Recorded April 17, 2020
Gary Bernier: Hi, it’s Gary Bernier. I have the extreme pleasure of interviewing Stephen Semple today, and what I’m going to be interviewing him on is The Tipping Point of Retail. So, Steve, my first question to you is…
“What is this tipping point thing that you want to talk to people about? What is a tipping point?”
Stephen Semple: So a tipping point happens when something is going along, and it’s minor. It’s a background thing, and it grows slowly. Then it hits this point where it explodes and takes off. And suddenly, something comes from being a minor thing to being a mainstream thing. So that’s the tipping point. The tipping point is when change happens and the growth curve goes from being flat to being almost straight up.
Gary Bernier: Is this the S-Curve that we’re always talking about from the technology industry? I’m familiar with the S-Curve, but are you saying that it’s applying right now to this particular situation in retail?
Stephen Semple: Yeah, and the S-Curve is applied to technology. The S-curve is referring to things like radial tires. The S-Curve has happened over and over and over and over again. And it’s well documented, and if you want to read about it, try the book “The Diffusion Innovation.” A five hundred page book that goes into massive depth on it. But yes, it’s the whole idea of the S-Curve, that’s just the way things grow, and it becomes pretty predictable.
Gary Bernier: Interesting. So what research have you bumped into that makes you think we’re at this tipping point for retail?
Stephen Semple: So, the tipping point occurs when something hits 12% to 15% market penetration; that’s where the tipping point lives.
And we go back to December of this year, so December 2019, and this data comes from Visa, Mastercard, and Facebook. They all confirm a similar number; 15% of retail sales were conducted online. So in December of this year, for the first time ever, we hit the tipping point. The tipping point happened and online retail is poised to explode.
Gary Bernier: Is anything that we’re currently dealing with — we’re recording this April 2020 — is there anything providing fuel to that fire? Something being that little bit of an accelerant that’s like providing that spark?
Stephen Semple: Yeah, if anything, one could argue this change will happen faster in terms of the acceptance of online retailing because of the events that are happening today.
People who’ve never shopped online before are shopping online.
People who shopped online are getting used to this idea of buying online, driving to the store, and picking it up.
The world has changed, and the longer this goes, the more this becomes the new habit. One could argue that not only are we at the tipping point. But we’re at the tipping point right when massive fuel has been added to the fire of change.
Gary Bernier: Cool. So, where does that lead us now? What part of the S-Curve are we about to take a journey on? And how long is that going to last?
Stephen Semple: If you’re looking at the S-Curve, the prediction is the amount of time it takes to go from 0 to 15% is the same amount of time it takes to go from 15% to maturity, which is around 85%.
The first online transaction happened 25 years ago, a few years later, you know, Amazon opened, and eBay opened, and PayPal was developed. All this stuff happened, but the first transaction was 25 years ago. 25 years from zero to 15%. This means about a dozen years from now 50% to 60% of transactions will be occurring online. And if anything, this might happen faster.
Gary Bernier: Cool. Can you give me an example or two of some businesses that you can see in the marketplace right now that are poised to take advantage of this that people can look at as models?
Stephen Semple: And this is where it gets fascinating. Just because transactions are conducted online doesn’t mean there’s no use for brick and mortar. And some exciting companies are combining the experience. So one, for example, is Canada Goose. So Canada Goose makes your thousand-dollar puffy coats that are popular with millennials. If you’re on a university campus today, you see tons of these coats.
So here’s what happens when you go to a Canada Goose store. They have no inventory for sale.
You go to their store, but what they have is every style, every cut, every size. So you go to the store, you can try it on. They’ve even taken a step further, and they have a freezer. You can try the winter coat and step into the freezer to make sure it’s warm. Make sure it’s the right fit.
And then, if you want it, you order it online, and they get shipped to your home. You don’t take a coat home. But this actually makes for a superior shopping experience because guess what’s our biggest frustration when we go to a store? Oh geez. We don’t have your size. Guaranteed your size is always there.
Gary Bernier: And the color you need to make your decision.
Stephen Semple: Right.
Gary Bernier: I just have to say for our Southern Wizard of Ads Partners. Yes. You go out into the cold in the middle of winter into a shopping mall that’s heated to then go into a store to put a winter coat on to go into their freezer inside the store to try it on and make sure it keeps you warm. I just had to put that out there. That’s their bold idea, and I just find that hilarious, but it’s working like mad for them. So Steve, what’s the other example?
Stephen Semple: The other thing is to think about how much easier it is to manage inventory. I don’t have to manage inventory for six different stores.
And it’s a better shopping experience, right. Casper mattress, the huge online mattress company, is now opening stores because what they recognize is people still want to lay down on the mattress. But do they have mattresses in the store? No.
Gary Bernier: Not that you can buy.
Stephen Semple: Not you can buy. It is still shipped to your home. But what they’ve done is they’ve said the brick and mortar is there to support them online. It’s not that online is there to support the brick and mortar. So there’s still a place for brick and mortar, but it’s changed.
Gary Bernier: Very cool, so let’s pivot this to marketing. We’re talking to our Wizard of Ads Partners today. What do they need to do differently to take advantage of the next 25 years?
Stephen Semple: So here’s what’s cool. This is the thing that’s completely cool about this. So let’s accept the fact that for a retailer, a larger and larger percentage of sales will happen online where everybody’s going to screw this up. Or many retailers are going to screw this up. They’re going to say, “Well, people are buying online, so I have to sell online.”
That’s kind of like saying, “People buy in my store so I need to advertise in my store.” That’s just completely wrong.
The next thing they’re got the in the other challenge with advertising online, it’s expensive. It’s the Zero Moment of Truth. We all know that as Wizard of Ads Partners.
And it’s hard to create repetition and speak to somebody before the buying process. Again, we all know that.
The other mistake retailers will make is they’ll go, “Well, now my market is national, so I have to advertise nationally.” Well, suppose you don’t have millions and millions and millions of dollars to spend. In that case, you can’t advertise nationally. But there’s nothing to prevent you from selling online and advertising locally.
So advertising doesn’t change. Still advertise on the radio. Still use billboards. Still use all those local advertising techniques that we are unbelievable at — and just sell online. And maybe set up one small retail store to support that experience if need be.
Gary Bernier: So if I heard you right, you’re saying to the partners, “We’ve got the model. Our model works. We don’t need to change our customers.” I was going to ask what the next opportunity for our customers is. Do they have the flexibility for expansion in the next 25 years in a sort of a different way? And maybe I should let you speak to that. But I really want to drive home the point to partners; the marketing stays the same, but the way the business model happens is going to get adjusted a little bit. I’ll let Steve talk to you about how he sees some of our existing brick and mortar partners expanding their business in the next 25 years in other markets.
Stephen Semple: Oh, god, the expansion opportunities are amazing. So, let’s take a jeweler, for example.
So if you’re going to open up in a new market as a jeweler, you’ve got to build out a store, you’ve got to sign a lease. You’ve got to put all sorts of inventory, and it’s a massive cost plus on top of that. You probably want to pick the next town over so that it’s easy for you to manage it. So now imagine saying, No, no, no. What I’m going to do is I’m going to advertise locally, but I’m going to sell online.
Stephen Semple: So now the only cost is your marketing budget. That’s your only cost. And on top of that, you can pick your town based upon it being the right size town for your budget and cheap media. So, for example, If I have a $200,000 budget and I can find a place that — let’s say I’m just going to use 50 cents because I can do the math in my head — I can find somewhere that I can create a radio campaign where I can reach people for 50 cents.
That means now what I can reach 400,000 people. So what’s the ideal size market for a million people, I just find a place that’s got cheap media that has a million people and I can frickin own it. But what if I only have $100,000? Well, then I find a market that’s half a million people. Or what if I’ve got 2 million? Well, now I can find a 4 million size market that, instead of thinking about it from the standpoint of geography, you can think about it from the standpoint of media.
Now, even if you sit there and say, I may still need a small retail store to support it. I can still start the media first and test it out. And if it’s working, open up a small little pop-up store that supports this marketing effort. But it makes expansion easier than ever.
Gary Bernier: Awesome. So is there an opportunity for partners to potentially pick up new customers in the next 25 years? And if so, what do they look like?
Stephen Semple: Yeah, a couple of things. This expansion model also fits. Let’s say you’re a home services company; the model is also there. You don’t need to open up offices or any of those other things. Calls come into a central call center. 1 800 Got Junk does this. All you need is a warehouse for parts, hire staff, rent vans. Boom, you’re in business with lower costs.
But here’s the exciting thing. I think, as partners, we are better placed than anyone to help online retailers. Because online retailers have gotten it into their heads that the way to grow an online retail business is by pretending you’re local and advertising locally. Pretend you’re local, advertise locally, and sell online.
Gary Bernier: Very cool, Stephen. I think the partners are going to be happy with everything you’ve shared with them. Insightful stuff. What’s your recommendation for people watching? What should they do with the information that you’ve just given them?
Stephen Semple: I can tell you what we’re doing. We are talking to all of our customers about this.
We’re explaining that these changes have happened, these consumer behaviors have occurred. And ask what do we need to do to take advantage of it.
And I’ll give you another interesting example. Things that were impossible before are possible today. Two years ago, I got talking to a customer of ours who sells metal roofing. And I said to them, “Look at our business model. It’d be so much easier if we could sell remotely. Suppose we didn’t have to have a salesperson go to somebody’s home. “Impossible. Can’t be done.” Well, guess what, guess what we’re doing today?
We’re selling without going to the home. We are selling remotely. We’re using Zoom and all these other things that sell a metal roof without having to go to the person’s home.
The world has changed. So the first thing is, go back to your existing customers, I believe, and talk about these opportunities.
But then the next opportunity is talking to online retailers about advertising their services using all the things that we know in local advertising.
Gary Bernier: And Stephen, would you be willing to share these insights with somebody else’s customer? Get on a call do that sort of thing with any partner that wanted you to introduce it to their customer? You know, as just a freebie kind of service that you just jump on a call with them. And they sort of explain, “Hey, we’ve got this neat thing he wants to share with you.” Would you be willing to do something like that?
Stephen Semple: Oh yeah, I’d be open to doing that and talking about what the opportunity is and how they need to think about it. And again, there are two mind shifts. Number one, it’s delivered online, think locally. And then mind shift number two is brick and mortar’s purpose is to support the online, not the other way around.
Gary Bernier: Very cool, so there you have it, guys. Steve will work with you to learn more about this. To share it with your customers. Or if you just want to bring Stephen as we’re going through these interesting times and have him entertain your customers with this insightful information. He’s more than willing. So Stephen, thank you very much for your time today. I’m sure people will find this extremely valuable.
Stephen Semple: Cool, I hope everybody does. I think big changes are coming in, and we need to be in front of it. And I think it’s a massive opportunity for us. So thanks for taking the time.