>> Narrator: Live from the Wynn Hotel in Las Vegas,
it's The Cube covering Magento Imagine 2018.
Brought to you by Magento.
>> Hey, welcome back to The Cube.
We are continuing our coverage live
from the Wynn Las Vegas at Magento Imagine 2018.
We've had a really exciting day
talking about commerce and how it's
limitless and changing dramatically.
Joining me next is Sucharita Kodali,
the vice president and principal analyst at Forrester.
Sucharita, it's great to have you on The Cube.
>> Thanks for having me, Lisa.
>> So commerce is limitless.
We've been hearing this thematically all day.
You primarily are working with
retailers on their digital strategies.
And you've been doing this for a long time.
Let's talk about the evolution that you've seen
in the retail space with everybody expecting to have
access to whatever they want to buy in their pockets.
>> Right, right, right. I would say,
so I've been working in the retail
industry for the last two decades.
I've been an analyst for the last 10 plus years.
I've really seen a number of changes.
And if I had to just summarize the biggest changes,
one is just the inventory across different retail channels.
So, that's definitely been a huge huge one.
It's like, how do you, how do you order online,
but then fulfill the item from a physical store
or fulfill the item from another store?
So those are, that's basically
the digital transformation of retailers.
Those are investments that companies like WalMart and Target
have really been doubling down on and focusing on.
The second big change is Amazon.
And they single-handedly have
transformed the retail industry.
They have increased consumer expectations.
And what Amazon's also done is reinvented
retail as a business model.
Because it is no longer about just selling product
and being profitable selling that product.
Amazon actually is not profitable
with a lot of the items that it sells.
It makes money in other ways.
And it is probably what I would describe
as America's first retail conglomerate.
And that becomes a really interesting question
for other companies to compete,
do you have to become a retail conglomerate?
Then, the third big change is just
brand selling direct to consumer.
I remember when I started at Forrester,
my very first project was with a large
consumer electronics company that asked,
Well, should we even sell directly to consumers?
There's channel conflict and issues with our distributors.
And now, that's not even a factor.
It's sort of table stakes
you have to sell direct to consumer.
And that's probably where we'll continue
to see a lot of retail sales in the future.
>> So the Amazon model, we expect to be able
to get whatever we want whenever we want it,
have it shipped to us either at home
or shipped to us so we can go pick it up at a store.
It's really set the bar.
In fact, they just announced the other day
that a hundred million Amazon Prime members.
I know people that won't buy something
if it's not available through Prime.
But I think this morning the gentleman that was on
main stage from Amazon said at least 50% of their sales
are not products they sell, they're through
all of the other retailers that are using
Amazon as a channel as part of their omni-channel strategy.
If you think of a retailer from 20 years ago,
how do they leverage your services and expertise
and advice to become omni-channel?
Because as today, you said essentially it's table stakes
for companies to have to sell to consumers.
>> Yeah, yeah. There are so many
questions that really require,
I call it destroying the retail orthodoxies.
And retail has historically been about
buyers and merchandisers buying goods.
There's the old expression in retail,
You stack 'em high and watch 'em fly.
And that is just where buyers would,
Take a company like Toys R Us, they would basically take
what Mattel and Hasbro told them to buy.
They would buy a ton of it, put it in stores.
And because there was less competition back in the '80s,
consumers actually would buy that merchandise.
And unfortunately, the change for retailers
is that consumers have so much more choice now.
There's so such more innovation.
There are small entrepreneurs who
are creating fabulous products,
consumer tastes have changed.
And this old paradigm of Mattel and Hasbro,
or kind of fill in the blank with whatever
vendors and suppliers, pushing things is no longer relevant.
So, there was just an article in the journal
today about how Hasbro sales were down by double
digits because Toys R Us is now going to go out of business.
So those are the kinds of things that retailers
who did not adjust to those changes,
they are the ones that really suffer.
They don't find ways to develop new inventory,
they don't find new channels for growth,
and they don't protect their own.
They don't build a moat around their
customers like Amazon has done,
or they don't find ways to source inventory creatively.
That's where the problems are.
>> You think that's more of a function
of a legacy organization;
having so much technology that they don't know
how to integrate it all together?
What do you think are some of the forcing
functions old orthodoxies that companies
that don't do it well are missing?
>> Yeah, it's a lot of it is just in
the old ways of doing business.
So, a lot of it is being heavily dependent,
for instance, on buyers and merchandisers buying things.
I mean, one of the biggest innovations
that Amazon realized was that,
look you can sell things without
actually owning the inventory.
And that is, their entire, what we call
the third party marketplace, and that is just so simple.
But if you were to ask a buyer at a major retailer
a decade or two ago, "Why do you have to buy the inventory?"
their response would be, Well, you have to buy
the inventory, that's just the way it is.
And it's like, well why?
Why don't you try to find a new way to do business?
And they never did.
But it took Amazon to figure that out.
And the great irony of why so many retailers
continue to struggle is that Amazon has exposed
the playbook on how to sell inventory without owning it.
And so few retailers to this day have adopted that approach.
And that's the great irony I think,
is that that's the most profitable part
of Amazon's business is that third party marketplace.
And every retailer I've talked to is like,
Oh, it's really hard. We can't do that.
But, the part of Amazon's business
that everyone is looking to imitate is their fast shipping.
Which, is the most expensive part of their business.
Amazon is only able to afford the fast free
shipping because of the third party marketplace.
Other retailers want to get the fast
free shipping without the marketplace.
And it just doesn't make any sense.
And that's really the heart of
the challenge is that they just don't
think about alternative business models.
They don't want to change the way
that they've historically run their businesses.
And some of this could mean that merchants
are not as powerful in organizations.
And maybe that's part of the pushback is that,
there could be a lot of people who lose jobs.
The future will be robo-buyers and financial services
you have robo-advisors, why not robo-planners in retail?
>> So one of the keys then, of eliminating some
of the old orthodoxies for merchants
is to be able to pivot and be flexible.
But it has to start from where in
an organization from a digital strategy perspective?
Where do you help an organization
not fall into the Toys R Us bucket?
>> Yeah, I think a lot of it does have to start
with merchandising and putting
in some interesting digital tools
to help merchants be more flexible.
So, you want to flex to supply and demand.
And some of that comes with integrating
marketplaces into your own experience.
Some of it can be investing in 3D printers
that can make things that are plastic
or metals based on demand.
That's something that I always wondered
why Toy R Us didn't, for instance,
make Fidget Spinners on demand.
Why did you have to get them with
a six month leave time from China, it never made any sense.
You can scale service, so use technology
to match great store associates
with a customer who may have a question.
And you don't have to be in the same store.
It can be a Facetime call with somebody who is far away.
But very few retailers do that.
And finally, the last bit is really
to look at new alternative business models
and finding new ways of making money
beyond just selling inventory.
>> That's really key because there
are so many oppurtunities when companies
go omni-channel of not just increasing sales and revenue,
but also reducing attrition,
making the buying process simple and seamless.
Everybody wants one click, right?
>> Right.
>> Super seamless, super fast, and relevant.
It's got to be something if you're going to attract my business,
you need to be able to offer something
where you know me to a degree.
>> Absolutely.
>> Or know what it is I might have a propensity to buy.
>> Absolutely. And that's the entire area of personalization.
And that personalization can be anything from
a recommendation that I give you.
It can be proactively pushing a recommendation.
That's what companies like Stitch Fix do
is I tell you what I want and then
they send you a box in the mail
of things I think you would like
and oh, by the way are your size and within your budget.
It can be customization.
One of Nike's most successful parts of their business
is their Nike ID program which allows
you to customize shoes according to colors and
different sort of embellishments that you may like.
And that's exactly the kind of thing
that more retailers need to be looking at.
>> What are some of the trends maybe
that a B2B organization might be able
to love or some of the conveniences
that we have as consumers and we expect in terms of--
Magento, I was looking on their website
the other day and a study that they've done
suggests 93 percent of B2B buyers want
to be able to purchase online.
So, new business models, new revenue streams,
but it really is a major shift
of sales in marketing to be able
to deliver this high velocity low touch model.
What are some of the things that a business
like a Magento, could learn from say a Nike with
how they have built this successful omni-channel experience?
>> Well, interestingly I think one of
the most important things to recognize
is that every B2B buyer is also a B2C buyer.
And their expectations are set by their experiences in B2C.
So, if you have everything from all
of the information at your fingertips,
all of that information is optimized for mobile devices.
You have different ways to view that information,
you have all of your loaded costs,
like shipping, or tax, or if there's cross-border.
All of the information related to the time to ship,
any customs and duties, all of that needs to be visible
because in any experience that you have
with say a site like Amazon,
you're going to get that information.
So, the expectation is absolutely there
to have it in any situation whether
it's B2B or whether it's buying components
or kind of very long tail items.
That's basically the cost of doing business at this point,
is that you have to deliver all of the information
that the customer wants and needs.
And if you don't, the customer
is just going to opt to go purchase
that product at whatever destination offers it.
>> Somewhere else.
>> And somebody will.
That's the challenge when you have 800 thousand Plus
eCommerce sellers out there selling every product imaginable
in the both B2B and B2C landscape.
>> So, on the data side there's so much data
out there that companies have any type
of business to be able to take advantage of that.
I know that there's, BI has so much potential.
Are you hearing retailers start
to embrace advanced analytics techniques,
AI machine learning,
Where are they with starting to do that?
I know that some eyeglass companies
have virtual reality augmented reality type of apps
where you can kind of try on a pair of frames.
Where are you seeing advanced analytics start
to be successful and help retailers to be able
to target buyers that might say, oh, I can't try that on?
No, I want to go somewhere that I can touch and feel it.
>> Yeah, well, it's emerging still.
I mean, retailers have a lot of data.
I think they're trying to
figure out where is it most useful.
And one of the places where it is incredibly useful
is in the backend with fraud management.
So, after retailers were forced to put
in chip cards as a payment form,
what you started to see was more
of the fraud shifting to eCommerce.
I just had two credit cards that had
to be shut off because of E-commerce fraud.
But that is where you see the fraudsters going to.
And what you see as a result of that
is some innovators in that space technology
companies really leveraging machine learning,
AI, other advanced data techniques
to identify fraudulent transactions
and to better help retailers eliminate
or reduce the percent of transactions
that have to then be charged back.
So, that's probably one of the most promising areas.
There are others that are emerging.
We're seeing more visual recognition technologies.
House for instance, is excellent at that and Pinterest too.
If there's part of an image you like
you can click on it or you can tap it
and see other images like that.
And that's incredibly difficult.
And it was even more difficult 10-15 years ago,
but it's becoming easier.
There's the voice element, voice to text or text to voice.
I think that the best applications
they're often in customer service,
there are so many interactions that happen
anywhere in a consumer facing world.
It doesn't even have to be within retail.
You can think about the complaints
to the airline industry or to a bank.
And a lot of it falls into a black hole.
You always hear that oh, This call may be recorded,
but it is really difficult to go back and transcribe that.
And to really synthesize that into major themes.
And what ML in particular can do is to basically
pull out those themes, it can automate all of that,
and can give insights as to what you could be doing,
what you should be doing, what are the opportunities
that you may not have even known existed.
So there are definitely emerging places.
I mean even a visual recognition,
so we talked about House and Pinterest.
Another great example is the computer vision
that you have in the Amazon Go stores.
And there's a robot that the Wal Mart stores are now testing
to go find if there are gaps in
the inventory that need to be filled.
Or if something is running low or out of stock.
So there are definitely some interesting applications,
but it's still early days for sure.
>> So last question, we've got to wrap here,
but, we're in April 2018, what are some of the,
your top three recommendations for merchants,
as they prepare for say Black Friday coming up
in what, six or eight months.
What are you top three recommendations for merchants
to be successful and be able to facilitate
a seamless online offline experience?
>> Well, we always have kind of imbalances
between supply and demand, and that's where I do think
things like third party sellers,
third party marketplaces are huge.
So to be able to leverage that is certainly one opportunity.
Another is to think creatively about promotions.
In Japan they have these promotions called
Fukubukuro promotions, and it's basically like grab bags
of like all the left over inventory.
But then they basically put it into mystery bags
where you can buy it for half off.
And consumers line up around the block
at stores to go buy these grab bags.
Because they also have also like a gamified approach
where, you know, one of out 10 of the bags
will have like an Ipad or some really high value item.
So people really like these things,
and they have trading parties.
So just new ways of having promotions
beyond just the typical door busters
that retailers think about.
And then kind of third I think is
just try to pace out the demand.
One of the big issues in E-commerce has been
just the burst in demand that always happen in December.
And that creates a lot of problems from
the standpoint of actually shipping the orders.
So the more that you can pull those transaction forward
into November, the better off you are
from a fulfillment and supply chain standpoint.
>> Alright Sucharita thank you so much
for stopping by The Cube
>> Thanks Lisa
>> And sharing your insights on the trends
and what's going on in the commerce and E-commerce space.
Really enjoy talking with you.
>> Nice to talk to you too.
>> We want to thank you for watching.
You're watching The Cube live from
Magento Imagine 2018, I'm Lisa Martin.
Stick around, I'll be back with my next guest
after a short break.
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