Consumer Spending Still Defies Gravity, Luxury Retail Winners and Losers & Untangling AI Shopping Agents

0:07Steve Dennis: Welcome to Markle Retail Podcast, episode 314, the only podcast brought to you by two of the NRF's top retail voices, well, at least for the next 86 days anyway, and then I'm riding your coattails. I'm Michael LeBlanc. And I'm Steve Dennis. Get your Birkin bags out. It's our focus this episode on the luxury retail sector, taking the pulse to check up and to check in with a reference back to Steve's annual predictions. Steve, when I think about luxury, I think of flights to Dubai to grab a watch or a hard-to-find handbag. Those shopping trips just aren't as fun as they used to be. So lots of pressure on the luxury category, but it's a great opportunity for a check-in.

0:46Yeah, two of my predictions dealt with the luxury industry, So we kind of kill two birds with one stone or whatever cliche we want to use.

0:54Steve Dennis: Well, and speaking of luxury, you were just in Chicago for a wonderful event. And you being you took the opportunity to go do some retail checks. Talk about your walkthrough at Bloomies. Yeah, well, I went and I want to get too in the weeds with this if people don't know the area. But there's a mall called the Old Orchard Mall in Skokie, Illinois. So that's north of Chicago. and it's actually an outdoor mall. So it's got kind of a typical configuration and some of the usual suspects like Nordstrom and Macy's there. And they used to have a full line Bloomingdale's store. So quite a large store down at one end of the mall.

1:31They closed that, I want to say, maybe three or so years ago. But they fairly recently opened Bloomies and folks may know or remember that Bloomingdale's has been experimenting with a small format store called Bloomies. The first one they opened was outside of D.C., which I visited, I don't know, 18 months ago, two years ago. And I thought it was very nicely laid out, good visuals, you know, super organized. But I wasn't really getting exactly what they were hoping to do with this. It seemed very niche oriented. Well, it turns out the Bloomies in Old Orchard, I like quite a bit more. It's actually two stories, and I'm guessing maybe three times the size of the original Bloomies, but much smaller than a typical Bloomingdale's store.

2:20And they seem to have really edited it against a certain price point, more contemporary. So it really makes sense. Like, you can really get the clarity of the merchandising vision. it's not so large that it's difficult to navigate, but it's also not so small that you feel like it's a big compromise. So I have no idea how well that store is doing, but listeners will know I often just get amazed by just how huge a lot of these old department stores are, make them very difficult to shop. This to me was a very different experience. Now, even under the best case scenario, I'm sure that location is not doing nearly as much volume as they were doing in the much larger store.

3:03But to me, it feels much more clear a reason for the store to exist. And it's quite close to the Nordstrom store. So it's kind of an edited version of a Bloomingdale's or a Nordstrom. So we probably won't get much information on how that particular store is doing. but it will be interesting to see if, I guess, A, Bloomingdale's is committed to continuing to open these stores and what those next ones look like. So they've got now a pretty good range between something like 9 ,000 square feet and something probably closer to 30 ,000 square feet.

3:34Steve Dennis: Well, you grabbed the phrase right out of my mouth, so to speak. I was going to say that whole reminds me as I listened to you about edit to amplify, right? And the challenge of choosing what the assortment looks like in a smaller format store. I was super impressed by the bloomingdale tour that we did in new york city uh particularly on the second floor now on the second floor is that where their housewares and uh brands or do they put women's apparel up there what what what approach did they take on that second floor to get i imagine beauty on the first floor actually the second floor is in the basement uh you actually go down i've got a big beautiful staircase but the main floor is women's uh very edited but very nice cosmetics beauty area as come into the store.

4:14Downstairs is men's, kids, and home. I think home is a little, I mean, many people would know home has traditionally been a really good category for Bloomingdale's because that's not so fashion focused. Like the rest of the ready-to-wear and all that kind of stuff, you could get it organized or understand how it's positioned with a younger, contemporary, more accessible luxury kind of customer. The home, you know, there's not much of a style point of view typically in home. So that's definitely a truncated assortment. personally, I wonder if it's really worth doing. That's the same way I felt.

4:46They did the same thing where they had kind of every merchandise category represented in the original Bloomy store. And I'm like, this is just a little bit of everything. And it was hard to figure out.

4:56Steve Dennis: So fast, how would you pick the brand, right? Right. And by the way, for any of the people who want to visualize what Steve and I are talking about here, we've got some great store tour video on our YouTube page when we walk through Bloomy's and some other stores. So be sure and check that out. All right, well, let's get to the news. Every day when I talk to retailers and when I talk to other characters, they try to make sense of what's going on in the economy because we get positive and negative signs in seemingly equal doses. I've got a bit of a background in economics. Maybe that is a handicap because it doesn't help me understand what the heck's going on.

5:31Steve Dennis: But take us through it because we see positive and negative signs. Certainly, talk of a trillion-dollar holiday, lots of upside and people keep shopping. but there's other things that we've been talking about for like 18 months, like interest rates. Yeah. I mean, the headline here for me is just kind of the contradictory indicators or the things like you say that if you kind of go to traditional economics, you would think that with higher interest rates, with a lack of consumer sentiment, the job market being kind of shaky, that consumer spending wouldn't be so good. And lo and behold, it continues to be quite good.

6:10GDP growth that we got in the United States, fairly strong. Now, again, we've talked about this a million times at this point. A lot of that is driven by AI. I actually heard a guy talking on, I can't remember if it was Bloomberg or CNBC, saying that we've got a tortoise economy in a greyhound costume because he said you really can't kind of connect all of it. But it really ladders back to AI being the thing that's driving so much, but still some pretty good consumer spending, which is not AI-driven per se. So, again, we got another consumer sentiment report that was quite poor, the lowest since 2014.

6:51We've talked about before the correlation between consumer confidence and actual spending is not that great. A lot of attitudinal surveys about how people feel about the job market are pretty negative. We got a jobs report on Friday for the U.S., which was weaker than people expected. But unemployment is holding steady. More people are coming back into, I guess, the job market. So we'll see how that pans out. It looks like inflation is going to stay relatively high in the near term. mortgage rates have gone up to the highest since 2002. So that's not a positive indicator for many parts of the economy.

7:32So, you know, I don't know. It's very difficult to work out whether this is just kind of a moment in time and the headwinds are starting to accumulate and that will cause a meaningful deceleration. I would have thought that. I have thought that for a while, but it has not panned out. I'll get back to this in my what's on my radar screen, But one thing that I saw that was interesting is that for the lower, you know, the so-called K-shaped economy, it's pretty easy to understand how very rich people aren't pulling back on spending. But the pressures on the lower-income customers have been there for a while.

8:06But one of the things I saw about that was that the lower-income consumers are still spending at a pretty good clip. Like the K is not so extreme. But they're funding some of that spending from savings. And that makes me more than a little bit nervous about the future. So anyway, as I say, I'll get back to that briefly in my what's on the radar screen towards the end.

8:30Steve Dennis: I saw some cautionary notes about what's happening in the buy now, pay later, or as we've sometimes called it, buy now, pay never. I think it's when people start funding their groceries with that, that's a pretty good indication of trouble. I was on the CNBC site, and they had this headline about Nike that said, retailer underperforms. underperforms. And it struck me like, it's funny to think of them as a retailer. We often talk about them as a retailer, but they're also a barometer for a brand, right? They're a wholesaler, a brand. The numbers just aren't shaken out in their direction. Yeah, we're coming up on two years of Elliott Hill coming back to Nike to be the CEO.

9:10And I think most people, myself included, expected to see Nike start to turn the corner a little bit, but it is not happening. Their sales for the past quarter were down 4%. North America did grow a little bit, so the real weakness is international. Their running business is showing some signs of life. It was up in the low teens, I believe. So it's really sportswear and kind of all other stuff that's really getting hurt. Now, they pointed to some new product innovation, which is something that Nike's been criticized for not keeping on top of. But to me, the other thing has been all the competition from on-running Hoka, New Balance, and the loss of some points of distribution, which they appear to be getting back reasonably well.

9:58So, that's a positive. But they also said, they basically guided that the sales decreases are going to continue for the foreseeable future. that's led them to do another round of restructuring so quite a few layoffs so a lot of things are really not working in their favor at this point and you know you can't as i often say you can't cost cut your way to the prosperity so that buys them some time but clearly we're going to have to see some real growth one of the things i checked which really shows how far they've fallen is what's going on with their stock price not that it's all about the stock price, but their shares are down 75 % over a five-year period.

10:40I wouldn't have imagined it. So, I mean, that's really startling. And so we'll see. I mean, we haven't really heard a clear articulation of what's different beyond kind of the obvious, which is get our assortments more focused, invest in innovation, get our cost structure better. So it's really quite a challenge for Elliott and team.

11:02Steve Dennis: Let's head over to Europe, talk about Marks and Spencer. They've cut a deal with an American, well, actually not an American brand. It's an LVMH brand. But let's talk about their deal with Sephora. Well, one thing, there's a couple of reasons why I flagged this. I do think we should come back and talk a little bit more at a future episode about Marks & Spencer. Maybe we'll get Stuart Matchen on the podcast because M &S has really done a good job of turning the, you know, kind of righting the ship and getting some nice growth. Both folks, certainly our UK listeners, would know that Marks & Spencer is a department store, but it also has a really strong food offering.

11:36So it's a little bit different than we would see in most of North America.

11:40Steve Dennis: But yeah, partnered up with Sephora for a shop-and-shop concept. Of course, we would, here in the United States, know about Sephora being partnered with Kohl's. They are in almost all their stores, I believe. Actually, Sephora started this shop-and-shop concept quite a long time ago. I think close to 15 years ago, 20 years ago at JCPenney, and that got dissolved. So I think it's interesting just to see which stores are trying to, well, I guess which brands are looking to leverage the traffic by being within a department store, as well as department stores using other things to create some draw and differentiation.

12:19So there'll be 100 new UK stores or points of distribution for Sephora in Marks & Spencer stores. and also the offering will be available online. And I don't think Sephora has an online offering within Kohl's. I think you have to go to the Sephora site separately. So one thing I just was also going to mention really quickly, Sephora at Marks & Spencer, from a brand alignment standpoint, makes much more sense. People probably heard me talk about, I never really understood why Sephora was such a great fit for Kohl's. It got them lots of points of distribution, which is terrific. But in terms of where Satora is positioned in the market and just the way the store looks within a pretty shoddy, to use Neil Saunders' term, shoddy host, I don't think really makes a ton of sense.

13:09So we'll see where that goes. I think long term we'll see some changes there. But I don't know what their agreement says. So that may be easier said than done.

13:16Steve Dennis: All right. Well, let's take a break from the news. We'll be back with more news. And then, of course, our very popular What's on Our Radar screen. Let's get into a check-in with your predictions. In fact, as you said, you had two predictions, being that you are a luxury retail-oriented fella. You should tell by my Gap shirt that I'm wearing. Tell us, first of all, what these two predictions were, and then talk about how they're shaping up. Yeah, so if you go look at my dozen predictions, you'll see that number seven was that Neiman Marcus and Sachs would emerge from bankruptcy. That was an open question as the year started since they had just filed.

13:53But they would emerge leaner, meaner, but still fragile. And then the other one was a broader prediction, which was that luxury's future will not be so evenly distributed. And that was really a response to quite a few people in the luxury industry, analysts and observers, saying that luxury was due for a significant rebound this year. And that prediction was really more that it will be uneven, that some of the best players will do quite well, but there'll still be a lot of laggards. And overall, we kind of average out as kind of a meh year. Just going back to a little color around where it stands, I would say so far, things are looking pretty good for my Neiman's and Saks prediction because they did, in fact, exit bankruptcy a few months ago.

14:37So they are definitely leaner and meaner. They did do quite a few store closings. In particular, they took their store count down from about 69 combined stores, Saks Fifth Avenue and Neiman Marcus full-line stores, to 49. So that is a 29 % cut in store count. I predicted they would cut about 30 % to 40 % of their stores overall. So it was a little bit of a mixed issue because they cut all their, except for two or three, off-price stores. So they basically exited that business, keeping a couple of them to do some liquidation. I guess the other part of the prediction was I thought most of the stores that would be closed would be Saks Fifth Avenue because my understanding from my time there and just generally following it is that on average, the Saks stores are the weaker stores.

15:25So anyway, that's where they are. I still think, as I think we've talked about on the pod, that there are some other shoes to drop here. My guess is, and I don't have any inside information, but my guess is they They redid some leases that would give them an out clause a little further down the road. And for various reasons, they weren't ready to close them, which does tie a little bit to where the strategy is going. So another big thing is Shafav Van Ramaduk, who was previously the CEO of Neiman Marcus before the merger, has come back in to run the new group, which is now renamed the Exemplar Group.

15:56A name I would say I hate, but anyway, that is what they're calling themselves. The idea here, obviously, is just to write the ship in general, get inventory back in position, fix some of the things that really deteriorated during the bankruptcy, but also try to figure out how to position Neiman Marcus and Saks Fifth Avenue when they're in the same market, which they are in quite a number of markets, as a bit different. Now, I went through this exercise actually almost 20 years ago when we were looking at acquiring SACs. And one of the questions was, well, wouldn't acquire SACs to shut down SACs?

16:28That wouldn't make any sense, but we would cut a lot of the overlapping locations and then position SACs more kind of younger, more contemporary, Neiman Marcus a little bit more upscale. We ended up concluding back then that that was not a viable strategy. A lot of that had to do with the price of the deal, though. There was a price at which you could have convinced yourself that could work. But of course, a lot has changed in the intervening years, mainly that department stores continue to lose share. There's a lot more competition with their vendors. And I would say trying to position Saks Fifth Avenue, I mean, basically, I think what they're saying, though it remains to be seen, is they will be more of a direct competitor with Bloomingdale's and Nordstrom.

17:07And to me, I would say good luck with that. I just don't think there's enough business that these markets, I mean, there are some markets that Bloomingdale's is not in, but Nordstrom's is in all the markets that Saks Fifth Avenue is in. So we'll see if that's in fact what happens, how different that is, and whether that's viable. The last thing I guess I would just say is there's some reports that some of the vendors that weren't getting paid really over the last couple of years as Saks Global got into more trouble have still not been made whole. Whether that leads to some real financial troubles for some of those vendors, whether they will decide to stop selling if they don't get paid.

17:45I mean, that's another shoe to drop, perhaps. And we just don't know anything really about their financial performance. This all just happened a few months ago. Some of the placer data that shows traffic to the two stores was quite negative. But it was in the transition period of store closings and jiggering. So I don't know yet what to make of that. But I would say if we don't see comp store traffic increases year over year, that would be a very disturbing trend because they were barely in business a year ago. So we'll see how that goes.

18:21Steve Dennis: Let's get to your second luxury prediction, which is actually prediction number eight by the numbers. And that was that the overall category would be some would win much, much bigger than either. As you said, the results would not be even. So talk about the different players and how you see their performance. Yeah, well, just a tiny bit of background, which actually relates to Sachs and Neiman's as well, is that what people generally call the luxury market, in a very simplistic way of looking at it, is really kind of three segments. There's the very high end, which serves a very affluent customer.

18:52There's more what people might call accessible luxury. So that would be more like coach. And then there's kind of like the one-time buyers or infrequent buyers that might buy a lipstick at Burger of Goodman or buy one handbag every three years. But they're not frequent purchasers. They may get a statement piece or something for a special occasion. So my general view is that the higher end part of it, for the retailers that are executing well, would stay quite healthy because that customer has plenty of spending power. It's not really affected very much by the to-ings and fro-ings of macroeconomics.

19:27Just start to move down, you know, still pretty affluent people, but not rich, you know, affluent but not rich, that they are more sensitive because most of what's sold at these retailers, nobody really needs. It's, you know, a want. And so it's easier to cut out or easier to kind of throttle back. Instead of four pairs of shoes, you get three pairs of shoes or whatever. So that's basically what I thought was. And when you average it out, the overall category is not going to be that strong. but you continue to see great players perform well, other players struggle. And that's pretty much what's going on.

20:02As an example, Hermes, you know, we often talk about up 17 % in the U.S., a little less robust internationally. Prada Group up 11%. Bruno Cuccinelli, which is more of a niche men's business, up 9.5%. Coach up 23%. But they're more similar competitor, Tapestry, which is really Michael Kors and Jimmy Choo has had very weak performance. Burberry kind of up five. Sephora also just up five. But again, Sephora would serve higher end but not uber luxury. And then two of the other big groups, LVMH and Kering, which is a mix of different players mostly tilted towards the higher, higher end, they've struggled a bit more.

20:52So that's the one that really doesn't line up. I would have thought, not so much Kering. Kering's had a lot of struggle mainly with their Gucci business. But LVMH has a lot of really great brands and diverse performance. Now, the Middle East underperformance is part of this, which I didn't anticipate would be an issue going into the year. So we'll see how it averages out. But I would say generally the split between really great operators going after the very high end, they'll continue to do well. some of the others will struggle with Coach really being the exception to the rule. I mean, they're the one luxury or accessible luxury player with a big footprint that is really outperforming other people.

21:32And that's really about their execution and brand positioning.

21:34Steve Dennis: Yeah. And a pretty good comp from last year too, right? They've really done a, I wouldn't call them a turnaround, but they're really doing a better job. They seem to be doing a better job. Right. That's a good point. I mean, their base, if you go back a couple of years, they were struggling a bit. So yeah, it is an easier comp. But it's just a tremendous amount of progress in a relatively short amount of time. And some of our listeners will remember we talked to a couple people from there that were working on their personalization and data analytics. And I think that's, you know, products obviously hugely important.

22:04The real estate's hugely important. A lot of other executional factors. But I think they've really gotten the marketing, particularly the targeted marketing, correct.

22:11Steve Dennis: And in that same vein, Hermes is just so impressive because they had tremendous results for the past couple of years. So what were they, 17 % up? So that's a genuine growth, and particularly given the pressures in the Middle East and in terms of the Middle East luxury market, they're really finding those buyers somewhere else. So it's pretty impressive, actually, from that perspective. For sure. All right. Well, let's get back to some of the news. And one of the most interesting phrases that I saw this week was from an announcement from Walmart, and they were clearly wanting to address AI in pricing.

22:47Steve Dennis: We've seen the surveillance pricing term come up politically. It's come up in many states. Federally, it's come up here in Canada. No one can quite explain what it is, but they generally have a fear that you and I would pay a different price for the exact same item on the shelf. Sometimes it's hyperbole in saying, you know, these shelf pricing things are detecting it's me or you. But Walmart considered it an important enough issue to put a pretty big statement out. So take us through it. They didn't exactly say it with a ton of detail, but they said, we price the product, not the person. So in other words, they're not going to use personalized data.

23:26You're more affluent, you're more price sensitive, or whatever it might be to change the pricing. And it's also not going to be time of day, and it's also not going to be anything really other than, which I think is kind of where the law sits. I'm not super familiar, maybe you know more about this. But I think generally speaking, the FTC says, well, if there's a cost to serve issue, that's a legitimate reason to raise prices. So if you're an inner city 7-Eleven or whatever, high real estate costs, you can charge higher than something out in the farm area or whatever. But I think a lot of this is also public relations because, as you point out, this whole surveillance pricing thing is getting a lot of attention and it's kind of a political hot potato.

24:09Just in general, there's all this discussion. I don't know if this goes on outside of the U.S., but there's been a lot of news stories about these flock cameras that are surveying, you know, reading license plates and basically kind of knowing where everybody is. And so I think this whole issue of privacy, so surveillance writ large, not just on a pricing standpoint. And then clearly AI gives you more capabilities and lots of people are using that for more personalized marketing. So I think the question here is, is the marketing or is the pricing personalized versus the nature of the offer? And we think this is more relevant to you because we noticed your spending patterns or whatever.

24:51So anyway, I think Walmart's making a mostly clear statement of what they're not going to do. And I think getting ahead of that as a market leader is a good idea. I certainly think as a PR move, most consumers would prefer that.

25:06Steve Dennis: So, yeah. It kind of also, I thought the timing was interesting because it laid a bit of the groundwork or plowed the road, as we would say, up here in Canada for their announcement that they're moving very aggressively into shelf labels with pick to light. And, you know, I think those two things came out the same week. So it felt like they were getting ahead of anyone criticizing that rollout, which is very practical and it saves a lot of money. And I don't think the timing was coincidental for both messages, actually. Yeah, I don't think so. I mean, they're obviously very savvy. And I think kind of throwing the gauntlet down, kind of your move, Costco, your move, Amazon, your move, Target, was probably a smart thing as well.

25:50I think there's a lot of nuance, though, to how this could play out. There's just the ability to do many, many more things at a very surgical level. And, you know, you can see why companies are going to continue to try to figure out how to target consumers better. I mean, that's been a thing for a long time. It's just that you can do it much more easily.

26:11Steve Dennis: I think for a thousand years. A thousand years. I want to serve different customers differently to meet their needs better. I mean, there's nothing. Right. The industry argument is that using all this technology and having the ability to individually address you allows us to serve your needs in a more relevant way. the skeptic says, oh, you're just doing that to arbitrage between when people don't have many choices. The example, I think, on a hot day, cold drinks or ice cream prices go up because you're just desperate to get something to drink and to cool off. Remember Coke and Pepsi did that in the vending machine?

26:48Steve Dennis: It just got smashed for doing that. It's a PR nightmare, for sure. I was going to say, one other thing I think that you would know is that, at least my experience has been, customers don't appreciate the degree to which retailers have a very good view of you anyway. I explain to people some of the target marketing things we were doing at Neiman Marcus 20 years ago that had to do with the car you drove and the value of your house. And whether you had brown eyes or green eyes, they're like, how do you know that? We buy driver's license data. That's how we know it. And we do modeling and we test and then we change our models.

27:26So a lot of that, I think, has been opaque to consumers. This is just raising it up to much more visibility, and for the most part, consumers aren't going to like it, whereas retailers left to their own devices would love to do more of it, I'm sure.

27:40Steve Dennis: Well, I mean, for consumers that crosses a line, you know, I don't want somebody standing beside me getting a different price, which is funny because there's lots of other villains in this story, like Uber and like the airlines and like a lot of other things that do price based on who you are and time of day and degree of traffic. So anyway, I would also add, you know, in all of this whole, you know, data center stuff mixes up and amplifies the emotions. And by the way, if you're a fan of the Terminator series in Terminator 2, she was in jail. Linda was in jail because she had blown up a data center.

28:16So then science fiction gets in right here every time.

28:20Steve Dennis: Well, let's stick in the whole AI thing. Thanks. Congratulations, by the way. You're our official AI influencer, according to our friends at Rethink Retail. Influence us now. Let's talk about personal shopping agents. So, you know, this is a whole thing that kind of comes right out of the matrix, right? There's a bunch of agents running around doing things. And, you know, we read in the news agents are talking to each other and conspiring and doing all crazy things. But let's dial that back to retail shopping agents. And in the hyperbole of some of these guys, it was like, you'll never have to do anything.

28:53Steve Dennis: You'll sit in your couch and you instruct an agent to go out and do stuff for you. And it all happened. And the retailers are like, holy jump, I don't want to deal with agents. I want to deal with people. Where do we sit? What's going on? What's your assessment? Well, it would probably be worth doing a whole episode on kind of where this stands and getting a real expert as opposed to me kind of faking my way through it. Because there is a lot going on. So I would think one way to think about a big picture are these kind of personal assistant agents. That's kind of the overall view, someone that can help you run your life.

29:27And then within that, there are shopping agents. So some of the offerings are these broader personal agents that build shopping into it. Others are more retail shopping focused. So the thing that prompted this was the launch of Meta's Muse shopping agent, but also a venture capital-funded, a very well-funded startup called Instinct. We've seen a lot of downloads already. And if you're just out in the world, the discourse around this is people trying it out. And in some cases, people saying, it's amazing. I can't believe how easy it is. Other people saying, this ordered something for me that I didn't want.

30:06So it's a fast-moving area. I guess I would say just to kind of set the table a little bit more, there are really four kinds of shopping agent. There are what's sometimes called vertical agents. So this would be an agent within a particular retailer. So that's Walmart Sparky. That's Amazon's Alexa, clumsily named, I would say. Rufus? Alexa for shopping. It used to be Rufus. They shifted it. Well, they were kind of doing two things simultaneously, which was very confusing. In fact, when we were out at Amazon a little while ago, they were taking us through to change. And for the most part, the analysts that were there were like, okay, this is way more complicated than it seems to be.

30:51So their landing now, or at least intermediate landing place, is Alexa for shopping. Not to be confused, but will be confused with Alexa as a piece of hardware. But anyway, those are vertical agents. So you go to the site and within the site, these agents help you navigate it, find things, answer questions for you. Then there is really the search engines agent. So Google's Gemini would be part of that. But also some of the newer, I guess not so much of a startup anymore, but Perplexity would be one that within the search engine, you were able to ask more questions and get kind of an AI mode within it.

31:29So I think Perplexity is an extension. I haven't used it very much, so I'm not sure about that. Then you have kind of narrow-focused specialists. So perplexity is more a little bit of everything. You can ask it anything. But then you have the experts. So we had, for example, Julia Bornstein, who is the founder of a fashion-focused agent called Daydream. So that's a little bit more like a personal shopper, but narrow in its focus. So presumably you would choose that because I just don't want a general agent. I want somebody that really understands this deeply. And then, like I said, there are really more of these life agents.

32:04So it's your personal assistant for everything. So fast-moving, you would think to a certain degree the Amazons and the Walmarts of the world have a big advantage here because there's already people naturally going there. And this would just be an enhancement to that, maybe to the degree it works super well, makes you more likely to convert, makes you more likely to be loyal, I guess, over time. But at the same time, if you're using Claude or any of these horizontal models, if you get good at using them, they start to learn what you like. It may just be more natural that I'm doing some work, but now I want to go plan a trip or what have you.

32:44Steve Dennis: It's interesting you say that about who's going to win from an agent. Because I was thinking that from the experience we had in COVID, when people broke habits and said, well, I always used to just go to Walmart and get what I needed. it's my first thought, or Amazon, that an agent would go find retailers you'd never heard of. It would open the aperture, so to speak, as we like to say. So I'm not sure that the incumbents win from that perspective. I mean, they're going to win for other reasons, but I think it opens suddenly you're getting offers for camera stores you've never heard of, and it turns out to be a pretty offer kind of thinking.

33:18Yeah, there's a lot of moving pieces here, and like I said, despite being an AI expert, apparently, or influencer, I don't have a very firm... Who knows? I think there are a lot of moving pieces here. If you think about, even though Agenda Commerce is quite a bit different than just pure online shopping, but one of the statistics I used to quote in my keynotes going back five or six years ago was that Amazon was the most popular search for a product-related search. And that just was, people come to expect that Amazon's going to have just about everything. So you go to Amazon and then you do a search within it.

33:54And if you don't like the price or the choices, then you come out of it and do Google or go straight to another company. So, yeah, you could absolutely. This is a disintermediation argument, which is why do you go to a multi-line retailer when you can skip it and either go directly to the vendor, which is an argument for all the investment in direct-to-consumer. Or, like you say, you might just say, I want the best whatever. I'm going to Iceland. I'm going to be hiking in October. Give me the best jacket, yada, yada, yada, yada. And up pops some brand that you really don't know much about. And you're like, oh, that sounds great.

34:34I think all these things will happen. It's just a question of how fast and who ultimately will stand tall. I think we're years away from that being clear. But I guess the main thing here is just how fast moving this is. You've got to expect, and this was one of the articles I was reading, was that how do these agents make money? Part of the reason why everybody's expecting that there'll just be more commerce embedded within Chad or within Claude or whatever is you've got to get paid perhaps more than just the subscription or more than the B2B business. We're talking about, as we've talked about a bunch of times, all this investment going to AI, even if you can get the compute, can you get enough revenue to pay back all this investment that has already happened, but more and more going into it.

35:25And so, yeah, I think this is something for people to really watch. I want to experiment more with some of the other ones. I've done a little bit of poking around in more of a shopping, more travel planning, really, than product purchases. And you found it useful, though. I did find it useful, but I guess one thing I'll say about it, and this is another thing that people talk about, when they argue for the acceleration of e-commerce by virtue of agentic commerce, I believe some of that will happen for sure because it'll shift the way, particularly if this is disintermediation. mediation. You may do a search and end up going to Walmart, but if it's a product you can get drop shipped directly from a manufacturer, that will take sales away from brick and mortar and make them online things.

36:09But the other thing is using it to make choices about where you're going to physically go. And in my case, travel is different, but in trying to decide which restaurants do I want to go to in Bilbao, Spain, you can do a classic search and that just brings you have a list of top tens. But I could say, well, this day is a splurge meal. This day, I want something super local within 10 minutes of the hotel. I can give a lot of specification, and Claude or Chat will come back to you and ask, is it more important to you to whatever? And I was traveling by myself. What place is good for a solo diner?

36:44So as it starts to learn about you, and then when I did another trip, it already has the, well, we think you're going to like this built into the logic because last time you said you like authentic places, you like whatever. I'm still going to a restaurant to eat. I'm still going to a hotel. It's not a virtual...

37:00Steve Dennis: It's a substitution. I don't know. If you want to go, we use our favorite brand here, Tecovas, if you're buying cowboy boots, using an agent to find the cowboy boot place doesn't necessarily mean you buy it online. It may just be, oh, I never knew about Tecovas or I never knew about Boot Barn I never knew about some local, like over here in Fort Worth, there's a famous, I can't remember the name of it, but a famous high end. I didn't even know that was a thing. Maybe it's worth traveling over to Fort Worth from Dallas to check out this place because I didn't know that was a thing now that I'm in the market for expensive cowboy boots because I want to look like Ella Langley or whatever.

37:36So, you know, I just think it's too simple to say that this benefits agents over retailers or this benefits online over physical. I think that's the direction, but I wouldn't be so sure it's going to move as quickly as some of the hype men and women are saying.

37:56Steve Dennis: Can we wrap this conversation, just talk about something you referred to a couple times, and that is trust. So there's a great article reviewing Muse, and I got the new Wayfair Metaglasses, which worked spectacularly for my limited use that I'm using it for, which is just taking quick video. and they say, you know, boy, if you hook Muse up to your entire life, it does a great job of doing a bunch of things. I, personally, am not going to give Meta any access, more access than they already have. So it does come down to trust. And I think that's where retailers can really win is they've done a pretty good job.

38:30Steve Dennis: The best retailers have done a good job in trust because that's what it all comes down to in these agents, I think. One of the benefits, I mean, this is in some ways just classical brand marketing, which is great brands build trust. Now, the trust may be quite different. The trust when you order on Amazon that it's going to show up at the time it's supposed to, and it's in fact what you ordered. And if I don't like it, I can return. That's a different customer job where the trust is really on reliability or speed or what have you. It's a different kind of trust when you go to, say, a very emotional brand like Hermes.

39:10You're trusting that the quality is going to be amazing. The experience is going to be amazing. Your friends are going to notice and do ooh and I-ing about your Birkenberg. That's a very different kind of trust. But still, you know the brand. You trust that you're going to serve you in the way you want to be served and you come to rely on. So, yeah, I think when we're talking about giving open access to an agent to go into your customer data, maybe send emails or make phone calls on your behalf, that's a really different thing i would imagine over time the ones that will win out part of what they'll do is be able to build that trust but you know you can just imagine this is some of the things you see on reddit or whatever whereas i tried this out and you know it bought me a plane ticket to zimbabwe or something just because i was doing research on where should i go in africa and all of a sudden i got a business you know 16 000 business class seat on south american airlines or South African Airlines or something.

40:09So, yeah. But early on, right, there's lots of misfires. I think the scaling of things like Agentic is really different than, for example, when we were testing buy online, pick up in store, and we had lots of times when customers showed up and we didn't have the product because we hadn't built the logic into our systems and the systems were expensive and clunky to operate with. Now, you scale things much faster. So that just opens up the potential of, I guess, destroying humanity. but also maybe booking an airline ticket you didn't want.

40:41Steve Dennis: We'll see how that all shakes out. Let's wrap with listener favorite. What's on our respective radar screens? What are you thinking about today? Well, I just wanted to go back. Maybe this is not super original because we talked about 80 % already, which is can consumer spending keep defying gravity? And by that, I mean the things we talked about at the top. There's lots of things that would suggest a slowdown, and yet it's not really happening to the degree you would expect. And you mentioned the credit card, well, you mentioned BNPL in particular, those credit trends where consumers risk getting extended because they do the buy now, pay later, or they're just racking up their traditional credit card debt, the drawing of savings.

41:29And a lot of those things definitely are concerning, but in aggregate they haven't affected spending very much. But that's, I guess, the reason I put it on the radar screen is I think that's worth paying attention to. Are credit card balances going up faster than just normal spending? Are BNPL payments going up? And the thing you pointed out, I think, is really the interesting thing beyond just the aggregate number, which is what types of products are going on buy now, pay later. It's one thing to buy a sofa. it's another thing to buy groceries or your chipotle order and whether people are just doing that reflexively like why not yeah they're not thinking about it as a financing decision they're really just like i'm just getting used to i'm in the firm ecosystem or whatever and i just do it with everything or whether that's really like i can't really afford it but i want to go out for a nice dinner or want to be able to feed my family that's what i would be paying attention to um in terms of some of the stats we get over the next few months well uh almost like

42:29Steve Dennis: We rehearsed this in advance. I'm over in Europe for mine. Boots is up for sale. The huge pharmacy in Europe and England is up for sale. It's a Sycamore product, Sycamore being private equity that's deep into retail. They own Staples. Here in Canada, they own Rona, which was when Lowe's exited the market. It consolidated to Rona. Very good, very savvy operator. Anyway, they've been running Boots. It's up for sale. And guess who's thinking about buying it? Well, Canada is on the move again. It's the Weston family who owns Loblaw. It's looking like they are going to buy that. Now, this is the second big acquisition by a Canadian organization.

43:09Steve Dennis: Couchtard made an$8.7 billion U.S. buy, a friendly offer for a large, very well-respected Polish convenience store chain. Now, if anybody doesn't know Loblaw, they also own Shoppers Drug Mart, which is Canada's biggest drug store. about 1 ,200 stores. They are, full disclosure, a client of mine, that being the Loblaw. And it's the Westin family that's looking at buying it. Boots has 1 ,800 stores. As I said, Loblaw already runs a drugstore. They have 1 ,300, biggest in the country, so they know how to run drugstores. It's up for sale for 9 billion, with a B, 7 billion euros or 9 billion US. Remember those days when the euro was double the US?

43:53Steve Dennis: I had to check that number. Is it only nine? Anyway, so much for the English pounds. Anyway, all of this is spurred by a growth orientation here in Canada. We start to turn our minds to growth outside of North America. Our pension funds are already big investors globally. I wonder why that is. Yeah, well, as we say. Has anything happened between Canada and any other country recently? Well, it's less. I feel like it's less about whatever relationship and more about do we understand the market anymore? I mean, just right back to the beginning of what we were talking about, we see these very diverse kind of, you know, gives and takes.

44:33Steve Dennis: And we're like, do we even understand the U.S. market anymore to make a big billion-dollar acquisition? Hey, let's go over to Europe. I think we, I don't know, maybe we understand the market better. There's a few good assets up for sale. I mean, that's also happening. So I'm keeping an eye on that. Let's see if that deal closes. I don't think that deal's closed. The Kuchard deal for the Polish C-Store is a friendly offer, so we imagine that's closing. and I don't see anything that would get in the way. So anyway, and that's a wrap for this episode. No beardos, no weirdos episode, should I call it.

45:02Steve Dennis: Just the latest and most interesting retail insights on the planet. So let's leave it there. Thanks for tuning in. To help more retail leaders discover the industry's leading podcast, please drop us that five-star rating and review on Apple, Spotify, YouTube, or wherever you enjoy your pods. And for more on my strategic advisory services, keynote speaking, best-selling books, and even more retail industry insights, go to stephenpdennis.com. If you are a brand or service provider looking to take your influence to the next level, reach out to us for sponsorship, advertising, or event partnerships.

45:39Steve Dennis: And if you want to learn more about my own keynote speaking and advisory practice, reach out to me via LinkedIn.

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