Agile Retail: Embracing the pace of change

AGILE RETAIL

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OUR AGENDA:

1: What we mean by AGILE (and what we don’t)2: Why it matters today3: From then, to now, to next4: Who is taking the first AGILE steps?5: How do the rest of us get there?

1: WHAT WE MEAN BY AGILE (AND WHAT WE DON’T)

If the past few years have been all about experience, we see the next few as being all about agility.

AGILE is this year’s retail “it” word

taking these experiences we create at retail, and making them more adaptable, more responsive and more nimble

AGILE is all about

Trey Ratcliffe

get used to seeing AGILE bolted to anything that moves, and hearing that agility as a concept is a kind of panacea for all manner of ills

Like all “it” words

it’s important to clarify our intent around how we are using the term, and specifically in the context of retail

In the face of this AGILE epidemic

Although adopting AGILE thinking may well make a retailer faster, and indeed more fashionable

AGILE RETAIL ISN’T JUST FAST FASHION

Our definition of AGILE focuses on the “means” and not just the “end” • process• approach• methodology• tools

And the influence working in an AGILE way will have on the design, evolution and development of a new generation of physical stores

This idea…of an AGILE methodology was born in the digital world, and now represents that industry’s standard

characterized by short, intense phases of work, frequent reassessment and adaptation - version after version, constantly in beta

A way of working…

Buschap

that applying this AGILE way of thinking and working, will lead us to a new dawn of physical retail

It is our belief

A truly quantifiable measure of a retail concept’s potential for success and its long term health as a business proposition

That AGILITY will become a benchmark

David Trauwin

where physical stores finally move from trying to chase digital…to (re)taking their rightful place at the center of a continuous retail ecosystem

And that this will lead us to a future…

2: WHY AGILE TODAY

We’ve discussed why AGILE thinking is important, but what makes it such a pressing issue today?

Why now?

Like most of the changes in our world, the need for AGILE is being driven by emerging and shifting behaviors of next Gen Shoppers

Simply put, the audience is demanding it

Glenn Brown

that Generations Y & Z are underwhelmed with old school retail (cue sudden rush of underutilized selfie walls)

We’ve known for a while…

Despite their spending $600 billion per year in the US, retail today is “under-delivering against millennials’ expectations…the capabilities and enriched services that help make the overall shopping experience better, faster and more memorable—remain works in progress.”Source: Accenture Millennial Outlook

Source: Forbes, What Brands needs to know about the Millennial Shopping Journey, August 2015

GenY has been raising Red Flags for years

“Millennials are incredibly fast in their shopping journey, any brand wishing to attract millennial buyers and influence their purchases needs to keep pace.”

Source: Things Millennials Love & Hate, Business Insider, October 2015 “Traditional retail simply doesn’t play to how Millennials want to buy”

GenY has been raising Red Flags for years

Source: Retention Science, March, 2015

“The biggest problem traditional retailers face today is Millennials”

Loosely defined as today’s 12-18 year olds, a group FITCH describes as “Shopping in a constant state of partial attention”

And right behind GenY is GenZ

Source: FITCH GenZ report, 2014

Because they live their lives at an increasingly frenetic pace, driven by nothing short of a new definition of time - mobile time

The biggest reason for AGILE and Y & Z?

for every year physical retail takes to do something new, mobile has already reinvented itself 7 times over (at the very least)

Which is like dog years vs human years

9 out of 10 Zs multi-task while watching TV (and only 1% are influenced by ads)Source: Forrester’s Technographics®, How To Build Your Brand with Generation Z, 2013

Source: Pew Research, Generation Z study, 2015

What’s life like in mobile time?

Almost two thirds would rather their wallet was stolen than their phoneSource: FITCH GenZ study, 2015

88% have a phone, 73% have phones that are smart

Screens and connections are a natural extension of their being, unrestrained by the boundaries of time91% of Zs take devices to bed And they are comfortable toggling across up to 5 screens, always connected across their netweave of collaborators

Attention span of only 8 secondsSource: National Center for Biotechnology, US National Library of Medicine, The Associated Press, 2015

What’s life like in mobile time?

Source: Sparks & Honey, Generation Z 2025 - The Final Generation

is less than the attention span of this guyWhich bizarrely enough…

is a shopper that is literally “addicted to distraction”

A group for whom the thrill of the new and the next are the only things that matter

Consumers who are rewriting the rules of demand

And therefore, by proxy, the rules of supply

Retail’s new reality

Source: New York Times, November, 2015

TheRealMStiles

to a MARKET BASED ON SPEED - on responsiveness, on the ability to pivot

From an idea like “speed to market”

TheRealMStiles

GOOD ENOUGH, NEW, NOW. THIS is the pace the new shopper is used to, it’s what they expect. And this is a key shift which retail will have to embrace

of perfectly planned in-store campaigns, brainstormed months in advance and flawlessly executed

Gone are the days

and embrace a culture of trying hard, failing fast, picking ourselves up if it doesn’t work and then doing it all over again

We need to move up a gear…

Wieden&Kennedy

LAUNCH, IMPROVE, REPEAT. A cycle of continuous improvement, and don’t forget…

LAUNCH,

IMPROVE, REPEAT.

INVOLVE,

is the inability to grasp this shift. And it’s potentially fueling an even bigger threat just around the corner…

One of the biggest threats to retail today

a perfect storm of change, sparked by circumstances out of your control and lurking on the horizon

Wholesale disruption of retail as we know it

Automated ServiceSelf Service

is already reinventing retail, and we are just getting started.Widespread category disruption

WHY ARE DISRUPTIVE BRANDS SO SCARY? Because they don’t play by existing rules

Uber world’s largest taxi company, owns no vehicles Facebook world’s most popular media owner, creates no content Alibaba most valuable retailer, has no inventory Airbnb world’s largest accommodation provider, owns no real estate Source: Tom Goodwin

RedBull Google Alibaba Snapchat CVS Facebook SoulCycle Chipotle Instagram Apple 72andSunny Houzz Taylor Swift Uber Waze Rent the Runway Airbnb Netflix Warby Parker Under Armour

Source: Forbes top 20 disruptive brands of 2015

How many of these began their lives through traditional bricks and mortar retail?

RedBull Google Alibaba Snapchat CVS Facebook SoulCycle Chipotle Instagram Apple 72andSunny Houzz Taylor Swift Uber Waze Rent the Runway Airbnb Netflix Warby Parker Under Armour

Source: Forbes top 20 disruptive brands of 2015

How many of these are turning traditional retail on its head today?

RedBull Google Alibaba Snapchat CVS Facebook SoulCycle Chipotle Instagram Apple 72andSunny Houzz Taylor Swift Uber Waze Rent the Runway Airbnb Netflix Warby Parker Under Armour

Source: Forbes top 20 disruptive brands of 2015

AGILE THINKING IS PROTECTION AGAINST DISRUPTION

the simple reality of today, is that we can’t afford not to

We used to say we can’t afford to work like that…

3: FROM THEN, TO NOW, TO NEXT.

let’s consider the lifecycle of traditional retail, which has been in place pretty much since the birth of retail design…

Against our new reality

Jeremy Schultz

which we built out of things called bricks and a thing called mortar and which we repeated about every 3-7 years

That lifecycle centered on stores

The cadence of this cycle was driven by…

• the type of retailer we were• the category of retail we operated in• whether someone else like us came along with something new and

bright and shiny which scared the pants off us and forced us to act

We began work on something called a new prototype. When we were happy with it, we built it. Then kicked the tires. Then value engineered it.

Once we decided to make a move

Would we roll the prototype out. A process which would take years to acomplish. And in the interim, we pretty much left the concept alone.

Then. And only then.

PMRPhotography

performing something at some point in the lifecycle we used to call a refresh…which was rarely refreshing

Except occasionally…

- the retail equivalent of a store design spit wash, and more often than not about as effective…

Or, frankly, even fresh

EXPE

RIEN

CE

YEARS 1 2 3 4 5 6 7

EXPE

RIEN

CE

YEARS 1 2 3 4 5 6 7

NEW STORE PROTOTYPE

EXPE

RIEN

CE

YEARS 1 2 3 4 5 6 7

NEW STORE PROTOTYPE

SHOPPER BOREDOM THRESHOLD

EXPE

RIEN

CE

YEARS 1 2 3 4 5 6 7

NEW STORE PROTOTYPE

SHOPPER BOREDOM THRESHOLD

SPIT WASH

There are numerous problems with this approach…

1: It’s a long tail 2: Resource intensive (and the procurement of those resources is a part of why retail is so slow) 3: Inherently unresponsive 4: Doesn’t anticipate changing shopper behaviors 5: Lack of integration with new/emerging channels

it’s also repetitive, and predictably so - the antithesis of the surprise and delight which retail was always supposed to be about…

If that wasn’t enough

With a perceived rate of change at retail that feels GLACIAL compared to the daily lives of our next generation of shoppers

Which is where we are today

1: It’s a long tail 2: Resource intensive 3: Inherently unresponsive 4: Doesn’t anticipate changing shopper behaviors 5: Lack of integration with new/emerging channels

A decade ago, none of these things seemed to matter that much…

1: It’s a long tail 2: Resource intensive 3: Inherently unresponsive 4: Doesn’t anticipate changing shopper behaviors 5: Lack of integration with new/emerging channels

Today, they are the only things that matter

the vast majority of retailers are still in some form of this cycle, and physical retail is still stuck in its own mud

And yet, despite all the pitfalls

Painted into a corner by an entire industry built around the old model

• bulk orders and mass production• production brokerage focused on lowest price over flexibility• off shore procurement and manufacturing• long-term locked contracts• change fees and delay penalties

All of which fuels an environment of rigidity - the opposite of agility - again, despite the evidence of the dangers of a bored shopper…

The results are clear… N o v / D e c F o o t Tr a f f i c

40 Bil l ion Visits

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20

10

Source: The Wall Street Journal, 20142010 2011 2012 2013

16.7 billion

The results are clear… N o v / D e c F o o t Tr a f f i c

40 Bil l ion Visits

30

20

10

Source: The Wall Street Journal, 20152010 2011 2012 2013 2014

-9.5%

The results are clear… N o v / D e c F o o t Tr a f f i c

40 Bil l ion Visits

30

20

10

Source: The Wall Street Journal, 20162010 2011 2012 2013 2014 2015

-6.4%

Last year we blamed the inclement weather

This year we blamed the mild weather

Perhaps it’s time to face up to reality and recognize the real reasons people are staying home

to make things fun again, and to get collective bottoms off of collective sofas and back into stores…

And that it’s going to take some new thinking

4: WHO IS BEGINNING THE REVOLUTION?

A traditional retailer which adopted AGILE thinking with the advent of their new CEO Brian Cornell

Target

Which presented a sharp contrast to the pace of change able to happen in Target’s chain

Cornell was inspired by a trip to Story

New merchandise development with a faster cadence (including - rather cleverly - a capsule line with Story)

A series of initiatives

Fortune

Where the brand fast tracks testing of a host of new ideas in real time, with real customers

Living Lab Stores

Repurposing an underperforming space to introduce customers to new products and ideas they can’t find in regular stores

San Fran Tech Lab

Linkedin

And the Wonderland concept they opened in Chelsea Market this holiday, billed as a pop up, but also a test bed for their cutting edge thinking

Wonderland NYC

TargetCorp

but, strategically, a continued evolution for us to think about what physical shopping is like when you blur the lines between experience and digital”

“A gift to our guests,

Jeff Jones, Chief Marketing Officer, Target

But in different ways and for different things…Lowe’s for exampleOther retailers use labs

Lowe’sInnovationLabs

Imagines future store experiences and tools for customers like this Holoroom where you can preview room settings designed in store

Lowe’s Innovation Lab

Lowe’sInnovationLabs

iPad Augmented Reality with Oculus VR the create the walkthrough in store which you then upload to your smartphone

The concept combines

Lowe’sInnovationLabs

Through Google Cardboard, a great way to extend the purchase journey beyond the 4 walls, and coming to 20 Lowe’s Stores by year’s end

And take home

Lowe’sInnovationLabs

Of a host of ideas the Innovation Labs are piloting. Bringing new ways of thinking and selling into the physical environment.

Holoroom is just one

Lowe’sInnovationLabs

SPACE10 is space launched this year to explore the future of products for the home, products IKEA will develop and then sell.

And then there’s IKEA

Is exciting because it showcases innovation in a very public way, and involved customers in shaping the future of the brand

SPACE10

IKEA

They let you test new ideas with lower risk and investment,and in theory they can pivot faster than the entire chain

Labs are a great idea in principle

IKEA

but there are still challenges

• layers of prototyping, tweaking, testing and approvals• often an inherently artificial (or limited) environment• no true metrics - certainly not in the way that agile thinking

outside of our industry defines metrics…

We believe the adoption of AGILE proposes something more ambitious than lab stores

Something bigger and bolder

RETAIL IN A STATE OF PERPETUAL BETA Never finished, never done, never static.

5: HOW DO WE LIGHT THE FIRE?

At FITCH it became apparent that in order to work in an AGILE way it wasn’t just the client that was going to need to change, it was us.

We recognized that our existing tools, processes and methodologies were not best suited for agility

DISCOVER

1DEFINE DESIGN DELIVER

2 3 4

The typical process today

Sequential, phase based, and in the digital industry, referred to as waterfall methodology

One step runs into the next

1 2 3 4DISCOVER

DEFINE DESIGN

DELIVER

Also known as a “baton pass” process

is the same, you can’t move on from one phase of work until you have completed the one prior…

And the principle

Agileway of working

With new principles and new activitiesWe recognized the need for a new process

Without giving away the farm…These are just some of the ways in which we are adapting our thinking to creating AGILE retail for our clients.

Sprint CyclesNew Measurement & AnalyticsRapid PrototypingRoad Mapping

LAUNCH, IMPROVE, REPEAT.

Adopting these principles under the umbrella approach of

New Activities: Sprint Cycles

What if instead of a single brief for a store of the future, our clients hired us for 10 mini briefs, or 20 micro briefs?

And what if, because of their size, we were able to execute these briefs in record time? Manifesting themselves in store in weeks not months or years.

Briefs which, by the way, we are increasingly authoring together

STRATEGY

1 2 3 4DESIGN

STRATEGY

1 2 3 4

MINI BRIEF

MINI BRIEF

MINI BRIEF

MINI BRIEF

MINI BRIEF

New Activities: Measurement & Analytics

Real time research live and in-store. Ongoing and iterative.

New tools to allow us to track and monitor customer behavior and respond rapidly.

New Activities: Measurement & Analytics

New Activities: Rapid Prototyping

The goal is to develop concepts that we can get into stores faster than ever before.

And to ask ourselves: “How finished does something need to be before we can begin gathering data on it?”

And, if we challenge ourselves, can we actually start to test things much, much earlier?

And finally: Road Mapping

Once concepts are identified as a “go” what would be the fastest way to bring them to market. And how could we prioritize?

TimeInvestmentROINew resources or skills

From here we develop our road map for execution

20% in 2015

6: IN CONCLUSION

that AGILE should move to the front of the conversation, that the very DNA of a brand itself should be mutable, fluid, liquid and adaptable

There are those that say…

has demonstrated our belief that AGILE is key to the future of business in our world, we don’t agree that it applies to everything

While we hope that today

become chaotic and lose their purpose. And the people that interact with them forget the reasons they ever fell in love with them in the first place

Brands in constant flux

OskarKorczak

We see the brand as a rock that our world flows around. It’s just that the river is flowing a great deal faster these days…

In stark contrast

Further down the chain from the brand?

THIS is where the true mutability needs to exist… and retail has been, is and always will be the perfect place to showcase our AGILITY

Where we lost our way was when retail became stale. Formulaic. Driven by the realities of bulk pricing and mass orders…

Retail is all about embracing trends and creating environments which can shape shift on a dime…

After all that’s where we started…

“Salesmanship, showmanship, call it what you will. Every week there must be something special, something new” Jack Cohen, founder, TESCO

“If the rate of change on the outside exceeds the rate of change on the inside, the end is near” Jack Welch

FROM SPEED TO MARKET TO A MARKET BASED ON SPEED

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#agileretail

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@cdaviesFITCH

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