Sucharita Kodali, Forrester Research | Magento Imagine 2018

Sucharita Kodali, Forrester Research | Magento Imagine 2018

September 13, 2019 0 By Bernardo Ryan


>> 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. (upbeat music)