've gone through. I think they've done a really interesting job of always staying just far enough ahead of where stores are going. And I always tell people if you want to kind of think about where the future of retail is going Best Buy’s a good place to hang out just to see some of the decisions they make around how their stores look.
Okay, well from a shopper of Best Buy, I will disagree on experience, but I get the rest. We'll have that conversation separately because otherwise I'll weep in the middle of all of this.
No, no, no, the problem they haven't solved for is the one I was talking about before, which is to be able to generate sufficient economics to get a labor model that really works. So as a result, execution for them is very inconsistent. But if you actually look at how the stores are designed, what they're supposed to do, if there's some really clever thinking that's going into them.
I don't disagree with it. So when you think about, you keep an eye on a lot of things. I always think about leading indicators. And I don't mean that in a really fancy way. Where do you go, I'll toss out my example, first. I used to watch people on the subways in New York City on the No. 1 line, especially, I would watch people, I would watch what they're wearing, I would watch people start to read hardcover books, how they're shopping online in the subway. What do you look at? What do you is there something that you, you know, put your finger up in the in the air and see how the winds blowing?
It's a good, I think, my older, my dear friend and old colleague, who we, we basically traded to Australia for you, I think in a complicated series of draft picks, but, Phil Banana, the guy that I worked at MVI with for years. So when I would always refer to things like this as a glitch in the matrix. You know, just with a second black cat shows up, you're like, wait, what was that? And you just kind of, it's just things that just slightly get outside a pattern? And you're like, wait a second, that's odd. I do think you can learn a ton, I'm actually preaching to God here on this, but you can learn a lot walking stores. Wendy, I don't know if you knew that or not. So
that sounds like a business model.
I know, there's nothing you enjoy more than when I mansplain your life to you. I mean, and you do a wonderful job of this by the end and always have. But I do think that paying careful attention to especially a category you're not as familiar with. And just going what's going on here? I remember reforming my entire idea about how about how you can architect brand choice by spending 45 minutes during a chicken broth and Walmart at one point, and it's like, this is a wait, what do they do? Oh, I get it. And like, I think so I think physical stores are still a good place to go and kind of get a feel for that. I always, I'm always just really curious to see. And especially now that I kind of am a little bit more overtly in the advertising industry than I was in my previous life. I think observing how both I and other people invest their time and attention is a big one. My colleagues here at OMB on the media side have been talking a lot about using attention as a metric for advertising effectiveness. I think that's really important. I would yell at the yell at the wind for like 10 years about why people weren't thinking more about gaming as a marketing platform, because it was a massive consumer of human attention. And because it didn't have a well understood advertising model. And I think that's usually where I think that's usually where arbitrage is, it's usually where attention is high. But the marketing industry hasn't calibrated metrics so that advertisers can easily participate in it. I think that's where you see the most interesting ways in which people's understanding of the world is changing. So I think you can learn a lot from from those ecosystems and you know, obligatory metaverse shout out, but I guess that's one of the reasons why the metaverse is attracting as much attention as it is right now. Though, I think the accessory platforms to the metaverse things like Snapchat, things like gaming, they're way more interesting than the metaverse at the moment because they're real and lots of people use them like.
Yeah. It is the bright shiny thing, right? It's crypto. It's the metaverse
And then you just see so many missing options. There's still this assumption that gamers are all male And people under 35, you know, that's I mean, gamers are pretty gender equally gender distributed. So, you know, if I'm trying to reach 26 year old women, gaming is a wonderful platform to do that. Right. And nobody, nobody gets that. So that's,
see, that's what I saw on the subway. I would watch people gaming, and with their kids. And I'd be like, what are they doing on this subway? Oh, thank heavens, we've got the wifi at 14th Street, we're good.
It was my airplane test, like walking back from the bathroom to the seat on the airplane. And you're walking back and just look down and see what see what people are doing on their phones. And it was and it was just overwhelmingly Candy Crush. Like it's like, wow, okay, this.
Yeah, exactly. Every Age every gender. So then, last question, are we still living in a world of wet cement?
Absolutely. Yes. Yeah, it's hard the system, one thinking we've all been engaged in for the last 24 months is tiring. And I think individuals are tired. But if you can rally the energy, and really think through the behaviors you want to change. And really think through how to reach people, you're never gonna have a better opportunity to change the way people behave and what they do, how they think about your brand, how they use it, what they're doing, you're never gonna have a better opportunity than right now. So this is, this is it.
I couldn't finish in a better way. You've encouraged me. You've inspired me as always and actually I have a light bulb that needs changing. Could you go...? That's a really sexist thing to say. But it's International Women's Week. So forget it, I'm saying it. Anytime you want to come over there's always a light bulb to be changed.
I would I be delighted to hire I will change light bulbs for food at any time. have
very good well, it's night. I thank you so much for doing this. You're always a good sport. I look forward to seeing you in person very soon.
Look forward to it as well. Wendy, thank you for the invitation. Cheers.
So here’s the thing. Bryan is right (as he actually often is). We do still live in a world of wet cement, where the implications of the last two years are still not totally clear.... not set. However, as we both agreed, it’s never been more important – or more opportunistic – to look towards the future. To build scenarios, to create contingency plans, all through the lens of what shoppers want and where shoppers are headed. As we always say at WSL, if you want to see the future, follow the shopper. And on that, Bryan and I agree. So call us, email us, text us if you want to see the future, we are your guide.
See you there.