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Talking Digital Reinvention, Product at Milken Conference

Don't take Ron Johnson's absence from the Milken Institute Global Conference panel as evidence that the executives who did appear disagreed with his strategy.

Don’t take former J.C. Penney Co. Inc. chief executive officer Ron Johnson’s absence from the Milken Institute Global Conference panel on retailing in a digital world as evidence that the executives who did appear totally disagreed with his reinvention strategy.

Although Johnson was only alluded to during Monday’s discussion at the Beverly Hilton Hotel in Beverly Hills, the panelists — especially HSN ceo Mindy Grossman and Claire’s Stores Inc. ceo Jim Fielding — emphasized the idea that enhanced and curated shopping experiences — not just price alone — will help keep traditional retailers relevant as e-commerce continues to boom. Without explicitly saying so, the panelists’ underlying messages suggested support for the rationale behind Johnson’s efforts, if not his execution.

“In order for people to thrive in this new environment, they really have to focus more on experience,” said Grossman, beginning the discussion. She disavowed the idea that retailers should think in terms of different channels in order to maximize that experience. “We don’t even use the word ‘channel’ any more. I think it’s antiquated,” she said, preferring to talk more about “creating networks.”

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Fielding pointed out that the barriers between online and brick-and-mortar shopping venues are breaking down, adding that Claire’s has to respond to that reality. This means not worrying about e-commerce sales cannibalizing store sales, because while it used to be standard for shoppers to come into the stores with their friends, it is now commonplace for them to come in alone and solicit their friends’ opinions via Facebook or Instagram. Claire’s is enabling its stores with Wi-Fi to help customers with that process.

“I don’t care where she shops with us. I don’t care if she shops in a store or online or through Facebook…as long as she’s happy with the experience and the product she gets,” said Fielding, noting, “Instagram is by far the most important platform for us to be a part of. We have over 90,000 tagged photos on Instagram without us really having a big digital strategy.”

Fielding and Grossman suggested that if product was king before brick-and-mortar retailers had to contend with pure-play e-commerce sites, then it’s now king, queen and all the rest of the court. The HSN ceo estimated 70 to 75 percent of products found on the site are exclusive to the home shopping network, and Fielding said 96 percent of what’s found in Claire’s stores is proprietary product. “At the end of the day, what the consumer takes home is product and, to me, great product is the price of entry,” said Grossman.

To the extent that digital players threaten brick-and-mortar retailers because of a sales tax advantage, legislation removing that advantage should help stores, according to David Simon, ceo and chairman of mall owner Simon Property Group, who, along with Novel Holdings Group president and ceo Silas Chou and Leonard Green & Partners managing partner John Danhakl, were also on the panel “It is certainly going to have some significant impacts on certain categories…I think it will be material,” said Simon.

Amazon will still push the envelope at retail, even if it no longer has a tax advantage. The panelists felt that same-day delivery will become widespread. “You see where Amazon is heading. It’s for that instant, immediate gratification that people get when they are shopping,” said Simon. Fielding highlighted that same-day shipping is already a norm in the U.K., where many retailers have adopted it to satisfy customer demand.

They were certainly biased, but no one on the panel stated the idea physical stores would become dinosaurs. They argued stores would maintain important roles in the shopping mix. Chou noted that brands sold on Chinese e-commerce sites were opening stores at Chinese malls to complement their online presences. And Grossman declared that she was beginning to wonder about physical locations for HSN. “I actually think having a physical environment in today’s world can also be an incredible asset and, for the first time, we are actually looking at, for some of our brands, what would that be,” she said.

Stores are critical despite constant connectivity because, as Simon stressed, the digital revolution has left people hungry for something beyond their phones and computers. “We’re about to start moving away from looking down and start to look up. We are begging for community,” he said. If HSN is considering being a part of the retail community in the mall, he turned to Grossman and asserted, “Let’s get a deal done.”