 Live from the Wynn Hotel in Las Vegas, it's theCUBE. Covering Magento Imagine 2018. Brought to you by Magento. Hey, welcome back to theCUBE. We are continuing our coverage live from the Wynn Las Vegas at Magento Imagine 2018. We've had a really exciting day, talking about commerce and how it's limitless and changing dramatically. Joining me next is Suturita Kodali, the vice president and principal analyst at Forrester. Suturita, it's great to have you on theCUBE. Thanks for having me, Lisa. So commerce is limitless. We've been hearing this thematically all day. You primarily are working with retailers on their digital strategies. What, and you've been doing this for a long time. Let's talk about the evolution that you've seen in the retail space with everybody expecting to have access to whatever they want to buy in their pockets. Right, right, right. I would say, so I've been working in the retail industry for the last two decades. I've been an analyst for the last 10 plus years. So I've really seen a number of changes. And if I had to just summarize the biggest changes, one is just the inventory across different retail channels. So that's definitely been a huge, huge one. It's like, how do you order online but then fulfill the item from a physical store or fulfill the item from another store? So that's basically the digital transformation of retailers. Those are investments that companies like Walmart and Target have really been doubling down on and focusing on. The second big change is Amazon. And they single-handedly have transformed the retail industry. They have increased consumer expectations. And what Amazon's also done is reinvented retail as a business model because it is no longer about just selling product and being profitable, selling that product. Amazon actually is not profitable with a lot of the items that it sells. It makes money in other ways. And it is probably what I would describe as America's first retail conglomerate. And that becomes a really interesting question for other companies to compete. Do you have to become a retail conglomerate? And then the third big change is just brand selling direct to consumer. I remember when I started at Forrester, my very first project was with a large consumer electronics company that asked, well, should we even sell directly to consumers? There's channel conflict and issues with our distributors. And now that's not even a factor. It's sort of table stakes. You have to sell direct to consumer. And that's probably where we'll continue to see a lot of retail sales in the future. So the Amazon model, we expect to be able to get whatever we want, whenever we want it, have it shipped to us either at home or shipped to us so we can go pick it up in a store. It's really set the bar. In fact, they just announced the other day that 100 million Amazon Prime members. I know people that won't buy something if it's not available through Prime. But I think this morning, the gentleman that was on main stage from Amazon said, at least 50% of their sales are not products they sell. They're through all of the other retailers that are using Amazon as a channel, as part of their omni-channel strategy. If you think of a retailer from 20 years ago, how do they leverage your services and expertise and advice to become omni-channel? Because as today, you said essentially it's table stakes for companies to have to sell to consumers. Yeah, yeah. There are so many questions that really require, I call it like destroying the retail orthodoxies. And retail has historically been about buyers and merchandisers buying goods. There's the old expression in retail, you stack them high and watch them fly. And that is just where buyers would, like take a company like Toys R Us, they would basically take what Mattel and Hasbro told them to buy. They would buy a ton of it, put it in stores. And because there was less competition back in the 80s, consumers actually would buy that merchandise. And unfortunately, the change for retailers is that consumers have so much more choice now. There's so much more innovation. There are small entrepreneurs who are creating fabulous products. Consumer tastes have changed. And this old paradigm of Mattel and Hasbro or kind of fill in the blank with whatever vendors and suppliers pushing things is no longer relevant. So there was just an article in the journal today about how Hasbro's sales were down by double digits because Toys R Us is now going to go out of business. And so those are the kinds of things that retailers who did not adjust to those changes, they're the ones that really suffered. They don't find ways to develop new inventory. They don't find new channels for growth. And they don't protect their own, they don't build a moat around their customers like Amazon has done, or they don't find ways to source inventory creatively. That's where the problems are. You think that's more of a function of a legacy organization having so much technology that they don't know how to integrate it all together. What do you think are some of the forcing functions and old orthodoxies that companies that don't do it well are missing? Yeah, a lot of it is just in the old ways of doing business. So a lot of it is being heavily dependent, for instance, on buyers and merchandisers buying things. I mean, one of the biggest innovations that Amazon realized was that, look, you can sell things without actually owning the inventory. And that is their entire, what we call the third party marketplace. And that is just so simple. But if you were to ask a buyer at a major retailer, like a decade or two ago, look, why do you have to buy the inventory? Their response would be, well, you have to buy the inventory because that's just the way it is. And it's like, well, why, why? You know, I mean, why don't you try to find a new way to do business? And they never did, but it took Amazon to figure that out. And the great irony of why so many retailers continue to struggle is that Amazon has exposed the playbook on how to sell inventory without owning it. And so few retailers to this day, you know, have adopted that approach. And that's the great irony, I think, is that that's the most profitable part of Amazon's business is that third party marketplace. And every retailer I talk to is like, oh, it's really hard, we can't do that. But the part of Amazon's business that everyone is looking to imitate is their fast shipping, which is the most expensive part of their business. Amazon is only able to afford the fast free shipping because of the third party marketplace. Other retailers want to get the fast free shipping without the marketplace. And it just doesn't make any sense. And that's really the heart of the challenges is that they just don't think about alternative business models, they don't want to change the way that they've historically run their businesses. And some of this could mean that merchants are not as powerful in organizations. And maybe that's part of the pushback is that there could be a lot of people who lose jobs. I call the future will be like robo buyers and financial services, you have robo advisors. Why not robo planners in retail? So one of the keys then of eliminating some of the old orthodoxies for merchants is to be able to pivot and be flexible. But it has to start from where in an organization from like a digital strategy perspective, where do you help an organization not fall into the Toys R Us bucket? Yeah, I think a lot of it does have to start with merchandising and putting in some interesting digital tools to help merchants be more flexible. So you want to flex to supply and demand. And some of that comes with integrating marketplaces into your own experience. Some of it could be investing in 3D printers that could make things that are plastic or metals based on demand. That's something that I always wondered why Toys R Us didn't, for instance, make digit spinners on demand. Why did you have to get them with a six month lead time from China? It never made any sense. You can scale service. So use technology to match great store associates with a customer who may have a question. And you don't have to be in the same store. It can be a FaceTime call with somebody who is far away, but very few retailers do that. And finally, the last bit is really to look at new alternative business models and finding new ways of making money beyond just selling inventory. That's really key because there are so many opportunities when companies go on the channel of increasing, not just increasing sales and revenue, but also reducing attrition, making the buying process simple and seamless. Everybody wants one click, right? Super seamless, super fast and relevant. It's got to be something, if you're going to attract my business, you need to be able to offer something where you know me to a degree, know what it is I might have a propensity to buy. Absolutely, and that's the entire area of personalization and that personalization can be anything from a recommendation that I give you. It can be proactively pushing a recommendation. That's what companies like Stitch Fix do, is like, I tell you what I want and then they send you a box in the mail of things that I think you would like and oh, by the way, are your size and within your budget. It can be customization. One of Nike's most successful parts of their business is their Nike ID program, which allows you to customize shoes according to colors and different sort of embellishments that you may like. And that's exactly the kind of thing that more retailers need to be looking at. What are some of the trends maybe that a B2B organization might be able to leverage? Some of the conveniences that we have as consumers and we expect in terms of Magento, I was looking on their website the other day and a study that they've done, suggests 93% of B2B buyers want to be able to purchase online. So new business models, new revenue streams, but it really is a major shift to sales and marketing to be able to deliver this high velocity, low touch model. What are some of the things that a business, like a Magento, could learn from, say, a Nike with how they have built this successful omnichannel experience? Yeah, well, interestingly, I think one of the most important things to recognize is that every B2B buyer is also a B2C buyer. And their expectations are set by their experiences in B2C. So if you have everything from all of the information at your fingertips, all of that information is optimized for mobile devices, you have different ways to view that information. You have all of your loaded costs, like shipping or tax, or if there's cross-border, all of the information related to the time to ship, any customs and duties, all of that needs to be visible because in any experience that you have with, say, a site like Amazon, you're going to get that information. So the expectation is absolutely there to have it in any situation, whether it's B2B or whether it's buying components or kind of very long tail items. And that's basically the cost of doing business at this point, is that you have to deliver all of the information that the customer wants and needs, and if you don't, the customer is just going to opt to go purchase that product at whatever destination offers it, and somebody will. That's the challenge when you have 800,000 plus e-commerce sellers out there selling every product imaginable in the both B2B and B2C landscape. So on the data side, there's so much data out there that companies have any type of business. To be able to take advantage of that, I know that BI has so much potential, right? Are you hearing retailers start to embrace advanced analytics techniques, AI, machine learning? Where are they with starting to do that? I know some eyeglass companies have kind of like virtual reality, augmented reality type of apps where you can kind of try on a pair of frames. Where are you seeing advanced analytics start to be successful and help retailers to be able to target buyers that might say, oh, I can't try that on, no, I want to go somewhere where I can touch and feel it. Yeah, well, it's emerging still. I mean, retailers have a lot of data. I think they're trying to figure out where is it most useful, and one of the places where it is incredibly useful is in the back end with fraud management. So after retailers were forced to put in chip cards as a payment form, what you started to see was more of the fraud shifting to e-commerce. I just had like two credit cards that had to be shut off because of e-commerce fraud. But that is where you see the fraudsters going to. And what you see as a result of that is some innovators in that space, technology companies really leveraging machine learning, AI, other advanced data techniques to identify fraudulent transactions and to better help retailers eliminate or reduce the percent of transactions that have to then be charged back. So that's probably one of the most promising areas. There are others that are emerging. We're seeing more kind of visual recognition technologies. Hows, for instance, is excellent at that. If there is anything that you, and Pinterest too, there's a part of an image that you like. You can click on it, or you can tap it, and see other images like that. And that's incredibly difficult. And it was even more difficult 10, 15 years ago, but it's becoming easier. There's the voice element, voice to text, or text to voice. And I think that the best applications there are often in customer service. There are so many interactions that happen anywhere in a consumer facing world. It doesn't even have to be within retail. You can think about the compliance to the airline industry or to a bank. And a lot of it falls into a black hole. Like you always hear that, oh, this call may be recorded, but it is really difficult to go back and transcribe that and to really synthesize that into major themes. And what ML in particular can do is to basically pull out those themes. It can automate all of that, and can give insights as to what you could be doing, what you should be doing, what are the opportunities that you may not have even known existed. So there are definitely emerging places. I mean, even a visual recognition. So we talked about like house and Pinterest. Another great example is the computer vision that you have in like the Amazon Go stores. And there's a robot that the Walmart stores are now testing to go find if there are gaps in the inventory that need to be filled, or if something is running lower out of stock. So there are definitely some interesting applications, but it's still early days for sure. So last question, we've got a wrap here, but we're in April 2018, what are some of your top three recommendations for merchants to, as they prepare for say Black Friday coming up in what six or eight months, what are your top three recommendations for merchants to be successful and be able to facilitate a seamless online offline experience? Well, we always have kind of imbalances between supply and demand, and that's where I do think things like third-party sellers, third-party marketplaces are huge. So to be able to leverage that is certainly one opportunity. Another is to think creatively about promotions. In Japan, they have these promotions called Fukubukuro promotions, and it's basically like grab bags of like all the leftover inventory. And then, but then they basically put it into mystery bags where you can buy it for half off and consumers line up around the block at stores to go buy these grab bags because they also have almost like a gamified approach where one out of 10 of the bags will have like an iPad or some really high value item. So people really like these things and they have trading parties. So just new ways of having promotions beyond just the typical doorbusters that retailers think about. And then kind of third, I think, is just try to pace out the demand. One of the big issues in e-commerce has been just the burst in demand that always happened in December. And that creates a lot of problems from the standpoint of actually shipping the order. So the more that you can pull those transactions forward into November, the better off you are from a fulfillment and supply chain standpoint. I will switch, Rita. Thank you so much for stopping by the Cube and sharing your insights on the trends and what's going on in the e-commerce space. Really enjoyed talking with you. Nice to talk to you too. We want to thank you for watching. You're watching the Cube Live from Magento. Imagine 2018. I'm Lisa Martin. Stick around, I'll be back with my next guest after a short break.