*Transcript by Descript

If it’s an electronic store, maybe it’s coming from some demonstration space that wasn’t there before, you know, just thinking about how you can pivot that in the moment. So it doesn’t become the point of conversation for the consumer that’s in that space that then layered with negativity versus like, Oh, they’ve done something really cool in this store.

Now, nobody knows the better that, that there’s something out of stock eventually hit the floor. And then, you know, you’ll modify accordingly. Retail Unwrapped is a weekly podcast hosted by Robin Lewis and Shelley Kohan from The Robin Report. Each episode dives into the latest trends and developments in the retail industry.

Join them as they discuss interesting topics and interview industry leaders, keeping you in the loop with everything retail. Hi everybody. And thanks for joining our weekly podcast. I’m Shelley Cohan, and I’m very excited to welcome Melissa Gonzalez and Matthew Goelzer from MG2. It’s a global architectural design and strategy firm.

MG2 operates seamlessly across three different markets and six offices. So, it’s a team of strategists and creatives and technical experts that work together to solve problems and design and build solutions and really bring their clients visions to life. So, there are so many contributions that you all are making to the retail industry, but today we’re going to focus on a topic that really has become kind of the forefront Since the pandemic.

So today we’re gonna be talking about supply chain. So welcome, Melissa and Matthew. Thank you. Thanks so much for having us, Shelley. Yeah, thank thank you, Shelley. Today is super exciting because we’re able to actually pull back the curtain a little bit to bring some visibility to supply chain from point of entry through point of sale, which I think if we would have had this conversation, well, we wouldn’t 5 years ago, right?

Like, it just wouldn’t have been a thing. And it’s the forefront of everybody’s mind. Everybody’s seen the empty shelves. Everybody’s had the misfortune of not being able to have what they want or, you know, from the retailer side, not being able to bring goods to market. So super excited to have that conversation today.

And hopefully we can just make, you know, make a little bit of a, an impact in that conversation.  No, I think it’s great. And I’m thrilled to have you both on Retail Unwrapped. So let’s jump right in. And what I’d really like to start with is where all design processes should really start with and that’s with the consumer.

So let’s start. And if y’all can just talk a little bit about the key consumer trends that you think are impacting retailers today. Sure, I mean, I think I can start on that one. Just so much kind of  constant evolution and behaviors, especially as technology continues to advance and reshapes how we live our everyday life.

And so the way I answer this could be so broad, but trying to keep it a bit tied to today’s conversation around supply chain. And I think, you know, people in this constant mode of, of discovery because the way they’re interacting through socials, right? And whether it’s TikTok or YouTube whatever it is.

So you’re, you’re kind of always being exposed to new things. And it’s also created this mindset of, I can have everything I see. Um, and so, uh, and so some of the things around that is just expecting all of that to be as fluid as possible. And I think that that’s something, you know, Consumers aren’t thinking about how they’re interacting with the brand and that it could be online. It could be offline.

It could be any of those things. But what, what, what you’re seeing as a continuous trend is just the expectation around fluidity. Like, I can, I can, I could learn anything I want whenever I want to have access to information. I can get any of those products wherever I am. However, I want to get them.

I can return those products, you know, and just that fluid fluency. And so that’s a key element. I think that’s an impact.  And then brand and retailers abilities to deliver upon those expectations. The other, the other trend is what that means for how you build loyalty today and what a key element those factors are towards building that loyalty.

The other thing is you’re, you know, while there’s. Priority on how much things cause for sustainability. You’re seeing this big growth and resale, which also has an impact to supply chain as well, right? Because you have to get those products back in store and then you have to get them back out to the customers.

That’s whole other layer. And then I think just the continual. Blending of online, offline and gamification and what that means for the evolution of the store itself and how people are interacting with those physical environments and what the purpose of those environments become.  Yeah, I think you’re spot on with that.

And when I think about expectations and. You know, I’ll ask you, I mean, two big expectations that I’ve seen kind of changes. One is that, you know, retailers have really spent the last two years right sizing inventories and you know, and most of the retailers that are doing this, the ones that really got caught off guard during the pandemic in 2020, when like overnight, 80 percent of their stores closed and revenue just. shut down immediately. Um, and the other piece that I think that is really top of mind is we’re changing the expectation on delivery. So we’re really looking at one and two day delivery. So can you tell us how these expectations are forcing retailers to really think about and rethink supply chain?  Yeah, I think again, back to where we were five years ago, right?

This wouldn’t have been a topic. So we’re all painfully aware of what we ran into in the last four years. I think, uh, no more so than, uh, than the retailers that were caught off guard, right? And I’d say that some retailers were caught off guard in both directions of that inventory equation,  maybe within the same month.

Right, maybe within the same week, they were caught off guard on both sides of it because the consumer demand has changed radically in the last four years, right? It’s like,  everyone needed nothing but sweatpants for two years. And now everybody’s back in the office, right? So, um, makes it makes a huge change.

And I think the challenge that we see is that  we were really living in a, in a Globalized just in time framework,  right? Everybody was, nobody understood what it meant. Um, you know, I’m looking at the wall behind you and let’s say I want to buy that helmet behind you and I can go onto my phone and find it and source it and it shows up in a day.

What does it take to get it there? Right, who’s talking that we didn’t really have to worry about that before, because it just got on a plane or a boat or a train or whatever. And that was there. Um, and so I think that, you know, we continue to see that retailers are trying to really understand that equation and right size it.

Um,  it’s always been a thing in retail, right? It’s just got amplified. Over the last couple of years, and we’re seeing that, um, we’re still seeing that tension today, right? You’re still seeing it in the stores. And the good news is that we’re seeing a ton of innovation in the market  and investment, um, and excitement around supply chain, right?

So people are talking about it. People trying to solve it. Um, one of the things we’re seeing is retail is really leaning into, like, really in a, not just an omni channel approach to sales, but also to how they’re doing fulfillment, right? So we’re looking at more localized distribution. We’re looking at. Um, using brick and mortar, repurposing brick and mortar as part of the fulfillment supply chain.

Right. And so if you make a purchase online, it might very well come from your local store. Right.  And at the same time that that’s happening, there’s this, uh, local warehouses shipping new product to that store so that they can meet the demand of the consumer that’s walking into shop. So, um, we’re seeing that from the retailer side.

Um, we’re seeing, uh, you know, Really an investment and leaning into AI in a way that is, um, really able to help us solve this too, because AI is at a point at this point where it can really be used both for order fulfillment and automated reordering, right? So you’ll see that whereas that wasn’t the even two years ago.

Maybe we could have done that, but we’re, we’re getting to that turning point where it really is a possibility. And so I think you’re going to see that you’ll see that investment happening. I think that the brands that are able to step into that and really embrace that are going to succeed and solve this problem.

Quickly, or maybe have a shortened learning cycle there,  whereas ones that are not maybe ready to take that leap yet are going to continue to struggle a little bit longer.  Yeah, I mean, I was in the stores over the weekend and I noticed that there were like, some empty shelves. major retailer, one everyone knows, and I was a little bit like concerned.

So I was trying to figure out did they over optimize their SKU rationalization or is the store now just over space? So, you know, what’s going on there in terms of that.  Yeah, it’s a really good observation. One of the favorite things my wife and I like to do when we walk into a store is to play the game.

Why is the SKU empty? Right? Like, it’s, we’ve all seen it and it’s there and it’s going to be a different thing, um, depending on where you walk in. And to your point, Shelley, It can be major, uh, retailers. It’s not just a, a local mom and pop that maybe had an issue with, uh, filling an order or something like that, or, or maybe they missed, miscounted inventory.

Um, you know, what’s interesting is that you can really understand  where the specific failure is in the supply chain if you understand how the supply chain works. So if you’re walking into a retailer and there’s multiple SKUs in a category that are missing, it’s very possible that, uh, their partner, three 3pl had an issue, the truck didn’t show up.

Maybe there’s a transportation issue because of a truck broke down, or there’s, uh, an issue between the distribution center and the, and the retail point of sale. So, um, you can see that if you, if you see a very specific skew that’s missing, it’s likely a problem within the supply chain at the plant itself.

Right. So maybe there’s a maybe there’s something that got backordered. It could be as simple as a part. We saw that with the automotive industry where there’s a chip shortage, right? And so the vehicles are ready to go, but for that last piece, right? And you’re waiting months and months and months for those chips to show up.

Um, hard lines in general, I mean, electronics, you might see an entire impact to electronics. It might not make any sense to any of you. Unless you understand, like, that piece, right, is that there’s one part missing. So, um, you know, the good news there is that,  you know, it’s a fully globalized supply chain and people recognize the need now for diversification of that supply chain.

We’re seeing reassuring and reassuring is a big piece of that. That’s been a big part of the infrastructure bill and the conversation there. Um, we’re moving in the right direction. Right. And I think that as long as, um, we maybe give a little grace and understand that we have to build some resilience into the system,  we should be able to turn that corner pretty quickly.

Uh,  yeah. And I think this was the right one to speak to over space probably. Yeah. Well, I think it goes hand in hand. So, you know,  being agile is I think a key element to success, right. As a brand or a retailer. And so there’s the fragmented nature of the supply chain, which Matthew is talking about, and really being able to be agile in that.

You know, maybe you have to form different partnerships or you have to think about different, um,  different modes of transportation, etc. And then within store when that does happen. I mean, clearly, it’s not a positive impression experience for the consumer that walks in the door. So I think when you are in those circumstances, it’s also critical to be agile about how you are using the space.

Because if you think about what the consumer is craving beyond just product, there’s a lot that you can touch upon to make it a really exciting brand experience, a brand moment, whether that’s like bringing together community or maybe, you know, if it’s, if it’s an electronic store, maybe it’s coming from some, demonstration space that wasn’t there before, you know, just thinking about how you can pivot that in the moment.

Um, so it doesn’t become the point of conversation for the consumer that’s in that space that then layered with negativity versus like, Oh, they’ve done something really cool in this store. Now, nobody knows the better that. That there’s something out of stock eventually hit the floor. Um, and then, you know, you’ll modify accordingly, but I don’t think we see that enough, even though we have so much conversations about modularity being built into the designs of spaces.

Um, but I think we still have a long ways to go and brands really bringing that into their playbook.  Melissa. Oh, my gosh. I think you’re so right because when people go into a store and they see empty shelves, the first thing is, Oh, my God, is the store closing? Right? And the second thing is, Oh, my God, where’s all the stock?

Why are the shelves empty? That’s all negative, right? Right. You’re right. You could just kind of transform that space and really make it a positive. So, I love that. And the other thing I want to mention on something Matthew said and you followed up with it is, you know, I’ve been on this plight, I don’t know, for a long time that we have to stop using the word supply chain.

Chain is very linear. It’s like a chain. And when one link breaks, you know, the whole chain collapses. So we really have to start Talking and saying and thinking like supply network. It’s a network. It’s not a chain. Um, so maybe y’all can help me get that message out there somehow. Um, but also the global, you know, how should retailers really be thinking about global presence?

Like how, how, how should the be approaching, you know, how can they keep up with US demand from a global perspective? Yeah. So when we think about brands that are international coming into the US, right, that’s that. Yeah. So, I mean, I think there’s a lot of nuances in both directions that have to be considered.

But in this circumstance, I mean, for example, if you are based, um.  In South America, or on the other side of the world, like Australia, you have totally different seasons,  right? There’s different cultural nuances. Um, you know, there’s different. I mean, depending on the category, right? There’s things around, um, size inclusivity, like, there’s so many elements that have made, um, product creation and production so much more complex than it has been in the past.

And so there’s so much more considerations that you have to factor in. To your planning, if you’re going to have that global perspective so that, you know, you’re not kind of tone deaf to again, either the season that you’re entering or the expectations around size or fit or all that stuff, um, merchandising.

I mean, there’s so many elements to consider. So that’s number one. And then, um,  I think it depends on where you are on the trajectory of your market, because as you’re entering a new market that buys probably smaller And your network right where you’re distributing is probably smaller. So I think it’s critical that you’re always having that learning mentality.

And I think the partnerships that are created with your wholesale partners and retailers, right? If you’re a new brand entry, you’re not having your own own stores. That’s a critical part of learning, right? So that as you expand further, you continue to build your reach  brand awareness and all of that. Um, you can season by season continue to build upon those learnings so that you have, um, larger sets of data for that demand forecasting.

Um, and then you’re probably going to need to make sure that you’re doing all of that due diligence to think about that supply network that, that you talked about, right? Who are going to be your distribution partners? How are you going to be thinking about that last mile? You know, what other networks are Can I, can you be a part of so that you’re not taking in all of that, especially when there’s so many companies that have specialized within the U.S. that understand all the nuances. Right. Um, and so, and so I think what’s exciting around that too, is you’re seeing a lot of the bigger guys, the UPS is of the world doing the research for us as well. Right. And they’re making really smart acquisitions and investments into companies like happy returns and roadie and, you know, right.

Things that are, that are, um, allowing these brands that are entering the U. S. to have, um, to have these partnerships that can tap into the larger networks on their behalf and also creating their own sets of data that they’re sharing out with brands that they can also learn from. That’s great. I love how you mentioned Happy Returns.

David Sovey has been on our podcast before. I loved him. Yeah. He’s great. And I love the reverse logistics company. So I know we’re going to talk about reverse logistics in a second, but before we get there, so AI has been impacting every function of our industry. And so I can just imagine how AI can help with inventory predictability and something that I’ve been talking about the last few years.

This near real time inventory allocation. So is this just a pipe dream of mine or do you see this really happening?  I mean if you ask Amazon it would say no it’s not a pipe dream because  you know I think that they’ve been like it’s but that’s the thing it’s the Amazon effect that is impacting all of us expecting that out of anybody we shop for.

You know, especially as a mom, you know, many times there’s this last minute birthday party and I’m like, Oh crap, I need to get a gift for the party. It’s straight to Amazon going to be in my house by tomorrow morning, you know? So, so yes, it’s possible. They have robust infrastructure and they have deep pockets.

Right so everybody doesn’t have the same capabilities, but theoretically, it’s possible, but it’s possible having that always learning mentality through data and through partnerships.  And so I think with what’s exciting, you know, we’re. At a better trajectory today than we were say 2020 when the world shut down and everybody was forced to shop differently.

Um, and there was a lot more adoption of online, you know, e-commerce and, and, and, and all that. And so we, there’s more data sets to learn from now. Because  AI is only as successful as a, the inputs it’s getting. Right and be the data that it’s kind of scraping in order to.  Generate back what they think the outcome should be.

And then again, tapping into what you said around the network, the more that that ecosystem within the supply chain is communicating to each other, the more there’s also like this continuously learning network. As well, so I think we’re in pretty early stages, but I think it’s possible because I live and breathe it through Amazon.

And Shelly, it really, I mean, a big piece of that comes to the fact that we’re still living in a very analog supply chain.  I mean, I’m going to keep saying supply chain until, until it becomes a network. I’m going to call it a chain, right? Because we’re still seeing that, you know, the Panama canal is going to run short on water again this summer.

It’s going to happen. What are we going to do? How are the 3PLs going to adjust to that? Are you going to take advantage of the. The new, uh, interoceanic railway that’s going across Mexico. Are they going to do that? Are they going to change to, you know, Port of Charleston? How are they going to get truckers on board, trains on board to readjust to influx that supply chain?

Huge opportunities there that AI can really help us solve in a really meaningful way. Um, but it’s, it’s still a very frag, as much as we’re a global community, it’s still a very, Fragmented business community when it comes to logistics and 3PL and until we’re able to bridge that gap and really lean into it, we’ll see the struggles.

But I think again, is ready for it. We’re seeing again, like Melissa said, there’s, there’s retailers that have solved that, um,  it’s really now a question of how we solve it on the other side to, and try to consolidate, um, at least the mindset of a, of a partnering solution to be able to solve the entire chain back again, back to port of entry, back to actually point of manufacture.

Yeah. Yeah. It’s very complex. I’m sure. Uh, so let’s talk a minute about this idea of last mile delivery. Is autonomous driving a real thing? Is it really growing? Um, also would love your insights about reverse logistics where, you know, the last mile actually becomes the first mile. So is there any like great opportunities in reverse logistics?

I’m going to leave reverse logistics up to Melissa, but, uh, really, I, you know, I love the, I love the topic. I love the conversation around autonomous driving and last mile. I mean, I think that  I think all the concepts are in place for last mile. I don’t know that we’re going to shorten the last mile. I think what we’re running into is issues with labor shortages.

We’re running into just issues with, um, Fulfillment in general has, has issues with quality of life and, and labor availability. So autonomous driving, I mean, it’s here now.  Everybody should be ready for it. Everybody’s going to be seeing it. There’s communities that already have it in place. So, um, the companies like Embark.

That are really focused on long haul trucking. There are trucks on the road today operating in the southwest. It’s here. It’s happening. Um, there’s companies like neuro that have been doing autonomous delivery since 2018. It’s here, it’s happening, right? So everybody should be ready for it. It’s time to embrace it.

Um, I guarantee no one’s going to be losing jobs. It’s the reality is we don’t, you know we don’t have enough people that want to be drivers. We don’t have enough people going into the industry to, to keep up with the pace of retirement. So, um, it’s coming. We’ll see what that means and how that, you know, if that really impacts, um, you, you know, a product getting to your house within, Two hours versus a day versus two days.

I think that that’s to be proven out just based on  the realities of capacity and how we make that happen. And what’s sustainable? Because a piece of this is really, how do we make last mile sustainable? Not just from an energy standpoint, an emission standpoint, but  it’s not profitable right now. It’s a lost leader in many cases.

And so part of this is how do you, you know, how do we tighten that refinement so that it’s a truly sustainable, um, business approach that makes consumerism something that, um, you know, it’s gotta be the right level of consumerism and the right level of on demand. So we’ll see, I think we’re going to see cultural, uh, norms around that evolve with time, but, uh, it’s, we’re right on the cusp of it.

Melissa, any thoughts on reverse logistics? I mean, you had mentioned it earlier. I do think it’s probably one of the biggest growing concerns with retailers.  Yeah, I mean, it’s interesting. I will bring up  Nordstrom Local, um, which I think is a perfect proof case of the opportunity of making reverse logistics a brand moment because right what, what we want or what brands and retailers want is to get a product in a customer’s hand.

On average, you know, right, if you can do that, they might keep it, they might exchange it and you have to make it as frictionless as possible. And so I think it’s a good case study and That’s what they leaned into with that format, right? There’s no, there’s not, it’s not about selling products. It’s about picking up your package and making that moment as fluid as possible.

And sometimes that moment means opening up the box and saying, this is actually not what I want. And I want to return it on the spot. I want to get that money back in my pocket. And as fast as you could make that happen, that person’s probably going to spend again. Right? So it, it, it. It is an, it is a benefit to a brand and retailer to be able to make that as fluid as possible as well because you’re not just getting the product back into circulation, you’re getting that money back probably too, right?

Like you’re giving it back, they’re giving it back because you made it so easy. Um, I won’t name this retailer, but there is a brand I fell in love with earlier this year and I bought a few things and I thought I nailed my size and then I had a different look. It was a little bit of a different style. My size is a little off.

The only way. That I could, um, get an exchange back was they don’t do returns. I had to ship it back, wait till they received it, get my money back, and then make a whole new purchase.  I didn’t do it. They lost me. Right? Because they weren’t in service of me. Like, and that is what you, you really should focus on as a brand or retailer.

And so by thinking through those reverse logistics, you’re making that as fluid as possible, but you’re also getting loyalty. Right. Um, and so I think it’s, it’s, it’s really a key element and that is why I brought up happy returns. I think when David launched it, it was so smart, um, because it was kind of an underserved element when we thought about that supply chain, because it does go both.

Those logistics do go both ways.  Definitely, and I remember when he launched, uh, Happy Returns, you know, I, I remember before reverse  logistics was a thing and seamless drop off and all that, you know, we’d be sitting at home and you’d have to go find a box and then you’d have to go get tape and then you’d have to tape it up.

And all of a sudden it becomes, as he said, uh, at homes arts and craft project, you know, every time you had a return. So it is a brilliant move. I do think it makes it easier. Um, but I also think Melissa, what you said earlier about, you know, this, um, re, re sell and resell market. That’s a whole nother area.

That’s a whole other area as well. And I think, but there’s companies leaning into it, like archive, right? And trove. And so again, these aren’t things that brands and retailers have to then build in house. There’s partners that they can collaborate with. Like they did with happy returns, you know, they could do that with drove.

They could do with archive. They embed that technology into their infrastructure. And so somebody is taking care of that part. For you, um, but again, at the end of the day, it’s meeting the customer and their needs and wants and desires. Right? And so some people feel better about shopping secondhand, or maybe it’s more cost effective for them to be able to do that.

And for a brand new retailer, it’s a way. Oftentimes to get a brand to get a consumer to enter your brand.  So it’s cost of acquisition too, right? So why wouldn’t you want that to be successful?  No, that’s so true. Uh, anything, any other topics that y’all want to cover or any closing thoughts that you might have on supply chain.

Well, we were joking earlier and like Matthew said in the beginning, we wouldn’t have had the conversation five years ago. And it was also like, you know, you would bring up this conversation like, oh, that’s not the sexy part of retail, but like, it is the cool kid now. Okay, because it’s a critical, it’s a critical part for customer satisfaction.

So, uh, for me, I think it’s just really exciting that, um, as this network comes together and it is more about collaboration and data sharing,  um, Thank you. I’m kind of thinking a little bit more outside the box together, right? Like using stores as part of the network or, you know, bringing in, uh, partners. I mean, look at Walmart who said their staff can also be paid drivers on their way home and deliver packages.

I mean, it’s just thinking differently, um, which is, which is I think always the cool part of retail.  Yeah, I think it has become the cool part of retail. Matthew, any closing thoughts that you want to make here? I, I’m going to maybe go almost the opposite way of what I thought I was going to say, which is, you know, what’s interesting to me about what’s happened is that, um, I think, and Melissa’s mentioned it, but there’s a lot of actually fluidity in how the consumer is.

Seeing brands at this point. So I think that, you know, part of that is, it’s really going to be crucial for brands to be able to deliver product because  there, I think there has been some erosion of brand loyalty through, uh, supply chain gaps, right? So we’re seeing that. I think that part of the success that we’re seeing with like a TEMU or an Alibaba moving into the U S market is that they’re able to, you know,  Make the fulfillment requirements and so people might be less brand conscious or much  less loyal to brand  if they can get it in an hour.

They want to get it in an hour. So it’s going to be really interesting where that inflection point where, um, again, technology can help bridge that and can help brands be successful, but it’s going to be really leaning into that technological revolution  to be able to keep competitive and keep ahead of this new globalization.

That’s at the next level. So I’m excited to see where that goes. I think there’s a lot of opportunity for retailers and brands to lean into it.  And the one thing I would say on that, too, is a lot of times I think there’s hesitation because of the cost of it. Um, but I do think that you’ve seen evidence as well, Amazon Prime being an example of that.

You could think of a modest fee that maybe people pay up front to help offset the investment into the infrastructure, but if you deliver upon that, you know, that extra 15, 20 I decide to spend a year knowing that I’m going to get free returns, um, or expedited shipping. Um,  If you deliver upon that and I shop you often enough, I’m probably going to do it and add to the stickiness of the relationship as well.

That’s a really good point. Yeah. It’s going to create deeper loyalty for sure.  So thank you both for being here, Melissa and Matthew. You were awesome. How do people find you? How do our listeners find you?  Um, well, you can go to mg2. com. We are often posting on our blog. Um, I’m active on LinkedIn, Melissa Gonzalez.

Uh, so, so social is a great way for me personally as well. Great. Well, thank you both and I hope you’ll come back. In six months, I’m sure we’ll still be talking about supply chain. Maybe Matthew will move to supply network by then. I don’t know. I might, I think you’ve got me swayed. I think I’ll be there.

Okay. For our listeners, uh, next week’s podcast is very exciting. We have Pather AI and the founder, George Saul, he’s the CEO and founder of the company. Um, and if you don’t know Pather AI, it is a company that is transforming How retailers understand physical locations through the power of spatial intelligence.

And I love their tagline, which is you can learn a lot from a dot. So make sure you join us and thank you.  Thank you for listening to Retail Unwrapped. We’ll be back in one week with another podcast. Please subscribe on Apple Podcasts, Spotify, or any podcast service. If you have questions, ideas for a podcast, or anything else, please contact us via therobinreport.com.