retail news in context, analysis with attitude

Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

This week, we talk about the importance of differentiation, the high cost of customer service (or lack of it), and how AI can help death take a holiday.

And now, the Conversation continues…

KC: Tom, this week I thought I’d bring up three different kinds of innovations that I’ve seen recently, and just get your reaction to them…

I was intrigued by the announcement by Nordstrom that at its new Local stores being opened in New York City, they’ll actually be accepting returns of online purchases made from other retailers. In other words, if I buy something online from Amazon or Walmart or Wayfair or Kohl’s, they’ll actually process that return for me. On the one hand, I think this is brilliant, and certainly on-brand for a company about which the urban legend has it that one of their salespeople took back tires that Nordstrom never sold. But I also wonder about the wisdom of making shopping at nominal competitors more convenient … it would almost be like Ford being willing to fix Chevys for nothing - sure, it makes Ford’s service looks good, but takes away one of the reasons to buy a Ford.

Tom Furphy:
It does seem a little over the top at first blush. I love that Nordstrom is willing to go to all lengths to serve their customers. I’ve always espoused that retailers need to intensively focus on their customers and solve real needs for them. If online returns are a significant customer pain point, and Nordstrom feels like they can solve that well for them, and that customers will reward them with more loyalty in “return” for the returns, then it could be a good call. I’m just not convinced that online returns are all that painful. Most sites allow you to print a label or code, slap it on the original package and drop it off at a UPS or FedEx store. Doesn’t seem that difficult to me, but perhaps I’m atypical.

I would expect that Nordstrom has or is working on deals with the other retailers that enable them to process and be reimbursed for the merchandise value. If not, it would be a very expensive trip driver or customer acquisition cost.

I’d think a good, sensible policy could be for Nordstrom to take returns for any brand that they carry. They could cut reimbursement deals with the brands and be able to re-sell and upsell those customers once in the store. That would solve for customers that they want to serve and would weed out those customers that are more price sensitive and less premium brand driven. If that’s too restrictive, maybe they could require a customer to be a member of the Nordy Club to return a brand they don’t carry.

KC: I’ve also been noticing a bunch of press releases lately for a company called Dog Spot, which essentially puts little dog kennels in front of retailers, and allows consumers who are members to use a membership card to unlock the door to give your dog a place to safely rest until you get back from shopping, at which point you use your card to retrieve your dog. (The card is unique to each member, so nobody can steal your dog.) You can even make reservations via an online app.

My question is this (and I’m honestly not turning this into an Instacart metaphor): does it make sense for different retailers in the same market to have the same offering? For example, in Seattle where you live, the Dog Spots are at QFC, and soon will be at both New Seasons and Central Coop. I guess I just wonder if you think the differential advantage goes away if it isn’t really different … and if you think there is a line somewhere that retailers should not cross, lest them become commoditized?

In my opinion, the line for which services a retailer should own versus which they can outsource is drawn around what they consider core and differentiating. When defining a value proposition, retailers should focus on what they can do well and uniquely for their customers. The more critical customer need that a service addresses, the more important it is to own it and uniquely win with it.

In the case of dog kennels, I don’t think food retailers should sweat owning them. I suppose if the pet category was strategically important and they wanted to deeply engage pet owners as part of the offering, then perhaps they should own it. But short of that, as long as Dog Spot does a nice job with the service, with clean and safe kennels, I think it’s fine to outsource it to them.

I think the same for delivery. If a partner is professional, delivers on time and the product is of top quality, it’s fine for a retailer to outsource delivery. I don’t think they should outsource customer stewardship and cede the relationship with the customer. They need to own that. However, relying on an expert, with a delivery system that is well-funded and self-sustainable, and that delivers a good customer experience, can be more economical for the retailer while enabling them to control the overall customer relationship and value proposition.

KC: Finally, I’m wondering what your reaction was to the new business model that we wrong about the other day, creating technologies that allow people to interact with their descendants for years, maybe even decades and centuries, after they’ve passed away. It all seems tied into the fast-evolving world of AI and machine learning, which when combined with Alexa-type technology, is going to stimulate whole new levels of technological integration into our lives, which probably will be good in some ways and bad in others. What do you think of this stuff? Is it real, or is it just smoke?

Part of me feels like I would be more at peace knowing that some elements of my being would live on digitally beyond my time here. I think it would be really cool to interact with my grandparents and my dad who are now gone. I think it would also be cool to interact with their parents and grandparents.

If I was comfortable that my digital avatar would be an accurate representation of me and what I would say, I would love for my descendants to be able to interact with me. If I could help them through a difficult time, maybe tell a joke, tell them I love them or recount a story, that would be pretty slick. I would want there to be some tight controls and standards around how “I’m” used, which I would have to approve.

I think this stuff is real. In your piece, you had mentioned Amanda Solosky at Rival Theory who we met at the Retail Tomorrow event in Los Angeles. They say, “Our mission is to evoke the best in humanity through AI Persona: virtual beings that combine the knowledge, strategies, values, and beliefs of a real person with machine learning and machine cognition.” It’s pretty cool, albeit some may think creepy. As it continues to improve, I can see this tech applying to tele-doctors, nutritionists and pharmacists. I can also see it with chefs and cooking instructions. This will happen at scale in retail in the coming years.

Wouldn’t it be cool if grandma’s recipes could be passed down over the generations? Not just a written recipe, but also the experience of grandma sharing her special techniques that she uses to make it taste just right.

Commerce can be embedded in all of this but need to be done so thoughtfully. I think it’s important that when commerce is embedded in services and experiences it provides value. If this is all a bunch of noise, then commerce could be as annoying as it is helpful.

The Conversation will continue…

KC's View: