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Kevin Ervin Kelley of Shook Kelley: “Get extreme”

Like any ecosystem, the weak retailers will die off, but the strong will adapt and get stronger. There’s a new breed of retail concepts will emerge to take their place, albeit in a different form and shape. We are social animals, and we’ve been going to market for thousands of years. We go there not […]

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Like any ecosystem, the weak retailers will die off, but the strong will adapt and get stronger. There’s a new breed of retail concepts will emerge to take their place, albeit in a different form and shape. We are social animals, and we’ve been going to market for thousands of years. We go there not only to buy bread, milk and silk, but to meet our neighbors, go on a date, escape from work and home, and feel like we belong to a community.


As part of our series about the future of retail, I had the pleasure of interviewing Kevin Ervin Kelley, AIA, co-founder of Shook Kelley, a strategy + design firm founded in 1992 with offices in Charlotte and Los Angeles.

Shook Kelley specializes in a process called Convening, which is the art and science of bringing people together around a physical place, idea, forum, and experience. The firm works with retail stores, grocery stores, pet stores, fitness gyms, developers, theaters, and even symphonies. Its list of clients includes well-known brands such as Harley-Davidson, Whole Foods, Kroger, Kraft, Coca-Cola, Smucker, and Cadbury.

Kevin is an architect with an unconventional approach to design. He’s less interested in what people consciously say about architecture from an intellectual perspective and more focused on how the atmospherics of place affects people’s behavior, perception, and decision-making on a subconscious level.

As Kevin puts it, “Most of us don’t wake up in the morning and develop a walking plan for the day. Instead, our subconscious brain makes decisions on our behalf about the people, places, images, and signals we encounter.”

“Our lizard brain is constantly scanning our environment to look for two basic things: enhancements and impediments to life. We gravitate towards situations that can improve our lives. And we avoid those that could harm us or drain our batteries.”

“Understanding how humans use their senses to interpret the physical world and how they react to external stimuli has significant implications for entities that have a physical venue as part of their business model and strategy.”

Kevin is a sought after lecturer for various retail and food conferences around the U.S. and in Asia. He has taught marketing courses for the professional development program at Harvard University’s Graduate School of Design for 11 years. And he previously served as an adjunct professor at the College of Architecture at the University of North Carolina, Charlotte, for six years.


Thank you so much for joining us in this interview series! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?

I decided to be an architect at six years old. While I always had an intense passion for design, I also spent an inordinate amount of my time studying psychology, sociology, religion, Buddhism, branding, marketing, and advertising. I read Freud, Yung, Buddha, David Ogilvy, and Ted Turner before I learned algebra.

Although I didn’t realize it at the time, I was trying to pull all these seemingly disparate fields into one integrated approach. And I was on a quest to answer three critical questions about human behavior:

1. How does a place attract, influence, and shape behavior?

2. Why do people imbue places — like a church, Stonehenge, or Trader Joe’s — with sacred meaning?

3. What can designers do to engender pro-social behaviors that provide people with a more profound sense of community and belonging?

Can you share the most interesting story that happened to you since you started your career?

In the first few years of our startup, we took all the money we made and put it back into the business. I didn’t have any extra money to spend on travel, seminars, or advanced education.

However, there was a summer design course at Harvard University that I dreamt about taking. The professor, Gene Kohn, was my design hero and one of the world’s most famous architects. Gene’s firm, KPF, has designed many of the world’s tallest skyscrapers.

I didn’t think I’d be able to take time off work to go to this post-graduate class, much less afford the tuition, travel, hotels, and meals. But I took a big chance and signed up for the course anyway.

To save money, I stayed in the hot, muggy, and unfinished attic space of an old college friend who lived on the outskirts of Boston.

During that class, I got to know Gene Kohn better, and he asked me to teach the course with him for the next 11 years. He became a board of advisors for the firm and opened many doors for me personally and professionally.

Gene is now in his 90s and still working to this day. He has served as my mentor and close friend for the past 25 years. I’ve learned more from him about architecture, business, and life than anyone I’ve ever met.

But none of this would’ve ever happened had I not taken the risk to fly up to Boston and take his course.

As a startup, you have to get out there to bump elbows with the right people to spark magic, even if it means you have to sleep in a hot attic in a sleeping bag with Ratatouille.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson or takeaway you learned from that?

When I was in my early 30’s, I wanted to become part of the movers and shakers leading the re-birth of downtown Charlotte, NC. The biggest company in Charlotte was Bank of America. And the maverick chairman that commanded that bank to the top of the business world was Hugh McColl.

Mr. McColl played a pivotal role in stimulating downtown development activity by helping fund and develop some of the most significant mixed-use housing projects in our city. I bought one of those loft units as my new home to support the downtown revitalization effort.

I used to travel about two weeks a month and was rarely ever home. I asked my European girlfriend if she could look after the place and take care of the cat I inherited from a relative. She said yes, as long as she could use the loft to study for her post-graduate degree.

It gave me comfort having her there to watch the place. But as a free spirit, she would often walk around the home, barely dressed. I had to keep pulling the blinds down whenever she was there.

When I arrived back in town one Saturday morning after an extended business trip, I saw my girlfriend for all of 10 minutes. But then I had to run upstairs to change into my black suit to go to the ribbon cutting of a new art museum downtown. My girlfriend had to study, so I was on my own.

I noticed my cat had left me a present on my way upstairs: a perfectly stacked, crisscrossed turd on the stairway carpet. I thought about getting some cleaner and paper towels to pick it up, but I was so late that I decided to take care of it when I got back home.

I ran into Mr. McColl at the event and his out-of-town guest, the president of the biggest bank in Texas. They invited me to sit down with them and have lunch. We soon fell into an engaging conversation about the innovative ways downtown cities can reinvent themselves. This chance encounter provided me a prime opportunity to talk about our firm’s work and process to two prominent business leaders in the U.S.

After lunch, Mr. McColl asked me if I’d be willing to let his distinguished guest see my loft, so he could give him an idea of what the housing units looked like inside.

“Sure!” I said without thinking through the details.

As we walked towards my loft, I sent a cryptic text message to my girlfriend, giving her a heads up that guests were on their way to the unit in five minutes. “Can you please put some clothes on and spruce the place up a bit!” I pleaded.

I assumed she got the message, but she didn’t.

When we walked into the loft, she was sprawled out on the couch, wearing only her bra, underwear, tube socks, and a chemistry book.

Oops!

The two gentlemen gave me a big eyebrow raise as I steered them towards the kitchen while tossing a blanket to my girlfriend.

As we headed towards the stairs, I suddenly remembered the cat turd was still lying on the white, carpeted stair tread.

Within milliseconds my brain went into emergency recovery mode. And in one swift lilting movement, I scooped up the dirty, mushy turd with my right hand slipping it into my pant pocket, while my left hand pointed out the details of a distinctive art piece on the wall.

I was so proud of myself for my quick thinking and perfect technique.

When we finished the tour, the two distinguished gentlemen thanked me for my time. As I held out my right arm to shake their hands, they looked at my right hand and said, “No…it’s ok!”

For the rest of the weekend, I couldn’t sleep thinking about the idea that two of the most powerful bankers in the country saw me put a cat turd in the right pocket of my formal black suit.

So first thing Monday morning, I tried writing multiple drafts of a letter to tell them how much I enjoyed meeting them — and explain the “Turd Incident.”

However, after six or so drafts, I realized no matter how I spun it — casual, funny, serious, or as a small P.S. — any discussion of the Turd in The Pocket made me sound like a crazy man, so I didn’t send anything out.

A week later, I found a large gift box at my door. When I opened it up, I found a bag of kitty litter, a poop tray and shovel, and a funny little note from the two men saying, “You can never hide a turd from a banker because we’ll always find it!”

Lesson learned: Don’t try to hide your crap from your bank!

Are you working on any new exciting projects now? How do you think that might help people?

Most of our clients are consumer-based companies. But every so often, we’ll get a call from some institutional entity to study their university, non-profit organization, or city.

Two years ago, we got an unexpected call from one of the top symphonies in the U.S., the name of which I have to keep confidential for now.

Nowhere in my business planning, marketing list, or BHAG did I ever imagine we’d be working with an orchestra. It was just too far out of our wheelhouse. But they hired our firm to rethink their orchestra facility and develop — what we call — an “Experience Value Proposition, (EVP).”

Sadly, orchestra attendance has been declining worldwide due to the busy lives people lead today, not to mention all the competing entities vying for our attention. But we believe there’s a lot at stake in society if we lose our live orchestra facilities.

When we were all kids, we got a kit of cultural studies in school regarding literature (Shakespeare, Hemmingway, etc.), visual arts (Picasso, Monet), and music (Beethoven, Mozart, etc.).

But with all the focus on science, technology, engineering and math (STEM), schools today have been taking out this cultural kit and replacing it with more STEM classes. Even cursive writing is out of the curriculum, which means our grandkids may not be able to read to the Declaration of Independence.

We’ve developed a compelling experience design vision to help our orchestra client become the headquarters for music literacy. And we’ve showed them how to frame up that issue, so it gets the public activated and engaged in protecting this sacred art form.

Since working with this orchestra, my team and I have become converts that a society without the cultural awareness of music’s value loses something vital to humanity. And we’re proud to help support the importance of music literacy for generations of musicians and citizens to come.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

As designers, our work is never complete. There are always more ideas to explore and more refinements to make. But this passion for perfection can lead designers to live an unhealthy life.

In design school, we learn to “pull all-nighters” at least once or twice a week. And we often won’t stop drawing until our teachers or bosses pull the drawings off our table. But this habit can lead to poor time management skills.

I discovered that if I took a structured class or exercise routine after work where people counted on me to show up at a specific time, I ended up managing my workday much better. Having to leave work at a particular time forced me to think smart about my to-do list and be more protective of what I would allow disrupting my creative workflow.

I also found that my mind got reinvigorated when I participated in something that is far removed from my day job. For me, that is studying the ancient martial arts of Muay Thai. For 23 years, I’ve been showing up at a dirty, grimy kickboxing gym with angry dudes that want to take my head off. That feeling of flight or fight helps me not think about work for an hour and a half a day, which is essential to my creativity.

None of us are able to achieve success without some help along the way. Is there a particular person to whom you are grateful, who helped get you to where you are? Can you share a story?

When we started our firm in Charlotte, NC, in 1992, Bank of America was the most prominent company headquartered in the city. At the time, the chairman of that bank was a gentleman named Hugh McColl, whom I mentioned earlier.

Mr. McColl was quite busy running a giant enterprise and buying up other banks in Texas, California, and many other states across the country.

He didn’t know me at the time, but I wrote him an earnest letter asking if he would like to come down to a blighted urban part of our city to see the voluntary work my colleagues and I were doing to improve the area. In short, we were trying to transform a crime invested, polluted and derelict area into a safe, walkable, and desirable district to live, work, and play. And much to surprise, Mr. McColl came to visit me, not just once, but many times.

Mr. McColl helped me set up meetings with all the right leaders of our city. And a year later, he invited me to present our district’s place-making and place-branding strategy at a symposium at Columbia University that included CEOs, mayors, and cultural leaders from all over the U.S.

Mr. McColl taught me that you’re never too busy or important to help out the little guy. And I have tried to carry his values of being a good corporate citizen wherever I go.

How have you used your success to bring goodness to the world?

We work on a wide variety of project types. But our firm is incredibly passionate about saving small, local, and regional retail businesses across the U.S.

We believe are an essential component of the American Dream, but it breaks our hearts to see how the international retail giants and Wall-Street funded tech-disrupters are wiping out this layer of American businesses. These small companies are saddle with extra taxes, regulations, and challenges that other big industries don’t face.

It’s not a fair fight, and we’ve become vocal activists to protect small businesses from going extinct. We take great satisfaction in our ability to not only help these smaller entities survive but thrive by changing the way they go to market.

Ok super. Now let’s jump to the main questions of our interview. The Pandemic has changed many aspects of all of our lives. One of them is the fact that so many of us have gotten used to shopping almost exclusively online. Can you share five examples of different ideas that large retail outlets are implementing to adapt to the new realities created by the Pandemic?

1 Get ready for the celebration.

Yes, it’s statistically accurate that many consumers have either adopted or increased their habit of ordering online and having everything delivered to their homes. But people have also had enough of staying at home.

Our research indicates that consumers are yearning to get back outside in the public realm. To hang out at the local coffee shop, have a leisurely lunch at cafes, drink a beer with the buds at the local sports pubs, take a weekend stroll through the local farmer’s markets, listen to live music, and window shop on the high street.

By no means does this mean the physical retail is out of the woods. They still have to contend with the incredible growth of online and their outdated business model problems.

But we don’t believe the headlines that say brick and mortar retail is dead. What’s dead is dead retail concepts that should have died a long time ago — such as traditional department stores and malls — but are held on by financial life support.

Like any ecosystem, the weak retailers will die off, but the strong will adapt and get stronger. There’s a new breed of retail concepts will emerge to take their place, albeit in a different form and shape. We are social animals, and we’ve been going to market for thousands of years. We go there not only to buy bread, milk and silk, but to meet our neighbors, go on a date, escape from work and home, and feel like we belong to a community.

2 Get more demand-side thinkers.

In the old days of retail, there was more consumer demand for products than stores to fulfill them. This imbalance created a significant market opportunity for developers to build shopping centers on nearly every street corner and intersection of our vast country.

For a good 50 years, tenants from all over the country and world filled up those retail centers. But eventually, we reached a tipping point where we had more stores than a sufficient supply of customers. The truth is, we’ve been over-stored with retail for a while. And when you add in the increase in online and direct-to-consumer channels/models, as well as Covid and a recession, the retail market dynamics turn upside down.

But the bigger problem is one of organizational culture.

At first, most local and regional retailers were old school merchants who intuitively knew how to attract consumers. But then came the era of the “quantifiers” who sophisticated the business with extreme efficiency techiques and programs.

Retailers started loading up with supply-side experts in logistics, warehouse, distribution, merchandising, pack-out, manufacturing, etc. Under the context of the understored/oversupply of customers, this approach made sense. But without realizing it, retailers built stores that made their supply jobs — not the customer’s job — easier.

Retailers today need to focus on the customer’s job — whether that job is literal and functional or emotional and social. And they need to be creating more demand for their products, goods, and brands. But far too many organizations have a supply-side leadership/management culture and not enough demand-side thinkers at the top of the organization who know how to innovate the desirability and payoff of these places for consumers.

One of the reasons you see emerging companies like Warby Parker, Away luggage, The Real Real, and Casper toppling established retail dynasties is because of their intense focus on solving customer problems and pushing all the right demand-side buttons.

These companies start with the demand-side value equation first and then build a supply-side system after, which entails both online and physical stores as part of the strategy. However, the old school retailers are still trying to win consumers by perfecting the supply-side model when there isn’t enough demand for their products or experiences.

3 Get rid of the friction.

Far too many retail stores use an outdated format no longer relevant to the way consumers live or shop today.

For example, the traditional grocery store chassis was designed over 50 years ago and hasn’t changed fundamentally that much at all. We still have long aisles with an inventory of dry goods, cold refrigerated cases in the back, a perimeter of perishables, and the most dreaded of all experiences, the checkout line/zones. It’s like a lumber yard, where you, the customer, have to figure out how to put a meal together.

Customers don’t want to have to work that hard to put together a meal. Nor do they want to walk down long aisles or wait in a long checkout line. But grocery stores haven’t changed these aisles or the checkout line experience because it’s more convenient for them to operate.

The same goes for department stores and malls. Our social behavior patterns and approach to shopping have fundamentally changed since they originated these formats, yet they persist.

My point is that too many retailers try to use an old format and outdated chassis to attract customers. These models had value in an era where there wasn’t as much choice, and we had different aspirations of the “good life.” But to compete in physical retail today, you have to create new demand models and new types of more relevant social experiences.

Consumers divide their life into moments of work versus pleasure. Standing in a long checkout line is work. But paying for your products with an iPad at the Apple store is much more comfortable. Amazon’s cashier-less store takes things up the next level and will be the next big game-changer in retail.

In terms of malls, consumers hate parking, parking decks, elevators, and escalators. But all of these necessary evils can be fixed and even turned into fun experiences. Rick Caruso of the legendary Grove outdoor shopping center in L.A. has made parking, elevators, and escalators a part of his delightful experience. But there’s still much more retailers can do to get rid of the work aspect of shopping and focus on the pleasure side.

Retailers and developers need to put themselves in the role of the consumer and ask themselves at every step of the shopping journey: “Is this place where I want to be in right now? Am I enjoying my time or finding this moment frustrating, draining, or too much like work?”

4 Get small

In the old days of retail, you could go to most cities around the country and find operators building giant stores with the widest variety of products at the lowest prices. We can all remember places claiming to be the mattress king or the largest leather couch warehouse.

This strategy of “big” worked until the internet came along. But there’s no physical store today bigger than a Google search, Amazon, Alibaba, and others. Just a simple search for mattresses on Google yields 596,000,000 results. Just think about that much choice?

The cost to lease, staff, stock, and operate big stores is costly and dependent on a high volume of sales. Additionally, finding sites in America that are big and populous enough to accommodate giant stores is much harder to secure. And lastly, customers don’t enjoy the amount of time, work, and navigation that a large store entails.

The future of retail is about smaller, highly-curated stores that are more nimble and can fit into many more site locations than big stores can. These smaller stores cost much less to operate, staff, and stock. They are also more fun and less time consuming for customers to shop. Trader Joe’s has proved this model of smaller stores works better than big stores for many decades.

5 Get extreme

Another characteristic of the old supply and demand equation in retail is that retailers could afford to offer a broad range of appeals to many different lifestyles and income levels. The department store was the perfect example of the generalist approach of providing “something for everyone” — from clothes to jewelry, washer, and dryers, to tires and wrenches.

But the internet has taught us that customers prefer micro-niching products/brands in obtuse categories such as buttons, olive oil, socks, and car seat covers.

The generalist, middle of the road approach to retail is (mostly) gone, except for a few outliers. The retail stores/brands that will succeed in the future will focus on a narrow niche of both products and/or customers. And they will build credibility, expertise, and authority around a more in-depth but less broad offering.

6 Get with the times

Consumers today are thinking less in terms of distinct and separate channels — such as physical retail vs. online — and more in terms of brands that solve functional, social and emotional problems through various channels.

Consumers will expect to have the option of purchasing online, picking up at the store via click-and-collect, and having robots assist them.

They will also expect to see a high degree of sanitariness, cleanliness, disinfection, and technology to prevent unwanted viruses. However, because the human eye can’t see germs, they will rely on their senses — such as the smell of disinfectants — and visual cues and triggers that act as surrogates to convince customers their stores are safe to inhabit.

In your opinion, will retail stores or malls continue to exist? How would you articulate the role of physical retail spaces at a time when online commerce platforms like Amazon Prime or Instacart can deliver the same day or the next day?

When I was growing up, buying and shopping were intertwined activities. You could go to the mall to hang out or go on a date. Or you could go to the mall with a specific task in mind and go home. Or you could do both.

One place, but two different mindsets.

But today, buying and shopping have become two separate activities. Buying is more overt, deliberate, transactional, and focused on commodity factors like price, variety, convenience, and razor-thin margins dependent on volume. The opportunities for differentiation in buying are lower.

Shopping, however, is much more open to differentiation because it taps into a different side of the brain that is seeking more recreation, leisure, discovery, adventure, escape, and social opportunities.

If you’re not the market leader, the buying business can be a slugfest and game of chicken for who is willing to go the lowest. But the shopping business allows you to charge slight premiums and more fun.

While Amazon and Alibaba might increasingly have a monopoly on commodity factors like price and variety, they don’t have the market cornered on joy, delight, surprise, sensory activation, or human interaction and connection.

While you can buy a Harley Davidson online, it’s nothing like the experience of going to the dealership and becoming part of a tribe that first memorializes your purchase/membership into the tribe and then encourages you to hang out at the fort several times a week with your new gang of friends.

Consumers can also buy their Apple products online — as they did before the Apple stores came to market. But many loyalists prefer to go to the Apple store to be around like-minded people and get the Steve Jobs experience.

And we can get all our vegetables delivered to the house cheaper than anywhere else. However, many foodies favor going to the local farmer’s market to stroll among the stalls and meet the makers, producers, and growers of the products they put on their tables and in their family’s mouths and bellies.

To compete in the future, physical retailers can’t make it on only selling commodity features. Amazon and others will dominate that price mountain with a ruthless focus on efficiency. Instead, physical retailers need to tap into consumers’ more recreational, leisure, discovery, adventure, escape, and social animal sides. While this may sound illogical, we do it every day.

For instance, when you go to a bar or restaurant to have a drink or eat a meal with your date, it’s an irrational proposition from a value perspective. Paying 16 dollars for a craft cocktail, 8 dollars for a beer or 25 dollars-45 dollars for a steak and au gratin potatoes is not a good deal in any scenario. But we don’t do it for the value. We do it for the experience of being in the environment, around other people, and for the social payoff.

Admittedly, Covid has made going out in public very challenging, but society will adjust to this reality. And people will come back out with a vengeance and look for the places where commerce and community meet, as they have for thousands of years. Buying an actual product is only one small part of the value proposition consumers are interested in obtaining, and shopping comes with a much longer equation.

The so-called “Retail Apocalypse” has been going on for about a decade. While many retailers are struggling, some retailers, like Lululemon, Kroger, and Costco are quite profitable. Can you share a few lessons that other retailers can learn from the success of profitable retailers?

Lululemon, Kroger, and Costco are three unique brands with three entirely different strategies.

Lululemon

Lululemon’s brilliance identified an underserved market of customers — mainly women initially — wanting high performance yet fashionable athletic-wear explicitly designed for low-intensity exercises like yoga and Pilates.

Nike, Adidas, Champion, and Under Armor could have easily solved this problem for consumers. They had all the capital, marketing resources, expertise, research, data, and designers any organization could ever ask for in a company. However, what they didn’t have was the right question to ask: “How are the closets of a very influential segment of their customer base out of balance?”

Last year Lululemon’s annual revenue surpassed 3 billion dollars. Not bad for a 20-year-old company. This revenue is not new expenditures but instead came out of Nike, Adidas, Champion, and Under Armor’s pockets. These athletic powerhouse brands are now playing catch up. But they missed a crucial part of the growth curve and now have to compete for that particular customer against their new competitor, Lululemon.

The Lululemon Lesson: Constantly ask the question of where your customers’ lives seem out of balance.

Costco

While Costco certainly has an image of low prices, that’s just one part of the appeal and value proposition. There are cheaper places to buy products. However, Costco is masterful in creating what we call a perceptual brand realm with compelling brand mythology.

Costco’s brand realm imitates a warehouse with giant shelving racks that a forklift would pull things on and the shelves. But these shelves are decorative props. Many shelf areas are mostly empty because they put just one Vitamix blender or Braun electric toothbrush on that shelf.

In other words, Costco uses the shelves (as well as the concrete floors, exterior warehouse shape, etc.) as a prop to cue and trigger in people’s mind that you’re getting these products from the warehouse without the middleman involved. But even Costco admits themselves that it costs a lot of money to look like a cheap warehouse.

Costco got its start with the brand legend/mythology that their stores were where the restaurants and small businesses bought their products. And consumers loved the idea, authenticity, and credibility of getting the same wholesale deals that restaurants and small businesses got.

The brand realm and brand mythology work well together to create a brilliant value proposition.

The Costco Lesson: Create a brand realm and legend so convincing everyone believes it’s real.

Kroger

We’ve done work for Kroger and some of the chains they’ve purchased, such as Fry’s Marketplace and Harris Teeter.

When we started working with them in the late ’90s and the early 2000s, Kroger had more of an undifferentiated philosophy/price leader approach. There was a statistic their executives touted often about their accomplishment of selling just as many diapers as Walmart did.

But no matter how hard they tried, this undifferentiated approach wasn’t working for them because Walmart owned the perceptual mountain and image of low prices. So Kroger switched to a more differentiated approach that still had value as part of their equation.

Kroger has acquired many regional grocery chains all over America, which has provided them with many different skills, capabilities, and insights for creating differentiation and customer demand. And Kroger has brought these regional chains a sophisticated supply-side discipline and focus on efficiency while also providing them with a considerable investment capacity and buying power they never had.

However, I do have some concerns about where they go next in a retail world that is more extreme with Walmart and Amazon on one side and more highly-differentiated, smaller store options on the other side. Many of Kroger’s chains are middle-of-the-road generalist brands that use an old grocery chassis that doesn’t appeal to millennials as much as baby boomers. But Kroger is an incredibly smart organization and seems to be making strategic adjustments along the way.

The Kroger Lesson: Even if your operationally excellent company, you still have to find creative ways to differentiate your goods and brand.

Amazon is going to exert pressure on all of retail for the foreseeable future. New Direct-To-Consumer companies based in China are emerging that offer prices that are much cheaper than US and European brands. What would you advise to retail companies and e-commerce companies, for them to be successful in the face of such strong competition?

First, be an expert in change

I have spent 35 years now working in the trenches of retail every day. And no matter what year it was, the retail industry has always been under threat and going through a transition. If it’s not technology, it’s generational changes, like consumers leaving the malls in the ’90s for the urban shopping districts in the 2000s, now heading back to the suburbs.

Industry insiders and investors look forward to the day when retail will level out, but it will never settle down. Why? Because retail is about change. Change is what gets us to buy that new sweater, which is a slightly different green shade than the one you had before. Change is also what brings us to the store to buy new iPhones, Tesla, or Samsung TV.

Retail reflects culture, technology, and the fashion of the times. And the retailers’ job is to keep up with that change and topics of national discussion. But too many retailer leaders act like historical preservationists protecting and defending the old way of doing business.

Secondly, forget the foreground and study the outer limits

When I was a kid, we had three big retailers in our area, Sear’s, JC Penney’s, and Montgomery Ward. If you were a manager of one of those department stores, you were a big deal in your community. Sear’s built one of the most influential brands in the U.S., and nobody ever thought anyone could topple them. But eventually, they lost their way and experienced death by 1000 cuts.

But even Jeff Bezos himself has said that someday Amazon could very well end up like JC Penney’s and Sears — if they’re not careful.

Most innovative companies have their start, rise, and heyday. But if they’re successful, they eventually reach a point where maturity sets in, and they become an institution and struggle to innovate against their own organization’s resistance to change.

We all remember how unstoppable Blockbuster seemed, but two guys riding in the carpool lane to and from work came up with a business model that took them down. That business was Netflix.

Companies miss out on future growth opportunities because they’re so focused on the foreground that they miss what’s happening in the background and around the outer limits. Blockbuster focused on videotapes, whereas Netflix bypassed the foreground and pioneered DVD rental and then streaming, which was way out on the outer limits.

Amazon seems overwhelming to deal with right now. But my vote is on the small, focused entrepreneurs that can 1) see what’s happening in the background of society, 2) take more risks because they don’t have to deal with internal departments, bureaucratic committees, and organizational layers of approval.

Direct to consumer has got Amazon’s attention. And many major brands tell us that DTC poses a threat to their business because manufacturing has become easier to do. Why? Because if all things are equal, consumers prefer customization, localization, differentiation, and personalization, over mass commodity, particularly in good times.

The direct to consumer revolution is just starting to build steam. But Covid has given aspiring entrepreneurs the time and urgency they needed to kick things into high gear. Our clients tell us that they expect to see many more DTC businesses, which is a frustrating factor they have to address.

Thank you for all of that. We are nearly done. Here is our final ‘meaty’ question. You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

For most of my life, we lived in times that were more stable, predictable, and secure. But the world seems so unstable, uncertain, and unpredictable right now. And this uncertainty poses a significant threat to our economy, democracy, and quality of life.

No matter what political party you affiliate with, most agree that things are a mess in Washington right now. We have lost our ability to govern effectively as a country. If our government were a public company, we’d be near bankrupt, and the shareholders would demand change at the top.

For the bulk of my career, most business leaders have generally stayed out of politics to appear neutral. But considering where we’re at as a country and economy, I think it is our duty and obligation as business leaders to demand more focus from our government and politicians.

While we all might debate the extent of government involvement in our lives, I think we can agree that the government’s number one job is to protect us from existential threats. To help preserve our ability to work, feed our families, stay in our homes, and live safe and healthy lives.

We have failed miserably in our duty to manage the Covid crisis and the recession and instability that have come with it. Not only did this event take 230,000 peoples’ lives who have families and loved ones, but it also destroyed our economy and made us much weaker as a nation. And frankly, I am pissed off that more leaders don’t speak out about the threats to their businesses, employees, and customers.

This event was preventable and manageable, but it requires a vision, strategy, and detailed plan effectively communicated to unite people to work together, not divide them.

We’ve survived other great disasters and crises in our history — such as Pearl Harbor, the Great Depression, race riots, etc. — by bringing together the best minds in our country and tackling the problem as one of the most innovative countries in the world. But this recent crisis was poorly addressed, causing far too much pain, loss, and suffering. And we’ve never been at more risk than we are right now.

How can our readers further follow your work?

Two recent features include an in-depth Longread article entitled The Man Who’s Going to Save Your Neighborhood Grocery Store and a few captivating chapters in an insightful book entitled The Secret Life of Groceries.

I frequently write on several platforms, including:

LinkedIn at https://www.linkedin.com/in/kevinervinkelley/

Medium at https://medium.com/@kevinervinkelley

Twitter at https://twitter.com/aia_kevin

You can also visit our website at https://www.shookkelley.com.

This was very inspiring. Thank you so much for joining us!


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