← The Commerce Collective Podcast
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- [00:00]
A
Foreign. Hello and welcome back to the Commerce Collective Podcast. I am Emma Irwin, your host for the show and today we are looking at what is going to disrupt and shape the future of retail in the next five years. Pretty juicy, right? Okay, so every year Flywheel Retail Insights Team releases the future Retail Disruption Report. It's become kind of the industry's North Star for understanding what's actually changing in commerce and what that means for your business right now. This year. Doug Kuentz, Senior Director of Consulting Global Partnerships, is here to help cover some of the key themes. And spoiler alert, the future isn't as far away as it seems. Before we dig in, this is the last time I'll say it. I promise. A reminder that you can watch the full video of this episode just about anywhere. Alright, moving on, saying here at the top of the episode, you can download the future Retail Disruption Report in the episode description for all of the good stuff. Because we won't get to quite everything today with that. Let's get into it.
- [01:00]
B
Hi Emma, I am Doug Koontz. I am senior Director of Retail Insights and my team and I spend our time thinking about the future of the retail industry and making sure that brands and retailers and everyone in between is ready for what's coming so that they can be making the right choices today to win tomorrow.
- [01:17]
A
Let's start off with if you could fast forward, let's say, five years and see one thing about the future of retail, what would you want to know first?
- [01:26]
B
So most people would probably say what shoppers want to buy, but as we think about the future of the industry, I think where we're seeing most change is how consumers shop. And what comes with that is a lot of big, thorny questions that brands and retailers are going to have to solve about technology, about capabilities, about channels, and about what and how they sell. That would be a great head start if we had our magic ball and could look forward.
- [02:02]
A
So my follow up is how will shoppers be shopping five years from now?
- [02:06]
B
I think there are a lot of shiny objects, particularly around AI, that give us plenty to think about. But fundamentally, humans will still act in human ways and it will come down to right product, right place, right time. What's different though, is there's a lot more options to pick from, both in terms of product and where and how they get those products. And transformational, yes, but also nothing new under the sun at the same time,
- [02:36]
A
and of course, before we dig into what's actually changing, I think it helps to understand how Flywheel's thinking about the future. And so for the last 10 years, that's crazy. We've used a framework called Steep, and it's this lens that separates real retail shifts from temporary trends. Can you tell the audience a little bit more about that framework?
- [02:56]
B
Yeah. So we've been doing this for 10 years and the purpose of it really is to quite intentionally boil the ocean. Think about all of these potential factors that we call drivers of change that could plausibly impact where the retail environment goes, and then help brands think about what that means for the decisions they have to make today. And so we've followed for all 10 of those years this framework that we call STEEP. It's just an acronym for all of these different elements of our world that we can look at. Society, technology, economy, industry and policy. And ultimately it allows you to think beyond the four walls of your business and the day to day problems that you're facing so that you can have the proper appreciation for where the industry is headed. But more importantly, as leaders in an organization that you're stewarding your business in the right direction. Right. It serves as sort of a north star for long term strategic imperatives, even though you're facing the day to day realities of short term results.
- [04:15]
A
So the framework does something important in that, I think like it helps brands see which changes are actually structural, like the ones they need to plan for, and then which are just noise. How does the STEEP framework help you prepare for both long term and short term change?
- [04:30]
B
Some of those things are inherently like flashes in the pan or can happen really dramatically, and others are really long term trends that you can see coming from a ways away. So for example, in society, we've known about changing population demographics and dynamics for decades. These are pretty easy things to forecast when you understand, you know, the cultural mix of a population in a market or the age of a population in the market. Right. And those have some really natural implications for what they buy, what they need, how we serve, how we speak to these different parts of the population. But then you have, on the other hand, really fast moving things like technology. Right. Where we were, believe it or not, 10 years ago, we were talking about AI, but we used entirely different language around it. And the way it evolved, you know, it's really difficult to predict precisely, or something like policy and politics where governments get to make the rules, and regardless of what our plans are, we have to follow those rules. And so that can be a major disruptor at the flip of a switch. Right. Whether that's a new regulation, whether that's a war that changes economics or supply chain, or whether that's a global pandemic, for example, that disrupts all of it. And so we try to balance the short term things that have just emerged but have real transformational potential with the long term changes and shifts that we know are foundationally true. And you can kind of have a long term approach to dealing with those changes.
- [06:22]
A
Narrator Emma Here the Future Retail Disruption report organizes around three big what will consumers need, how will consumers shop, and where will they shop? Let's start with talking about what consumers will need. And so value is one of the call outs from this section of the report. As in, value seeking behavior isn't fading away now and it likely won't fade away despite whatever turns the economy takes. So that makes sense. But like, how do brands protect margins when an increasing number of consumers are seeking so much value?
- [06:52]
B
Yeah. So turns out value seeking behavior didn't fade away and probably never will because it really is one of the fundamental things that we base our purchase decisions on. Right. And so what we now find is, as it relates to brands, is a mandate for much more discipline in their assortment. They are dealing with an environment where you have a widening gap between high and low income shoppers and discretionary spending. And so what that means is brands creating more tiered portfolios to reach and serve their shoppers in the kind of economic state that they require. It means much more sophistication around product pack price or architecture. And it means having stronger, more intentional strategies for traditional value channels, things like the discount channel or club stores that are growing faster than certainly most of store based retail and are putting real pressure on how brands communicate value, particularly when their retailer partners, customers that brands are selling to, are adding more private label to their own stores every day. And so what this comes down to is brands having a more sophisticated, more complicated assortment in many cases to serve all of these different needs and all these different channels, but also having clear ways to talk about quality and product sourcing and brand values that justify the price when they're sitting side by side against all these other alternatives.
- [08:46]
A
So one of my favorite nuances here with the report and with value is that brands don't just have to compete on price anymore. Like they have to help consumers understand what they're getting for their money. And that's where, and I really like this, that's where affordable wellness comes in. The idea that like consumers are looking for products that deliver both value and tangible benefits to their health and well being.
- [09:08]
B
Yeah, there's a lot of potential angles to what affordable wellness means to a consumer. And that's I think one of the challenges right. When we've talked about aging briefly. Right. And an aging population has certain product requirements. GLP1s are been a big topic for a couple years now. And how do we create products that are relevant to consumers using GLP1s? And then within affordable wellness itself, that can mean it can mean health related things, it could be nutrition and ingredient related attributes, it could mean environmental sustainability characteristics. Right. There's so much noise about is a product healthy? Is an ingredient healthy? Is does this product do what it says it does or does it, does it actually live up to the claims it makes? I think that's probably where you see brands can do a better job beyond just the availability and the products themselves is how do we communicate? How do we design solutions that are understandable, that our shoppers trust and that our shoppers will buy in a world that has no shortage of alternatives and duplications and other other products that seem just about the same or good enough?
- [10:33]
A
Well, I think one of the, one of the greatest challenges in life is searching for something such as probiotics. And then you see 5 million probiotics and they all say like a bazillion and then it's like an acronym of all the little gut biome things. And you're like, I, I just don't know. And then I think the interesting element of retail media is then a few of those brands latch onto you and you only see ads for those specific brands and that sort of helps you narrow the consideration set. But it is really just like an overwhelming catego. And how do you really stand out in such a crowded space?
- [11:10]
B
It is an immense challenge because it's so hard to even know what's true, what's real. That's why amidst all this noise, I think brand credentials, brand trust, brand credibility goes a long way, even if it feels like it's being spread so thin and it's hard to know what is in fact true.
- [11:41]
A
Narrator Emma Here again, the second major shift in the report is all about discovery and how consumers find products. And here's where AI enters the conversation in a very real, very immediate way. You already know this based on things we've talked about on this podcast before. But consumers are using chatbots, AI search and conversational tools to really narrow down what they want before they even hit a retailer site. Brands need to show up in those spaces, obviously. So how do brands adapt to being discovered through AI? Like what do they need to do Right now.
- [12:14]
B
So number one is just to take it seriously. I appreciate that there's probably some AI fatigue out there, but in the same way that we were figuring out what sponsored products did on a website 10 or 15 years ago, or how content impacted conversion, we're doing, we're running back that same playbook, but just in an AI environment this time around. Right. And so, number one, we want to be testing and learning. It doesn't have to be an expensive thing to play around and understand how your products are showing up. Are you auditing to know this is the experience that a shopper has when they're using these tools to discover your products or to search in your category? There are certainly we've seen lots of brand organizations have kind of like a head of AI type of role or an agentic commerce type of role that is meant to lead this. But it starts with just figuring out what's true now, what works for your category, how relevant is this for your category, and then making sure that your organization understands what's happening. As always, particularly folks in E commerce and digital commerce that have to be on the forefront of this, it can feel like they're out there on an island and are having to figure it out for themselves. But we know in the same way that E commerce demanded our organization to operate differently, to communicate differently, ultimately that the supply chain changed and the way we go to market changed. AI has that potential as well. And so you want to be bringing people along the journey, even if we're not ready to upend the organization for how we discover things through ChatGPT or through Rufus.
- [14:15]
A
Okay. We know AI changing discovery is just one part of the shift in how consumers will be shopping. Right? Like another massive change. I think this is a nice segue. Another massive change is happening with retail media itself, which also ties to discovery, search and conversion. Retail media is becoming this entire commerce infrastructure. It's not recovering streaming TV in store, conversational commerce, whatever. What does that shift change about how brands should plan their media investments going forward?
- [14:45]
B
Traditionally, retail media has been this lower funnel tool, right, where you bid for search terms and these other concepts that those of you that work with retail media have known about for quite some time. What's of course changing is that becoming a broader discovery and upper funnel tool. The major headlines are retailers like an Amazon or a Walmart who are running ads on Prime Video or connected to Walmart's Vizio ownership and integration. But ultimately, what's happening with retail media is there's more inventory to reach consumers across More touch points, more parts of the shopper journey and in new ways that we've had before. So while you're watching TV or streaming a show or watching a live sport, or even when you're walking through the store and all of these TV screens on end caps are now sharing what we traditionally call retail media in the physical store, retailers are finding new ways to put it kindly, give brands new ways to reach shoppers. And brands are sitting there having to stretch budgets across more things in ways that they haven't had to before. And it really challenges the way that we fund that we divide and think about what what media and national brand and shopper marketing do ultimately means a much more integrated, holistic view of where we spend our dollars to reach our shoppers. Conversational commerce in that context is just one more angle. Conversational commerce to most probably means, hey, I'm, I type into chatgpt. I'm looking for this thing. I'm buying a birthday gift for a friend. What should I do? Or I'm comparing these products. It fits in the same way, which is it's another way we have to figure out how to deliver media, how much money to spend towards it, and then measure and optimize whether it's an effective use of our resources to drive our business forward.
- [17:10]
A
Narrator Emma here. Okay, we've covered a bit about what consumers will need and a bit about how they will shop. And, and as we said up front, that third shift is in where consumers will shop. But if you want to know more about that, you're going to have to download the report. I just want you to get the full story and all of the insights you know. So you just have to download the full report and you can find it in the episode description. But I'm not cutting us off here. Let's get back to Doug for some real quick final questions. We're running short on time here, so let's hit the key takeaways. Doug, five years from now, are brands optimizing more for humans or algorithms?
- [17:44]
B
Humans. But there is definitely a scenario where repeat purchases become much more automated without human intervention, and people will outsource some of their research. So brands need to be ready to win in that environment too.
- [17:57]
A
Which will win in the future? Better product or better product data?
- [18:01]
B
As always, better product, but better product data will be essential to figuring out right place, right time, right shopper, and making sure you're converting and driving traffic.
- [18:12]
A
What is the biggest future retail shift that brands are pretending is still far away?
- [18:17]
B
Population flattening, particularly in the developed world. Not a lot of new humans to consume new stuff in much of the developed world. And that has pretty significant implications.
- [18:29]
A
Boom. Last one for you. What is the most uncomfortable truth for brands in this report that they really don't want to hear right now?
- [18:36]
B
That traditional national brand differentiation will increasingly be flattened because technology will make it more easy to compare prices, product attributes, characteristics across channels in a way that they've never been able to before.
- [18:54]
A
So here's the bottom line, the whole enchilada, if you will. The future of retail isn't about having the shiniest technology or the biggest marketing budget. It's about understanding what consumers actually need, meeting them where they're shopping, and being honest about the constraints you're working within. The good news? Nobody's nailing it yet. That means every brand has the opportunity to get ahead. I'll say this one more time, one more time, which is hopefully a reference from Britain's Got Talent that if you don't know, you should go Google. The full future Retail Disruption report is available and you can download it in the episode description, take a look, share it with your team and start planning for what's actually coming. With that, we can wrap it up here. Thank you to Doug for his insights. I've been your host, Emma Erwin, and we'll see you next time. It.