In this interview, Al Lalani, Co-Founder and Chief Strategist at Annex Cloud sits down to chat with Rob Garf, VP of Strategy and Insights at Salesforce to discuss what Salesforce’s data has been reflecting since the COVID-19 outbreak and what predictions they have for the coming holiday season. They also discuss the turn from traditional shopping and marketing to the new digital market and what consumers will expect moving forward.
Welcome to Annex Cloud Market Movers. This next discussion, I'm so excited to welcome Rob Garf. Rob is the VP of Strategy and Insights at Salesforce. Rob, welcome to the discussion.
Thanks, Al. It's really a pleasure to be with you today.
Wonderful. Rob, if we may start with you just kind of explaining what your role at Salesforce is. Maybe we start there.
Yeah, sure, of course. Well, I came to Salesforce by way of the Demandware acquisition about four years ago where I spent about five years prior and I now am in the retail and consumer goods practice. And I have this fun job of really being chartered with staying out in the industry and understanding where the market is going. We do that through a lot of data and research. We look at all the data flowing through the commerce cloud. We bubble that up and it really becomes the de facto standard of what's happening in digital and then we supplement that with primary and secondary research. We're able to have fun and insightful conversations like this with our customers and even internally, as we think about our products and solutions.
Wonderful Rob and I've seen you speak over the years about amazing shifts in the commerce and digital space. I'm very excited to have that discussion with you today and starting things off, one of the things that I think I've seen float around is this massive shift on digital transformation. Obviously, we're all sort of in the middle of it. And specifically, on the commerce side, since you mentioned sort of that big shift of people buying on commerce in different industries that weren't as commerce-enabled before, specifically, overall, numbers showing that we went from 5 to 15, it took us a decade almost to get there and 15 to 27 or give or take around that sort of piece, in less than three months. That's a massive sort of shift that would have taken us probably another decade, maybe at least five more years to get to and so we've sort of transgressed that time very, very quickly. What's your take on that shift toward digital and what's driving it and then how will that work out?
Yeah. For me and for most of us in the industry, it was really a tale of two cities if you think about it. On one hand, you had brick and mortar traffic, really flat-lining with the shuttering of doors given COVID-19. But on the other hand, we saw an unprecedented surge in digital. In fact, for the second quarter, given our shopping index at Salesforce, we saw a 71% increase year over year. To put it in perspective, if you're getting to 12, 13, 14% year over year increases for the quarter, you're doing pretty darn well. And we anticipate this continuing and it's really created this whole new baseline of behavior and it's not just for the traditional categories that you'd normally, as a consumer, buy online.
It's a sample size of one, but my mother-in-law who has a preexisting lung condition, she's not going in a grocery store anytime soon. She would normally do that. She wants to touch and feel the product, makes sure it's fresh. She's not going to do that. And again, that behavior is not going to snap right back, but rather, creating a whole new baseline and it creates a whole new dynamic. I have one customer of ours who put it this way, digital used to be an outpost for the store and now the store is just a component to the overall digital strategy. So we've seen such an acceleration over the last three, four, or five months to digital, both for consumers and for retailers and brands.
Yeah, that's wonderful. And one of the things I continually hear from our customers is it's almost like Black Friday every day, right? And so to be able to sustain that, not just from a technology perspective, but also from an operational perspective is an interesting sort of challenge. So my next sort of piece to just understand from you is two things. One, what are retailers and brands doing to kind of position themselves for success, especially with this massive, amazing growth that they're seeing on the digital side of things, while still seeing challenges on the store side of things in many cases. And secondly, what do you foresee in the upcoming holidays? Will we keep up with sort of this massive shift or as COVID-19 starts kind of getting a little bit better and then we start getting maybe a vaccine comes out or something, will that sort of going back to where it was?
Yeah. It's a great question. And the way I'd categorize it, Al, is I've seen really this scrappiness over the last several months where retailers would accelerate their digital strategy by five years. I had one CIO tell me that their CEO credit that technology organization from moving their three-year roadmap to three weeks. That's no joke. And so the trick is, Al, moving from scrappy to scale. So we're doubling down on digital, for sure, as we talked about before, and again, we're seeing it in a lot of non-essential categories as well. We saw a seismic shift in surge for non-essential products in the Q1, Q2 timeframe. We're also seeing this move to contactless engagement, whether that's a payment, whether that's service and certainly, fulfillment. We're hearing story after story about curbside. And we saw that last holiday in terms of those who succeeded in having to buy online, pick up at the store.
The second quarter, those who had built this buy online, pick up at the store, so a 127% increase year over year and that's two times, by the way, those that didn't have it. But we're also seeing this move to unleashing the store associates and untethering them from, well, the store, really making them virtual concierge, virtual assistants, being able to engage the consumer because you know, Al, and you know this better than anybody, it's one thing to work on attraction, but it's another thing on retention and consumers have so much choice now. So building loyalty, building advocacy at this time is becoming so important. So I think the next part was around the holiday, right?
Yeah. So holiday, we see some of the same, right? So we actually just announced our holiday predictions this week and some people say, "Well, it's the dog days of summer. Why are you releasing your holiday predictions?" Well, while consumers might not be thinking about holiday just yet, the retailers and brands are. They're in the throes of planning. You brought up that percentage shift, right? It took us 20 years to get to 15%. We're anticipating over the holiday season that 30% of sales will be digital.
So this is going to put a huge strain operationally as you put it, right? In terms of fulfillment. We actually are anticipating that the traditional last-mile delivery, the couriers, the FedEx, UPS, DHL or they're going to run out of capacity. They're going to run out of capacity. There is already a huge strain on the system and it's only going to be bigger. We also see, by the way, a pulling forward of demand, there are rumblings that prime days are going to be at the beginning part of October. And if that comes to fruition, that's going to put it smack dab right in the middle of really the beginning part of the holiday season. So retailers are planning now for not only attraction but also retaining their most loyal customers in new and creative ways and again, thinking about how to do that in a digital context.
That's great. One of the things, since you mentioned, sort of on the retention and loyalty side, what we saw, we pulled out a study from back in 2008 and one of the things we're trying to do is learn from a retention perspective, what happened in the last recession or the recession before it.
And sort of what we can learn from it. And one of the studies that were done by CML Council and Alina Marketing back in 2009 for consumers in 2008 and their behavior. They studied about 685 or sorry, 32 million customers.
Which is a massive number of over 685 brands that they shopped on in 2008 and compared that behavior versus 2007, what they found was 52% of their loyal customers defected in 2008 from 2007. So if you had a hundred loyal customers in 2007, 52 were no longer loyal to you and bought from you in 2008. And so that's a massive shift because usually, that's not the rate of defection any good brand likes to have. These brands, by the way, were the best, like Samsung, Apple, Pepsi, the Cokes, and so on in the world. And so what we're we're predicting is that shift will probably happen again as consumer spending habits change and they're looking for lower-cost alternatives, as they're looking for maybe a digital way of fulfillment that that brand may or may not have in place.
And so all of these drivers may change that behavior from a loyalty perspective or a retention perspective with sort of the challenging environment that always comes to the forefront. The first thing I was thinking about when this sort of struck is how can we help our customers stay successful? And every sort of leader is probably thinking about the same thing as well. What's your take on retention and loyalty and the importance of that in the upcoming years as a part of that digital shift and transformation?
Yeah. Well, this has been something that's talked about in the business for a long time, right? Sam Walton certainly talked about it and his mantra is all around the customer always has a choice and they could choose another brand instantaneously. But here now, where we are with COVID and so much digital, consumers have more choice and access than ever before, and they can make moves to and from brands in an instant. So it's more important than ever for brands to create that emotional connection. And a lot of it has to do with leveraging the data that the consumer is knowingly providing about themselves in exchange for some value and that value can be personalization. It could be automation. In many cases, it's convenience and safe. I just think about our joint customer, e.l.f. Cosmetics, and what they're doing as a traditional D-to-C brand.
There's a whole new battleground, if you think about it, for the consumer and their attention, and they're reaching out to the consumers wherever and whenever they want to shop, whether that's on social, whether that's on messaging platforms or even in the retailer location, which was this area which was oftentimes not available or accessible to the brand themselves. And maybe you can expand on this a little bit out, Al, but I love what they're doing in terms of the ability for the consumer to take a picture or have a digital receipt sent to e.l.f so that e.l.f. can have a broader view of how they're shopping and then understand their preferences and their profile to build that 360-degree view of that customer to therefore provide a relevant and personalized experience. To me, that is so important as we think about differentiating and again, thinking about how to provide this convenience and safety in the digital world. But you know obviously a lot more about what's happening at e.l.f., maybe you can expand on it a little bit.
Yeah, certainly. And I think e.l.f., they've got two major channels. They've got the digital commerce channel powered by Salesforce, and they've got sort of a massive distribution channel through retailers. And what they're trying to do is reach out to those customers directly in a way to kind of have those customers are buying at a retailer to join their loyalty program by scanning their receipts and bringing them into that mix of customers. And especially now with brands that are trying to go to digital now that may not have a presence there, or may have a smaller presence and are really trying to grow that direct to the customer or direct to consumer sort of presence.
This is a massive shift where you can access the customers you have in retail to help you drive and understand those customer behaviors and help them buy direct from you potentially as well. And so that is one of the big sorts of pieces that will help you drive that massive shift towards digital and direct that's happening. And with that said, I know you're working on some amazing initiative that's coming up. I would love to sort of understand how you foresee that initiative, making a difference in how executives think about retail overall as a whole. So if you may tell us a little bit about that.
Yeah. Well, I appreciate you asking about that. I know you're very passionate about this topic and that's what we're calling becoming retail, and what it is... I mean, let's face it. We're all going from some level of digital transformation. It's only accelerated as we were just talking about, given COVID-9. Unlike what some pundits like to say, it's not about the machines, it's about the people. It's about the people of retail, right? If you think about becoming, it's a real choice word in terms of, it's aspirational, it shows movement, it shows innovation, going from one place to another. And retail, for me, who's been in and around retail for more than 25 years, it's not just a career, but it's my identity. It's my passion. It's my community. Right? We see each other a couple of times a year, at least we used to, Al, at various events and it's a coming home party for me and many others.
So what we want to do given it's about the people is really understand the people, understand the leaders, get inside the head of retailers and understand their career path, their aspirations, how they got to where they are and where the future might be going and we'll be doing that by talking to a lot of different retailers, having a steady drumbeat of their thoughts and their points of view. We're really just the curators, if you will, of this community. And if we do our job right, our goal is, at some point, it will end up in a book. We want to leave some sort of artifact for the industry to provide a blueprint of what this thing has looked like for the last many decades and what it could look like for the time to come. So I appreciate you asking. Again, it's been a personal and professional goal of mine to really put a stamp on the industry and this is our way to do it.
Well, that's wonderful. I'm personally looking forward to seeing, what people say because as much as we see an opportunity coming up, there's a massive challenge from an execution standpoint that's ahead of us for many of the retailers and many of the executives at these companies. And for me, I love the choice of words, for me, the becoming part is aspirational. It's exciting. It's something we can look forward to. And retail, sort of that brand shift that talked about where they're all trying to become retail, they're all trying to become sort of the direct to customer sort of aspect. And so those words really sort of parlay where the industry is going. So I'm really excited to see what your discussions look like and what you learn from these executives and eventually when you produce something all put together, I'm very excited to see what comes about with that. So congratulations on launching that initiative.
I appreciate it. Two quick things to that, Al. One is you talked about retail. It's funny because I'm talking to actually executives across various industries at this point and retail being more of a verb or a strategy, right? Because everybody's looking to get closer to the customer and who better to learn from than retail? And you brought up execution. It's really interesting. We did one of our first interviews with a chief digital officer at a specialty apparel company and I asked him, "What are the important measures of success beyond, of course, financial?" And he brought up these two words, "Digital ready." And his point was, the last couple of companies that he came from, he feels like he left it in a much better place to be digital-ready than the time he came in. And that's because they're able to execute. They're able to be agile. They're able to be innovative and they're using digital as the backbone. So again, I appreciate your interest and your passion for it and certainly, we'll stay close on. It
Sounds great. Well, Rob, this was wonderful. Thank you so much for taking the time to speak with us and thank you for sharing all the numbers and insights that you shared today. There's a lot of value in this that I'm sure we will be able to kind of share with everyone out there. And for everyone else, if you want to see more such videos, please go to annexcloud.com/marketmovers or follow us on #acmarketmovers. Thank you, Rob. Bye for now.
Take care. Be well.
Co-Founder, Annex Cloud
VP of Strategy and Insights, Salesforce
Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.
The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.
Salesforce is the industry leader in customer relationship management (CRM). Their services include a large suite of applications focused on marketing automation, analytics, customer service, and sales. Their platform is geared towards uniting business teams company wide to ensure a positive customer experience.
To learn more about Salesforce, visit https://www.salesforce.com