Michael Koch is the VP of LOC Associates, and a retail innovator.
George Martocchio, VP, Retail Innovation has spent the past 15 yrs working with global brands & retailers helping to develop innovative retail programs, from kiosks to shop in shops.
Michael Koch, Vice President of LOC Associates, and formerly of Samsung, Apple, Guess? Inc. shares his insights for retailers with George Martocchio, VP Retail Innovation at In-Store Experience. Michael has worked with Fortune 500 companies to create experiential flagships worldwide, delivered retail expansion programs and developed consumer strategy in physical and digital channels globally.
George:Welcome Michael! I want to start the discussion with the retail industry in general. There’s been a lot of coverage in the news about the state of physical retail. Some say there’s a ‘retail apocalypse’ - others say it’s only ‘boring’ retail that’s dying. With the news about major retailers closing their doors, such as Toys R Us and Sears, what are your thoughts on a retail apocalypse’ or a ‘retail reinvention’?
Michael:I think the ’adapt or die‘ mentality has never been more true than it is today.
Retailers that cannot connect with their consumers and adapt to trends are facing an uphill battle, if not downright extinction. Think of how different the retail landscape is today compared to the 1950s, 1960s, 1970s….but, I think the retail apocalypse is not what people think it is. Think of it this way, online retailers like Amazon and Wayfair are building physical stores…that isn’t an indicator of an apocalypse. It’s an indicator of adaptation. Ultimately, the experience consumers receive digitally or physically is key to a journey that they can relate to feel immersed in. George:Agreed. There are so many examples of online brands opening physical stores, and I have even seen an example of a store that has closed down their online offering to only be in physical retail!
While some retailers are thriving and others are really struggling, what are your thoughts on the physical retail environment?
Michael:I think some retailers over index on their product instead of focusing on the relationship between product or service and their consumers. The successful companies are focusing on understanding not only their current consumer, but their customer of the future as well. It’s as simple as this: you could displace thousands of products in a line and hope that people will understand and purchase one. Conversely, you can create activities in retail that people can relate to and associate with, and then in the background displace products associated with those activities. I would contend that the conversation rate will be stronger in the latter than the former. George:Right, so it’s about being aspirational at the same time as servicing current customers. I think the move towards experiential retailing may also help with that relationship building you’re talking about.
One of the impacts of the move towards experiential retailing has been the introduction of new store formats. What are you seeing and which new store formats are bringing success?
Michael:I can see that open formats that encourage experience are successful - product laden shops are not. We know that people can buy anything online…but they can’t experience anything without physical interaction. The consumer journeys that focus on the attraction and affection of the consumer and product relationship are very successful. Retailers should be aware of this and keep it in mind when exploring new store formats or physical retail approaches. Warning-- experiential retail will only get you so far. Keep your experiences modular. Keep them fresh. Retail is not static. George:When you think of experiential retail, it can sometimes involve technology and digital tools. We’ve talked in the past about technology, and some retailers integrate technology for the sake of technology. My thought is the real focus should be on the consumer and provide a better experience. The basics of retail, a better consumer experience. Do you think there’s always a role for technology in stores? And what should retailers be thinking about before bringing new technologies into their retail environments? Michael:Yes, I think there’s always a role for technology, especially in the digital integration of how we face our consumers with user selling points. Fact tags and collateral are a thing of the past. Not only will this be key to the story of the consumer in their store-based journey, but technology will continue to drive assisted sales and mapping of large box locations. Imagine a GPS mapping feature created that will guide you in your journey in a mall or a single big box store (i.e., Lowe’s). As people have less and less time to shop, we will have to make each minute count when they are in store. That technology is being created now. George:Finally, what challenges do you think retailers will face in the next 10 years, and what's your advice on being best prepared? Michael: There are two main challenges: (1) Technology will drive sales to a level never before seen. Companies will have to reinvent consistently and create modular experiences that consumers can relate to. CMS platform updates will be more important than they are today. (2) The labor force will be impacted as studies show that by the year 2035, the older generation will outnumber the younger. The journeys created now will apply for a longer time, but what happens to the common labor pool? Specialty trades in construction are at risk as much as the retailer that does not adapt to ongoing demand. The labor force is experiencing a drop in hard and soft selling techniques as the younger generation does not communicate the same way. The years ahead are exciting, not just in the advancement of technology, but in how we go about our day–to-day. Tech is no longer just about retail, hotels, or restaurants.
It’s about who we are and how we use it. It is immersed in everything we are: how we live, how we work, and how we play. Smart cities, factories and homes will be the norm. Today’s ’technology‘ will be a thing of the past soon. It will be as laughed at as the brick phones or 56k modems. The advent of 5G and beyond will be more than just bandwidth on a cell phone.
The question is, what are you willing to do to create the next phase of technology and apply it to everyday life?