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Adam Najberg:

There are few out there who would question our guest’s unparalleled expertise in brands and retail. Apart from all the executive hats David wears at WPP and BrandZ, he’s also an author, a documentarian and a genuinely good guy. David has made time to join us in Alicast today. And we welcome him. Thank you, David.

David Roth:

Well, thanks very much, Adam. It’s a pleasure to be with you today,

Najberg

David. I know you and we have probably analyzed 11.11 10 different ways from Sunday by now, but you’re the expert. And I wanted to raise with you some of the things we noticed to try and understand them a little better with your help. For example, some changes in consumer behavior exhibited at the height of the Covid lockup in China looked to have kind of stuck. Especially, we noticed in the older, silver generation that’s come online and stayed online during 11.11. We know a lot of older people who would always shop offline at brick-and-mortar shops and markets, for example, had to shift to online during Covid lockdowns. But these were also social occasions for some of China’s older shoppers. Now that they can go back to stores in person, why aren’t they choosing to still buy online?

Roth:

Well, I think you’ve raised a really interesting point because I think one of the things that we’ll be able to do probably in a six, seven, eight month’s time is to really take a good sort of helicopter view of the various different changes in consumers’ behavior and attitude that we’ve seen sort of pre-pandemic to post-pandemic. And I think one of the things that is already becoming apparent but will be much more noticeable when we do take that helicopter and have a more-distant perspective, is a lot of the trends that we saw pre-pandemic. And you might’ve had to look very hard in order to really see them, but you know they were there. If you studied them hard, they have been rapidly accelerated during the Covid lockdown period, and clearly e-commerce in its various different forms is one of those.

And I think what we will also see is that you could call it progress. You can call it change, however you want to define it. But over the course of maybe eight or nine months, probably maybe four or five years’ worth of change has taken place over that period of time. So what I would say to the specifics of older generations having to experiment with e-commerce and especially grocery e-commerce, they are much more used to going every day or every other day to stores to get what they, what they needed. They had to use an e-commerce and home delivery version of that in order to get the food that they wanted. And I think they found that experience really interesting. It was a great thing to do in terms of making the best use of your time and when doing that physically started to become available.

But again, I think many of them thought, well, actually I could do much better things with my time than to spend that time in the stores. And I think what we’ll see again from that helicopter perspective is other forms of social activity taking the place of what the shopping social activity used to be. Now, having said that, I am not in the camp that says consumers going to stores enjoying themselves in the stores is something that won’t be a fundamental part of the way in which we as consumers all over the world behave, but we will be much choosier in the things that we do physically versus the things that we do virtually. And I think you will be up to really smart retailers, marketeers, e-commerce operators to give us a really good reason to shop out as opposed to shop in,

Najberg

In terms of the brands and their advertising, have they noticed this, and are they adapting to the trend of people coming online, kind of a broader spectrum than just Gen-Z and Millennials in China? Are we going to see any sort of fundamental shift in the way they try to appeal to these different generations online? And when I say different, I mean different from the way they reach out to Gen-Z and Millennials?

Roth

I think we’ve seen the initial signs of that. I mean, clearly at the height of the pandemic and the height of the lockdown, clearly in China, and it’s reflected right across the world. We saw quite a big shift from print, from outdoor media, into digital, in one form or another. And I think that shift is going to continue. It will rebalance itself. As people spend more time outdoors, I’m pretty certain that digital out of home will be a much more-fluid leisure that people would be used more than they have done in the past. But yes, I think we’re going to be seeing to two things. The first is that advertisers will find older consumers, new habits online and will reach them online. And then, I think there will be a segmentation of the types of messages that are good and for the younger consumers and other messages that resonate much better with older consumers. So we’ll both see a different place in the way in which the media is placed. And we’ll also see a different form in terms of both its content and its creative content. And I think that will be a good thing

Najberg

About creative content, you noted some time ago that livestreaming – and I’m using your words – it integrated the social and commerce experiences for many brands. We know it’s a big thing a “must-have” for brands on platforms, especially in China, a hallmark of both the maturation of livestreaming and the change in consumer behavior that we just talked about. It’s not just more livestreams, but more types of them, more segmentation. We have farmers going online, CEOs being trained to go on camera and talk about their company and products, KOLs obviously who started this, and even AI-powered avatars to handle overnight live streams. This clearly isn’t going away, but I want to ask you to look into your crystal ball and tell me, where is livestreaming headed?

Roth

Well, it’s always interesting when you have your own words quoted back to you.  I’m a big proponent and supporter of the way in which livestreaming is moving. I think it’s going to be a very important part of brands go-to-market strategy and a very important distribution part of their strategy as well, in terms of its segmentation. I think livestreaming is going to grow and evolve at a very rapid rate. And therefore, like all things that are new, you know, start on that sort of curve of adoption. There’s lots of experimentation that takes place. And there’s also, that, because clearly this is operating at China’s speed. We’re going to go from people experimenting on live streams, into very sophisticated live streams very quickly. So I would say that there are three things to look at the first is the way in which the livestreaming is integrated.

First, it becomes a completely seamless experience. Now, of course, in Asia, especially in China with the Alibaba platforms. And that’s a much simpler thing to do because, you know, there is amazing integration between the payment end, the distribution and the delivery end, and that is very seamless out of Asia, and that seamless integration is much more difficult to create. And therefore, it’s not as fluid an experience with consumers. So that’s one side. The second area is actually who does livestreaming. And one of the really interesting things that I observed from this year’s 11.11 global shopping festival was the amount of very senior C-suite executives, as you mentioned, CEOs, but also marketing directors, chief growth officers actually participating in the live streams of their products from their organizations. And that I think is important in two respects.

The first is I think it’s really good for CEOs, very senior C-suite executives to speak directly and have a direct dialogue with their consumers. It’s good for the consumers and it’s very good for them as well. And the second thing is that they get to really understand how it works and the importance of it and how it can drive the business. So clearly that’s very important. And I think the third area, and you briefly touched on it yourself in terms of, livestreaming enables the supply chain to be significantly shortened. So you can go from the farmer in the fields, talking about the products, you know, various different types of products, or his produce that he’s growing. So, directly to the consumer, cutting out quite a lot of the supply chain.

And I think that’s a very interesting area that we’re going to see in livestreaming developing, which is, you know, how can livestream in one form or another disintermediate a number of people who currently play an important part in the supply chain. Some of that is going to be good. And some of that is going to be bad, depending on which part of the supply chain you happen to be in. But I think it’s yet another way of, technology and e-commerce, in particular, shortening supply chains, allowing producers to have a much more direct relationship with the consumer. And, and also, I suppose yet another element of the trend that we’re seeing right across the world is to have a much more direct-to-consumer activity.

Najberg

I guess where we are right now is brands are evolving out of necessity. They’re evolving also because of technology. We were just talking about livestreaming. I remember you’ve talked about how first we talked about product brands, then corporate brands, then platform brands, and now ecosystem brands. Could you dig into that a little bit, just talk us through how that helps brands improve their value, but also what about for the operator of the platform and the ecosystem’s brand? What does it do for them?

Roth

To give you just a sort of brief view of those stages, it was very much the FMCG brands that got and understood the whole concept of branding and pretty much taught the world how to do that. And then companies and organizations realize that they, that, especially in the realms of the growth of the conglomerates, which were in favor for a long period of time with financial institutions, they sort of fell out of favor.  Probably about 15 years ago, they realized that there was a great strength in that corporate brand. And then, obviously, the platform brands suddenly sort of came onstream, the likes of the big technology players. The whole issue of the ecosystem, I believe, is really interesting because what we’re seeing at the moment is for any company, brand, organization to be able to be expert at all the things that they need to do in this much more-integrated, you know, really integrated relationship between things being done physically and things being done virtually is really complex and very, very difficult.

Not only have you got to be an expert in the manufacturing of your individual products, you’ve now got to be an expert in delivery to a single end consumer. We all know that, you know, how frustrating it is for a consumer to have a poor delivery experience, and that delivery experience gets put straight back on the brand again. So to be able to do all of those things in a phenomenally efficient way all by yourself, I think now is an impossibility. And therefore, being able to create an ecosystem around you of people that, you know, share your perspective on life, that the relationship you have with the consumer is now an essential ingredient in being able to deliver not physically, but metaphorically, deliver for the customer and also being able to evolve and to do things both at scale and also at speed.

So I believe that the ecosystem brand is going to be a vital ingredient in business performance, you know, for the next generation of business development. And I think I am already seeing signs that those organizations that have more of an ecosystem have performed better over this very stressful period that we’ve all been in and we’re still living through it. Hopefully, with the development of the vaccines that look very promising at the moment, so maybe in six, seven months’ time, the outlook will look, will look very different from now. Doesn’t at the moment, but those who have an interesting alliance of ecosystem partners have done better, and I think we’ll do better for the foreseeable future. So it’s sort of, my advice would be, you know, understand how ecosystems work, work out who your ecosystem partners could be and start to create and develop really interesting alliances and ecosystem partners that allow you to do things in a bigger, bolder way, faster, cheaper, more responsive and closest to the consumer.

Najberg

When you describe this, it all sounds very logical to me, and I’ve seen this, I believe it with FMCG and other sectors. What about luxury, though? So much of luxury has dependent on brands getting you into their stores to feel the exclusivity, to feel the vibe. What’s been sort of astounding to me over the past three years, is that we see luxury brands increasingly moving online. And from our side, the Alibaba side, we have the Tmall Luxury Pavilion and others have, have their own iterations. I’m really interested in trying to understand what have we seen recently. And we’ve seen an increasing number of luxury trying to reach customers online. Why is that happening?

Roth

I mean, luxury brands have been, I suppose, the least responsive to the digital age, and you can understand why in a sense. And you highlighted them yourself just there. Luxury is about the experience. The store is, I suppose, the temple to the luxury brand. It espouses everything about the brand, you know, the exclusive nature of it, the design nature of it, the, you know, the personal selling nature of it. And the store is a reflection and an absolute manifestation of what the brand stands for and its psychological contract that it has with its consumers. And consumers, for their part, also love the experience of going into a luxury brand store to be treated in the way in which they are treated there, to have somebody talk about the product, the provenance of that product, the story behind that product, and for them to be not just a shopper, but somebody who is known and respected within that store and have a relationship with them.

So you can understand why, in a sense of the digital experience, which, which even today is, you know, it’s a much more functional experience than an emotive experience. So you can understand why the digital experience has not been particularly attractive for the key luxury players. But of course, I think the theme running through this podcast is the acceleration of trends that were emerging. And even for the luxury players, they, you know, they had to accelerate what they were prepared to do online. And I think it is possible. And given the way in which the luxury brands have, in a sense, defined what a luxury experience is physically, I think there is a tremendous opportunity for the luxury players to define what a luxury experience is in the virtual world. And I think there will be a much tighter interrelationship between things that are done virtually in the luxury arena versus things that are done physically and a tighter interrelationship between the two of those.

I mean, we have seen a number of platforms. Clearly, Alibaba platforms have done some very interesting work in the luxury space in order to create a different type of platform with a different type of experience. I don’t think everybody yet has really got that right. But I think there were, you know, a lot of very clever and bright minds, both in the marketing arena and also in the luxury brands thinking, I will be spending a lot or have been spending a lot of time in the last few months trying to make that integration much tighter and also feel more like a luxury experience, as opposed to a digital functional experience.

Najberg

David, let me ask you one last thing. Timing-wise, 11.11 is over for another year. You can all take a deep breath–

Roth

Yes. I think we can all take a little bit of a deep breath. Well, at least till January. And we also start need to start to think about it again,

Najberg

But, but on the other side of the world, Black Friday and Cyber Monday are coming. So I just wanted to ask you, and I’d be remiss if I didn’t: Could you dissect a little bit, how were these different shopping festivals like 11.11 and Black Friday are similar, and how are they different? What are the key distinguishing features and what makes them evolutionarily different?

Roth

Sure. Well, of course, you know, the origins of the name Black Friday sort of gives you – should give everybody – a hint as to where it started. I mean, it was called Black Friday because pretty much that was the first Friday of the year that retail stores over the course of the year actually went into the black, as opposed to the red, in terms of you’re actually making money, as opposed to losing money, which most of the big stores did up until that point, which is why it was called Black Friday. And I suppose it has its origins in terms of the period for big discounts, relatively recent in the history of the sales period coming up. And of course, Black Friday, in itself, is a blessing and a curse because, of course, you know, you’re giving away a reasonable amount of money over a period in normal years where people have got quite a lot of discretionary expenditures running up to the Christmas period.

So it’s always a bit of a dilemma because on the positive side if you lock people in over Black Friday, you know, you’ve got there, you’ve got their holiday purchases. On the downside, it’s the margin management between what you give it away with the Black Friday period and what you could have made over the period between Black Friday, running up to the Christmas period. Now, I believe there is a fundamental difference between in the sense, the bundle of things over Black Friday versus a bundle of things over the 11.11 period. And that is that the 11.11 period is much more-involving, you know. I think it’s no deceit in the sense that it’s called a shopping festival because it is a festival, it has gamification to it.

Consumers are very much engaged in it. You know, you have your friends and your community engagement that helps support you over that sort of period. Whereas, Black Friday is still very much a discount period that is not particularly engaging at all. And I think the other big difference that I’m seeing, and I see a big divergence now between the promotional periods of Black Friday and the shopping festivals. Which means to me they are in a different sort of arena because they, you know, the shopping festivals bring excitement and innovation and clearly phenomenal sales into what I would say in the reflection of breadth. Black Friday is getting to be now a very tired sort of the old retail model of purely promotional activity. And the one thing I would highlight to make that point is that 11.11, the Global Shopping Festival, is now seen as a place to launch new products, to display new innovations for the first time, as opposed to a place where you can get rid of stock that hasn’t sold. Maybe it’s stock that you’ve sung Happy Birthday to in your distribution center for, you know, one or possibly two, years. And you’ve seen this as a great opportunity of slashing the price. It could be a big discount. And to me, there is a big divergence now happening between the Black Friday type of model and the shopping festival type of model, and I think those differences are only going to get significantly greater

Najberg

Well, David Roth, you have as always enlightened and educated and informed us. Thank you so much for joining us on Alicast.

Roth

Well, Adam, it’s been a pleasure and a delight. I’m pretty certain that, you know, as difficult as 2020 has been for the retail and the brand industry, I think 2021 is shaping up to be really phenomenally interesting. And something that we’re all going to have to be not only a part of, but observe as the year emerges. Thank you very much. It has been a delight and a pleasure to be with you.