Let's Get Real about Retail: A Conversation with Chris Walton

Today we have the privilege of chatting with Chris Walton. He is a leading expert and influencer in omnichannel retailing. An accomplished Senior Executive, with nearly 20 years of success within the retail and retail technology industries, Chris has high-level executive experience across nearly every discipline within retail, including: merchandising, store operations, inventory management, product design, forecasting, e-commerce, pricing and promotions, product development, and store design and architecture.

Chris began his career at Gap, Inc. and holds a BA in Economics and History from Stanford University, and an MBA from the Harvard Business School.

StyleSage: Can you tell us a little more about your background in retail - you’ve had exposure to all of the central business functions - which really is critical to being able to dive in and address root cause issues. So working on both the brand side and as a consultant, what have been some of the most important things you’ve learned along the way?

Chris: My background is pretty unique. In my 20 years of retail, I haven’t met someone with my background (yet). I started my career after college, at the Gap. I spent four years at the Gap in inventory planning and allocation. I then went to business school, and after business school, I joined up with Target. I started with Target as a buyer of seasonal bath and rugs -- that’s all things kitschy, Santa Claus hand towels, pumpkin-embroidered doormats -- I like to call it my grandmother’s favorite job I ever had.

I ended up spending six years in traditional stores merchandising in all kinds of roles, and then a life event required me to move to Colorado. I decided at the time to stay with Target, and asked if I could learn how to run stores, something I had never done. I went to Colorado and soon ran my own store and then ran a district of 12 stores, spread across the glamorous states of Wyoming, Nebraska, and South Dakota. It was the best professional decision I have ever made. I learned how retail works from the ground up.

I then returned to Minneapolis a few years later and was fortunate enough to be given the opportunity to become the VP of Merchandising for Home Furnishings on Target.com. I had no e-commerce experience at the time, but loved it and found tremendous success, more than doubling the business in just two years. Based on this unique set of experiences, Target then made me its first “omnichannel” merchant, where I oversaw both the stores and the e-commerce channels at the same time in a pilot that occurred roughly two years before the company went to an omnichannel structure across the board.

From there, I was fortunate enough to be given another great opportunity -- I was asked to become the Vice President of Target’s Store of the Future initiative, a black box project where I spent two years developing a working concept, fresh from the ground up, that answered the questions, “In five years, why are people still coming to stores to shop? And, what is your omnichannel conception of the Target brand in answering this question?”

It was an awesome role. I had soup-to-nuts responsibility for every aspect of the project -- it was like being a CEO of a new brand start up. Once the project concluded, I decided it was time to venture out on my own and to start Act II of my career -- entrepreneurship. Entrepreneurship was something I always wanted to try, and so now I focus my efforts on my writing, my blogging, and my ultimate goal of opening up a new omnichannel retail concept (with a little consulting on the side to help pay my startup costs). I am currently trying to raise money for my concept and so far, so good.

The most important thing I have learned in my career, and especially since leaving Target, is that no one quite has all the answers in terms of how retail will unfold.

Legacy retail thinks about its business model one way, and e-commerce thinks about its model another way.

But, omnichannel retailing is something completely new -- it is like learning to ride a reverse engineered bike, a bike that we have to be willing to ride with the enthusiasm of an 8 year old, who is unafraid of scraping his or her knee.

StyleSage: Tell us a little more about the mission and objective of Red Archer Retail. What sorts of challenges are retailers coming to you with these days? (Guessing it starts with an A and ends with ‘zon…) And what is your approach to helping retailers change - and push past the old ways of doing things?

Chris: My partner, Anne Mezzenga, and I started Red Archer Retail for one reason -- we believe passionately that there are new and different ways to do retail, and we wanted to immerse ourselves in work and with people who share our love and desire to shape the future evolution of retail. We want to reestablish Minneapolis as a center for retail innovation, like it was in the past. Innovation should not be Seattle’s birthright. While we consult and advise, our main passion is building a community of inspired leaders, via our blog, and also “eating what we cook” by building and operating our own retail concept that we all can learn from, by documenting our journey along the way.

The biggest challenge that I see retailers have is breaking free of legacy thinking, whether they be bricks-and-mortar players, or e-commerce players who may be thinking about going into stores for the first time. Usually I will come in and say,

“In a world where the only thing that will differentiate physical from digital are the experiences and memories of being somewhere, how are you thinking about physical stores as the actual product you sell?”

Usually one of two things happens: 1) They say “Crap . . . that’s deep” or 2) Their eyes gloss over because the concept is so new to them. Regardless of their response, I then push forward and challenge them to think about who owns their store as a product, just like they have an owner of their e-commerce site as a product, and then help them to think about how they make money, how their stores fit into the equation, and then what features and capabilities they need built into their stores to make people want to come back over and over again. Much of the time I leverage my omnichannel flywheel as framework for this discussion.

StyleSage: Building off of this, I love how you talk about how you and the team have an “allergy to stale, traditional retail tactics.” What are some of the most stale and overused tactics you’ve seen retailers take?

Chris: The tactics that reek of being stale and overused are anything from the student-body-right playbook of retailing -- things like focusing on exclusive product, SKU reduction, table stakes fulfillment tactics, etc. All these things might be well and good, but they don’t solve the fundamental question -- why will people still come to your stores to shop? More work has to be done.

Retailers still fail to realize that a long time ago they stopped competing on the products within their four walls, and now are only competing for their customer’s time.

I also hate tech for tech’s sake. One need only look at the unused digital kiosks within stores to find examples of this. They are what I call “bolt-ons” -- solutions bolted onto how retail used to work, not developed for how it should work fresh from the ground up.

StyleSage: I know that you’ve worked with a lot of start-ups, and there’s a lot of talk about how large companies should think and act more like a start-up. But for retailers with shareholders, thousands of employees, and generally so much at stake, is it truly possible for them to achieve the speed and agility of a smaller organization? Where should they start?

Chris: Truth be told, I am not long on legacy bricks-and-mortar retailers, with all the years of debt -- cultural, operational, technical, architectural, etc. -- they have hanging around their necks. My prediction is that the total retail pie will remain relatively the same as it is now, but that much of the space will be carved up my new entrants over the next 10 to 20 years and that the old, legacy players will either consolidate or go the way of the dodo bird. But there is hope. If retailers embrace a new flywheel of omnichannel retailing, and think of their stores as a product, retailers can still flourish.

We are not far from the day where we can analytically understand our physical spaces in the same way we understand our e-commerce web browsers today. But, there is too much to rewire to do this within an existing operation. The only way for an existing player to figure all of this out is to go offline, to create something new, and to molt the idea back into their operation, much like a snake sheds and regenerates its skin over time. Retailers' greatest advantage is their real estate. It is what makes it difficult for new start-ups to pop-up quickly. They need to start using it to their advantage and to generate completely new ideas, fresh from the ground up within their footprints under new brand banners. Macy’s and Kohl’s are great examples of two companies that I believe should take this “molting” approach.

StyleSage: Many retailers who we’ve been watching struggle had a stronger than expected finish to 2017 and are seemingly starting off this year on a more optimistic note. And for a multitude of reasons - whether that is weather that pushed seasonal merch out the door, the corporate tax breaks, and some of the work in better managing inventory starting to take effect. While these are good things, we’re not at all convinced they should think themselves out of the woods. What’s your take on the health of some of the big brands the market is watching closely? Smooth sailing, mild turbulence ahead, or get thee into the brace position?

Chris: I wrote extensively about this for the Robin Report recently. I agree completely. I do not think retailers are out of the woods in any way shape or form. In fact, I think Q1 will be the real tell on who is strong and who is weak. Holiday season is abberational for so many reasons -- and especially because digital sales naturally “lift” -- so it is hard to base anything on last quarter’s results. I am especially wary of retailers whose physical stores comps are still negative year-over-year and who have no signs in place of strategically turning this trend around either.

StyleSage: Retail is obsessed with talking about and observing Amazon’s moves, and for good reason, obviously. Candidly, what’s a struggling brand’s best defense against the giant? What do you think are Amazon’s blind spots? (Or do they even have any?)

Chris: I think Amazon has two blind spots, and maybe a third if you want to include the government (though that is not really a blind spot -- I think they are very aware). The government notwithstanding, the two blinds spots I see are:

1. Community Impact -- I don’t think people believe Amazon ultimately cares about them. Amazon pays little in taxes, and even if we look at their flywheel, their main focus is growth -- growth above all else, with almost a pyramid scheme-like obsession. So, I think strong brands, who can objectively point to the impact they have on the betterment of their communities can still carve out a niche against Amazon.

2. Physical spaces -- Amazon has no idea how to run physical consumer experiences. They are trying to learn but they haven’t built up the muscle memory yet. As I mentioned before, the blend of digital and physical is new for everyone, especially Amazon.

Digital is linear, but physical retail is non-linear as well, and is as much about art as it is science.

Retailers that learn how to use data in the physical space, yes, for science, but also for more impactful art can differentiate themselves from Amazon.

StyleSage: Which technologies, as you look towards the next few years, excite you most and will most transform the customer experience? How do you personally distinguish between what’s noise and what’s truly transformative?

Chris: I believe the holy grail of next generation omnichannel retailing lies in what I call the triumvirate -- the intersection of three key technologies. Those technologies are cloud commerce, mobile applications, and location tracking/analytics. In the future, our mobile phones will become our remote controls for the commercial exploration of the physical world. We are already seeing this. Look at mobile applications like Amazon’s visual search within its app or Starbucks mobile payment system. Combine these then with real-time commerce systems that connect a customer’s data both online and offline with location tracking, and, all of a sudden, we have the makings of physical stores that begin to look more like the analytical equivalents of multiplayer video games than the traditional installations of yesteryear.

These technologies will combine to give us unprecedented levels of data capture so that our customers will become like main player characters within the game, while everything around the customer -- the fixtures, the products, the sales associates -- will read and react in real time like the non-player characters within the game, meaning retailers will have data at unprecedented levels that they can use to new expressions of physical retail.

StyleSage: Which retailers, perhaps of the less obvious kind, are you watching this year? Why are they on your radar and what should we be watching?

Chris: The retailers I admire right now and that are on everyone’s radar screen are Amazon, Starbucks, and Ikea -- Amazon, for how experimental they are, Starbucks, for how they have embraced omnichannel via mobile applications better than anyone, and Ikea for experimenting with new urban formats that will likely employ great technology but that will also likely still celebrate the store driven aspects of shopping for home furnishings as a family or on “the big move in day.”

The lesser known players I have my eyes on are Fabletics, Indochino, and Ocado. Fabletics and Indochino because they are thinking about their store experiences already in the manner I have described -- they are the first penguins in the water -- and Ocado because of how impressive their online grocery fulfillment operation is in the U.K. I am anxious to see how their concepts start to translate in the U.S.

Meanwhile, I say three Our Fathers and five Hail Mary’s every night before bed for Macy’s, hoping they start to figure something else out.

StyleSage: Lastly, what was the last great in-store experience you had? What made it memorable?

Chris: Oooh, that is a tough one. Most of my great experiences within physical spaces don’t involve stores anymore. They usually involve some sort of option that includes dining, entertainment, or are some place where I can take my two devil-may-care toddlers and put my mind at ease for a brief moment. But, if I had to choose, I would pick Starbucks. Starbucks is great because they have manufactured an experience that is 100% user-controlled. I can now interact with Starbucks on my terms via mobile ordering and payment. The experience is quite unique still.