Retail’s New Reality

Speaker 1: This is the Jump Off Point, an original podcast from Jump Capital. In recent years, retailers have had to respond to the shifting demands of new generations of consumers, and recently, the heavy impacts of COVID- 19. What is being prioritized? How are brands and retailers innovating? And how should tech in this space be approaching these customers? Our conversation today features our host, Jason Felger, Jump Capital colleague, Yelena Shkolnik, and our special guest, Scott Lux. Scott's currently the acting Senior Vice President of Customer Experience and Digital Commerce at Alice + Olivia, and has led eCommerce and digital initiatives with Theory, INTERMIX, Diesel, Khiels, AmEx, Morgans Hotel Group, Varvatos, and more. He's also an adjunct professor of D2C, and eCommerce at Columbia University and FIT.

Jason Felger: Just as a little preamble maybe before I just start hammering away on the questions, it was... I was trying to get a little running this morning and thinking about this and feeling the anxiety of getting ready to chat with you. And I'm like, " Why in the hell am I anxious to talk to Scott." And then I was flipping through your background this morning, and legitimately I was looking at just the experiences that you've had and the industries that you've operated in. And I might argue those have been the most affected both short term and long term of what has happened over the last year. And just really excited to hear your perspective on these topics, not just around COVID and its impact, but more so just how this has changed the trajectory of retail and eCom and how brands are approaching customers. Yeah, I think there's a really logical place to start as we begin this conversation that's with the customer, and how building customer centric experiences is embraced by brands and by retailers. And I've heard you talk about the importance of really identifying the target customer experience for a brand. And then having that drive strategy. And we'd love to hear you just describe what that really means to you. And some of the things that embody that more customer centric approach to a brand and how they are executing against their strategies.

Scott Lux: It's a great point. And I think I love the idea of customer first, customer- centric because I would say over the last five to 10 years as eCommerce has evolved. Part of the challenge we've run into is there's been so many buzzwords, but rarely had they put customer at the center of the equation. So, you talk about omnichannel, mobile- first, digital- first, whatever the case may be. And what it does is it alters your perception on how to approach the business and your customers. So the way I think about it, is you have to put customer experience at the center of everything. And I define customer experience as really looking across the plane at digital, physical, and people because all of that fits into the equation. Especially, when you get into what we've seen with COVID, and looking at store associates. So, starting to elevate that way of thinking. And you almost take a secondary approach to business objectives. Now that doesn't mean they're less important. I'm always held accountable to driving top line sales. However, the example I always go to is talking about returns as a case point. It's always like, " Oh, how can we reduce return rate?" How can we do that? Instead of thinking about how do we make it a better experience for the customer? And that could be using fit guides, it could be better product detailing, better product imagery. Even when you get into returns how do you make that a seamless experience, whether it's in store or online? So, just altering your perception on where to think about customer journey and customer first.

Speaker 1: Yelena Shkolnik is a partner with Jump Capital, and leads investments in digital media and eCommerce. She has been following the ways COVID-19 has changed shopping forever.

Yelena Shkolnik: I feel like most of the conversation, especially when I think about the D2C brands and digitally native brands is so about how do we do new customer acquisition? How do we just grow top line? I don't hear nearly as much about retention of the customer, the lifetime value of the customer? How do I cultivate that customer that I have acquired? Does that sync with what you've heard? Does that feel like the right priority type? How do you hear people prioritizing?

Scott Lux: Yeah, I think it's a little bit of a legacy approach, but it is starting to change. Part of it, it's being forced to happen. The cost of media and the cost of acquiring a customer has skyrocketed. So it's really forced brands to look at can we even afford to acquire customers at certain periods of time? So, I think it's again mapping out that timeline. When do we acquire a customer? How much are we willing to spend on a customer and then looking at their predicted or lifetime value as a payback. So, it's shifting away from that historical ROAS model that quite honestly was easy. It's like, okay, let's run a campaign. We'll accept a two to one ROAS because it's acquisition, and we'll call it a day. But you really can tell how many new customers you're acquiring.

Jason Felger: When you talked about customer journey mapping how does that then manifest itself externally actually to the customer? Are there brands that you think do this exceptionally well who've embraced it and you can point to as best practices?

Scott Lux: Yeah, that's a really, really good question. I would say we'll look at it through two lenses, one pre- COVID. I think Nordstrom was really spot on, on how they think about their customer journey and customer experience. If you look at New York, and some of the work they're doing in Los Angeles where they're opening up these smaller footprint local stores. So the whole concept was why should we force the customer everything we're talking about? Why do we force the customer to drive to a mall that may not be relevant for them? Let's open these smaller footprint stores that are really enabled for them to engage with the brand, a stylist or associate, you can get free services such as tailoring. You can get smoothies, whatever the case is, kind of created this model that is really geared towards what works best and is easy and convenient for the customer. So there's just a lot I would encourage the listeners to look at what Nordstrom is doing because that's the other question I get asked all the time. Am I my bullish on department stores? They're the ones that give me hope.

Jason Felger: We go from strategy almost down into the weeds, and start thinking about the analytics aspects of executing these strategies for the brands and how data is utilized. And there are just an abundance, maybe too many actual analytics solutions out there for retailers. The spectrum is tremendous. There's everything from light BI tools to obviously retailers and brands can build their own capabilities in- house. They can build their own teams in- house, and they can have their own data warehouses. With that, where do you see the most ROI coming from? Is it on customer acquisition? Is it demand planning? Is it logistics? Just holistically also, just how do you think about embracing a data- driven culture for these organizations? And where do they spend and where have you seen the benefits of that spend?

Scott Lux: I would say the one piece to start with is data and analytics. I think it's been a blessing and a curse, to be honest with you, right? Because maybe, again, back to five or 10 years ago, you did not have access to cloud data. A lot of your data set and different solutions or systems. Most retailers, especially the midsize, smaller ones don't have a data warehouse because that whole concept was our customer data lives in our POS, or our eCommerce system, and that's that. Maybe you do use Google Analytics or an Adobe solution for your web analytics, but the conversations stitching that together was really complex. I think where we are now it's evolved. All that data is now accessible. So you've almost reached a point where there's too much data. And what I encourage our teams to look at is what is that actionable insight. So really surfacing it back up a level and saying, " Okay, what is our key objective we're trying to solve? How do we measure that objective? Did it work or did it not work? And then how do we scale that?" And I think you can apply that, as you were saying, whether that's to planning and looking at how do we become more robust in setting objectives? When I'm thinking about our spring buy as an example. So not just what is the inventory we bought? But what is the expectation of that inventory. If you look across classification and say, " Okay, we expect dresses, or joggers or denim." We've bought into that 30, 40, 50% to last year, but how do we expect to sell that? How much will that drive in our revenue on a week by week basis? And I think that's where you can start to leverage data to look at what are those forecasting models? What's your trend, and applying it to your marketing activities to determine whether or not you're successful? On the customer side, I think it's become more and more critical to where we can start having that conversation, then move away from the ROAS model we were just discussing on acquisition to where you can build a fairly lightweight predictive lifetime value model to say, " Okay, we know all customers, you may only buy two or three times. Maybe I'll buy four or five times." So you need to start understanding that data. What's the lifetime value so I can adjust my spend and how much I'm willing to pay for you. So, I think that's where you're starting to see the boundaries get tighter, and where you can leverage the data. I would say bring it back to... Your question of looking at the for me, it's really how do we drive the most efficiency out of digital marketing? And I think that's where the data is really helping us to become more efficient. And since dollars become more and more precious, I think on the planning, buying, and performance side is really looking at understanding how does our product truly behave and perform? And what are the implications from a customer perspective? Now I can look at and say, " Okay, what is that first purchase a customer made, and how does that equate to their lifetime value in their future behavior with us?"

Yelena Shkolnik: When you talk about the opportunities in customer acquisition and doing your analytics there, I bet you're... I mean, you're leaning on the CDPs. That's CDP land. That's their territory. We hear about a lot of brands also really critically thinking about the data and trying to innovate with the way that they even approach customers. So to give an example, changing the way that they fulfill orders, changing the way that they discount orders, changing the promotions, and the personalization that they'll do on a website based on the lifetime value of perhaps you as a customer versus Jason as a customer. And I wonder to what degree is that a far off ambition? Like, yes, we would like to have a very personalized experience for everyone that shows up to our website, and one day this is the dream. Or is this something we do today? Is this a priority today? Or no, today is really just about CDPs and marketing and being cost effective at our acquisition, and this is next.

Scott Lux: I would say really good question that comes down to you have to prioritize and understand what's needle moving for your business. I think when we were kicking off the conversation, that's where COVID, you've seen this in the press a time, kind of buzzworthy, but it's just accelerated everything we've done. So now brands really have to have sharpening their pencil and understand, okay, where do we prioritize where we think we'll get the biggest lift in driving revenue. And that's how we start to look at it. So yes, personalization is important, giving that elevated experience, looking at a holistic omni- inventory planning perspective when you get in the ship from store, buy online, pick up in store, all of those are important. But if I look at one of my largest controllable variable expenses to bring it back to the CDP land and digital marketing, that's it. That's where I'm always going to get pressure and lean times. How can you pull that down? How can you push for more profitability?

Yelena Shkolnik: One thing that we noodle here is there are so many different approaches to the customer experience. And there's the smart search tools, there's any number of other how do we make the digital experience exciting and fun and really entertaining for the consumer. What is your thought about all of these, some of these. Are some of these sustainable and really going to be successful?

Scott Lux: When you're talking about chat. That's one of the things we've seen an explosion in capabilities around live streaming platforms. So, number one, we probably wouldn't be talking about TikTok nine, 10 months ago, or just YouTube, just a proliferation. I think that's one area is how do brands utilize live streaming? I think they'll continue because it is proven to be a valuable way to reach the consumer. And then when you take that on a very micro level with our sales associate, so how do we think about doing video chat. We've connected online customers to store associates, looking at remote selling. This could be influencers, it could be a network of stylists that support the brand. So, how do you enable that network where anyone can be an advocate and a brand ambassador? How do you connect that back into commerce? So I think those are the areas that are interesting, where I think innovation is pushing towards. I think there's also a lot of noise out there. And that's why that journey mapping is so critical because it will allow you to understand, okay, how many customers are we touching at a particular point? So when you mentioned that selling component? Okay, what does that look like? How many people do we think we can reach that would engage in a certain technology or capability? And then what's the opportunity to provide them an amazing or exceptional experience? And if so, then let's focus on that, define what that is, and find the right solution versus going down that path. There's a lot of augmented reality. I think that's where it gets a little bit tricky. Because I just find one, it's still not a lot of customers are willing to go down that path, and just the amount of technology is not quite there besides that gimmicky standpoint that I've seen in the market.

Yelena Shkolnik: It's maybe a related question because there is so much conversation about Gen Z, and what does the Gen Z want? And the Gen Z customer that's on TikTok, that's on Twitter, and that's on Facebook, and what gamified really fun experiences can we use to lure them? What is your perspective of focusing that way, of thinking about how do I target a millennial, and now how do I target a Gen Z? And then how do I think about the next generation?

Scott Lux: I think two things we have to look at. One is to stop siloing certain generations as being more tech savvy or liking certain aspects because for every Gen Z or Millennial that's out there that loves engaging with a brand or content or wants social responsibility. I guarantee there's a Gen Xer out there in the same category as well. So, I think if you just focus on siloing a generation or putting certain attributes in that you may miss some other audience opportunities. The way I like to think about is going back to what is our target audience? How do we protect and defend that core audience? And then where are the opportunities to grow that audience and that consumer? So some of that relates to product. And then some of it could be a younger audience. If we say our growth opportunities is a 25- year- old. Then, okay, what are those characteristics, what are those attributes, and then finding the right way to target them versus saying, " Okay, we're naturally going to get a younger audience if we make this gamified approach, or this new product or entry point pricing," because you haven't done your homework to really understand where's that market and growth opportunity going to come from then you can layer everything else on top of it.

Yelena Shkolnik: Yeah, that makes sense. This is a good time maybe to circle to all of your experiences. I mean, you have been at L'Oreal, and Diesel, and Varvatos, and INTERMIX, and Theory, so tremendous experience across a variety of brands, all exceptional brands. Is there something really exciting that you've seen in any of those brands that you've experimented with that you think, yeah, this has legs, we should keep coming back to this versus, nom maybe this is kind of gimmicky.

Scott Lux: Going back to INTERMIX, and really just pivoting how we looked at our customer. So, I would say there's two components there. One is just really understanding how do we move from more of a discounted environment to more full price selling. Obviously, pre- COVID. I think that was a monumental shift. Because if you look at a lot of brands, historically, especially when you get into the contemporary fashion place, some of them have used online as a clearance channel because the whole notion was, okay, my customer is going to come into the store at the price point, that's their main primary purchase point. Anything we don't sell in store, we'll just move it online and market down. So, I'd say with INTERMIX we spent probably a good year laying the foundation to understand what you were talking to earlier. How do we drive and understand what is our frequency of customer purchase both store and online? How is that different? What's our churn? What are we lapsing customers? How do we minimize that and understand the health of our overall database? And then start to build tactics that leverage our exceptional store associates and create a more engaging styling component. And then that's where I think we started to push the editorial approach, changing the way we talked about our emails, styling online, and then connecting our store associates who are amazing stylists with our online customer, just to have that higher touch point and more elevated experience. I think that's probably the one area would point to the most. Some of the other brands had a much, I guess, you would experiment. But there's just so much noise out there, it was really hard to choose. And a lot of times we would abandon or not go forward with certain capabilities or tech we saw.

Jason Felger: Scott, you dropped a mention of live stream, and we didn't touch on that. So, it's something I definitely want to come back to. It's such an interesting experience. It's around 9% of commerce in China. And if you translate that to stateside, it's somewhere in the$ 70 billion range of what that market could look like. And it is such a different experience for those folks here in the States to engage with that type of content in a commerce and an eCommerce setting.

Scott Lux: Yeah, no, I think it's definitely one of the more interesting components when we're talking about whether you're trading a network of brand ambassadors or stylists. It's that whole notion. Now commerce is pretty much everywhere. I think the challenge with the US is it's still very, very fragmented. So, if you go back to live streaming, and we could probably name a couple. You can look at TikTok, YouTube, Facebook, Instagram, they're all pushing into some sort of commerce live streaming, live chat capability. So, I think that's the number one inaudible right now is if you look at China, most of it you have WhatsApp. So, you have a singular platform, singular payment all wrapped into one container and marketplace that enables that experience that their customers are used to. Here in the US, it's all over the place. I think that's probably the biggest barrier I see. Second, I still think there's a little bit of reluctance on consumers. We are still seeing a ton of traffic, almost now 70% of our traffic, I think revenue is starting to surpass desktop is coming through mobile, but you still see a lot of customers browsing on their mobile device, engaging with a brand on their mobile device, but still going to their laptop to complete a transaction. So I think customer adoption and behavior is a little bit different in the US that may slow that a bit.

Jason Felger: Yelena, what's your perspective? You've looked at this, obviously, predominantly from early stage companies and what they're doing. But to do that, you've got to get a sense of what are the brands interested in? What is the consumer interested in? And so, we'd love to get your perspective.

Yelena Shkolnik: I think Scott's point was dead on, actually. Both comments, that fragmentation of all of the platforms here, it's just not the same. So, in China, we'd all be connected on Taobao. Easier for everyone just hop into that experience. And it's easy for every brand that wants to meet its customers to build a Taobao presence. And I think certainly Facebook shops is trying to mirror that, but it's not quite the same. Then the fact that people are completing purchases in a different spot than where they started the purchases. The fact that mobile isn't the entirety of the experience also damages that. But I got very excited about the possibility of live streaming just because it seems like a lot of purchasing, a lot of the digital experience of buying in the US is not that fun. It's just very search powered. I show up on the website, and I tell the website what I want, and I hope that I find that thing, and then I purchase it. It's not as engaging, and certainly not as gamified as what we see certainly in Asian markets. So, I wonder if some of that will come here. But I think Scott's point is right, there's just a ton of customer reluctance. And we see a lot of companies try it, not just trying to enable brands to be successful on Instagram Live, but also try to be themselves new destination sites, fully live stream shopping- centric new locations, and we'll see. Maybe it'll be hard to get momentum because there are other platforms, and it's so fragmented. Maybe one of them will win and we'll see a real change in customer behavior.

Scott Lux: Yeah, and I think, Yelena, one of the things I wanted to go back to that you said that's really important is that online shopping is kind of boring, right? I mean, that's the biggest challenge for fashion. Whether it's contemporary or primary fashion brands is it's just not that exciting or interesting. It works really well, and we've seen that with CPG, and core products, footwear, but that experience you get when you walk into a store and you have the associated romancing the product. You can understand the knitting or the craftsmanship that goes into it. You get that pure high VIP customer. Like at INTERMIX, we would offer them a glass of champagne or water. So, you just have a much more engaging experience, where you can really understand the product, and what that does is it gives you the confidence that's worth spending full price or whatever value you set in your mind. I think that's been the biggest challenge is how do you solve that for eCommerce. Getting into machine learning and showing, okay, here's a product assortment based on what people are browsing and all the data, personalization, still doesn't really romance that product.

Yelena Shkolnik: What's very interesting is I still see a lot of a digitally native brand say that whatever pop- up experience or physical experience they've opened, they've seen the customers that come through that tend to be higher lifetime value customers, tend to have higher AOV right from the jump. Just have a very different loyalty of the brand. So clearly, there is something that happens in the physical experience that guided white glove. And maybe it's the education piece of it, maybe it is that authenticity and connection, but you're dead on there something that just lacks.

Scott Lux: It's the one area you can truly engage with the brand. And all the research we've done internally for any of the brands, like your most valuable customer is that hybrid shopper. But it is because you can go into physical retail, engage with the brand, understand what it stands for. One of the things we love with John Varvatos, you go into stores, I mean, they were beautiful stores. They were all different. The staff was amazing. The issue that brands have run into that no surprise is there's just too many of them. That's the balance is how do you find that right number of stores, size of store footprint, and then coupling it with digital experience. And that's where I bring it full circle, you have to look at your customer experience across digital, physical, and people. And that encompasses everything we're talking about on streaming and these newer platforms. If you don't think of it that way, you're going to miss a key component.

Jason Felger: Scott, have we seen a permanent shift in how customers are going to have that type of engagement with brands and just put it under the context of obviously, it's impossible to not talk about how COVID's impacted this industry? How the lack of physical outlets has impacted that experience? And obviously, eCom as a percentage of overall sales just had a massive jump in 2020. Have we taken a permanent shift? Or are we going to go back to the 2019 and prior type of blend and experience that customers are really looking for?

Scott Lux: Yeah, I think it's going to be somewhere in between. I don't think this high level of penetration for online will stay 100% because as Yelena and I were just talking about the other side of it, there's that social component of going to a store. So, I think you'll see some level of evening out. For sure customers will continue to shop online because we've evoked this whole new group of customers that were hesitant about buying and suddenly it's like, " Hey, I can try it on. If it doesn't fit it too easy to send it back. Online grocery is probably the biggest example. I think he had like a 2% adoption rate despite some of the data I've seen as high as 20%. I don't think it'll stay that high. But people have realized there's so many barriers with online grocery. Am I going to get my food on time? Is it fresh? How do they pick it? Some of those have gone away to where yes, I will use that some of the time, probably not 100% of the time. But I'll still go into the store. And I think the same holds for physical retail is looking at how does that balance out going forward with the transition to customers online, and how many will still go into store? So it'll continue to be a hybrid in my opinion.

Jason Felger: Are there trends? Are there tactics that you've seen the last year, seen implemented, that you think are going to go away? It's the other side of this, which is the industry has adapted. But I'm curious if some of those tactics and strategies they put in place will effectively just go by the wayside once the consumers can go back into the store. And so, a little bit of a regression back to that what the customer's real desire is and how they want to interact?

Scott Lux: Yeah, that's a really interesting question. I don't know if they would go away, per se. I think it's more the adoptability or usage that we get, and how much you invest in it. So, as an example, buy online, pick up in store or curbside, those variations, I think you will see some of that usage taper off a bit. But as people go back into store. However, I do think there's a valuable service. So all this notion around scheduling appointment, things that make it just convenient. That's where I think it's going to be a hybrid. And there are some things that work really well from a customer experience standpoint, and from a brand efficiency standpoint. So I would say I don't look for that many of them to drop off. But just more brands who continue to fine tune and optimize what's the right level? And which ones do they continue to invest money in and really promote and talk about as a way to drive their experience or revenue forward?

Yelena Shkolnik: Yeah, Scott, as we talk about COVID. One of the other things, I mean, obviously, eCommerce penetration, that's what everyone talks about. One of the things that's happened to brands is if you were a brand that sold predominantly through wholesale channels, that probably changed. And I am very interested in what that experience was like for you at Theory. How was the dynamic different? March and April, how was the perspective different as the team realized that this was not just going to be a month of lockdowns, but was going to be something a lot more substantial? And as a follow up question, I mean, do you think now that the brands have started to focus a little more, do you see as a result of necessity does that change once COVID is led up and we're back to an earlier kind of behavior?

Scott Lux: Oh, gosh. Yeah, that's a good question. How much time do we have for that topic? It's interesting because I think wholesale and specialty retail absolutely still has a place. But just a backup a bit, that's really where these D2C brands were born out of. You look at Theory, we were created for a wholesale market. We didn't open our retail store till after we had wholesale distribution because that was the way you got traction. If you go back when I moved to New York I was advising a couple of fashion startups. You didn't have technology like Shopify to stand up your eCommerce platform. The only way they could gain traction was, okay, we've got to get into X mini adores at Nordstrom or we've got to sell the Barney's when they are around. And that was the model because that's where you got your distribution and your visits because it's too costly to set up eCommerce at that time. Now that shifted, so you have technology costs coming down, your total cost of ownership. You can set up eCommerce first before physical retail. And in many cases, almost every direct to consumer brand I've talked to says, " Yes, we're going into digital first because it's easy to enable and start. But we will get into physical. Maybe we'll sell to some specialty retail." The challenge you run into with wholesale is you don't control the customer experience or the customer data. So it gets really, really tricky when you have those two sides of the coin to focus on. What we saw with COVID, which was really interesting that, that you commented on. We had no idea how long this was last. I think from wholesale everyone's looking out for their business. Well, we saw right away they start cutting orders, they started scaling back deliveries that cause massive challenges on our side. That's why you saw a lot of brands having to become promotional because we had this inventory that we started to have to clear through. Four latter brands, not necessarily saying with Theory, they did fracture the relationship you had with your wholesale and specialty retailers because in some cases you felt they weren't true partners and had your best interest, and is mainly everybody out for themselves. I think the wholesale model has changed. It used to be where you would go to discover new brands or products. I remember living in Seattle that's why we would go to Nordstrom or Barney's because you had access to brands I couldn't buy online. I couldn't discover new brands on my own. Instagram wasn't there. Certainly didn't have the level of influencers you have today. And just your network and how you find out about product didn't really exist. So you would go to a wholesaler department store for that edit and that curated approach. I think now, that's come back to where that value proposition just isn't there, quite honestly. And which brings me back to the last point to Nordstrom, I think that's where they've been able to store excel because they are testing these new categories. Again, going with Rent the Runway, going with specialized curations, or drops with Nike. Just how do they push the boundaries in what is a nontraditional model for them?

Jason Felger: How do you think retailers will be thinking about their physical stores? Is it a just we need less of them? We just need to physically reduce the total footprint or the volume of them? Do they become like many have this year micro fulfillment centers? As we do continue to rebound from just an overall retail standpoint, how does that physical store play into this for brands?

Scott Lux: I think it's still critical because I believe for a lot of brands that have this brand DNA, designer lead, whatever the case may be, that is still going to be one of the primary places you can engage with the brand. One just from the design of the store, the merchandising, the way the product is laid out, the store associates. Again, you can understand. Yeah, when we get back to event dressing, at this event I'm going to... What should I wear? How should I pair it together? You can have those looks, that curated approach, that high touch experience? So, I think that'll stay. Second, I do agree 100%. You've seen this with a lot of the brands, Gap, for example, just shrinking their footprint quite a bit. I mean, that was the number one issue, whether it was Gap all the way down even to Varvatos where we just had too many stores for the size of brand we had. Because again, keep in mind, that was also part of the older model. It's like, " Hey, let's open up a store and that'll drive marketing." That was it, and it's like you got to be in these 24- hour cities, be on Madison Avenue, Fifth Avenue. And then people see us and then we'll have brand recognition that we have that credibility. So, I think that's going away. I think location and where stores are located will be really, really interesting. There'll be a ton of opportunity in the marketplace. So instead, you've seen brand exit malls. You've seen a lot of stores open up and local areas. Pop- ups, I think will continue as brands test that experience without the high cost of investment. And then I do think you will start to see some brands may exit retail completely, but I just don't see that truly happening. And then going back to what you're saying from a fulfillment perspective, I think that's where it gets really tricky. It goes back to a little bit of what Yelena was saying, I think that's where data you have to get to this logical inventory component that I think a lot of retailers aren't quite there. So where does your high turn inventory live? I still believe it should be in the warehouse. Maybe your fashion floor pieces. It should be in stores and you look at this logical approach where your customers are buying from, their behaviors to determine do you use them as mini fulfillment centers or not? The challenge that brands run into with fulfillment from store is they're just not set up that way. So, one, a lot of their footprint, if you get in older cities, Chicago, New York, they have very, very small stock rooms. So, it's almost impossible to leverage that for fulfillment. And then the staffing side of things becomes another equation as well.

Jason Felger: You are an adjunct professor at both Columbia and FIT. And when I think about that, I think about you are in the classroom with the future leaders in this industry. And what are you hearing from your students? Where are their heads at? I'm curious if there's ever any lightbulb aha moments that you see and hear from your students about where these topics are headed that we've been touching on?

Scott Lux: Yeah, it's interesting because at Columbia its MBA students and their orientation you have a lot of entrepreneurs, a lot of people that have worked in professional consulting, so I think from their lens is just to better understand directionally where they see retail going. From fit, which is the Fashion Institute of Technology, part of the SUNY system in New York is undergrads with an angle towards creativity and fashion and they're really looking at, okay, how do I position myself well from a career perspective? Because knowing everything we've talked about, they have to have that digital orientation and mindset. What's really interesting when I teach in both those audiences is a lot of it is validation. A lot of it is what do they think as future retailers I'll ask questions about loyalty. How does that relate to them? How many people are buying online versus going in this store? What does that look like? Their ability to use as we were talking about earlier, live streaming platforms. A lot of people get their news from TikTok, and discoverability. So, I think it does help me give that grounding and orientation to know, okay, how do we need to think about these going forward? Because as you said, at best, that's our future generation of retailers, both in consumers and operators. So, I do think for me, it's fascinating to hear just how they're experiencing brands and their perception.

Jason Felger: And the other one, I always think about founders and how they build businesses and build the products for the industry. And so, I'm curious if maybe there's two opportunities in the industry that you think remain unaddressed? Or in other words what do you think still needs solving? Are there a couple that come to mind you think are still green spaces that companies and founders might be thinking about?

Scott Lux: Yeah, that's a really tough one because you run the gamut if you're looking at from a product perspective, what's missing in the marketplace. Whether it's apparel, or retailers, customers are still looking for a good value. And that doesn't always mean cheap, but just really understanding what are you willing to pay and to find a good value, and that has this overarching brand experience with it, that tends to be socially responsible and authentic. So I think there's still some white space that brands can operate in that that side. One brand as an example just to give you I think how they've really cracked into the space is I'm an avid runner. And there's an amazing brand called Tracksmith out of New England and Boston. And really just they broke in leveraging really good craftsmanship and quality, but just harkening back to the old styling that you would have in running cross country meet, but they've modernized it, and they've leveraged community. They have ambassadors, so I think there's still a lot of opportunity if you're starting a brand not to shy away from this editorial approach, building a community, having ambassadors. Don't be afraid to be content creators. So I think there's a lot on that side of it that brands who started taking advantage I'd like to see more dive into.

Yelena Shkolnik: You guys have that in common. Jason is an ultra- marathoner.

Jason Felger: I am. I know Tracksmith as well. I love everything you said about it. It's a great brand. If you're not familiar with it, you just pick up one of their catalogs. It looks like they're designing clothes from'70s, '80s- esque type of old school cross country. Yeah, it's a great brand.

Scott Lux: Yeah. And the amazing thing about it. So going back to your question because they had such an authentic community following to start with. I remember running maybe three, four years ago. I'd wear this quintessential striped going down there that you'd recognize it. I would hardly see anyone. And now I would say there's probably a good 30 to 40% of avid runners are wearing their product. And they don't do a ton of advertising. It's a lot of word of mouth. So I think that's the message, I would say, from a product perspective. From a technology perspective, I think it's a different story. I think it's really tricky. Yelena, you touched on with CDPs. There's so many out there. I would say for brands going in the technology space is really just building a good network, and almost a borrowing front page of influencers. Instead of just going out on these cold calling. But how do you create that credibility, that network effect where your product really resonates with people like me that may be looking at whether it's AI or OMS capabilities. I'm going to leverage my network and go to you guys first and say like, " Hey, I need an up and coming OMS provider. Who do you know? Who have you seen in the space?" Versus someone emailing me or calling me directly, I'm not going to respond. So I think that's the other side of is how do you build that network from a supplier perspective that almost harkens to these modern D2C brands that we've talked about.

Jason Felger: Scott, we could keep going. Absolutely. But we covered everything that I think we certainly wanted to cover and so just thank you so much for taking the time.

Yelena Shkolnik: Thank you.

Jason Felger: It was a fascinating conversation, and I just appreciate you chatting with us.

Scott Lux: Thanks for having me. I enjoyed the conversation as well.

Speaker 1: Over the past year, we've seen a dramatic shift from in- person to online shopping. This growing trend is here to stay, even when the pandemic is over. The retail industry has been directly impacted by this change in consumer behavior and will need to continue to adapt to survive. Thank you so much to Scott Lux, and Yelena Shkolnik for joining us on the show. The Jump Off Point with Jason Felger is an original podcast from Jump Capital. If you have an idea about the show or know of someone who would make a great guest, contact us at podcast @ jumpcap. com. Thanks for listening.