EPISODE 094 : 12/29/2022
Paul do Forno
Paul do Forno is a Managing Director for Commerce & Content at Deloitte, a leading consultancy specializing in audit & assurance, consulting, risk and financial advisory, risk management, tax, and much more. He’s been named one of the Top 100 E-commerce Influencers in the world by Retail Technology Innovation Hub. In this episode, Paul discusses the rise of livestream shopping, how e-commerce and physical retail are merging, virtual shopping, AI in retail and why loyalty matters in retail.
Host: Ned Hayes and Kira Cleveland
Guest: Paul do Forno
Listen to every episode
Topics discussed in this episode
- Detailed small business insights from Olympia, Washington
- Small business resiliency and adaptation during COVID
- Doubling community outreach during the pandemic
- Opportunities for small business loyalty programs
Watch Spark Loyalty’s Small Business Success Channel
Ned Hayes [00:00:00] Welcome to Spark Plug, where we talk to smart people working at the intersection of business and technology brought to you by Snowshoe, your smarter loyalty leader. Sparkplug is happy to welcome Paul to the podcast today. He is the managing director at Deloitte Digital and part of the leadership in the commerce practice. He has great experience, 25 years in strategy and digital experience and technology has worked in ecommerce practice for years and years. And in the past he’s led digital platform programs with some of the biggest brands, such as Target, Footlocker, hired Victoria’s Secret, Eddie Bauer and many more. And we’re really happy to have him on the podcast because he speaks to ecommerce, but he’s also work with a number of top digital platform vendors. So welcome to the podcast, Paul.
Paul do Forno [00:00:52] Thanks a lot and happy to be here.
Kira Cleveland [00:00:55] We’re thrilled to have you. You know, kind of digging in a little more on your job at Deloitte. You know what? What’s the best part of your job? And also, it can be the most difficult part, especially from the average person who probably doesn’t know what you do. You know, like, how would you how would you describe that?
Paul do Forno [00:01:12] Well, first of all, Deloitte Digital is the largest digital agency in the world. We are the largest customer agency that helps with commerce services. And so for the past five years, we’ve been by far the biggest and we’ve worked with some of the biggest brands, probably things that you order and all the clients I can’t talk about. But we work with five of the top Internet retailer, top ten customers and a lot around the enterprise. And so we’ve got a lot of experience. So the really cool things is that we get to help. Some of the biggest brands sell stuff online from, you know, creative designs to building the systems and seeing the full end to end and going through that transformation. And so what I’m excited about growing up in the industry, you know, I’ve been doing commerce now for 20 years, which for the most people, like I am the old guy, right? So I remember the days where we were talking about e-commerce and they were like, Yeah, it’s never going to be anything. It’s small. So I’ve gone through the life cycle of like literally some of the first retailers that we talked e-commerce. They treated e-commerce like store number 998, literally. That’s the way they treated it. It was just another store. That’s how big. And they treated it very siloed. And so I’ve come a long way from that piece. So yeah, it’s growing. Yeah. Or it’s going to be something to the last two years. When it got in the midst of COVID, I started to hear like, e-commerce was everything, right? It’s taking over the whole world and like, you know, retail is going away, it’s all going to be ecommerce. And I’m like, Hey, guys, wait a minute. I’m the e-commerce guy. That’s not right. Retail’s been here for millennia. It’s not going anywhere. Right. And so the part that I hope to bring in being around have gone through these waves is to see what where got to now for the ecommerce world is guess what? We’re at the historical growth period. It’s continuing to grow and it’ll grow at the continue, but it’s never going to take over everything. And so how do you find for your retail brand the proper balance of digital and retail within your space?
Kira Cleveland [00:03:33] Yeah, that is that is definitely the question. And along those lines, you know, how is the growth of retail technology helped you do that job better, serve those clients better?
Paul do Forno [00:03:42] Yeah. So a whole bunch of I’ll use this example of like where we’ve come from to see what we can take advantage of. When I was working with some of the early retailers back in 2000, seven and eight and six and stuff, well, it would take six months just to get the hardware, like to put them in into the frames, right. Like it wasn’t like you hit a button and I have a server like in the cloud. And so just all of all of these SAS based solutions and being able to leverage the, you know, e-commerce platforms that are now in the cloud, that you can instantly get access to them. And all the tools intertwined, you know, the, you know, the unbelievable fast to market like that that’s so you know, such a game changer to what used to be like. You know, I can see the times, you know, becoming smaller and smaller and smaller, but like, you know, a key thing that, you know, people can’t forget that is very different than, you know, small businesses that you still at larger companies. There’s the change management of how to help people come along. And so all the technology in the world and all this SAS based solutions doesn’t solve for good products, how to execute and actually get the technical or the new newest technology implemented.
Ned Hayes [00:05:10] Right? Implementing the. Technology, getting it out there, that’s the key. Sometimes, though, we have unexpected circumstances like COVID that changed the world. And so as we kind of emerge out of the COVID bound world, what did we see in e-commerce and in retail in in 2022? Where’s the world going now, if you can tell us?
Paul do Forno [00:05:31] You know, first of all, I kind of alluded to it before that there was a lot of over estimating what the demand plan was going to come out of COVID. So as you’re seeing today, we’re dealing with a lot of oversupply in a lot of different industries. Right. A lot of different companies kept thinking that same growth was going to happen continually, which there’s still growth, but it’s not at the same rate at the beginning of COVID. And the complicated part is not only projecting the growth period, but it’s also the changes in the supply chain. So you’ve got that whole demand planning off, right? So so that’s number one. So what is a more reasonable on demand generation that helps you be more successful, right? So that you’re not all of a sudden you have to do a huge sale in retail because you have oversupply. And the other thing that’s happened on the macro affect even more so that in combination with COVID is some of these geopolitical right like the the factors of some of the supplies in different industries coming from, you know, be it Russia or Ukraine and limiting those come across. It’s again, affected the supply chains. It almost seems like there’s a backlash around, you know, on demand and services from everywhere and how do you bring onshore back. So it’s changing the demand planning. So that’s a huge big macro change. So that’s definitely one and there’s more, but absolutely.
Kira Cleveland [00:07:04] And that backlash that you describe, it affected things beyond just supply chains. So kind of broadening the scope, you know, what would you also say you observed happening within the financial markets and like commercial real estate markets in 2022?
Paul do Forno [00:07:18] Yeah, I think this is where you have our Deloitte retail researchers have done a lot of research and they they keep like every year they do a checkpoint on clients. And what we’ve seen over the past 15 years, it’s gotten worse and worse. We’ve talked about this before. Right. There’s this bifurcation in retail where luxury at one end and the, you know, the most expensive players in the low end retailers, dollar stores, etc., both of those are growing at the fastest rate because what you have is through this COVID, you know, the top people that could get through it are much better off. Right. And then the lowest end have gotten massively hit. And so what you have is this despite vacation, where loyalty is still doing reasonably well and it might have, you know, coming out of COVID, you’ve seen a little bit more shift back to the historical in store and go there but like the middle is has like again a lot of the retailers that have been in the middle have been hurt. And so what you end up having is this challenge of where do you fit in that marketplace and how do you optimize around that? Right. And I think we’re still early on some of the impacts of historically high real estate rates. So right now, we’re in the midst of, you know, we haven’t seen these real estate lending rates in over 20 years. And so those are the economic headwinds. People are going to feel less sure of their biggest investment, their house. And so classically they’re worried about their buying. But interestingly, a lot of the early studies so far are, you know, some of the U.S. Census Bureau retail still says people are buying at a higher percentage that they predicted. And so while the impacts haven’t fully hit yet, so it’ll be interesting to see how exactly they play out. They still have it played out like a traditional early recessionary period.
Ned Hayes [00:09:20] Right. It’s kind of a strange economy because we’ve seen behavior that would indicate we’re going into a recession, but then we see other behavior like buying behavior that says that people are still very engaged with economic success. So where does a retailer fit there? If you’re a relatively small retailer, say a retailer with 5 to 8 franchised stores, any advice for somebody who’s trying to build out their business and survive and thrive in this economy?
Paul do Forno [00:09:47] And in many ways, it’s, you know, stick to what’s most important. Right. And if you go back to many of the retailers who came out and did well through the last recession and 2008, 2009, they made actually they made more investments in technology and automation. And in many ways, this is going to force some of the retailers who haven’t made the investment. Because the pressure is going to come to margins. And so how do you look for opportunities and margins? It’s technology, be it, you know, robotic automation in warehouses for delivery or if it’s perhaps not having the same amount of inventory placed. So being much tighter on their supply chain ordering also ways to you can’t get away from your core knowing your customer and being close to them. Right, and listening to them what they want. So, you know, going back to the your core customer and marketing and and listening to them, I think, you know, you could say that for anybody. But I think between going back to your core and looking for all the different ways automation can help you from a margin perspective.
Kira Cleveland [00:11:02] So, you know, you gave some suggestions there on ways the retailers can be looking now to protect themselves within this kind of unprecedented economy economic time. How else would you recommend retailers combat kind of the negative effects of inflation in the coming year? Yeah.
Paul do Forno [00:11:17] And again, I think it’s going to be depending on where you are in the marketplace. Right. The luxury segments are continuing to do very well. And so if you’re in that segment, you know, continuing to focus on one people still coming out of COVID. People are wanting to experience, you know, things that they missed out. So travel. And so products that are related to travel and experiences. And so how do you fit those into those stories? Right, into those macro stories on the higher end? Like, that’s what I would look to, you know, opportunities around, you know, things that were missed along on there. And again, also, there’s a game plan that, you know, traditionally retailers have looked at that during recessionary times. There’s certain services that people actually lend themselves to. Well, to like, you know, they want to feel better about the unfortunate times and actually invest a little bit more. Right. And then on the other side, if you’re, you know, selling to, you know, perhaps your clients are on the cost consciousness that, you know, how do you make more formulations or, you know, different packages that then can be easily you’re adopted or bought by your customers? Because the challenge is here, like you have less spending. And so if they’re going to spend the money, they’re going to make tough decisions there. So how do you make it easier? So break up your different packaging sizes or, you know, look at different offerings that might target and help them out.
Ned Hayes [00:12:57] One thing that we’ve seen in the news is that some retailers and some businesses are using the economic climate and inflation as an excuse to price gouge. So I’m sure that our audience is concerned about being accused of price gouging. How do you, you know, accommodate for the fact that there are real supply chain issues and some costs are going up? How do you communicate effectively with your shoppers so that they don’t feel like they’re just being asked to pay more for the same product?
Paul do Forno [00:13:26] That is a big challenge. And, you know, hopefully as part of your normal communication that you have that dialog with your customers that you’re having in all the different channels so that they feel comfortable that first of all, you want to come across that they’re you’re empathizing what they’re going through, especially if you’re targeting around and you see that in a lot of commercials now like, hey, we know you’re feeling these pressures. Like, so make sure you’re communicating that either through different, you know, from your direct marketing or different communications that way. And I think that at least helps if you at least have that conversation. Right. You know, it’s hard to be completely transparent in some product areas. You literally have to go through that, I think. But at minimum, have the communication out there.
Kira Cleveland [00:14:20] Absolutely. You know, just kind of looking at ways to make a difference within customer engagement and things of that nature. You know, what impact does the economic situation have on loyalty programs? You know, many famous loyalty programs were started during recessions or the Great Depression. So do you think that holds true, that we enter into a true recession? Loyalty programs will have higher value.
Paul do Forno [00:14:43] Yeah. And there may be ways to, you know, tie loyalty sessions into deals, right. Like or gamification of that. Like if you go back to the last recession and if you can remember, like who really kicked off like Groupon. Right. Like Groupon kicked off on these deals and they did have some loyalty kicked off and they did so well because of those capabilities. So like, you know, part of what I would look at. If I was a retailer right now is what are the lessons learned that I can take? How do I leverage ways that people understand that you’re getting the value? So if I’m going to invest in your brand and you want me to continue that relationship and that loyalty provides a way where I’m getting additional value, where I have to make everything stretch further. I think it’s a great loyalty is a great mechanism to show that continuous relationship can give you more value. And especially in these times that they’re trying to make every dollar stretch.
Ned Hayes [00:15:46] Yeah, making every dollar stretch is kind of the watchword right now. So do you have any predictions for what we’ll see in the coming year as retailers and other businesses grapple with the changes coming?
Paul do Forno [00:15:57] Yeah, I think in many ways we may be in the midst of the new recession as it stands. Right. Like, I think the challenge with our our classic way of defining it, we’ve just had a couple of different, you know, between the interest rates, you know, you know, increase from a real estate perspective and kind of all the effect of, you know, the slowdown of housing and what impact that will be. It’s not going to be the same impact of what we saw, I think, in the last recession, because it’s more of just slowing. And, you know, there’s been a large increase in the perceived pricing. And so one, I tend to think based on all the different economists that I’ve heard, is that this is going to be more of a softer kind of recession, meaning that the impact next year won’t be as big as what the last recession was. And so some of the inflationary pressures are going to fall back and that the Fed will get that at least tamed a bit by next year because we are at historically high like over 8% inflation. You know, based on what we know from our own economists and others, we’ve heard, you know, that inflationary pressure for next year looks like it’ll be a little bit more tame. And with all of these other things that have gone in, what the government’s doing, especially from the Fed, that I think there will be a slower impact, but I think it will be more impacted on unfortunately on those with less. And so it’s probably going to impact like people in the mid to higher end less than you know, at the lower end. And so part of depending on what product that you have, I think you’ll have to like make sure to target that market.
Ned Hayes [00:17:45] So you wrote an article for Forbes and you commented on Generation Touch. So could you explain what that is and why it matters in retail? How do we market to this kind of generation touch in the future?
Paul do Forno [00:17:58] It’s interesting that generation touch is like now almost adult. It’s unbelievable that digitally native and in fact, even beyond that, that’s that’s become so ingrained in our interactions. Right that you know, from how people perceive brands and their interactions and their all of these different channels, like if you see, you know, if you have kids or you see them sitting in front, it’s not just you’re watching TV, you’re watching TV with an iPad in front of you and maybe a friend as well. So you have multiple devices, not just one. And and you’re interacting with them all. And so people how they perceive in that connection. And so what you’re seeing is people like moving to new platforms where, you know, tick tock is now, you know, what we hear for the latest generation is the equivalent of the touch generation. Today is the tick tock generation where I’m using tick tock for Google, right? And these short form 22nd videos are now driving in and the attention span is getting shorter, shorter and shorter. That’s the biggest challenges, the battle for attention and who knows where this goes. I think the touch people growing up with all of these devices and touch and multi has now gotten to this unbelievable level. And at some point, you know, people will be like, it’s the image and they’ll be like, okay, where do I buy or what do I do? Right. It’s unbelievable where we’ve gotten to.
Kira Cleveland [00:19:31] Yeah, absolutely. Especially devices everywhere. But speaking kind of to that trend, we’ve seen new shopping modes like livestreaming in the metaverse, you know, kind of trying to come to a new forefront in do you think there’s a future in a virtual shopping experience? And what could you imagine that would look like?
Paul do Forno [00:19:51] Yeah, absolutely, for sure. And I think the interesting part is I’ve seen multiple iterations like in some of the early iterations of this and that came out. People first imagine these ways of you shopping as if you’re shopping in malls. Right. And and as they. Go through and in VR. And I think those they end up being lackluster and not really connecting. I think the utility ways that you make life easier and cool to connect is where the things that will actually click in. So, you know where I think the interesting overlap between Metaverse and commerce gets into like this overlap between, you know, like the roadblocks of the world where you’re building these interesting areas and you know, there’s incentives and gaming and then people are buying these virtual goods, right? And then learning from these new formats. That’s where I think so our whole idea of just, hey, I’ve got this virtual floor and I’m going to go through it and I’m going to look at it. I don’t think it will end up being in that version, but like tools that would make fitment necessary, right? Like oh I tried to on it’ll guarantee that it fits right. Utilitarian ways or cool new interesting ways that you could interact. I think that’s where the opportunities are and in some of the more visual VR like mechanisms. But I think on the back end there’s a lot of other really interesting, especially loyalty, I think loyalty and lots of different community and tokenized ways to incentivize people to work together and tying loyalty together. I see there’s a lot of neat opportunities there as well.
Kira Cleveland [00:21:46] That’s awesome. And with loyalty solutions playing a large part in customer retention and retail, which legacy solutions have you seen works and why do you think that is?
Paul do Forno [00:21:55] Yeah, I think loyalty has a fine line. I think like you have this line of how do you learn enough about your consumer without being too obnoxious. Right. And also providing the value. So there’s the quadrant on value versus too much info and and how to balance those two and aligning, you know, actions. And, you know, you know, a couple of things. There’s lots of loyalty programs where doing things that you would do and showing those benefits back like and if it’s part of my natural and you show you have mechanisms to you know provide a firm and like you’re part of something I think those those are the ones that do well. I think also finding opportunities for loyalty areas where you have surprise and hey, by the way, like real surprise, the worst loyalty that I’ve seen as I’ve started to see like emails like, hey, you have you want a deal or you got this and then you click on it and it’s just another special off, right? Like the ways where you have like, hey, we have something custom and even if it’s like I think what you’re going to see in like to go back to your question on like how do you use the metaverse or whatever? Like, Hey, we’ve got this custom NFT image that only our loyalty. You have your own collection that we’ve created for you, right? That you now can, you know, have benefit of like, oh wow, that’s something new and different that people get excited all the more so than just getting, you know, percent discount off our next transaction.
Ned Hayes [00:23:39] Right. So it does seem like a lot of changes will be coming to retail, either Nfts or Metaverse or wherever this is going. Are there any kind of old school realities of retail that retailers should keep in mind, like the physical store, for one thing? I don’t think that’s going away overnight, you know?
Paul do Forno [00:23:59] No, absolutely not. Like it’s been here for millennia. It’s just it will continue to evolve. So how do you make it easy for people? Like it’s all about no matter what. Like the thing that you want to make. How are you making your customers life easier? How are you reducing friction? Right? Or how are you increasing the wow for what you’re buying? So when they’re coming into the store, do you make it easy as they’re looking at a display if they don’t have the size or if they have different color variants? Is there a QR code there that I can use my phone and look it up and can I get it delivered? Hey, I’m just looking at this. I might have a person there, you know, can I see other colors? Right. And this is where if you start to blend in and in place, is there other tools, digital tools like, hey, I’ve got a big screen that pops up and maybe show me because it recognizes that I’m closed and it pops up a new look of that other product that I might want to look into. So finding these unique experiential mechanisms, right. And changing the way, you know, what is it? To be a store versus just the most efficient way to deliver the product.
Ned Hayes [00:25:17] Yeah, I like that question. What is it meant to be a store? Because, you know, when I was growing up, being a newspaper meant one thing and now it means something different. Being a journalist meant one thing, and now it means something different. I wonder in the future if being a retailer will mean something very different than it means now. So I’ll kind of put that question to you. You know, ten, 20 years from now, what will it mean to say that you’re a retailer? What’s the future of being a retailer?
Paul do Forno [00:25:43] It’s a great question. Thinking, you know, looking forward, first of all, retailing as it is and having a physical place is not going to go away. Right. There will always be these locations and what. Actually the the reverse this this is the one big thing that’s come out of COVID. The learning of so many of these brands that started on nine and didn’t have their retail footprint have not been able to grow. Right. And, you know, if you look at some of these brands who are now starting to grow, it’s because they’re investing, you know, in stores. And and you’ve seen a couple of these brands like, hey, I’m opening up 100 stores. Like, you know, that’s crazy. But so stores are not going away. But the the role of the stores might change different footprints and, you know, things such as that retail becomes an entertainment. You know, in some brands it could be, hey, work, you know, come to this physical place so that you can jointly experience the brand together. Right. And with your common like if you’re building this loyalty, it’s almost a community, so community as a brand. And so I see some brands becoming that whole idea of community and brand and a retailer kind of merging a little bit more that, that that’s what’s important. People want to feel good about the brand that they’re at and be part of something. Right. And especially as we get into, you know, a lot of these things that people are, hey, I want to be associated with a brand that’s green, that socially conscience or whatever. And we’re hearing that more and more. And so I think what you’re going to see more of like retailers, you know, bringing together how they can really bring this community together and kind of then use that. So for example, I’ve seen even small retailers who open up their space after hours and have community events. They’ll have little parties around it and they might have, again, products. So like a candle shop might have. Hey, come here. Free space for your community event. And oh, by the way, if you want to, we’ve got these, you know, customized candles that you can do to put it on. You know, so I think the whole interesting way of from that, you’re going to see in one realm a community to I think you’re going to see a lot more what they call dark stores and the automation. I think, you know, we’re just starting if you look at, you know, companies such as Kroger. Right. And what they’ve invested in robotic companies like Ocado and all of those micro fulfillment places. Right. And, you know, many of these dark stores to be more efficient for delivery. I also see that continuing. And I think there’s going to continue in some ways, the growth of big retail is going to continue. And I think they’re going to take up even more space in that some of the smaller retailers, I think they might start to have like different spaces. Like, you know, I’m here in Columbus, Ohio and downtown. They’ve created a unique little place where pop up designers and retailers have come together and it’s become more of a bar, you know, a growth and entrepreneurial area. And so I think what you’re going to see is that much more of a changing of all of this, that just kind of going back to the there’ll be less in the middle players. I think there’s going to be even bigger, bigger players and then many more smaller players as you’ve seen this growth around the you know how easy it is to start a ecommerce shop online.
Ned Hayes [00:29:41] Yeah. So that bifurcation between a fully automated kind of an e-commerce pickup store and a store that has little parties and little meals and and show up for the big party this weekend. And it’s really a destination community. That distinction between two types of buying and two types of experiences that that’s really fascinating to me. I’m curious what it will look like.
Paul do Forno [00:30:05] Yeah. Yeah, it’s it’s good. It’s going to be fascinating them and they’ll be every bit in between. But again, being the ecommerce guy, like depending on how you calculate, you’ll either say buy on U.S. Census Bureau. We’re up near about 17, 16, 17% on the overall retail. Or if we’re just, you know, if we discount gas and stuff, we, you know, we might be in the 20%. I don’t think over the long haul we’re going to it’s not all of a sudden we’re going to get to the 50 or 60% across everything from an e-commerce perspective on the total retail, even from the US retail, I think that we’re going to find a happy medium that we get to and that it’ll continue to be like that. And in fact, I think some of the interesting questions will be how do we optimize for all the delivery? Because in fact, I was having this discussion with this. You know, the paradox of e-commerce is this you get this unbelievable things on demand in fulfillment. But meanwhile, you also have these how many people are like, hey, I don’t want to impact the environment? Well, e-commerce is by far the least friendly to the to the green from an impact perspective. And but it’s what is the most convenient. And so how do we change all of this to align around optimizing? So we reduce our footprint, our green footprint? I think that’s a big interesting question, that it’s not clear how that’s going to be solved. But I think those pressures are going to be pushing down for multiple ways. One, changing what people care about, but also because of the costs that are out there. And also going back to our macro, there’s also government challenges like not, you know, some of the price of oil. And that is also going to force this discussion. And so whenever big both recessions and big changes like that, that’s what’s going to drive those big changes.
Kira Cleveland [00:32:07] You know, you’re obviously someone who’s very passionate about your work and keeps an eye on the big picture, which is beautiful as kind of a fun ending question. Would love to ask people, you know, what? What do you hope your legacy will be? What do you want to be remembered for?
Paul do Forno [00:32:21] I guess one thing is a little personal. I guess I’m an immigrant multiple times, right? My family came to I’m originally from Canada, but my family is Portuguese. And we came to the North America with nothing. And, you know, being able to live the Canadian slash American dream. Right. And being able to, you know, give back. And, you know, I’m pretty passionate about. And it’s also, from an economic perspective, how important immigrants are, because especially as the birth rate continues to go down. I mean, right now, China’s number one long term issue is because they had the one child policy. Right. And they don’t have the immigration. And so we’re but for immigrants, immigrants have saved that growth. And so, you know, I’m I’m very proud of being an immigrant and being able to I think, if anything, you know, showing that immigrants add to the economic benefit and hope that you good that’s my part of my soapbox for what I do is you know the thing that I’m passionate about is obviously e-commerce. I think the piece that I hope to do in all the clients that I’ve worked with is that people really understand, like how to connect, to make your customers life easier and make them happy, you know, by e-commerce. And there’s so many different ways and it’s all about understanding your customer. And so if there’s one passion that our leave is that, hey, you know, commerce has always been there for, you know, to connect with people. And it’s an important tool and channel that that really helps drive, especially for retailers.
Kira Cleveland [00:34:02] Absolutely. Well, thank you for being so generous with your time and your expertize and yourself. It’s been wonderful to get to know you and what you do.
Paul do Forno [00:34:10] Yeah. Thanks so much.
Ned Hayes [00:34:12] Spark Plug is a wholly owned property of Snowshoe. Copyright 2022 2023 Spark Plug Media.