From Where I Sit: Episode 10 with Neil Saunders Transcript

Tom McGee:

Welcome to From Where I Sit, I’m your host, Tom McGee, President and CEO of ICSC, the preeminent membership organization serving the commercial real estate and retail industries. Each episode, I’ll be joined by top experts to explore the trends impacting communities and commerce and the spaces where people shop, dine, work, play and gather.

I’m pleased to welcome Neil Saunders, Managing Director and Retail Analyst at GlobalData Retail, to the latest episode of From Where I Sit.

Neil’s clients rely on his analyses and expertise on consumer behavior, brand preferences, channel dynamics and stores to make business decisions. In addition to his work with top retailers, Neil is widely quoted by top media outlets such as The Wall Street Journal, The New York Times, CNN and AP News.

Neil, looking forward to our conversation and welcome to the show.

Neil Saunders:

Yes, thank you very much for having me, Tom. It's great to be here.

Tom:

It's great to have you and Neil, I'm very familiar with you and your work throughout the retail industry, but just for some of our listeners, let's start a little bit about GlobalData Retail and talk a little bit about the services you provide for your clients.

Neil:

Yeah, sure. Thanks, Tom. So, GlobalData is a market research firm and we provide insights and data on all kinds of things. The bit I focus on, I think, is the most exciting bit. It's the retail industry. And within that, we're looking at the consumer, we're looking at the retailer, we're looking at the market, the economics, the trends, everything that really impacts on retail. And of course, we're gathering, as our company name suggests, a lot of data and information and our team of analysts synthesize it, they pour over it to try and make sense of it. Also, we can advise our clients, what does it mean for you and how do you need to adapt to be successful? So as you know, there's always something going on in retail. So it's a very dynamic and exciting place for us to work and to investigate.

Tom:

Well, there certainly is always something going on in retail. It's the ultimate consumer facing industry and very sensitive to things that are happening in broader economy. And let's talk about that a little bit. Let's talk about the state of retail. The last few weeks have certainly included a lot of new things that are impacting the economy in general and retail in particular. And the one that's probably top of mind is tariffs and the new focus upon implementation of tariffs. Talk a little bit about how you see that playing out in regards to the psychology or the mindsets of retail executives right now, as they try to think through supply chain challenges, the cascading impact that can have around pricing and consumers.

Neil:

I think it's something that is highly disrupted, so it is foremost of mind. But one thing I would say is I think when you listen to the media and you hear the political commentary about it, there's a lot of emotion involved. Really, retail executives strip that emotion away. I'm sure everyone has opinions on tariffs, but for them it is a problem. We need to tackle it. What do we need to look at? And I think what they're going through at the moment—there's a lot of planning to really understand the impact of their business and to look for ways to still deliver value for the customer, even in a higher tariff environment. So that could be things like retooling the supply chains. It might be renegotiating with suppliers. It might be changing the composition of products or the steps in the manufacturing process. So there's a whole array of things that the executive teams are working through. I think one of the problems for them though, as we all know, is the situation changes very rapidly. So I think everyone is keeping a very open mind as to what comes next and it's being nimble and being flexible that are really key in this kind of market because you need to be able to react quickly. And I think that's what a lot of teams are really focused on at the moment.

Tom:

Thank you, Neil, and I think you're spot on around uncertainty and that's just a challenge for all business leaders. The business folks, generally, if they know the rules of the game, they're pretty good at adjusting. And that's one of the challenges here is the uncertainty. I’m just intrigued by the supply chain and that's the core of this. Where does the product come from? How is the time lag between sourcing to being on shelves? I would imagine for some retailers, it's not an easy task. It's not like you can just say, well today I'm sourcing these products from China, tomorrow I'm sourcing them from some other country. How do they evaluate that? It's such a complex decision making matrix for these major retailers.

Neil:

Well, that's absolutely right and it's a really interesting thing because there's this assumption that everyone uses China, for example, because it's cheap. It's certainly cheaper to manufacture things there than the U.S., but it isn't dirt cheap. I mean, China has been reasonably expensive in terms of labor for quite some time and a lot of it has to do with the ecosystem and products like electronics, for example, you need a lot of inputs, you need a lot of specific skills, and you need them en masse. And China has that. It has all regions, whole cities that are kind of devoted to a particular industry and all of the components of the supply chain ecosystem are present. If you're in clothing, for example, it's not just a matter of changing factories, you have to make sure the factory has the skills, the capabilities and can deliver to the quality you want, especially if you're a mid-market or a higher-end brand. And you can't just change factory because you could find that your quality drops off, which of course is then terrible for the consumer. So it's actually a very, very complicated thing. And supply chains have just become so intricate and interwoven that there are input costs from different areas. So even if you change where you make something, the components that you're buying to make that thing may still be subject to tariffs and other things. So it's a really difficult thing for retailers to work through and it requires a lot of retooling. It requires a lot of working out the best kind of processes that you can use across the globe. And that's why retailers are taking their time over this. There are very few knee-jerk reactions.

Tom:

As you said, there's just a lot of uncertainty and perspective changes that could still come. So we could probably talk about tariffs for the entire podcast and not exhaust the topic, but just to move on a little bit from tariffs—you mentioned, in talking about GlobalData and the things that you do for your clients, just evaluating a lot of different information, a lot of different data. You're very knowledgeable about retail. You can talk very broadly about supply chains. Well, as well as talking very granular about specific retailers. What are the kinds of things that you look at on a regular basis that really help you get your arms around this very complex industry?

Neil:

Yeah, it's a great question, Tom, and we take the approach that you need to look at a lot of different sources to get the complete picture, because there are so many different things going on in retail. With some of the things that we look at most commonly, we have our own consumer panel, for example, so we understand what people are buying, where they're buying it, how much they're spending. That's really important to us because it enables us to detect changes.

It's not so much the what people are doing—that's important and we use it—but it's what they're doing compared to what they were doing last month or the year before. That's the interesting thing. You can see those changes. We get things like credit card data so we can look at those. We get some, what we call signal data. So we're constantly monitoring things like patents and the job market. And that's kind of interesting because they're not very intuitive data sets, you wouldn't think, I'll go and have a look at those. But sometimes when you dig into them, you can say, hey, look, this retailer is actually recruiting a lot of roles around AI, or they've just patented something that is really interesting from a technology perspective. And it gives you a kind of a little insight into something that they might be looking at. So we use that a lot as well.

The other thing that we do is visit stores a lot. You can find out a lot about what a retailer is doing just by looking at the stores. What products have they got out there? What's new? How have they changed merchandising? Has customer service changed? And of course, we augment all of that with talking to retailers as well. We talk to a lot of the executive teams on a regular basis just to find out what they're thinking, where they see things going, and what's important to them.

You put those things together and what's interesting to me is you then start to get patterns and themes and you can start to discern what's going on or where things might go in the future.

Tom:

I mean, it's fascinating. There's so much—I would imagine the richness of that data is tremendous. And there's just a lot to gather from it. You talked about trends and patterns that are happening. Are there some interesting and new things that are emerging in retail outside of the broader topic of tariffs and so forth that we talked about that would be interesting for our listeners to hear about?

Neil:

There are lots of things that are happening. I think one of the interesting things we're seeing at the moment is the concept of value. Now, value has always been important to the customer. I don't think it's ever not been important, but it really has become a lot more important over the past few years, partly because of inflation. And value is not price, price is part of it. But consumers are really asking themselves very deeply: What value does this product add to me in my life? What value does this product have over another product? What value is this retailer adding over another retailer? And one of the ways we've seen that in the data is just the time taken to make different purchases and the number of stores people will compare or browse during the purchase process. Both of those metrics have gone up. They went up over the past couple of years and they've gone up a little bit this year from what we can see from the start of this year, the data. And it just shows that people are shopping around a lot more and they're putting in a lot more thinking around what they're buying, especially for discretionary products. And that's interesting because it just means the competitive environment is much more intense.

Maybe in the past someone would have come to you by default as a retailer because they've always used you. Now maybe you're still the first port of call, but they’re maybe looking at one or two others as well. And if you're not really delivering what that customer wants, there's much more opportunity for them to defect. So that's one of the interesting things we've seen.

Tom:

It's fascinating. There's so much more transparency around pricing and product availability because of data, because of technology than there was five years ago or 10 years ago. I'm not surprised by the concept of value, but is it telling you something about the consumer? The last couple of months, we've seen a pretty meaningful drop in consumer confidence. Some of that's relating to some of the broader macroeconomic uncertainty. Are we in a new era for the consumer where they're just so much more price conscious, so much more focused upon value that this is a trend that's going to take hold for the next decade or so?

Neil:

Yes, I think this one does stick to a degree because as you mentioned, Tom, that technology facilitates this. It's so easy for people to compare price and to compare different retailers now. We have so much choice. There's so much competition in the retail market. It's easy for customers to shop around. And I think that uncertainty lingers. So all of that pushes the consumer to prioritize value and to ask themselves the question, do I really want to buy this product? Do I really want to spend this money? I don't think that dissipates. I think the good news though is people are still spending. I think you do see a lot about consumer confidence and it's certainly gone down. We see it in our own surveys, but I think a lot of it is based on uncertainty and whilst that uncertainty may turn into something quite nasty, at the moment it is just a feeling. And feelings are important and they definitely influence spending. But we're not seeing collapse in consumer spending because the reality is not much has actually changed for the customer. The uncertainty is there, but actually their own financial situations have not really deteriorated at the moment. So, a lot of this is around feelings and they are important, but they're not necessarily the only driver of what people commit to spending.

Tom:

The job market continues to be strong. The unemployment rate is still near historic lows. And so if people feel confident in their jobs, they generally continue to spend. One of the things I found fascinating is there's still a pretty significant disproportion of spending in the U.S. A recent stat I saw was 50% of all consumer spending in the U.S. was done by the top 10% income producing households with, by default, the remaining 50% done by the other 90% of households. Does your data support that kind of, it's almost like a barbell impact a little bit and that the top of producing households certainly are not feeling the same type of stress that the rest of America is experiencing. Are you seeing a similar type of trend?

Neil:

Yes, I certainly think it's true. Our data show that with the lower income consumer, there has been a very hefty impact from inflation and they're still spending more than they did before. It's just a higher proportion of what they spend is going on non-discretionary goods because things like food and gas have gone up and they need to buy those things. And that's just squeezed the amount that they have to spend on discretionary things. So we've seen some pressure there. The upper income households, there hasn't been as much of an impact. Sure, they're spending more on discretionary products, but they have more wiggle room to still spend on discretionary goods. So there, the play is more about confidence and willingness to spend. It's not about the ability to spend. They have that ability.

What's interesting though is we have seen over the past maybe nine or so months, a little down tick in their willingness to spend. And that's where the uncertainty piece comes in. I think especially as things like the stock market get impacted, people do say, do I want to make this spending? Is it wise? And it's almost like a vibe thing in a way. It's quite strange. It's like, hey, there's something going on with the economy. We're supposed to be more frugal. We don't necessarily have to be frugal financially, but we'll kind of join in. It's a very strange psychological thing and it only really affects the higher income consumer at the margin. Their spending doesn't collapse, but we've definitely seen some small shifts there and it's one of the interesting emerging patterns.

Tom:

I recall one of Walmart's recent quarterly calls, they talked about growing their market share with kind of top income households, that they were seeing an uptick in high income household shopping at Walmart, which I think supports what you were just saying. Also, I guess and expect this concept of value, which I'm intrigued by, that's something that your data is pointing out as a major trend, I guess that would intuitively then be a strength and a competitive advantage for value-based retailers.

Neil:

Yes, I certainly think when you have a price focused retailer, you can do pretty well in this type of environment. And to your point, think Walmart has been the example of that. Walmart's always had low price leadership. It provides value for money. It's very clear on that messaging. And it has won more customers from across the spectrum because people are saying, hey, look, the price of food has gone up like crazy. Even if I can afford to spend that much, I don't want to spend that much. I don't feel comfortable with that. And they've migrated to channel like Walmart to try and save money. Aldi is another one. I think that they've saved consumers a lot of money on the grocery shop and they're winning customers from across the spectrum and great growth from Aldi. And I don't think, though, it's a guarantee of success because we've seen problems there. Family Dollar hasn't done particularly well. We obviously had issues with Big Lots, you know, they're in the value space. But to me, the reason why they haven't done well is actually because although they're in the value space, they actually have failed to deliver on value. I think if you look at Big Lots, for example, its pricing probably wasn't sharp enough and its ranges weren't as interesting enough to, say, Home Goods in off price. Though they just didn't get something about that value equation right. So you can be in the value space, but you still have to work incredibly hard to actually deliver the promise of value to the customer.

Tom:

There's some things that are timeless in retail. You got to the right merchandise. You got to get the right pricing. You got to have good customer service regardless, no matter what, no matter where you are in the channel. You mentioned, you know, visiting stores. That's something that's of high interest to ICSC and core to our value proposition, our members. When you're experiencing the store, are there things that you identify immediately and say this is a retailer that kind of gets it? And this is a retailer that needs to really step up their game in a certain way to differentiate themselves or serve their customer in a better way? What are some of the differentiating characteristics of those retailers that are doing well from the store experience standpoint and those that need to raise their game to some extent?

Neil:

The thing that I look for when I first go into a store, especially for stores that are kind of in the middle market and the upper parts of the market, is I look to see whether there's an understanding of the customer. And that immediately comes through in the merchandising and the way in which the store is laid out, the way in which it feels. Because what stores should be doing is saying, look, here's our point of view.

We can all get stuff. We can get stuff on Amazon. We can go to Walmart or Target just to buy things that we want. I think when you're going into more of the middle market and the upper part of the market, what you want is something that's more curated. You want to go into a store and say, this is a store for someone like me. I can see things that I like in here. It's easy to shop. I'm having a bit of an experience in this store. I'm enjoying my time in this store. And of course it goes back to adding the value.

So I'm always looking to see, does this store have a point of view and is that point of view aligned with who the customer might be for that store? And I think you can almost pick up on those vibes very quickly. I mean, if you go into, they've done really well, of course, but if you go into an Abercrombie & Fitch, you can see the point of view right away. You can see what they're aiming at, the type of customer. You can see why the customer would get excited and buy multiple items.

So it's almost like a vibe check in a way. It's quite a qualitative thing, but it's very insightful.

Tom:

Well, it's almost like, they understand their mission. What differentiates them versus other consumers? You mentioned, do they understand their customer and who they're trying to serve? You know, we talked a little bit about customers from an income perspective, upper income, middle income. How about demographics from an age perspective? Are you seeing in your data differences between how a Gen Z, a Millennial, a Gen X, a Boomer is reacting in this? First of all, let's talk about it from an economic environment perspective before we talk about it specifically to their preferences and retailers. Are you seeing different behaviors based upon where people are in their age groups?

Neil:

Yes, I think we are. And the age group that's probably most reactive, I would say are kind of the Millennials, maybe Gen X, because they are kind of the family groups. So they actually have a lot of income pressures, especially if they've got kids, they're seeing grocery bills, clothes bills, all of those things have gone up for them. So they're being very mindful about where they shop and what they buy, very budget conscious.

At the lower end of the age range, the kind of Gen Zs and some of the Gen Alphas coming through, it's really interesting because definitely from a confidence perspective they're affected, you can see that, you can see in their sentiment it shifted more negatively. But actually in some of their spending behaviors, they're still quite carefree. And I think not among everyone, but along some of that group, you have a really interesting dynamic there that says, well, look, everything is kind of uncertain. I'm not certain whether I can afford a house or how I'm going to progress in a life stage type way. So I'm just going to enjoy myself because what's the point of worrying about it? There's almost a degree of kind of flippancy or carefree attitude among some of those consumers. So they're still spending even though their sentiment has gone down. So I think that's quite an interesting dynamic and one that's quite good for retail.

Tom:

Well, it's the beauty of youth, right? You don't have that maybe some of the battle scars of going through some of the previous economic crisis. As you mentioned, the young, the youth and Gen Z. And one of the things I just want to check if you're finding a similar type of experience, the presumption out there is that Gen Z is all about digital and all about the use of technology. It's integrated in their life. They're digitally native, but we have found in our research that Gen Z really does appreciate the in-person shopping experience as well. Of all the demographic groups, that group in particular enjoys shopping at a store and enjoys going to a mall. you see something similar in your data?

Neil:

Yes, well, I think you're right. Gen Z and Gen Alpha are digitally native generations and they use digital technology extensively. But one of the big myths is that that means they don't shop in stores. And not only is it untrue, it's actually untrue to an extreme because they're actually very, very social consumers and they love going into the malls. I mean, we see that come through in the data from where they're spending. But also anecdotally, you see it as well. I always make a point on Black Friday, I go to the mall, I get there really early, because obviously all the stores open early, I get there at 6 a.m. Do you know what the group there that is the biggest at that time? It's the young consumer. All of the Boomers are still in bed. They're coming out later on. They're relaxing. But the Gen Zs and the Gen Alphas, they're there in the mall. They're lining up for the Starbucks. They're there. And the biggest line I saw in the mall I went to this past Black Friday was outside Pacsun. And it was all these young consumers. So yeah, to your point, it's become a very well-engrained myth, but it is just that. It's a myth. I think the younger consumers, they love digital, but they love stores as well. And they combine the two. It's not either or for them. It's just part of one ecosystem in retail.

Tom:

I always say that the only channel that matters in retail is the consumer channel and that to be a successful retailer, generally, and there's some exceptions to this, but generally you need to be able to compete both in the e-commerce channel and in the physical channel. And I can personally attest that the Gen Z group is out there early on a Black Friday. I have two Gen Z daughters and that's a ritual there to go to the store.

I want to go back to one of the interesting things you said was that you have a consumer panel that you talk to as a source of your data, which I find intriguing. Talk a little bit about when you say consumer panel, you mean these are your everyday Americans that are going out and experiencing retail and you're talking to them about their likes, dislikes, viewpoints? Is that the right interpretation of what you mean by consumer panel?

Neil:

Yeah, so the consumer panel is basically a body of people that we have in the U.S. and it's a very large group of people. It's millions of consumers, although we obviously don't speak to all of them. We just have them within the orbit. And we do two main things with them. One of them is longitudinal. So they will be people that we ask questions of every single month, every single week, and we ask them the same sorts of things to understand things, basic things like what they're buying, where they're shopping, what they're thinking, their sentiment. The other side is we do sort of ad hoc things. So we will ask people about specific things now and again. So it might be how they're using social media for retail or what do they think of a particular retail and we'll do a deep dive.

That's how we kind of access their insights and it's both quantitative and qualitative. Sometimes we will ask them traditional type survey questions. Sometimes we do qualitative things with them as well. So we will maybe have a chat with them. Maybe we'll do a focus group with them. Sometimes we walk around stores with them. We'll do accompanied shops. So it's a whole variety of things, but that's really important to us because to your point about the consumer being the channel, the consumer is the truth in retail. So it's really important to us to understand their perspective and their habits and behaviors as well.

Tom:

Before we leave this topic, they're the consumer, they're the ones who are going to put down their hard earned money to shop at a particular retailer or not. You mentioned the concept of value being something that's a trend that will be a sticky trend that's grown in prominence. Are there other things that you're learning from the consumer that are surprising or just new around their view?

Neil:

Yeah, I think there are some things that we're discovering. I think one of the things is high-low consumption. Because there's this perception, like, and it's sort of a historic perception, I think, where it's sort of like, oh well, in the value space, you have the lower income consumers. And that used to be true to a certain extent. I think it's scattergun now. We're seeing consumers from across the spectrum, across the income spectrum, across demographics shop high low. Sometimes people will be in value, sometimes they'll be at high end. People that are shopping in luxury sometimes are also shopping on Shein. There's a real mix and churn in consumer behaviors and it's really shattered some of these established perceptions about where people shop and why they shop. I think that's one of the things that's not really going away. And that's become very, very important for the customer.

I think the other thing that we see is we see some very specific things and you have to be really careful with the consumer and you have to layer the insights because one of the things we hear all the time is how sustainability is really important to the consumer. And it is overall consumers are concerned about it and it's very important for everyone. But it doesn't always drive behaviors. It's sort of the icing on the cake. The consumer wants everything else to be right. The price, the product, the design, the convenience, the channel. And then they want sustainability on the top. And I think it's really interesting because you have to layer it in as an added value component on top of everything else. And I think that's become even more heightened now. So everyone that just chases sustainability and doesn't focus on anything else tends to not do very well because it's actually an additional thing that the consumer wants. It's not the core of their needs, despite what they sometimes say.

Tom:

Right. You still got to get the fundamentals right to deliver. One other thing you mentioned, you know, is just the use of social media retail and just any observations around that. Because I am an older demographic. I'm not on social media that much, but when I am on social media, if I'm looking through Instagram and so forth, you really can see the influence of retail, the integration of product within the social media channel. Just your thoughts around that. Because I think that's just going to continue to become more prominent.

Neil:

Yeah, it's really interesting. I think social media has become a more significant purchasing channel because you can purchase direct from TikTok Shop, from Instagram and so on and so forth. But in a way, I think the biggest influence that social media is having on shopping habits is that it is an engine of discovery. Because what a lot of consumers are doing, especially on a platform like TikTok Shop, is they're going on there to see and to find interesting things. And when they see those things, those brands, those products, they will say, that's interesting. I may purchase it directly from the site or I may go into a retail channel and buy this product. And in a way, what it's doing is democratizing the space of retail because you don't necessarily have to be a huge brand that gets a deal with Sephora or Ulta or someone else in beauty, for example, to get in front of the consumer. Actually all you have to do is be creative on social media to generate some interest. And I think a lot of consumers now are discovering some of these smaller brands on TikTok and other places. And that's the real battleground for brands big or small. It's like, how do we take a slice of this space to generate discovery and ultimately to generate excitement and then sales for our brand? And I think that's a really interesting aspect of social media as it plays a role in the shopping process.

Tom:

I love that phrase. It's an engine of discovery. What a great phrase. It's so true. And it really does democratize retail to a certain extent. Speaking of retail, you also said that you talk to retailers a lot. And we talked about the impact of tariffs and uncertainty on the retail community and retail leaders. Are there other major things that are top of mind for retailers right now that they're looking at from an investor perspective or a differentiating perspective for the consumers?

Neil:

Yeah, I think there are. And I think this kind of links with tariffs, but it's something that's been around for a while. So it's not exclusively around tariffs. It's around curation. I think one of the viewpoints of retailers is, look, what we've got to be better at is curating what we offer. We don't necessarily want to offer everything under the sun. We've got kind of Amazon to do that. What we want to do is place our bets on products we think the consumer will like, edit down our range so that we are more efficient. We've got fewer SKUs, but they're actually better quality SKUs in terms of quality of what people will want to buy. And then we can merchandise that effectively in store and we can put a proposition in front of the consumer that's really interesting. And there's creative things going on in that space as well with retailers saying things, especially in fashion with retailers saying things like, we commit to this amount of inventory, but we want to leave some open to buy because we want to be able to chase trends and actually do things within seasons that are creative and resonate with the consumer. So I think that kind of piece around curatement of assortments and merchandising is something that a lot of retailers are working on and to really just refine the proposition. And the reason it's important is because it's good for the retailer because it's more efficient and it's better for profitability, but actually it's good for the consumer because what the consumer often doesn't want in a kind of comparison shop that they do is just to be faced with a sea of merchandise. What they want is actually a more edited, curated experience which is relevant to them and saves them time. So that's something that we're seeing a lot with retailers and there's a lot of re-engineering going on. So things like supply chains, business models to really bring that to the fore.

Tom:

Yes, back to that. You were talking about understanding, as you visited stores, understanding who your consumer is and what your value proposition is. Talk a little bit about the importance of the store to the retailers. We went through a period of time where there was the so-called retail armageddon or apocalypse. Retail was heavily impacted by the pandemic, but there's been a real resurgence in understanding the importance of the store. And we're seeing the real supply demand mismatch. In other words, retailers are looking for space and there just hasn't been a lot of new space put online, built, since really the Great Financial Crisis. I'm presuming that you are seeing the same thing. The retailers are beginning to use their stores for multiple purposes as little mini fulfillment centers, as well as traditional, for traditional shopping experiences.

Neil:

Yeah, I think it's really interesting because that retail apocalypse, it's just the most ridiculous headline ever. I mean, it's just whoever came up with it really, it's taking to task because it was never true, but it still does the rounds. And I think we do see in our data just how nonsensical it is. I mean, just for core retail. So, I mean, it's excluding food service and all of the other services and entertainment things that occupy physical spaces. Last year, it was about $3.8 trillion of core retail sales through physical stores. And that's far more than online. So stores have got the monetary weight behind them. And apart from the pandemic, the value going through stores has never really fallen. So it's not like the sector's collapsing. There are changes in the way people use stores, both from a consumer's perspective and a retail perspective, but that's never not been the case.

The trouble is I think the media pick up on every little change or nuance or every closure which is perfectly normal and healthy in the scheme of things and they latch onto it and say it's a retail apocalypse. But the thing for me, Tom, that really underlines this is the data again that comes from the consumer. The vast majority of consumers want to shop in stores because, let's face it, who really wants to sit at home and at work in front of a phone or a laptop or desktop and do all of the shopping. There are very few people that want to do that. And when you look at the reasons why people visit physical stores, sure, it's to get goods, it's a functional thing, but it's also for the entertainment. It's for the enjoyment. It's for the sociability of doing that. It's really important to people. And that's where I think it's exciting because that's what we're seeing more of. The retailers are responding to that and saying, well, this is important to consumers.

How do we make our stores more engaging, more entertaining? How do we make this space more valuable for someone's time by integrating food service, leisure, other services that they want to use to create a really nice ecosystem where they want to come? And I think that's where we're seeing a move to and we're seeing a lot of investment in that space. So actually I'm really optimistic about physical because the numbers are there.

The psychology is definitely there and we're seeing retailers evolve the concept of what stores look like, but they're still just enormously relevant. And I can say this because I'm not going to be here to take a photo if it's not true, in a hundred years time, stores will still be here. They're not going anywhere.

Tom:

Well, you never know with the advances of modern medicine, maybe you will be, Neil, you never know. Before we end our time together, Neil, I'd be remiss if I didn't ask you about AI and the impact of artificial intelligence and just some observations in regards to that and the impact it has or could have upon retail over the forthcoming next few years.

Neil:

I think that AI is going to play a major role in retail. But I think where it plays a major role is in spaces where there's a win for the retailer and a win for the customer as well. There's a lot of fanciful things. And just one really practical example of that is in search capability. This is more for online, but what we're seeing now is AI actually helps products and brands and retailers create better listings for the customer. And we're seeing AI play a role in spouting the consumer search and find the things that they want more effectively because you know what it's like online. It's kind of a Wild West. You type in something to Amazon, like thousands of things pop up. And actually what AI can do there is really help curate what comes back to the consumer in terms of the assortment and create a better and stronger experience. Now, obviously that's good for the retailer because they'll probably end up selling more. It's also good for the consumer because it creates a more disciplined experience. Where it's interesting, of course, is how you train the AI and what brands it prioritizes and there you get into a bit of a minefield. But I do think in that kind of space, we're going to see a lot of uses of AI, which is very exciting. And it's going to play a role in the backend, things like supply chain, forecasting, all of those good areas. But ultimately, what all of that should be about when it's done properly is delivering a better experience for the customer with forecasting, making sure the products are in stock, with supply chain, making sure it's efficient so that prices can be kept low. That, for me, is the really important thing. And it's what retailers should do with all technology. They should tie it back to, okay, this is great, but what does it do for the customer? And if you do that, I think that's an area where you can see real success.

Tom:

I totally agree with you, Neil, and that's a great way to conclude. You've been very generous with your time. I know that you're in Hawaii today and on the great island of Maui, so thank you. It's very early where you're at, so thanks for taking the time. And before we conclude, any final thoughts or feedback for our listeners?

Neil:

Yeah, thank you, Tom. It was great to have joined you. The only one thing I would say is there's a lot of uncertainty in the world at the moment and there's a lot of negativity. But I think we all need to look beyond that as an industry because we're still a multi-trillion dollar industry. There's so many exciting things going on with technology, with propositions, so many great people in retail and retail real estate. And I think these are definitely challenging times, but we can work through all of these problems because you know what? We did it during COVID. That was a really difficult time. We showed the resilience of retail and I think we can do it again and we can come out of this a lot stronger. So I think a lot of optimism going forward despite where we find ourselves at the moment.

Tom:

Great. Well said. I totally agree with you. Retail is a fiercely competitive business, is super dynamic and that's why you and I love it. That's why we work in it.

Neil:

It is.

Tom:

Neil, thanks so much for joining the show today.

Neil:

Thank you very much for having me, Tom. It's been a real pleasure.

Tom:

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