We conducted a Q&A interview with Trevor Sumner, CEO at Perch Interactive, regarding how digital transformation affects the future of retail.
1. Could you introduce yourself and what you do?
I have been an investor, advisor and operator for cutting-edge technology companies for 15+ years with multiple successful exits, and a regular contributor to business and technology publications such as Inc, Forbes, TechCrunch and Mashable. I love technology, how it transforms everyday life, the new opportunities it unlocks and I’ve spent most of my career being an evangelist and innovator in emerging spaces…
I am currently the CEO of Perch, the first and only mixed reality retail marketing platform that can detect what products customers are touching, picking up or putting down and respond with dynamic digital content. PERCH’s embedded IoT technology unites digital content with physical products, delivering highly personalized product messaging that drives 5-10x customer engagement, 30-80% product sales lift and 200-400% ROIs. Previously I was President, CMO and Cofounder of LocalVox, a SaaS-based marketing platform that drives online customers to in-store sales via social media, search engines, websites, email, directories and mobile. LocalVox has been named a top social media platform, top SEO tool, Best Manhattan Software Company and hottest NY Startup by organizations such as WIRED, Good Day New York, Business Insider, Social Media Today and Huffington Post. LocalVox has acquired several companies and had a successful exit in 2014, being acquired by a wholly owned subsidiary of the Blackstone Group.
I am a native New Yorker, an avid fisherman (I’ve caught a 600 lb Black Marlin), an amateur chef and an adventure scuba diver who has dived on every continent including Antarctica. I’m an adventure junkie and startups definitely fit the bill.
2. How did Perch Interactive start?
Perch was founded by Jared Schiffman, who has spent his career reimagining the merging of physical and digital interactions, starting with his groundbreaking work at MIT Media Lab. Twice he has been a National Design Award finalist and he spun Perch out of Potion, a product agency that he co-founded.
Jared saw that by overlaying digital onto the brick-and-mortar consumer shopping experience you could create some interesting and engaging interactions. At the heart of it is computer vision and sensing technology that detects which products customers are picking up and putting down. We have broad patents on using any type sensor and responding with product-based digital media. Perch started with projector-based technology, which we quickly realized was challenging because of the lack of table space (with retail per square foot a key KPI), the difficulty in installing projectors into retail spaces, the lighting washing out the projection, etc. We added the ability to embed interactive LCD displays into retail shelving, cabinets, cases, and tables and we’ve seen tremendous success ever since.
PERCH has deployments in over 20 countries across 5 continents with clients that include Neiman Marcus, Sunglass Hut, Jo Malone, Sephora, Kate Spade, Bayer, Pernod Ricard and many others. PERCH has won numerous Clio, Digi and retail design awards and was named one of the 15 tech companies to watch in 2018 by Forbes. We recently won the prestigious Edison Award Gold Medal for Retail Innovation, where previous winners have been Nike, Apple and Disney. We are humbled by the recognition we have received both from the press and our customers and partners.
3. How can AI, Big Data, IoT and SaaS transform the shopping experience?
It’s an amazing new world in retail right now. There is a massive transformation underway. For the first time in decades, brick-and-mortar retail is aggressively adopting technology to transform every process from the supply chain to the last mile of the customer journey. AI is being used to better predict future product demand, reduce inventories and optimize pricing. Enhanced customer data sets are unlocking personalized offerings and marketing to maximize relevancy and engagement. IoT technology is being deployed in store to track customer counts, traffic flows, product flow and with Amazon Go, frictionless checkout.
Every area of the business is being impacted right now and we believe that the key to the long-term competitiveness of retailers will be improvements to the shopper experience. The first sets of problems being tackled are around driving customer in-store more effectively and making that more convenient. The current wave we are riding is that the actual shopper experience will be vastly improved. That means bringing rich digital media to every product on the shelf, not just boring looping video to check the “hey we invested in digital” box. The only way to do that is with IoT-based sensing technologies like Perch.
Finally, you can meet the demands of modern shoppers who are used to videos, how to’s, ratings and reviews, product information, ingredients, etc. along with the key advantage of direct product interaction that can only be offered in-store. The results of combining the best of both digital and physical are 30-80% sales lift across CPG, Beauty, Accessories, Electronics, Beverage, etc. We have great retail marketing case studies across categories. It’s pretty amazing to see.
4. Your products and systems at Perch are highly interactive. How much focus do you put on UX and UI?
UX and UI are absolutely critical. This is in effect a new medium for shoppers. You can’t touch most screens in retail. Most of them are showing boring looping video. So you have to be cognizant about how to attract and engage customers in the content.
Shoppers generally don’t interact with kiosks, in part because it is a foreign system (and often not well designed for UX) and in part because without behavioural detection, kiosks are separate from the natural shopper journey. The result is 1-4% lift vs. 30-80% lift with Perch. Lisa Kauffman, the CMO of Perry Ellis, said it nicely to me at Shoptalk that “shoppers don’t want to interact with kiosks. What’s great about Perch is that the kiosk interacts with you.” The act of touching a product is in effect a type of permission marketing to engage the customer about that product. You can click on a product online to get more info. We believe you need that same capability in-store.
One of the great things about Perch is that we collect the data regarding every interaction. So, we can quickly A-B test designs to see what drives interaction, product pick-ups and increased sales. It’s a key part of our practice to use in-store analytics to optimize the brand experience and impact.
5. With the amount of data Perch must be collecting through their instore experience, what are you doing in the way of data privacy and security?
Security is definitely a concern in this day and age. For the vast majority of our installations, we don’t collect any PII (personally Identifiable Information) at all. We ship with our own 4G hotspots so we run on cellular networks independent of the retailer, so there isn’t a security concern there. In fact, we rarely get caught in IT department discussions around security or privacy for that reason.
We have had some installations where you can text or email the product to complete the purchase online. Kate Spade New York is one example, where you can personalize one of their handbags and order it to be shipped to your home. Gathering customer data can be extremely valuable but it must be treated securely, encrypted in the cloud, and only accessible to verifiable users.
6. It seems that many retail companies are struggling; physical retailers are closing stores in their masses, yet online retailers are opening stores…What is going on in the retail industry at the moment and what does technology have to do with the ‘clicks to bricks’ movement?
We’ve written quite a bit about the “retail apocalypse” narrative and why we believe it is hooey. There are a lot of store closures, and a tremendous number of openings as well. You’re seeing what is being referred to as a dumbbell, success at the low-end (grocery, CPG, discount) and in the high-end (luxury, branded stores, etc.) and a hollowing of the mid-market (department stores, etc.). There are a lot of options to buy online and you have to have a unique value proposition and engaging shopper experience to compete nowadays. After decades of stagnation, department stores have finally felt the pain deep enough to innovate or die. Macy’s just ended 12 straight quarters of same store sales decline. Nordstrom’s new Local concepts are interesting. And some like Sears and JC Penny are too late and too burdened with debt to survive. Toys R’ Us may have gone bankrupt, but their ex-CEO is mounting a new concept in the space.
Part of the challenge is financing and Wall Street dependencies. Incumbent retailers find it hard to invest in online activities that are growing quickly, but very unprofitable without getting hit by Wall Street. It’s hard to make long-term investments with quarterly targets and expectations.
By contrast, digital natives are finding early growth easy, without the costs of physical retail storefronts. But they plateau at a certain limit when their online CPAs get more expensive with scale. To get to the next level, you need brick-and-mortar locations. Warby Parker sells more glasses in-store than online, for example. That’s why Amazon bought Whole Foods. You need to get to the customer across channels, and they can be complimentary. Studies show that opening a store near you increases online conversion in that area by 38%. The grocery space right now is extraordinarily hot with Aldi opening up 900 new stores, Kroger announcing new partnerships and everyone focusing on online ordering for pickup or delivery. It’s a fascinating time.
7. Digital Transformation within organisations can be difficult, but what is the importance of people in executing the technical aspects?
Any C-level executive will tell you that people and culture are absolutely critical. As Peter Drucker famously said, “culture eats strategy for breakfast.” I believe that part of what is driving the acquisition spree in retail technology is the need to build that technology into the retail organization’s DNA. For many organizations, it simply is going to take too long to build up organically. The trendsetting buyer who predicts demand 18 months out from feel is not likely to be the same person who uses AI and Big Data to make computer-simulated predictions. That’s ok. Both skill sets are needed. Right now, the fastest growing job in retail is software engineer. That’s a healthy sign.
8. What would you say is the biggest pitfall of organisations going through a digital transformation – What do organisations get wrong?
It’s a really difficult transition characterized by the standard pitfalls of the “Innovator’s Dilemma.” What I see as the most common pitfall is not making a big enough commitment to testing technologies and measure results in a statistically significant way. We see people trial technology in one store, and when we show 30-80% sales lift and 200-800% ROIs, they say “hey, that was just one store.” We always push for meaningful tests of technology across multiple stores, with a rigorous success criteria that includes comp store analysis. It’s the only way to statistically prove the impact technologies like Perch can have. Otherwise, you could be wasting time. You need to find platforms that can have systemic impact across a broad range of your footprint or you are wasting your time. Time is too scarce. You need to move and you need to move more quickly.
9. Technology is fast-paced and ever-changing. What do you see as the next biggest disruption to watch out for?
It’s an exciting time right now. I think you will see major innovations in healthcare as a retail market soon. It’s much needed and why Amazon, Walmart and Target are all circling Insurance, Pharmacy and Medical services to create a vertically integrated offering. Amazon recently announced a billion-dollar acquisition of online pharmacy PillPack, for example. I think brands will continue to push forward to own their own retail presences as retailers continue to push them out in favour of private label brands with higher margin contribution.
AR is forecasted to take off in 2021, but there is still a long way to go. There will be some cool apps, but consumer adoption in retail will lag except in areas that it provides meaningful value, like visualizing your furniture in your home.
And the biggest disruptor will be voice. The statistics on usage growth are astonishing and voice input is the most natural method for human interaction. This will further put Amazon in the catbird seat of retail. They continue to play chess in making long-term investments, where the rest of retail is playing checkers. Expect a trillion-dollar market cap by 2019.
This interview is exclusive to The Business Transformation Network.
