Scott Galloway is a Professor of Marketing at NYU Stern School of Business where he teaches Brand Strategy and Digital Marketing. We spoke with Scott to get his take on what the retail landscape will look like in a post-pandemic world.
Elham Rizi-Shorvon, Think with Google: We’re seeing more ‘dispersion’, where organisations use technology to make the supply chain more efficient. How can retailers prepare for dispersion?
Scott Galloway, NYU Stern: What I tell the retailers I’m on the board of is to think of your locations not as stores, but as warehouses; it’s a distribution centre.
Consumers want to save time. So, if you think about it, I need a warehouse that is closer to my consumer. How can I make that warehouse as sophisticated as possible? How do I add more features: an ability to seamlessly figure out pickup, even curbside pickup? Or, a super-efficient delivery from that point of distribution?
The other really key trend in retail will be membership models or recurring revenue bundles. I think every retailer needs to be thinking, how do we take this transactional business and move to a recurring revenue model? I think that is probably going to be the most accretive business move in history.
Rizi-Shorvon: What type of retailers will be affected by ‘the great dispersion’?
Galloway: I think grocery is going to do exceptionally well; there’s been a huge investment in innovation around grocery, grocery delivery, cold storage and efficient distribution.
In terms of working from home, the reality is, the majority of firms are going to do a hybrid of home and office. But, that blend is going to be increasingly work from home. That’s naturally going to decrease a lot of apparel purchases and beauty products. You’ll see a sugar high from stimulus and the fact that no one’s bought anything for work in a year but I think it’s going to be a structural step down.
I think anything that services the home is going to boom over the next decade – whether it’s home furnishing retailers or home repair. We’re going to see a massive reallocation of capital into residential.
Rizi-Shorvon: How can retailers reduce choice complexity?
Galloway: Choice is usually couched as a positive; I would argue that choice is a tax. That is, consumers don’t want more choice, they want to be more confident in the choices presented. If I walk into a store, I could get a selection of a hundred toasters in a big-box retailer, but a specialist company will have picked the best two. Someone with better taste than me in kitchen appliances has decided these are the two toasters to choose from.
Companies use algorithms to help guide me and calibrate me to the right choice. So, I’m more confident in the choice presented. Could an algorithmically-driven media company partner with a retailer and limit choice to the point where they could almost get you to the right one or two products? Everyone talks about 1-click ordering; I think where we’re headed is zero-click ordering.
And, I think the algorithms, sitting on top of a retailer’s merchandising and distribution capabilities, could create a new generation of what I call ‘algorithmically-driven commerce’.
Rizi-Shorvon: What does marketing mean in the product age?
Galloway: The primary algorithm for marketing since World War II to the introduction of Google was: have a mediocre product— mediocre car, beer or shoe— and create amazing brand codes.Then, figure out a way to reinforce these brand codes: European elegance, Italian romance, American vigour.
Now, new weapons of mass diligence—Google, TripAdvisor, user reviews on Amazon— have swung the pendulum back to what I’ll call the ‘product of the innovation age’. When you think about marketing, it’s no longer just about broadcast advertising or brand. Most of the major, most accretive things in retail have really been from innovation around supply chain more than they have been around marketing. It’s hard to say that a company went from $1billion to $10billion based on a great branding campaign – instead it’s because they figured out a way to fulfil product or get hard-to-ship products to the consumer faster.
I think we’re back to the product innovation era. And, I think you’re going to see a transfer of capital out of traditional marketing into product, research and development, and more supply chain innovation.