Retail Innovation and Trends with John Andrews

IF John Andrews IS TALKING ABOUT IT, THE RETAIL COMMUNITY NEEDS TO HEAR IT. ~Ted Rubin #RetailRelevancy

I am incredibly excited to introduce you to John Andrews, the co-innovation director at Ricoh, to provide an update on Ricoh’s retail initiatives.

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Thank you for inviting me. Your ongoing content is greatly valued. The KSV community is fantastic. I’ve been fortunate to meet some of your startup partners. I’ve also introduced a few who have now joined, and I plan to continue doing so. It’s incredibly valuable not only for understanding current activities in this field but also for networking. Every day, I engage with someone from the King Street Ventures Council!

Ricoh continues to offer excellent printers and multifunction devices. What sets us apart is our expertise in creating, managing, and installing intricate electromechanical devices. In today’s retail landscape, which includes robotic sizing and computer visioning, paper-based processes still play a significant role. Ricoh recognized this shift years ago and adapted accordingly.

This week, I had two insightful conversations about anthropomorphic robots. Our service team at Ricoh is deeply involved in robotics management services, training, and deployment. One of our robotics partners is introducing a new humanoid robot to the market today. This robot is specifically designed to efficiently move items from one place to another in distribution centers and warehouses. With its uniquely hinged legs, designed to navigate spaces optimized for human workers, this robot is a glimpse into the future where warehouses are increasingly designed with robots in mind. It’s fascinating to witness this shift towards robotics in the workplace.

We highlighted three key challenges that retailers currently face. My role involves addressing one of these challenges. The first issue is the difficulty retailers encounter in finding and retaining sufficient staff. For instance, I recently spoke with a partner whose workforce turnover rate reaches a staggering 90% annually. The integration of automation and robotics is crucial in mitigating this challenge. This transition is already underway and presents opportunities for improvement. My responsibility is to identify these challenges and opportunities, assess how Ricoh can contribute, and collaborate with partners like Uptok to deliver effective solutions to our clients.

Retailers leverage technology primarily for cost-cutting and increasing profitability, evident in initiatives like self-serve checkouts. Is the core concern about enhancing profitability in the face of intense competition?

I mentioned the first challenge and discussed three major issues affecting the retail sector today. Firstly, the main issue revolves around people. There are concerns about the workforce. Amazon has set a high standard for retail service. For instance, I can order anything at any time and it arrives promptly. Let me give you an example. While having dinner with friends outdoors under a marketplace umbrella, I suggested we replace it.

During dinner, my wife ordered a replacement on Amazon from her phone, and it arrived before our dinner ended. This incident highlighted the level of service people expect from retailers.

In the world of retail, if you’re not Amazon, you’re often measured against their standards. Making a profit in e-commerce is challenging, especially at scale. For instance, a McKinsey presentation at a retail media conference highlighted the significance of retail media in boosting Amazon’s margins. Without retail media and other key elements, Amazon would face significant losses each quarter. This shows that e-commerce profitability is not solely reliant on selling products online but also on additional services. The pursuit of profit margins is vital in e-commerce, as it continues to shape the future of retail where omni-channel shopping is becoming the norm.

We are currently working on projects involving multimodal delivery or fulfillment. Picture this: I’m at the grocery store, picking up dinner items for the night, and I realize I need a $50.00 bag of dog food for my pet. Instead of carrying it out, I simply add it to my delivery cart for it to be sent to my home. The challenge lies in addressing the needs of the shopper. The pressure on margins is significant, especially with a high rate of e-commerce returns during the holiday season, reaching 17%. When factoring in the cost of acquiring customers in e-commerce and handling returns, it greatly impacts retailers.

Traditional brick-and-mortar retail has never had wide profit margins. For instance, Walmart’s net profit averaged only 2.5 to 3% over four years. Even though this may seem small, any disruption in the industry can quickly lead to unprofitable outcomes.

Retailers are diversifying revenue streams with health insurance, entertainment, and retail media networks to increase profits amid challenges like declining TV earnings. Amazon’s success highlights the importance of additional revenue beyond core operations for growth and profitability.

I believe this explains why we often see media involvement in the retail process. If we look back to the pre-internet era, TV and print media played a significant role in advertising products available in retail stores. The advertising revenue from companies like Procter & Gamble promoting products such as Crest aimed to drive consumers to retail locations.

Some retailers saw the value in this advertising approach. Recently, I was sent a link to a CNN article, but before I could view it, I had to sit through a 30-minute advertisement for Charmin toilet paper. While I appreciate Charmin, I didn’t really need to think about buying toilet paper as I already have my preferred brand. The 30-second skippable ad disrupted the user experience, but I understand it’s necessary to fund the content.

If we consider the functions of retail, such as advertising and media to attract attention and engage customers, organizing items for sale, and handling fulfillment, returns, and services, Amazon took a unique approach early on by separating these components. They realized the need for extensive cloud storage to operate efficiently and decided to build it themselves. This led them to offer cloud services to others, which was well-received. Currently, they are applying the same strategy to logistics. These steps represent the core elements of retail.

Diversifying revenue streams within these areas enhances the business. With Amazon’s strong market presence, traditional brands face challenges in generating profits as Amazon exerts pressure and has a robust global supply chain that can easily compete with non-branded products if prices are not favorable.

Brands are increasingly shifting towards direct-to-consumer models to access first-party data. This transition may impact profitability compared to traditional retail or e-commerce channels. Any advice for brands navigating online profitability?

There was a point when I was convinced that Nike was heading towards a complete direct-to-consumer approach. They seemed to be moving in that direction, remember? They were gradually parting ways with retail partners, reducing from, let’s say, 150 to 30 stores, with a clear focus on going direct. However, at some stage, this strategy significantly impacted their business because some consumers prefer not to purchase shoes that way. Some individuals prefer buying shoes from stores like Kohl’s or Foot Locker because there’s someone there to assist them.

People have diverse reasons for their purchases. Recently, I had a conversation with a man who shared that he was at a store, found an item, checked the price on Amazon, saw it was 56% more expensive, but still chose to buy it from Amazon. I understood his choice because it’s more convenient and hassle-free, especially for returns. It’s a thought-provoking decision, isn’t it?

In response to your question, I believe that similar cost models pose challenges for DTC (Direct-to-Consumer) players as well. Depending on the brand or product, there may be scalability issues when aiming for profitability in a direct niche business. While businesses like Warby Parker and Allbirds started as DTC brands and expanded to include retail, they often struggle to generate profits due to the additional costs associated with logistics, automation, warehouses, and the necessity of partnerships with marketplace platforms that impact profit margins.

It’s not easy to provide a straightforward answer to that question. The scale of the product plays a significant role in determining its success. Drawing from my experience advising and being involved in various Direct-to-Consumer (DTC) brands, the market size is crucial. What works for a $20 million brand might not necessarily work for a half-billion-dollar brand. It’s essential to assess the available market potential.

While billion-dollar figures may sound appealing, they only represent a portion of the market. For instance, the telecom industry highlights this point well. Consider the affordability factor; not everyone can purchase a $2,500 bike or a $45 monthly subscription. The market size is substantial but finite, raising challenges in reaching a broader audience.

John, at Ricoh, you excel in advising and thought leadership. Your active sharing and education benefit the industry. What topics currently interest you or keep you up at night?

I’m extremely enthusiastic about the omni-channel delivery aspect of retail media at the moment. What I mean by that is introducing a new product called turnkey media, which is a screens-as-a-service offering. When considering the challenges of in-store media delivery, factors such as costly CapEx, installation, and connectivity come to mind. Many retailers may be hesitant to allow connection to their Wi-Fi network, as it is primarily reserved for Point of Sale activities and their operational systems. Additionally, the maintenance and upkeep of screens are crucial considerations. How can this be effectively managed?

We have successfully addressed numerous challenges through a comprehensive turnkey solution. Currently, our focus is on identifying the essential elements people require from a screen. Although I am unsure of the individual who shared this insight within our application, I am committed to providing proper attribution once I locate the source. This perspective is not originally mine, but it was suggested that customers seek three specific things from a screen in a retail setting. Interestingly, one of these needs is not an advertisement. While ads have their place, being in a bustling retail environment, characterized by noise and crowds, an ad might not offer significant assistance to customers.

The concept of aiding individuals in navigation is crucial, particularly in a retail setting. Customers often seek guidance on finding specific sections, like the peanut butter aisle, which might not be as easily achieved through a screen. Navigating through various journeys, such as planning a healthy meal or locating a replacement light bulb for an older vehicle like a 1987 Honda, requires assistance. Offering support in navigating these different paths can greatly benefit and guide individuals.

So, you see, companies like Uptok and other unique ones really caught my attention. I found it quite fascinating. How can they support people in need? Exactly. Let’s go back to the initial problem of not having enough staff. Perhaps I can easily locate someone in the store, use an app, or, as a shopper who prefers not to interact in person, engage comfortably in a chat, which is quite unique and intriguing. Then, when I’m ready to make a purchase, how can they make the process seamless for me? How can they… you know?

That’s a good time to consider if they could offer me an enticing deal, introduce a new type of toilet paper, or something similar. However, I find the concept of omni-channel retail media delivery incredibly thrilling at this moment, especially when combined with the ability to recognize a consumer if they choose to be identified, or even predict and understand a consumer’s preferences without direct knowledge. I believe this aspect is particularly fascinating in today’s retail landscape.

Privacy is a complex topic. Today, in Atlanta, Delta offers its Delta ID product, which solely relies on facial recognition. You can approach the TSA without needing an ID or ticket as the camera recognizes you instantly. While this technology brings convenience for many consumers, some may have concerns about privacy. It’s a choice individuals will have to make. On the other hand, this technology has the capability to gather information about users, potentially allowing for targeted marketing without revealing personal identities.

And with no privacy concerns whatsoever. Another area that has rapidly improved is computer vision systems and their operational capabilities. For instance, Speedway stores now feature Fujitsu’s visual self-checkout systems, which are a significant upgrade from traditional scan-based self-checkout systems. When purchasing items like my favorite junk food and drinks at a convenience store, the camera detects them, displays them on a screen for approval, and allows for a seamless checkout process. This new technology is truly impressive and enjoyable to use.

It seems like changes are happening rapidly. Amazon is readjusting its Amazon Go model due to the high costs of RFID and sensor-based technology. It’s likely that using existing cameras and more affordable camera systems will replace these technologies. My personal view is that Sam’s Club is already implementing self-scanning technology for about a third of its customers. Instead of traditional checkout processes, they are introducing computer vision systems to streamline the shopping experience. This transition to advanced technology in retail is expected to happen quickly and revolutionize the industry, especially in terms of predictive inventory management and real-time communication.

Imagine if a sophisticated AI system within Walmart could track all its inventory in real-time. This system could quickly analyze data and request precise amounts of products for distribution to various stores. This capability would prevent inventory issues and optimize supply chain management efficiently. Exciting, isn’t it? Apologies for the lengthy response.

Combining all those elements, John, paints a picture of the future store. The technologies you mentioned are all currently available. It’s like they say, “The future is already here; it’s just not evenly distributed.

Certainly! It seems that emphasizing what truly works is crucial, especially in the retail sector. Many are adopting various innovations, but the key lies in connecting all the dots to truly revolutionize the industry in terms of customer experience and expectations. Areas like logistics, supply chain, and inventory tracking are intricate and captivating, though I have limited knowledge about them. As a consumer, I have encountered numerous technologies, such as camera scanning at checkout.

I have encountered startups in San Francisco and various retailers that are implementing these technologies. Have you heard of the standard API group? They are known for their impressive video showcasing a futuristic store concept. The store of the future revolves around a seamless shopping experience based on camera technology, similar to the checkout-free concept.

They are considered a strong competitor to the Amazon Go platform, with kiosk-sized stores popping up in airports and college campuses as test environments. This innovative technology may soon be integrated into traditional retail settings.

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Innovations In Retail With John Andrews | Episode 27