Channel Mastery - Ep. 196: Steve Dennis, The 8 Essentials of Remarkable Retail

SageBerry Consulting

8 Essentials of Remarkable Retail’ framework, retail winners, internal brand honesty, and inventory glut

featuring

Steve Dennis is a consultant, keynote speaker, and author focused on retail growth and innovation. He has been named a top global retail influencer by multiple organizations. His thoughts on the future of shopping are regularly shared in his role as a Forbes Senior Contributor. Steve's best-selling book-- "Remarkable Retail: How to Win & Keep Customers in the Age of Disruption"--was released in a completely revised and expanded 2nd edition last year. He is also the host of the Remarkable Retail podcast.

During a 30-year career as a senior executive at two Fortune 500 retailers–and more recently as a strategic advisor–Steve has worked with dozens of retail, consumer, luxury, and social impact brands to inspire, catalyze and design their journey to remarkable results.

As a sought-out keynote speaker, Steve has delivered talks on six continents, sharing his unique perspective on what it takes to reignite customer growth in a world of constant change and shifting consumer preferences. Steve is currently the President of SageBerry Consulting. Prior to founding SageBerry, he was the chief strategy officer and SVP of multichannel marketing for the Neiman Marcus Group. Steve received his MBA from Harvard and a BA from Tufts University

show highlights

In this episode, guest Steve Dennis chats with Kristin about Steve’s latest book, Remarkable Retail, and the overarching state of retail today. Steve has a wealth of experience in the space, and we are delighted to have had him on the show. A major facet of the new book is the ‘8 Essentials of Remarkable Retail’ framework, crafting what’s necessary to adapt to an ever-changing landscape.

In the show, you will learn about how major retailers performed crisis innovation quickly. The retail space had to pivot dramatically during COVID, and many chose not to innovate or did so too late. Companies that pivoted early, like Tractor Supply, Best Buy, and Target, are strategically overcoming similar problems that have closed many big box retailers in the last few years. One learning lesson is that consistent innovation is the key to being in front of market trends, often equaling success. Kristin and Steve also dive into what success looks like for a retailer in today's market, inventory glut and what the future holds for companies in this space.

The Channel Mastery podcast is presented by Verde Brand Communications, a consumer-centric brand strategy and communication agency serving the outdoor recreation industries. We are also grateful for the sponsorship and partnership of Life Time, Inc., owner of the Sea Otter Classic and producer of the Sea Otter Classic Summit outdoor recreation executive gathering, taking place April 18-20, 2023, in Monterey, Calif. Learn more at Seaotterclassicsummit.com.

Kristin:
Welcome back everyone to a very special episode of the Channel Mastery Podcast presented by Verde Brand Communications and Life Time Inc., the producer of the Sea Otter Classic Executive Summit 2023. My guess today is perhaps the biggest proponent of what we do here every week, considering how to be remarkable to our consumer. In fact, that's part of the name of his book and is definitely the spirit behind his bestselling book Remarkable Retail. Welcome to the show, author, podcaster, sought-after retail consultant and thought leader Steve Dennis, principal of SageBerry Consulting. It's great to have you here today.
Steve Dennis:
I'm happy to be here. Thanks for inviting me.
Kristin:
I literally feel like we've won the lottery having you here. We're right about in September of 2022. We've been talking a lot on the podcast just about how brisk the change is out there in our markets. And you've literally written a great, I think it's not a blueprint, it's like a formula you can apply as you're out there derisking and making decisions as you're going along. But before we get into your excellent book, and we're going to dive into that at length here today. Can you tell our amazing audience all about your background and what you do at SageBerry Consulting?
Steve Dennis:
Sure. Well, it's been a pretty long strange trip. Sometimes I got asked how I ended up doing what I do and I really have no idea. It's just been a series of left and right turns along the way, but I pretty much been in retail most of my career. Early on, I was with a big consulting firm. And I spent a little bit of time in the food business. But really for the last 30 years, pretty much been exclusively retail. The first part of that time was working my way up through various leadership positions at a couple of big retailers.
First, well, I guess they're not quite late and great, but they're getting there. I was at Sears for a good chunk of the '90s eventually getting up to the senior leadership team as the head of strategy. And then I came down to Dallas where I live now to be the chief strategy officer for the Neiman Marcus Group. And for the last, oh gosh, it's been 13 or 14 years now I guess, I've been out on my own doing strategy and innovation consulting. And last four or five years adding to that, writing a book as you mentioned, launching a podcast and speaking all over the world on retail strategy and innovation.
Kristin:
Well, I'm going to put your links to your bio and obviously your LinkedIn and your book in our show notes, but you have, I think, quite a storied background and I love in your book you kind of explain it like you were in-house at Sears and then obviously at the Neiman Marcus Group. But at the Neiman Marcus Group, you were also heading up, I think, kind of the emerging channel, if you will. I know you don't like omnichannel. You prefer harmonized, which I do.
Steve Dennis:
Yes. You owe me 5 cents.
Kristin:
Yes, and we're going to get into that. But point being is you actually jumped into consulting, I think, with a very interesting diving board of sorts coming out of Neiman Marcus. And it was very early on in the game to be diving into kind of a future pace of retail at that time for that group. Would you agree?
Steve Dennis:
Yes and no. I actually... And this is sort of lost in the annals of history I suppose because of what's happened with Sears. But in 1999, I was named the vice president of Multichannel Integration, so actually many years really before Neiman Marcus. One of the things our CEO at the time was really paying a lot of attention to was how digital technology and e-commerce was going to revolutionize how we shop, and in many cases, how we live. And we decided to make that an enterprise-wide initiative. So at that point, Sears already had a pretty sizable dotcom business, several hundred million dollars. And we were starting to figure out how to be really more customer-centric rather than channel-centric.
Now, as everybody probably knows, a lot of other things happened at Sears to make that not the most interesting part of the story, but our mantra or our CEO's mantra at that point was... And sometimes when I do keynotes I actually ask people who said this just to have them be surprised. But what Arthur Martin has said was that, "The future of Sears would be increasingly determined by our ability to meet our customer's needs anytime, anywhere, anyway." January 1999 he said that.
Kristin:
That's amazing.
Steve Dennis:
That was a very forward thinking way. So I got to lead this initiative and we worked on a lot of technology infrastructure, worked with our online business, worked with our CRM team to start to build out that foundation. So when I came down to the Neiman Marcus Group to essentially do the same sort of things, I was already steeped in some of the technologies, some of the customer issues, kind of where things were going, but very different kind of company, very different kind of brand, very much one was that was very siloed in its approach to the market.
Kristin:
And so you obviously went through these. I mean, it's like getting an MBA at those two companies. Then you went out and applied everything one on one with a lot of great, I think, leadership-focused brands in retail. I just have to ask, going through COVID must have been a little bit of shock and off for you in terms of what you saw prior to that and the acceleration that happened during that window. And I just thought I'd get your take on, not that we want to look in the rear view mirror for much further in this podcast, please hear me audience, but I do think it's just I'd be remiss if I didn't ask all that you've seen from your entire career bundled into that COVID window, and obviously we're still living through it, but can you just give us maybe one or two takes on what that was like for you with the body of work that you'd put in place prior to it?
Steve Dennis:
Well, I'm not sure this is where you're going with your question, because what sort of annoyed me the most... Well, lots of things annoyed me about COVID, but from a retail strategy standpoint, what annoyed me the most was, and I talk about this a little bit in the book and we've talked about this on my podcast and I talk about it all the time when I speak is, why does it take a crisis for retailers to innovate.
Kristin:
Right.
Steve Dennis:
Almost everything that many of these retailers did that were behind was absolutely obvious to have been done many, many years earlier. We rolled out, for example, by online pickup in store at Sears in 2003.
Kristin:
Wow.
Steve Dennis:
We were very much on top of this idea of different channels gets in the way of being successful. That digital drives physical, physical drives digital. And that the idea is to be customer-centric. So people sort of waking up to this, so to speak, just shows that they were asleep.
So I get very animated about it because too many companies, I think, sort of pound their chest about how, "We did all this stuff. Things that normally would take us six years, we got done in six weeks." And I'm like, "Well, congratulations, but you're six years too late." So it just disappoints me that more boards, frankly, didn't fire some of these CEOs because they clearly didn't understand. Very few things happen in COVID from a strategy standpoint that weren't completely predictable. Obviously, things like having to close stores and appointment shopping and some of these other things, those were very specific to COVID. And a lot of people made... I'm being a little too ranty here, but a lot of other things was, "Oh, there's this massive acceleration." Well, actually there's been very little acceleration if you actually look at it because a lot of the behavior just sort of reverted to the trend we were on anyway.
So there were a lot of very COVID specific things that needed to be done. But when you come at it from a strategy standpoint, the companies that did those things early, like Tractor Supply, Best Buy, Target are kicking everybody's butt. Those that waited too long and watched the last 20 years happen to them as I like to often say that are sort of patting themselves on the back by all this innovation, I don't know, I'm not very impressed by that. And the question will be, "Okay, will you not make the same mistake again? Will you continue to innovate rather than have to basically have a gun put to your head and be fearful of going out of business to make those kinds of changes?" So maybe not the answer you want, but...
Kristin:
I like that answer better honestly, because it's more honest and it really kind of holds us accountable to what we can do when we're willing to take risks and actually do a different approach. Not only because we have to, but because we know we are consumers at heart, we are living this and breathing this as we are being catered to by our favorite brands every day and as we're solving for things every day. So we're seeing it. In our direct marketplace, if you will, we have our own things that I like to say make us special snowflakes, but they really don't because we all roll up to the same consumer.
Steve Dennis:
Right.
Kristin:
And by that, I mean, like, "Oh, we have to get preseason orders. We have 18 months to develop a brand new ski boot or backpack or RV." And honestly there's a version of that in every single category of retail and outdoor rec or consumer package goods.
Steve Dennis:
Sure.
Kristin:
So I actually am right there with you and I appreciate the correction, frankly. And you're perfect. Your timing is so perfect because I wanted to ask you about kind of the state of the great weirdness, is what I've been calling it, of 2022 because here we are, the bull whip effect. You're seeing the headlines in Target and in Best Buy and all of these retailers who are trying to deal with being saddled with inventory glide as just one of many levers and pressures that we're operating through right now. But I have to tell you, Steve, I'm seeing and hearing a lot of our really important larger chain specialty shops in outdoor rec are getting absolutely hammered by this and we're starting to see the emails at the beginning of late August, early September, around Labor Day sales that we've never seen before. And to me, that is going back to what we've known to solve a problem and not trying to innovate in the face of yet another crisis.
So that is kind of the context I wanted to talk with you about today because we have this great opportunity to have your mind and apply it to this problem that we're living through right now, and it's an opportunity. So you always like to say in your book and I love it, the consumer is the channel. I'd love to have you maybe talk with the audience around just this eight... We're going to get into the eight essentials framework. Why was it important to you to bring it to the world? And how have you had to update it? Or maybe you haven't because they're really solid principles that can apply in any situation. I just would love to kind of hear your take on it before we dive in and apply it to today's backdrop.
Steve Dennis:
Sure. Well, really the motivation for writing the book and for developing the eight essentials framework gets back a little bit to what I was saying was that I felt like a lot of retailers, particularly... I mean, the book is really for retailers that are struggling to innovate. The retailers that are already remarkable probably don't need this book as much as I'd like them to buy it and share it. But what I saw, really going back probably 20 years, was that retail was starting to change in a very fundamental way. And most of that has to do with digital technology, not all of it.
But if you think about it, in the mid '90s, not to give too much of a history lesson, something like 98% of all retail took place in a physical store. There was a small mail order catalog business. But retail was all about the customer going someplace to see something, maybe getting some sales help, picking it out, hopefully paying for it, and taking it home. That was what physical retail was about. And that was also the era generally where you had these category killers. Whether it was Home Depot, Circuit City, you name it, building these big stores, displaying a lot of stuff. And it was very convenient for the customer to go there because they could see everything all at once, right? That was the business model.
But as the internet started to become a thing, not only did you not necessarily have to go somewhere, but having these very expensive boxes to display all this inventory increasingly became less of an advantage, which is why you've seen Toys R Us go out of business, all the struggles at Bed Bath & Beyond, Circuit City. You can kind of go through many of these retailers that were fabulously successful in the '80s and '90s that have struggled to stay in business or struggle to stay relevant. And most retailers, at least the bigger ones, are very slow to respond to change, which is probably a whole other podcast episode. And I guess I also started to see some of these narratives, like physical retail is dead or talking about e-commerce as a thing separate from regular commerce. And I just felt like, number one, I wanted to explain how we got to where we are, what's important, what's nonsense versus useful, but more importantly, give, I don't want to say a formula, it's not really a formula, but give a framework to help retailers navigate to this new world.
But the biggest idea in the book I think and the reason why it's called Remarkable Retail is this idea which I really stole from somebody else, that even very good is not good enough anymore. In a world where you've got abundant choices, very little friction, the ability for consumers to find information about products, prices, go back and forth between different choices in a nanosecond as opposed to having to drive a half an hour, go up the escalator, run around with a bunch of stores, even being very good is not the source of competitive advantage. You really have to aim much higher and create that much more distance or you're likely to just be lost among all the noise. I think that's what we've seen is some very good retailers objectively have really struggled to stay relevant. So I wanted to kind of light a fire underneath people, help them understand kind of where we are, where we're going, but mostly give them some hopefully pragmatic advice to execute potentially a very different kind of strategy.
Kristin:
I love that. And I think it's much needed and it can apply, I think, to any category of retail. So I really think what you've put together is definitely a game changer here. And again, we have you here, so let's get into the meat and potatoes of what I think a lot of our executives want to get to you.
Steve Dennis:
Sure.
Kristin:
Let's say they have the opportunity to sit down with you right now and they're looking at kind of inflation, deflation, inventory glut. I hear there's just semi truck after semi truck of product that is nowhere to go in these warehouses. They're getting it off season. There, obviously, are a lot of alligators close to the boat. It's tough to even prioritize which one to address first.
Steve Dennis:
Right.
Kristin:
So let's hear from you. I know we're going to go through the eight essentials. It may not be in order, everyone. Just know that the link to the book and everything will be in the show notes. But let's talk about if you're sitting down with a retail executive today who is heading into their most important moments before now and at the end of the year with all of these pressures, where would you start within this framework?
Steve Dennis:
Well, one of the things I say in the book is, and this is one of the challenges, I guess, of an industry as big and diverse as retail is, that it's very hard to say there's one specific answer because companies are in very different situations. But I mean the main thing I think to do is be very, very honest about where you stand relative to the customers you are trying to retain, grow and acquire. So I often say, "Do that diagnostic and understand where you really stand. And if you have struggles, why you are struggling to grow on a pretty specific basis?" And hopefully by doing that, you could start to identify the levers you can pull. That's really sort mapping out the path you're going to take. If you're lucky, you will find one or two things that can address a wide swath of some of those issues.
So I wouldn't even say the eight essentials framework in and of itself is the place to start. You really need to take a hard look at what your strengths and weaknesses are and where you stand with customers and where you can get the most leverage moving forward. Is that about selling one more item to customers you already have? Is that about maybe being able to take some margin with certain customers because they already love you? So I mean that's the first place I would start. As it relates to the eight essentials, one of the things I talk about in the book is of the eight, six of them I call more table stakes. And what I mean by that is if you aren't doing them pretty well relative to your competition, there's a pretty good chance you are at a disadvantage.
So if, for example, you have a terrible digital presence, chances are that's a real problem relative to your competition. And that may be a gap you need to close very, very quickly. It's possible that unfortunately because of their table stakes, sometimes just doing them at a decent level actually gets you very little, right? Because you're just the same as everybody else and you've closed that gap. So that can also be very frustrating. And unfortunately though, that's often what a lot of companies that are struggling do. They think, "Wow, I'll just close this gap and everything will be great." But unfortunately, that doesn't mean you're going to win, right? So the seven and eight are really more differentiators, so I call one of them memorable and the other one radical. And those are the places where hopefully you can really generate competitive advantage.
So everybody's really got to do kind of this diagnostic assessment of where they stand, where they have the best opportunity to get some leverage. In many cases, obviously you've got to figure out how much risk is there, how much investment is it going to take and try to prioritize that to get the right kind of momentum. So a lot of these things are building blocks to success that everybody's going to have to look at. The unfortunate thing with this inventory glut is you got to deal with it, right? I mean, particularly if it's seasonal merchandise. A fish doesn't get any better as time passes, right?
Kristin:
That's fantastic.
Steve Dennis:
That's true of a lot of fashion merchandise or seasonal merchandise. And so it's just a very unfortunate reality that we've gotten to this place where there's such a glut and discounting is just going to be rampant. And if you are in that environment, you kind of have to deal with it. But that's where I think you've got to strike this balance between the day to day, week to week, month to month operating things you have to do versus keeping your... Or not versus, but in addition, making sure you're thinking longer term have that true north that you're trying to get to it and try to balance those. But I just think we're unfortunately in this really... I don't know. I don't even want to say things are weird anymore. It's just the next normal or the next weirdness or whatever. Because as soon as I say, "Oh, this is a really unusual time," then six months later, we're in a different kind of really unusual, unprecedented or whatever time. But I think the next six months are going to be really, really challenging for just about everybody in retail unfortunately.
Kristin:
Mm-hmm. And what would success look like for a larger chain of stores that are still very specialty? Because this is literally where a lot of brands have a big percentage of their revenue and they're seeing things getting shipped back and canceled. That's on the brand side.
Steve Dennis:
Right.
Kristin:
And on the retail side, the consumer is seeing a lot of sales on really specialty high end product. And obviously like you said, you have to deal with it in order to right-sized what's going on in your company from a retail standpoint. But I guess if you really go back to being remarkable to the consumer and the consumer being the channel, that's really the quandary, I think, they're in.
I love your advice around keep your eye on the prize, keep making your advances on the strategic plan that later literally you've laid out for exceptional retail here, but at the same time, if they have to look at what they mean to the consumer today during the lens of this promotion window, I don't know how they're going to get a really clear look at that. It just seems like we're at a real inflection point in terms of understanding how to be remarkable to your consumer when you kind of have to deal on the level that a lot of these retailers are dealing. There has to be some ways to do it. And I know everybody's kind of looking at the levers they've always pulled and I would love it if you could just share some ideas with the listeners here today.
Steve Dennis:
Well, number one, I think, which is actually one of the essentials which I call personal is this idea of treating different customers differently, which is easier said than done for sure. But you don't necessarily have to offer the same discount to everybody. There are ways to be more strategic about that. One of the problems with these broad-based promotions is that in many cases you give customers that don't need such a discount to purchase an extra discount, which is just giving margin away. Or in other cases, customers that need a bigger discount still don't get enough so you don't move them. So to the extent you can somehow tailor or kind of semi customize some of your promotions, that's a way of not getting too caught up in the race to the bottom, which that's just going to be sort of the broad macro trend, I think, here for a little bit.
The second thing is I would not miss an opportunity to remind people of what makes you special. So it's very hard unless your Costco or Amazon to own price. That's not going to be the key value proposition for most of the people listening to this podcast, right? That's not the source of competitive advantage. And as I quote in the book, my friend, Seth Godin says, "The problem with the race to the bottom is you might win, or even worse, finish second." So trying to-
Kristin:
I'm just about to quote that from your book.
Steve Dennis:
So trying to find those ways to remind people of the emphasize that special value you bring, unique product, unique service and an environment. I mean, one of the advantages potentially, and this is definitely trying to put a positive spin on a difficult situation, is it may be that by offering very significant discounts, you get customers into your store or to your website that may not know you, right? And so it may be seen as more of a loss leader, but it could be a good way to get some trial. Or maybe it's somebody who hasn't shopped with you in a while, use that opportunity to remind them of why they should come back, right? If you're just thrown out there in the world of commodities with the lowest price, then yes, that might move some product and might put a little bit of cash in the till and save you some storage costs or whatever, but it's not advancing your brand.
So I would not necessarily, and I'm not saying people are doing this, just sit there and whine about it, but say, "Okay, how can we turn a largely negative situation into an opportunity to expose our brand to more customers or to remind existing customers of what makes us special, which hopefully will pay off over the long term?"
Kristin:
Right. I love that. And there are two clients on Verde's roster who really had a big growth in business. I mean, all of our clients did throughout direct through COVID, but two of them really embraced the masks and the PPP, everything around that. And they grew a huge number of new followers that may or may not have been ingrained in their brand. And this might be a time to get back in front of them, for example. I think that's a really interesting way of looking at it because many, if not, all of the executives tuning into this show have seen huge growth. It's part of the reason why we have the bull way of happening right now.
I guess I really just wanted to... I love the way you're saying it. And I've been saying remember to stay special and don't put your brand on sale at every touchpoint for the consumer. But what I'm hearing from you and I love it, it's like, work every time you're in front of this consumer and make sure that you're almost pork barreling in what's special value this sale. I love it. I think that's a really, really good idea, the storytelling.
Steve Dennis:
Well, and the thing I would add, and this as an option, when I was at Neiman Marcus, the financial crisis was brewing way back in 2008. There was all of a sudden a lot of inventory. Actually, I left around that time and I was working with some clients that were navigating through the glut of inventory. And in that particular case, Neiman's decided, and I don't know necessarily this was the right decision, but Neiman's pretty much decided not to discount all that extensively. Whereas Saks Fifth Avenue, our evil competitor, decided that they were going move quickly and just move through inventory.
Now, I think there's a lot of things that have happened since then, it's difficult to parse out. But you could make the argument that Saks taught their customers, that the regular price isn't really the price and that greater discounts can be had, whereas Neiman's really stuck to its guns. It was very painful in the short term for Neiman's to do that from a revenue standpoint. But from a branding and positioning standpoint, it definitely reinforced the more we're not a discounter, make a deal kind of thing. So it's a very tough call, I think, to make when you've got this near term pressure to turn inventory into cash. So I don't want to make it sound like it's a black and white sort of decision. But if you've got the financial capacity to leave a little bit of money or a little bit of cash, I guess, probably a better way of saying it, on the table, it might really reinforce your brand position and not put you kind of into the mainstream price discounting kind of world, which is ultimately not where you want to be if you can avoid it.
Kristin:
Absolutely. So as I'm looking at, I think that's a really great jumping off point around to my next question, which is, prior to COVID, I think in our markets some of the legacy wholesale brands looked to retail to do the theater for their brands and to really talk with the consumer on behalf of their brand, right? I think that there are still a lot of brands who like to prioritize specialty retail and support that, but they realized through COVID that it was really their responsibility to grow audiences and grow brand and then empower the consumer to choose the channel they want to embrace or discover or buy from this brand. Where do you think we're netting out now as potentially considering the alligators around the boats in retail and brands? How do you think we were sitting in terms of who is responsible for that storytelling?
I know it seems so obvious, but in our market, Steve, it really isn't. There is such an allegiance between brand to retailer and for retailers to be telling that story. And I know in your book you talk all about how digital first brands are expanding through physical retail. So I just would love to get your take on where you see that now in terms of that opportunity to create new consumers and to tell stories to them and kind of where that is now going forward.
Steve Dennis:
Well, hopefully I'm answering your question. I mean I think, first, manufacturers, I believe, are generally going to push as far as they can the direct-to-consumer strategy. The ability to go direct-to-consumer to have that data, to have a direct relationship with the consumer, to potentially have greater margins. I'll come back to that in a second. But I think there have been enough examples of brands, Nike's probably the one that gets the most pressed nowadays, moving in that direction and controlling that experience. But we saw this back with a lot of our vendors when I was at Neiman Marcus. They were very slow on e-commerce, but the Louis Vuitton and Chanels of the world were opening their own store because they got to control that experience.
At the same time though, I think any great retailer is able to do things that manufacturers can't necessarily so easily do. So my general statement is that I think there's this sort of gravitational pull towards direct-to-consumer that is likely to continue. And I think most brands are going to push that as far as they can go. So, one, I think you've got to really, as a retailer, understand more precisely how it is you add value in a unique way. Sometimes that's providing reach that the manufacturers are never going to be able to replicate. But in other cases, it's being much closer to the customer. Having multiline, right? Because a Nike store or a Columbia store or whatever, it's one brand. And so from my Neiman Marcus experience, we clearly had customers that really liked being able to put an outfit together. Not that dress head to toe in a particular vendor, right?
Kristin:
Mm-hmm.
Steve Dennis:
That is the value, potential value of a multiline retailer. So you have to think very carefully about how you do that. I did work with an association that was a manufacturer's association that was dealing with... Or I mean, I'm sorry, a specialty retailers association that was dealing around a lot of these issues, and there was just a lot of whining basically. I understood it because it's very frustrating that your business is potentially being challenged by some of your vendor partners and so forth. But at the same time, it's the reality and it's annoying, which you have to accept it and make the best of it. And like I say, I think there's this gravitational pull.
One of the things that I think is going to happen, and we're starting to see this already, and if folks haven't checked this out, Simeon Siegel who's an equity analyst at BMO has written extensively on this, is this wholesale DTC kind of debate is not nearly as clear as people think. I think there's been this idea that anything that can go direct may end up going direct. And I think what we're seeing, whether we're talking about the digitally native brands or just some of the struggles of manufacturers, is it's actually pretty expensive, both in terms of investment, physical stores, but mostly in marketing, to go direct-to-consumer. Some of these kind of margin comparisons, people are focused on gross margin too much, not the end margin, which is ultimately what pays the bills.
So I think we're going to see that some of this push to direct-to-consumer isn't so black and white, but I do think that the tendency of manufacturers, the push in that direction will continue for a while, which puts pressure on retailers to really figure out how they can add value and potentially some new in different ways. Sorry, that was a very long winded answer to a simpler question.
Kristin:
No, it's fine. I've been really asking my questions, there's like four questions in each one so thank you for your patience. I'm just excited to have you here as a resource. So I'm trying to pack as much in as I can. Did you speak to what you wanted to on the margin front? Because that is so top of mind and has been for some time with brands and retailers, there's just less and less of that to play with. And then you did talk a lot about kind of the middle man in your book, if you will. So I just thought I'd see if you had anything to add on that front.
Steve Dennis:
Well, one of the unfortunate things, well maybe not for consumers but for retailers and brands, is the internet just makes it a lot easier to understand price, the price you might pay and creates a-
Kristin:
For some reason, I can't hear you. That's so weird. Huh. Oh, I have to ask you to unmute, it says. Huh, that's very weird. I still can't hear you. Oh, I think you're back.
Steve Dennis:
Can you hear me?
Kristin:
I can now. Who knows what that was?
Steve Dennis:
Yeah, it's weird.
Kristin:
Okay. [inaudible 00:35:38]-
Steve Dennis:
I had that happen one other time. So we were...
Kristin:
We were talking about margin. I don't know if I asked the question the right way, but you said I'll get back to margin and then you went into your answer. And then I kind of brought in the question again because it is so incredibly top of mind for everybody. Even prior to this year, it's kind of the $64 million question.
Steve Dennis:
Well, I think... I'll also kind of rewind a little bit.
Kristin:
Yeah.
Steve Dennis:
I think there's going to continue... I mean, once we get past hopefully the inventory glut relatively quickly, the effect of e-commerce or just digital accessibility more broadly tends to put downward pressure on margins because it's so easy for consumers to see the price they should pay or what deals are out there. And you get in kind of this auction sort of mentality sometimes between retailers, people using algorithms to change their pricing and all that kind of stuff. So unfortunately, I think in general there's this downward pressure on margins. So I think that puts even more, or should create more emphasis on trying to understand where you can create value added opportunities with customers.
But again, I would go back to what I said earlier about trying to treat different customers differently. A lot of times these sort of uniform pricing strategies or uniform promotional strategies don't really allow you to treat different customers differently, because not every customer is equally price sensitive, right? Other customers are willing to pay a premium because they really value service or the ambiance or whatever it might be. So a lot of this... It's such a cliche to say. I was just on a call earlier though with somebody from a very large retailer where we were just talking about how, even though everybody says it, we often don't really understand our customers very well. I think that's always needs to be the heart of where you start, is understanding the customer. But you need to do it in a way that understands the emotional triggers as much as just sort the functional triggers and understands or tries to understand the difference between customers you're seeking to acquire, versus customers you're seeking to grow, versus customers you're seeking to retain or share your story.
So I mean there's a granularity, I think, of customer insight that often doesn't happen at a lot of retailers, which is it's surprising to me given how we talk about being customer first and customer-centric and we have all these new tools that allow us to get that level of detail, but a lot of retailers don't apply it very well.
Kristin:
That's so interesting. I know we need to look to wrap up here, but if you look at map pricing through the lens of what you just said, maybe that's something we need to revisit as we're moving forward in these partnerships between brand and retailers in terms of a one size fits all from a point of fairness. I mean, how do you deal with that?
Steve Dennis:
Yeah. I have very mixed feelings on that. I mean, I do think that having map pricing or sort of manufacturer suggested pricing, whatever, at least creates sort the ceiling on pricing and in some cases, and again, I spent a lot of time in the luxury industry where generally speaking the price is the price unless you're into seasonal markdowns. That's sort of helpful because the consumer starts to understand that there isn't for the most part... There's used and other ways to get the product perhaps, but you're not going to get a better deal on the product anywhere else for the most part. So then the retailers get to add their value in ways other than just the price or who's got the hottest deal this weekend or free shipping. Or you know, you name it. So I think there's some value to that just in terms of simplicity, but it doesn't always serve everybody's strategy as well as you'd like. And it doesn't make you as agile as you sometimes need to be.
Kristin:
I think that might be the takeaway from 2022. And you would think that we would be pretty darn agile by this point, and we still have more to go. So I really want to highly, highly recommend your book. It is very understandable. It's engaging. I listen to it and I also bought a copy to read and make notes on. And I just want to say it's a fantastic read and I do feel like it's something you don't need to come out with a third edition really quickly to meet the needs of 2022. So talk a little bit about kind of just the evergreen framework of it, if you will, before we wrap up here today.
Steve Dennis:
Well, I certainly like to think it's going to have some longevity. I haven't really felt... I worked on the first edition or wrote most the first edition in the latter part of 2019. When I did the second edition, mostly I didn't really fundamentally change the advice. I just did a little reset because obviously this big thing called COVID happened and it just seemed weird not to have reflected it, and I did delve into a few things that were sort of specific to the effects of the pandemic. But I think when it comes... I mean I, just in general, feel like the pace of change is going to continue to accelerate, that for the most part the things that made us successful in the past aren't likely to service very well going forward, that the world is going to continue to be pretty volatile, hopefully a little less volatile than we've seen the last year or two. But it's just a more dynamic complex world.
And so that puts a premium on really, really raising the bar higher in terms of your performance, moving more quickly, adapting faster, being bolder, frankly. I mean, I think one of the... We touched onto this a little bit, but one of the things that I see, and it's actually kind of some of the stuff I'm delving into in the book that I'm working on now, is that a lot of retailers talk about transformation, but they really engage in a pretty timid transformation, which is a bit of an oxymoron, right?
Kristin:
Yes.
Steve Dennis:
But when we actually look at what counts as innovation at many companies, it's really pretty incremental what I call the slightly better version of mediocre. And that's just not going to cut it. I mean, I don't think it cuts it for the most part right now. But if you see the trajectory we're on in terms of increasing competition, technology, changing constantly, I don't think the metaverse is going to be a big thing anytime soon, but we're moving into lots of different possibilities and ways we're going to be connected. Who knows what technology is going to be important in three or four years? If you're not aiming higher, acting more boldly, building flexibility into your operating model, thinking of your business more as a platform rather than a channel or a store or whatever, you really risk becoming irrelevant.
And that, again, gets back to why I wrote the book in the first place. I just felt like there were so many great retailers that were the proverbial frog slowly boiling and water, that we're going to lose the opportunity to stay relevant, to stay in business in many cases if they didn't understand how profoundly and how, in many cases, quickly they actually need to change.
Kristin:
Well, I love the way you put it at the end of the book. It's a compass, not a map. And I love that it's a journey and this compass can guide you. I also think it's a way for teams to really come together and work across. Like you mentioned in the book, there might be a legacy set up within a brand or a retailer that's like, "Here's our e-com group." Those should be together to create the most consumer-centric experience. So there's just so many things that I think this would be a relevant read for you and your teams as you're kind of looking to navigate, finish 2022 strong, and really set a relevant transformational strategy going into 2023. So I just want to thank you for that. I'm excited to see what this new book is. Will you please tell the audience where we can find this book and your podcast and more about you?
Steve Dennis:
Sure. Well, if you Google Steve Dennis and retail, you'll see a bunch of stuff, but probably the most straightforward way is to go to my website, which is Steven with a V, P as in Peter, dennis.com. And I'm generally @StevenPDennis on social media.
Kristin:
Awesome. He has great LinkedIn content as well. So thank you again. I really look forward to having you back as we kind of continue to step through this tenuous time together. And I just feel like our audience is so perfect for your book because we are specialty, and you really talk about being remarkable. We wouldn't be here, we wouldn't have communities if we didn't have the drive to be remarkable to our communities. I just feel like this is a great rallying cry and a great compass for us, so thank you again for this awesome book.
Steve Dennis:
Well, thank you. You're very kind. I appreciate the opportunity.
Kristin:
All right. We'll see you here in the future on Channel Mastery. Thanks.

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The Channel Mastery podcast is presented by Verde Brand Communications and Life Time, Inc., owner of the Sea Otter Classic and producer of the Sea Otter Classic Summit outdoor recreation executive gathering, taking place April 18-20, 2023, in Monterey, Calif.