From Brick-and-Mortar to WEB3: The Future of Retail in a Digital-First World

I'm Christine Russo, and you're listening to what just happened on Market Scale. I'm Christine Russo, and welcome to another episode of FAD trend and strategy on what just happened. Today, we welcome Andy Lautado, Chief Operating Officer, the vitamin Shop and Chris Silver, Customer Technology Executive. Welcome. Hey, guys, Uber. Excited. You both bring really interesting perspectives, particularly from inside retailer point of view. A lot of people who are listening and part of this ecosystem were in retail a lot were never in retail, and their retail, what I call retail adjacent, all good, all having, you know, their own experiences, However, unless you've really walked through the fire, there is really a very unique perspective as to even just the simplest things, like prioritizing different forms of transformation, for example. I think you definitely live in the shoes, especially when you spend any time in stores. Whatsoever. You go around, you understand where the stores are, you feel their pain, you feel their struggles. You know, they are the closest one to your customer. I spent my formative years in retail stores in the back of it talking to the managers, and you really wanna help them out at every single piece. Andy? Yeah. So else that I I started my career at the limited and nine ninety, so thirty three years ago. I left for two years, and, I was kinda, like, snobby to my friends, like, oh, I got out. Retail so hard. You know, I'm gonna go do something else. And I came running back because it's it's who I am. It's in my heart and and, Chris is absolutely right. When you're talking to the store associates and the customers. So you're on the episode of FAD Trend and Strategy, which is a really fun, interesting way to cover a lot of ground and then deep dive into a couple of subjects. So I thank you for participating in that. And the way it works is I will throw out a topic, and you will provide your opinion on where it stands in the retail landscape or where you think it should. And maybe retailers aren't embracing it so much. Right? So this is really a reflection on your educated opinions. And thought leadership. I know that things are nuanced. I totally get it. You can have fads and trends under strategies, and you should. So we are taking a simplistic approach. And then what I like to do is see what's exciting to us and then do a deep dive. So here we go. Let's hit some topic. Sound good? Love it. Gameification. Andy. Andy. Chris? I agree. It's definitely a strategy. Now here's one for you. I'm gonna ask you building tech versus buying tech. So it's gonna go build and then buy. Build Andy. Strategy with an asterisk. Chris? I'm a bi person for the most part. Foundational things it's a buy. So that's like one of the most heated things with brands as well. It's like you have brands that are just build everything, and then you have brands that are buy everything, and it's, like, a mix between the two and to get the one to jump into the other. It's, So it's it's it's a deep conversation. How about by Chris? Strategy. Andy? Friendship. Chris? Strategy. Andy. Strategy. Great. Next. Drop. Chris, drop shipping. Table stake, strategy, live shopping, or video commerce. Chris? Strategy. Andy? FAD. Except for in China. Love it. First fad. And it wasn't even a trend. He went hard. He went down. He went fat. Okay. Cool. Mobile payment, and I mean self pay, not in the kiosk, so mobile payment on your phone in stores. You're on your own device. Right? On your own device. Bad. Yeah. God. Interesting. A nightmare. Andy? Trend. Okay. We have a lot of grab and go in our business. I come in after the gym and grab a protein drink and a bar. Why not hit it with your own phone and and be out of there. Right? So that's what I'm thinking for that. One hundred percent. Exactly. The word omni channel or the meaning of the word omnichannel, which recently has been said as, yes, it's where we're at. But it's an old word. And I'm like, is it? I feel like this is exactly represents exactly what should be happening right now. So the the I would like your opinion on the word omnichannel, Andy? Krend. Killing me. Killing me. I see it. Is there Do you wanna hear my why? Of course. Okay. All these buzzwords are trends. And whenever there's a trend, there's some journalists out there that'll come up with a new trend. I mean, Omni Medi That's the definition in the dictionary. Many channels. Right? So now they're trying to say we're moving beyond three separate channels to one converged, harmonized, seamless, whatever you wanna say, and it'll get, you know, integrated. So it's a trend, whatever word we use, the real truth is customers need to shop, how when and where they want, and it needs to be seamless and work the same. Chris, thoughts on that in that vein? I put in agree more, honestly. It's like every I I feel like every other year, you hear a new word get brought up, and then everyone circles back to omnichannel. What are your thoughts on composable commerce? Chris? Trend. Andy? On the word or the actual concept, the word is a trend, all words are trends, but the actual concept is a strategy. Yeah. Okay. How about headless? What are your thoughts on that? Andy? It's a fad. It's a horrible word. Chris? I agree. Okay. Let's dig into build versus buy. I think you guys are perfect for I think a lot of people would be kind of afraid to touch it, and we don't like beer on this show. There's pros and cons to both sides of it. There are trends. There are strategies. These change, sometimes from fad to trend and then strategy or sometimes it's a strategy. And underneath it, there's circulating trends trends and fads that need to happen to fulfill the strategy. So it's a very complex subject, and it's really juicy for for this show. So let's start with Andy. Why don't you just give us some top line thoughts? Everyone needs a payroll system, everyone, and no one's gonna build their own payroll system. Yeah. So there are certainly back office things like accounting and payroll that nobody would ever contemplate in this day and age building their own. And that certainly is also true for productivity tools. Right? No one's saying, wow. Outlook's kind of a horrible email. I'm gonna build my own email system. So, generally, most companies are going to buy the software they need to run their business. So it's a buy. But there are unique places where you want to innovate and be different and offer different capabilities So in that case, I think that build becomes a really good strategy with the asterisk of being that building off of components. So we get into composable commerce, formerly known as headless. And I just always use the analogy of a box of Legos. Now if you can buy those components instead of an entire fleet monolith. Now you can assemble them in a unique way for your business and your customers. So it's more Not down to. I'm writing C code anymore, but if someone else did those components that are very small, we could call it a microservice. Snapping them together uniquely and creating, really good experiences for my customers and processes for my my employees. Well, I would call that really more of a hybrid than a true build. And I think Chris would agree with me on that, but I don't know for sure. Chris, I think it's all kind of like a little bit of a hybrid. Right? And but Andy's right. It does fall into that build category. And I think you know, as you look at your layout, you know, as you look at your architecture and your ecosystem, and then you understand where you wanna go as a business, There are certain core technologies that you can't be an expert in. Right? And I think these large companies often take that on because they have the scale. They have the resources And because of where their business is, you know, going build makes sense for that. I think for most businesses and speed and flexibility and integrations that you can't possibly keep up with, buy makes a lot of sense, especially because buy with customization now is just so, so easy, it becomes the talent, right, and the speed and all the changes. And I think it's one thing we learned over the last few years. It's being able to flex, to pivot, to change, to be agile is where these things came in. And a lot of folks that were in these build scenarios ran into trouble. You know, they ran into trouble because they weren't able to we had new social media outlets coming up really quick. New integrations coming on. New different things coming on. And to tell you the truth, it showed a lot of weakness in the ability for these businesses to kind of change and dynamically be flexible to the customer's behavior and experience. So I think there are core systems that you do want to, and I think there's three levels of this. Right? There's core foundation of these are the best the best in class vendors. And then I think you have your middle tier where you can go a little bit startup. You can go a little bit more, newer Right? And then you have some that you do wanna build, and that's the connectors. That's kinda like the business models that make sense for your business, individually. The last couple of years. It's been very interesting. You know, now as I head back into the brands, I have all this wealth of knowledge and experience kinda going back in of where these things can kind a puzzle fit in with each other. So it's extremely interesting. I do wanna pull the curtain back on that because I I think the brand perspective for this is very interesting. But before we do that, I like the Lego mentioned because in a way, it's the special versus lord business here. So my question for both of you from inside retailer perspective and pulling the curtain back is do those technology suppliers of the kits of parts the ones that you go out and source that then become your building blocks of these these pieces that you build and customize Are they like okay with it? Are they like, sure. We'll be part of a bigger like, obviously, you're not building everything all by your so you're building these component pieces and how do the pieces work together? How do you ensure they work together? How do you act that seems like such hard work. Can I get some light on that, Andy? And then we'll go to Chris. I think that not only do these people who make these kids, embrace it, that's their entire model. Right? Because probably they got sick of trying to build packaged software at the end of customizing for every single customer. Most companies I know run highly modified package software. Like, it was a package and they modified it. And no one ever says that's a strategy. That's you didn't have the option of a bad idea, but that's what a lot of people end up with. So this takes away you're having to buy some I wanna name names, but I won't buy some monolith then, you know, hack the crap out of it to work your way. So this that goes away. And now you're buying the pieces parts and assembling them ideally for your business. Chris, before you comment, I do know a lot of tech solutions even today who are feel like one of their strongest selling points, are there an end to end solution? Which probably, to your point, Andy, has to be customized. So it's like, okay, you can do all of that, but we only need this these pieces we need these other things to do different things. Chris? Yeah. I I think there's a lot that say they're an end to end solution, but also the better ones of them understand that you know, they are not in the end to end solution for these brands. And it's these flex points that I think, you know, Andy, I completely agree with what you were saying. It's the flex points that I think I've learned, you know, that's where things kinda matter. That's where customization, that's where the brand comes in, that's where these customization points and these points of where you want the flexibility to happen, you know, really kind of matter in this, where you have your core foundational elements but then you have your flex points of when you do wanna add a new channel, you know, when you do wanna add a new in engagement item, a new message, a new different kind of touch point. You know, that's where the things do matter so that the brand can pivot and dynamically change to where their customers headed, you know, very, very quickly. And I think When I look at software, you know, there's foundational software you need to run-in the business. There's the core. Right? But then there's the pieces that the individual groups and departments you need to give them control over. Right? Because different elements happen in their business that you need to be able to move dynamically, otherwise they go around you. So building in these flex points, building in these pivot points, to dynamically change, I think that's extremely important. And that's the part that's a table stakes strategy that I'm using going forward because it's that keeps you safe that keeps your environment moving forward in best practices so you don't get yourself into trouble or locked in later on where you know, these huge digital transformations that are organizational transformations come in, and it uproots the business and really puts a damper on it. So flex points is what I love. And that's a trend word, by the way. What is the internal approach inside a retailer when, it comes to addressing, not a corporate digital transfer formation, but something that's coming from a dev divisional head. Give me some color on when you have a group that needs something as you reference, Chris. And they are it's very niche and specific to their own business. How how does that work? Are they out in the market looking for stuff? Are they approached? And then they bubble it up? Is there, like, a year end, like, what do you guys wanna accomplish next year? We'll go out and find it for you. I hope once a year is not the case for anybody because that's way too late if you're just going in a budget time and saying, what do you need? I prefer to have team members, you know, completely embedded in their team at all times, kind of running forward But, you know, we've seen even look at marketing teams. Right? The emergence of these digital transformations last three to five years has taken it from from marketing teams that have been named after certain technologies to the way that we talk them and implement them and and drive new projects. It's completely different. It's now customer first and then backwards in where, you know, in the past, it's been we are this product team. We are this product team. It doesn't happen that way anymore. So it's having the technology teams embedded in so that you're understanding these things live building in those flex areas that you can when your core foundational element, you know, doesn't do what you needed to do. And there's a new piece that came in so that you can then plug it in, but you're working with these things live during it. And I think the role of IT is to be dynamic. It's to move at the speed that the business needs you to move, and that involves me having team members embedded in those different groups and departments at all times feeling the same pain. Just like I talked, I was in stores, you know, and I felt that thirty seconds as they were talking to the customers, they were waiting on something to process. You feel that pain. So you don't wanna do that. Having it embedded in makes you a partner, makes you a partner internally and helps you really drive that transformation, that innovation. Andy? Yeah. So it it starts with your business strategy. And so say you have a strategy, I'll use, example, that we talked about earlier dropship. So you have a strategy and say, I wanna offer a broader assortment to my customers so they don't leave my website, but I don't wanna spend the money on inventory. So that becomes a strategy. So now you need a capability and that capability is how do you extend your website and your POS to be able to sell more products, and then sound defeat first, and then you prioritize that work. And so I actually wrote chapters on this in my book about prioritizing work in IT, and it's there's always the debate about the little things or the things, and you really gotta do both. There's, you know, the little things that matter, tweaking like UX, for example, could be a big deal. So it's a small project, but a big project would be completely redesigning your carton checkout. So but, yeah, it starts with a strategy. The strategy leaves a capability. The capability leads to features and then the features lead to in the agile world. Stories and then the work gets done. You have just so I am hearing you guys correctly. You have opposing opinions, actually, then because what Chris is describing is it's fluid and it's constantly being evaluated because there's this embedded tech constant feedback loop on what's happening. F filling back the current priorities and defining new at all times. And yours, if you're going off of strategy, it is that once a year, twice a year, around the budget, big idea, big ideas, medium, big ideas, that, so you wanna be kind of systemic or systematic about deploying resources And Yeah. But no. I'm actually in more agreement with Chris. So I have a rule that you can change anything on the list anytime as long as it hasn't been started. Once you start a project, you gotta finish it. Because if you get halfway through three quarters through, you get ninety nine percent through and you put that on the shelf to start over, you wasted every dime. Mhmm. But I also believe that you should still have a long term vision and strategy that you're always updating. So it doesn't mean it's gonna be right. They're never right. They're just at least it's a direction you're going in as you get closer, you know, you pick the right roads to get there. So now we're always evolving, you know, reviewing ours, but one couple of my principles are stop starting and start finishing. So just doing fewer things and having a smaller list and and getting them done and then moving on to the next thing. But, no, it's about a framework of a strategy, but still, adapting it on the fly. Fluidity within there. Okay. It's not locked and loaded. So it's it's it is similar. Okay. I wanna ask you both your opinion on this because I don't think either of your experiences included this, but a lot of retailers have an innovation department now. They are their job is to gather requests from all the department heads and spend the time doing demos and, you know, time consuming it is. Demos and vetting and doing RFPs and and and getting that work done, which, I think a lot of times still falls under IT, but with the with an innovation department in a retailer, do you think that's an effective way to go about deploy not so much gathering information because that really who cares? It's the deployment of the actual decision making. I see it as my personal opinion is no. I didn't work somewhere where they had this, but I know how retail organizations work. And it's like, I'm running a business. Oh my god. You know, I heard about this thing. I love it. I think I need it. I'll pop it. I'll send an email to innovation. They'll do the leg work. They'll figure out if that's solves my problem, or maybe they create a form, what is the problem you're solving, without, you know, why, what, this, that, the other thing, where will it affect the P and L, etcetera? How many points do you think you'll gain from it? Right? Is it is it an ineffective way to run innovation within an organization to have it as an outsourced agency within? Or is it better to have this infiltration strategy? Chris. So you're gonna hit me on innovation for the guy that wrote the book on it. Okay. Okay. I'm getting to him. No. No. It's fine. So I'm always it has to be part of the teams. Right? Because if it's a separate group, separate item, And it's this rogue team that's kind of just pulling in the shiny objects, right, that really can't scale, can't be implemented, and you can't operationalize. Then it's not really helping anything, and it's a little bit of a distraction because then the groups that are gonna get tasked with it when it gets the check mark, it's just gonna be like we're telling bad news. It's like, no. Here's the reasons why you can't. And it becomes a negative effect. I'm a fan of innovation groups, and I think it's esseri for brands and companies to continue to look into, not just innovation. I know it's got a ton of different names. Right? It's one of those terms. It's It was R and D. It was innovation. It was future. It was this. It was that, you know, you know, pick the year, pick a different term. I I think it is important. Right? Because it keeps you looking forward. It looks the competition of what's happening. It looks at trends. It looks at everything. But I think that everything that that group does has to be a part of how to operationalize it scale it and support it along with your current other channels and business priorities. So I think it's a group that is necessary, but it has to be one that's made up of the current business folks that are, involved in the teams that are involved? Like a committee. Committee task force, but it's gotta be built up of the folks that are k. Yeah, responsible for those areas. Interesting. Okay. That's not what I was thinking when you were saying that you wanted a tech innovation person in the department because I was like, what if they sit with the planners, what are they gonna do? Just sit there and watch everyone and take notes while they're like I gotta tell you the truth. Honestly, the most innovative things, like, at Urban Outfitters. Right? The most innovative ideas and concepts were the ones that came from the store employees because they were frontline. They understood exactly what was wrong, and it was often you know, these little these little things that once we change, we fix, we enhance, we did whatever to, made the most impact and everyone was thrilled over it. And it was only because those folks lived it day in and day out. So why would you get a separate team that has not been through that pain, had the gray hairs, been through a a black Friday or, you know, you know, a a super Saturday that, you know, not a part of it. You know, I think it's gotta be the folks that are living it day in and day out. They have the best ideas, and it's just giving them value for it pulling it together and then getting the company behind it. I think that's a big thing. Andy, let's go. This is your this is your domain lay it on us? Well, it's interesting because my book is not about innovation per se. It's about creating an environment where innovation arrives. An environment wherein innovation thrives means that innovation is everybody's job. It's not some separate group. It's like, your job to be mundane and they're over there trying to do something interesting. Everybody needs to innovate and it's wake up every day and come up with a better process, a better thought, a better idea. So I'm a hundred percent with Chris that it's everybody's job. One of my quotes is that innovation without execution is just brainstorming. So, you know, it's fun. I mean, it's a fun job if you're getting paid to think of cool things and play toys and have gadgets and drums or whatever it is. And so and I think for the very big companies who rattled off some earlier, then, yeah, why not? You know, they have the money to to spend on it. But I think in a medium size, a retailer, I wouldn't separate it at all. I'd make it part of everybody's job. The way to innovate in a company is not to have separate people. It's to make sure you have psychological safety and actually allow failure. There's a lot of fear in taking risks and taking chances, and there's no one gonna innovate. Absolutely, one of the most important things you do is a is a bad interesting takeaway from this entire discussion wasn't planned by by me thinking about what we would touch on, but it's very clear, and I wanna clarify for you guys and also commend you for, making it so apparent, which is the emphasis on the team and the team experience and the front of house and all of the people working throughout the corporation, how they're really the ones driving the growth of the organization and solutions. And it comes from in house, it comes from frontline, it comes from all of the areas. So the people piece of this is a nice pleasant talking point coming out of this discussion. I mean, what is a company besides its people? Right? It's just the name on a on a wall. And so, really, it's all people. And I know I spent a lot of time in stores, but also in our warehouses, our distribution centers. Mhmm. I did every single job in my distribution center, and I I learned so much from that week that people would never tell me. Like, at one point, we're asking the people on the floor to do math. Were having to multiply the twelve times how many cases. And so if they put away five cases at twelve, they gotta put a sixty. And then you start doing twelve times eleven, you know, that's a long time since I learned all that math. And it's like, why can't the computer do math? Computers are good at that. Right? And and I got an explanation, and the explanation was, was sometimes they don't put away a whole case. So we designed it to allow them to enter the unit. So ask the people on the floor. Do you ever put away not a whole case? And they go, we never do that. Never. So guess how it took for the computer people to make it, say, put away four cases. It took them like an hour. You know, is it a really easy fix? And I worked here four years before that ever got surfaced, and I don't know if it ever would because they they're told, here's your job. You put it away, you do the math, and you tell guess how many times it was wrong more often than not not I'm sorry. It's mostly right, but there's mistakes made, and then your inventory screwed up. And so Those little things matter. And when you're in the store, when you're in the distribution centers, when you shop your own website, you know, get the deliveries you've learned, you learn all these things. So I absolutely absolutely right. It's about the people. For sure. Chris, you wanna add anything? I mean, no. You're right. It's a listening. Is the big thing, listening to the team, listening to the challenges, listening to it, getting close, you know, get the team out, let them go work in all the different of the business. Right? I think it's fascinating. That's how you build passion to say build addiction. They build loyalty in the brand. You know, I think that's huge. Well, I wanna thank you guys. This was incredibly fun and also very enlightening. I learned a lot, which is always great. No. Thanks for having us. Yeah. Thank you so much. It was really great seeing you both again.