Are you ready for the retailer-as-service revolution?

Discussion
Photo: Getty Images/gpointstudio
Apr 19, 2021

Through a special arrangement, presented here for discussion is a summary of a current article from the Spieckerman Retail blog. The following article synopsizes key takeaways from Episode 24 of the Spieckerman Speaks Retail podcast.

Services and solutions have quickly become retailers’ growth engine of choice. Major retailers like Walmart, Kroger, Target and Amazon.com have branched out into health services, ad marketing, financial services and more. Media coverage has largely portrayed these efforts as a defensive scramble among retailers, but recent quotes from Walmart CEO Doug McMillon paint a different picture.

Addressing Walmart’s acceleration into services, Mr. McMillon said, “We feel emboldened and are now moving with even more speed and aggressiveness. For an increasing number of customers, Walmart will be seen more like a service.”

His comments illustrate a new approach and identity — retailer-as-service — that differs from retailers’ past service expansion efforts in three ways:

  • Employees are included: When you think of a retailer positioning itself as a service, you assume that it is serving consumers. Increasingly, however, companies are viewing their own employees both as beneficiaries and as prospects for growth. Walmart’s press release on its formation of a FinTech upstart in partnership with Ribbit Capital stated that the venture will “deliver innovative and needed options to our customers and associates — with speed and at scale.” Focusing on employee health, whether financial or physical, reduces risk, cuts costs and plumps up profitability.
  • Suppliers are customers: Suppliers have also emerged as powerful prospects. A web page outlining the “key advantages” of Kroger’s in-house Precision Marketing arm boldly states, “We know your customers better than anyone” and promises to “grow your brand equity alongside Kroger, the third largest retailer.” Here, deep-pocketed brand marketers can help retailers hedge against the volatility and limits of consumer spending.
  • Platforms are parlayed: After years of monetizing its supplier relationships, Amazon is now bringing employees into the fold through its Amazon Care service, which provides tele-health and in-home healthcare to employees. The company is offering the Amazon Care model to all Washington employees as well as other in-state employers who want to add its capabilities to their benefits packages. Employees are a great beta test to ensure smooth sailing for scaling.

The retailer-as-service model illuminates retailers’ commitment to expand beyond purveying products, by tapping into captive customers and monetizing platform-building moves.

DISCUSSION QUESTIONS: Which aspects of retailer-as-service will have the greatest impact on retailer profitability and viability? How should brand marketers respond as retailers begin to see themselves as services to them?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Product is just product. You can get that anywhere. It’s the experience that matters."
"This move is a natural evolution for the industry and makes sense on many levels."
"Reducing Walmart employee benefits and associated costs while at the same time allowing Walmart to cut costs and plump up Walmart profitability. Very interesting message."

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27 Comments on "Are you ready for the retailer-as-service revolution?"


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David Naumann
BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
5 months 4 days ago

The B2B services such as marketing and advertising are likely to be the most profitable for retailer-as-service, as the margins should be very high and attracting clients should be easy. Retailers have been providing a form of “services” to CPG manufacturers for years in the form of slotting fees, in-store promotions and advertising in flyers. Now it has become more digital with online, mobile and social media advertising.

Jeff Sward
BrainTrust

This almost sounds old-fashioned to me. Retailers have always been in the solutions business. But retailers are now giving themselves permission to think in broader terms about the kind of solutions they can offer under one roof or one brand. Reminds me of the first time I saw a dry cleaner or a bank branch open in a grocery store. Perfect. A win for all parties, especially the customer. Expanding that thinking makes all the sense in the world. The “under one roof” thinking also gives me hope for the future of the mall, and how the combination of product and services will evolve in that context. Bottom line, it’s now about how brands, stores and malls can think more expansively about the definition of their brand promise and how they most efficiently can serve the customer.

Georganne Bender
BrainTrust

I hope it bodes well for malls, too!

DeAnn Campbell
BrainTrust

Yes! Malls must become multi-channel support systems for brands and retailers, including small local businesses, if they want to get back to being a community cornerstone.

Carol Spieckerman
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
5 months 4 days ago

Thanks for weighing in, Jeff! Yes, solutions and services have been a part of retail for ages. The difference now is that retailers like Walmart are identifying AS services (not just places that provide them), the “customers” being served are expanding (employees and suppliers), and the approach of testing services (sometimes with employees) then marketing them to others, including competitors. A few new twists that point to new priorities and opportunities.

Venky Ramesh
BrainTrust

We are in the experience economy where an experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. It should be more aptly called as retail-as-an-experience which combines services, goods and immersive entertainment. That’s the future anyway.

David Weinand
BrainTrust

The biggest strain on the average American is healthcare, with many now paying more for healthcare than they are for their mortgage or rent. While it may be limited to a handful of major retailers, if they can build out services that can keep costs down while benefitting their ecosystem – that is the major impact.

Patricia Vekich Waldron
Staff

Totally agree, Dave! The healthcare and life sciences industry is being transformed and retailers are in a position to provide services, logistics and insight that benefits consumers and the production ecosystem.

DeAnn Campbell
BrainTrust

As more brands pull back from wholesaler selling to build a more direct relationship with customers, retailers are left with a choice — become private label sellers and hope customers fall in line, or change their vendor relationships to become more of a support system for popular brands. This move is a natural evolution for the industry and makes sense on many levels. It lets retailers focus on honing a top notch multi-channel retail operation, and lets brands focus on staying in lock step with the customer on product development and manufacturing. With tech and cultural changes happening almost weekly now, life is moving too fast for brands and retailers to continue to be all things to all channels. It makes so much sense for each to develop a different expertise and work together. But the key will be developing a new way to measure and reward success — and shareholders!

Kevin Graff
BrainTrust

This reminds me of a great athletic retailer focused on runners who ran running clinics every day. That was their secret sauce. The product was good. But the service offering was even better.
Product is just product. You can get that anywhere. It’s the experience that matters. So, it only makes sense that retailers extend into service offerings for vendors, staff and customers.

Suresh Chaganti
BrainTrust

As a management principle, extending the brand to adjacent products and services is not new. Retail companies have been doing this for a long time. Every major retailer has a credit card business. retailers like Sears, J.C. Penney and Macy’s also held a lot of real estate and, for a long time, it was their defensive strategy and cash cow.

The new age retailers are monetizing data and capabilities – offering marketing, fulfillment, and logistics services. The thing they have to watch for is not forgetting what drives these ancillary business units. Good retailing will get customers, and in turn power up other services.

Georganne Bender
BrainTrust

Been there, done that, doing it again. It’s ironic that the last couple of years all we heard was free-standing stores are the future. Now we’re back to “everything under one roof” thinking. But it makes sense. At the end of the day, consumers want a consistently good experience that is provided in the easiest way possible. If it saves them time and money, they’re in.

Gene Detroyer
BrainTrust

Watching Amazon with Prime and their successful holistic approach to their customers (target everyone) others must take notice. That is exactly what retailer-as-service is. It is brand building to the nth degree.

Dave Wendland
BrainTrust

Service offerings can become real difference makers — for retailers, for brands, and for distributors. The value of a physical product is not nearly as important nor as differentiating as services.

Art Buchwald is quoted as saying, “The best things in life aren’t things.”

Carol Spieckerman
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
5 months 4 days ago

I love that quote, Dave, especially when applied here!

Ricardo Belmar
BrainTrust

Amazon turned consumption into convenience for consumers, and convenience has given way to services that breed more convenience for the consumer. That’s starting to look like an interesting flywheel effect for retailers that execute this well. Can every retailer do this? Certainly those with the necessary scale, like Walmart, can perform effectively with services. For others it may be more a matter of their specialty area and if it fits a consumer need. Take for example Best Buy’s new subscription program for Geek Squad services they are trialing.

As Walmart is finding, this also opens the door to employees and suppliers as customers. It’s turning the retailer into a platform play and given that the largest companies in the world tend to be platforms, there’s an obvious financial incentive for retailers to pursue this path.

Jeff Sward
BrainTrust

Interesting. I’ve always thought of Amazon as more of a platform than a retailer. Now retailers are discovering they too can be a platform and extend their opportunities to serve the customer.

John Hennessy
BrainTrust

The explosion of e-commerce has shown shoppers that where they purchase their favorite soup, cereal or spaghetti doesn’t matter. It will be identical. What won’t be identical and what makes a trip to the store worth the effort are the added services. Historically those services have been the bakery, the deli, the meat counter, and the produce department. After that came in-store clinics or ready-to-eat meals. Extending services to cover other areas gives shoppers more compelling reasons to visit the store. The local flavor a store can add could be a key service differentiator.

Cynthia Holcomb
BrainTrust
In the new game, retailers who do not offer health care to part-time/almost full-time employees now have a captive audience of employees who must pay their employer Walmart for health care as a service. The same employees who report to work every day in the thousands of Walmart stores. Next on the list — vendors, we all know the costs associated with being a vendor to retailers. Many vendors will not be able to pay to play the retail as a service game due to the cost to participate. Which as always, will lead to vendor consolidation and reduced brand offerings on the retail floor. Which will lead to an emphasis on the retailer’s higher-margin private brands versus brands in the wild who will disappear. Curiously, a newly found, deep affection for employees is clearly spelled out in Mr. McMillon’s comments “deliver innovative and needed options to our customers and associates — with speed and at scale.” Walmart will now focus on Walmart employee health, whether financial or physical. Nice. In other words, store associates… Read more »
Carol Spieckerman
BrainTrust
Carol Spieckerman
President, Spieckerman Retail
5 months 4 days ago

Thoughtful extrapolation, Cynthia! Exactly the type of conversation that I hoped to provoke – not just services in retail, but the implications of retailers’ increasingly overt outreach to employees and suppliers.

Cynthia Holcomb
BrainTrust

Thank you, Carol. I appreciate your feedback. Retail employees always seem to serve as the underdogs in the latest “shiny object” retail revolution, this new one, now poised to make profits on a retailers own employees. What happened to hero pay? Why have hourly, front line retail employees been last to receive the vaccine? The beat goes on as they say.

Dave Bruno
BrainTrust

We long ago established that experience is everything for all but a very, very few. For a fantastic case study of creating real value for customers by offering adjacent services, one need only look to Costco. Its menu of services, including photography, tires, eyes, ears, car buying, vacations and more combine to create an ecosystem of services that all bring with them the highly trusted Costco brand. Amazon, of course, copied that model, and added more digital services. B2B services only expand the ecosystem further, leading to a very diverse portfolio that gives marketers many more options to create brand value for shoppers.

Bill Hanifin
BrainTrust

Retailers should accept that e-commerce is going to be the first channel for shopping in the future. That doesn’t place a death sentence on brick-and-mortar locations, though the size, layout, and intent will continue to evolve over the next few years.

Imagine a mall as a place to “experience retail shopping” rather than a destination to purchase. By changing the role of employees and investing more in training, customers might look forward to spending an afternoon in the mall touching, feeling, trying on, etc. If they go home and make the purchase on their phone, that is their choice and it’s one that has already been taken out of the retailer’s hands.

This scenario embraces the retail as a service concept and I believe will lead to a brighter future for many retailers that invest in an omnichannel approach.

Shep Hyken
BrainTrust

Major retailers like Walmart, Target, etc. are scrambling to become the go-to place for many, if not all, of what a customers needs. They want to be woven into the fabric of their lives. Amazon has the advantage, but we’ll see other brick-and-mortar retailers working hard to win the customer. They’ve always been a “service” business, even though to most it appeared to be retail. Furthermore, if they follow the SaaS model, they will potentially charge a membership fee, such as Amazon Prime, Costco, etc. Grocery, clothing, pharmacy, health and more will be part of the mega store that is the one-stop place for a customer to get all their essentials and more.

Rachelle King
BrainTrust

Retailer as a service is not new. Walmart and 7-Eleven have long offered financial services to customers. For some time now, you can get your eyes checked at Sam’s Club and and refill your gas tank at Kroger. As with most “new” things in retail today, it’s positioning that’s new more so than the service itself.

The relevance here is the pandemic has shift consumer spending from goods to services. So, now, suddenly, retail-as-a service is a thing. Some retailers may benefit as convenient, low-price services always draw an initial crowd. However, brand marketers should focus on what will drive incremental revenue for them. Retailers are masters at inventing new ways for brands to invest. While these services are novel, it’s worth understanding if you can reach the same customer, at the same retailer, by the same means you always have, then these services are nice for customers but not necessarily something brand marketers need to chase.

Oliver Guy
BrainTrust

This approach makes a lot of sense in a number of situations – testing appetite in a given country, region or channel before expending large capital expense on new locations could be one such example. But also the very fact that different companies are better at different parts of the value chain could also be another reason. Thorntons are a U.K. chocolate manufacturer who recently closed all their stores after 100+ years with a view to selling through supermarkets. Some analysts commented that this was because their owner since 2015 – Ferrero – did not understand retail. In the eyes of some, they have actually had their premium eroded and had their market position as a retailer of premium chocolate take by new entrant – Hotel Chocolat. For Thorntons, outsourcing their retail operations to someone else could have been a better answer.

Mohamed Amer
BrainTrust

The significance here is that the biggest retailer in the world is no longer viewing the function of the store (and commerce website) as the mechanism to move products but as a platform for all stakeholders to fulfill their needs and wants. Mr. McMillon is tapping into Walmart’s incomparable store count and footprint to build a macro ecosystem and micro-communities that meet the social and economic demands of the 2020s. This strategic declaration by Walmart has the potential for profound effects similar to Amazon’s acquisition of Whole Foods in 2017.

wpDiscuz
Braintrust
"Product is just product. You can get that anywhere. It’s the experience that matters."
"This move is a natural evolution for the industry and makes sense on many levels."
"Reducing Walmart employee benefits and associated costs while at the same time allowing Walmart to cut costs and plump up Walmart profitability. Very interesting message."

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