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Jan Gliszczynski on Brick-and-Mortar’s Knife Fight With Amazon and Omnichannel Retail

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"…retailers are being forced to innovate again …and now they're going to have to really try and think apart about what is that business model and how do they make the best use of the assets that they've got …It's about looking at your bottom line and it's about looking at your assets and go, "Well, how do I maximize what I do with what I have?"" - Jan Gliszcynski

Jan Gliszcynski is a Senior Project Manager and Implementation Leader at IKEA, an MNC of Swedish origin that is famed for its innovative and modernist flat-packed furniture.

Jan has over ten years of experience working in the retail and logistics sectors and has led project teams in almost a dozen countries across three continents. He is currently leading a global programme to digitally optimise the workflow of over 10,000 employees and exploring a number of innovative technologies in the logistics sector.

Jan graduated with an honors degree in business from De Montfort University and holds a number of professional qualifications. Jan is also the owner and administrator of the ‘Retailers and FMCGs’ groups on LinkedIn and enjoys writing contemporary business articles for LinkedIn.

Jeremy Au: [00:01:17] Jan good to have you on a podcast.

Jan Gliszczynski: [00:01:21] Hey Jeremy, great to be on it. Thank you for inviting me.

Jeremy Au: [00:01:24] You've been a tremendous innovator and thinker of the changes that are going through retail and logistics right now. But before we dive into the industry insights that you have, what's been your journey so far?

Jan Gliszczynski: [00:01:38] It's been a pretty crazy journey. I dropped out of uni originally, went back into retail and worked in there for a couple of years, and then eventually kind of found myself going back and then graduated from uni before working in an arena where I was selling to other retailers. So that was hugely interesting speaking to a lot of people at very high levels and kind of really understanding from their perspective, what was happening in the retail market.

And now I'm working in logistics side of retail as well. So it's been really interesting one to find out all the different angles right down in the retail store and all the way up to the COO's and then back down into the logistics arena as well. So right now I'm working with their care consulting with project teams in design and implementation of new distribution units. And then I'm also project managing for lots of different innovation projects as well.

Jeremy Au: [00:02:27] Awesome. So what do you think drives that kind of project re engineering? What kind of a secret sauce or what needs to be done to make it happen?

Jan Gliszczynski: [00:02:35] One of the things that I've always taken is I've really liked to try and understand businesses as well as I can. And that not only gives me the insight into what is happening, but it also then allows me to call it, work on that and see what we've done. So if we take one instance, I recognize that there was a problem that we were having in a part of the business where it could easily be solved with a bit of automation. And so I looked at it into real depth, wrote a business case and then started running a tendering phase. And ultimately that led to an 89% decrease in the labor costs in that area. And what that allowed us to do then as well, was it allowed us to redeploy people into other parts of the business so that we could actually increase our output.

So as well as an 89% reduction in costs, we were actually able to increase our capacity for the entire site by about 25% as well. For me, it's about really trying to find those little bottlenecks in the business and try and break them down and then try and exploit it to then build the business back up again.

Jeremy Au: [00:03:33] Those numbers are absolutely bonkers, right? Because normally those are numbers you see on marketing, growth side increases. But to do that on the cost side of the business is really tough. And not only the fact that you've done it but you've done that repeatedly. 2020 is one hell of a year for retail logistics, huh? I mean, it's on the news about how things are changing and the damage. What do you think is going on?

Jan Gliszczynski: [00:03:56] Absolutely, it really is a crazy year for everyone, not just in retail, but yeah, I think when we look at the retail markets, what we're seeing is an acceleration of things that have happened over the last kind of 10 years, e-commerce has been a huge disruptor of the market. And now what we're seeing is because people weren't able to go into the stores, obviously the e-commerce has taken a huge chunk of that and the brick and mortar retailers, the traditional guys are really suffering. I think we described it previously it's a knife fight in the dark and the e-commerce guys are where they're standing holding a gun. It's pretty brutal out there at the moment. I mean, I certainly see like even in my local paper, constant news stories of this store's closed down and that store's closing down, there was 70% off in a store the other day.

And so it's not uncommon now. And I think now retailers are being forced to innovate again. And it's not like they've never been forced to innovate, they've always been big innovators. And now they're going to have to really try and think apart about what is that business model and how do they make the best use of the assets that they've got. Because a lot of these retailers, they hold assets, they have big leases as well. It's about looking at your bottom line and it's about looking at your assets and go, "Well, how do I maximize what I do with what I have?" So I think we're going to see some really interesting stories now over the next couple of years, about how these retailers adapt to the environment, which they're now are being faced with. And of course we don't even really know what that environment is going to be. Realistically, we're still right at the start of this.

Jeremy Au: [00:05:30] Knife fight in a dark while Amazon is holding a gun. I love that. Let's zoom in on this analogy. So what would you describe is a pot stock, a knife fight at a dock? Is it because of the offline competition or retailer versus retailer or the changing habits? What do you think about that?

Jan Gliszczynski: [00:05:49] We don't know exactly what is happening right now. Everyone is just reacting and just kind of feeling around and trying to understand. And then in the corner, he's got all of these big e-commerce giants, you've got your Amazons and your Alibabas and 10 cents and people like that. And they can beat them all on price and they can beat them all on availability. Everyone's now getting used to this environment where was just sitting down with your laptop and you have 12 million articles and it can be delivered to your door tomorrow. It's pretty difficult for the brick and mortar retailers now. I mean, how do you compete with that? You can't beat them in terms of SKUs and you can't beat them in terms of convenience. So you have to offer something different.

Now you have to offer something like an experience. I think that's going to be a way that we're going to see retailers pivots in the future. And I think we're also going to see them as well looking to utilizing the assets, which they do have. I think they're going to have to start looking at about how can they do for things like the film from stores.

Jeremy Au: [00:06:46] That's so true, and what's interesting is that your company Ikea has been able to ascend or fight back right? With its recent pushes to expand, grow, deliver. It's interesting to see that Ikea is figuring stuff out. What do you think is behind it?

Jan Gliszczynski: [00:07:06] Yeah, for sure. I think every retailer initially sort of huge drop in sales, but then as things started to evolve and people started to understand the situation, Ikea reacted very, very positively and as things started to open back up again, they actually sort of sales going way beyond what they were achieving last year. So if we look at things like home improvement and home furnishing, those parts are going to be doing very well. And we look at grocery as well, people are still going to get food so that wasn't really affecting. And I think what would be interesting in the industry, is now how we look at Amazon and how they are innovating in this space. That's going to start to prove to be very difficult for retailers to compete with. So I don't think anyone's ever going to stop going to the shop to go and buy groceries. I think what we may start to see is maybe some kind of down scaling of some of the largest stores or site pivots in their offer.

Jeremy Au: [00:08:01] What's interesting is that you're implying that the reason why retailers are waking up to the threat of digital competition has been due to COVID. Is that a fair statement?

Jan Gliszczynski: [00:08:15] Yes, of course. They've been forced into reacting into this way. This has been a trend that we all know has been changing over the last 10 or so years, all this is really now is just an acceleration of that trend. But I think this is a really positive thing for the retail, of course, in the short term, there will be losers. And that is unfortunately the nature of business. But I think it's just natural when you kind of go through many periods of economic instability and it just tends to shake out the people holding the weaker hands. So I think what we'll see is tends to shake out the people holding the weaker hands.

Jeremy Au: [00:08:49] That reminds me of the analogy where the frog is in boiling water and if the water was just like rising temperatures, gradually, the frog would never jump out right? So that's analogy I'm feeling from you.

Jan Gliszczynski: [00:09:01] Absolutely, and it's going to have to jump out pretty down quickly.

Jeremy Au: [00:09:05] So you've been leading a lot of the effort, right? Like click to collect is a big trend and then Ikea also doing delivery as well. Tell me more about these trends to combine match. What has been a standard feature for online retailers?

Jan Gliszczynski: [00:09:20] I think a lot of it really evolves around or revolves around logistics. Logistics comes with a completely separate alliterative costs now instead of doing mass trailers to the shops and the customers are doing that kind of last mile of it, that last mile of it has to be absorbed by the retailers themselves. And that in itself comes with a lot of problems because that last mile is always the most expensive part of the journey. The retailers that do well out of that, particularly the homeless ones are the ones that are able to really look at those bottom line costs and are able to control those in the best way possible.

So it's already been something that we've seen over the last five years, but just this continuing trend towards automation within warehouses. So that's going to be a huge area in which retail is going to be looking to improve themselves, because if you can reduce that cost, the labor cost is normally is about 80% of the cost of running a warehouse. So if you can reduce that, then you provide yourself with a huge advantage over other retailers. And then we look about getting close to the customer, Amazon now during the next day delivery, or I think they're even trying to do the same day delivery. I mean, how can you be that convenience? So I think it's really an opportunity for retailers to look at the entirety of their business model and look at how they're going to change that and manipulated in a way, which just makes them more cost efficient.

Jeremy Au: [00:10:46] Let's talk about robots, right? And automation, right? So who does it benefit more to seem all robots? Is it going to be the traditional retailers or is it going to be online retail platforms that benefit more from more robots in the warehouses?

Jan Gliszczynski: [00:11:02] Well, I think it's going to be both, they're the e-commerce guys because they didn't have those sunken costs and they didn't have those assets already in place. They've got out into the market and they've innovated very quickly. Now what we're going to see is those retailers that have existing stores, they're probably going to have a robot in the store. I saw some very interesting research recently that customers are actually becoming more open to the idea of having robots do services for them.

So I think there's some really interesting new dynamics here where people are the same time we're being socially distant from each other. Perhaps you could even say starting to be mistrustful as equal. We starting to look at robots in a completely different light. I mean, if you look at countries like Japan, they'd be very open to robots for years. The hotels where you walk in and there's a robot at the desk, which serves you. But now imagine that kind of thing happening in a store as well. And I think there's some opportunities here for some really interesting innovations in the world. And it comes back to that thing again, it's those that innovate are the ones that will survive and the ones that don't, they just won't.

Jeremy Au: [00:12:08] So you're saying that online retailers are better positioned to take advantage of robots because they don't have that legacy, assets and infrastructure. So what strengths do conventional retailers have in fighting back?

Jan Gliszczynski: [00:12:24] I think brand awareness is probably the biggest one. I think that is something that they're always going to be out of trade on. If you look at fashion retailers, for example, one of the biggest problems, that online retailers in the fashion sector have is that they get a lot of returns. So quite often, particularly with females, what they'll do is they order the same item of clothing in three different sizes. And they don't know which one that they fit into. So they order all three, they try them all on and they'll pick the one which suits them or in a lot of cases, they want you to send them all back. They actually may decide they don't like the dress at all. This is a common thing that I remember actually visiting, it was a John Lewis warehouse in the UK and they actually had to build an entire extra warehouse on the site just to cope with the returns.

I think they were getting something like a 70% return rate. These are all costs that become very difficult to absorb. Of course, you don't have that problem with a brick and mortar store because everyone could just go in and you just try on the cloth on. There is no cost involved for the retailer there, but for the e-commerce retailers, you've got the initial delivery, you've got the return delivery and then you have the cost of the items as well. We've seen with certain items, you can't sell brand new again, so they're going to find that very, very difficult to understand that transition and to profit and prosper from that.

Jeremy Au: [00:13:45] That's really fascinating, right? That's inherent weakness of the online transaction model is the sizing slash return process, which is very much un depreciated and under costed in a lot of business planning. Ikea just announced that they're moving into the suburbs in America and into the malls. What do you think about that?

Jan Gliszczynski: [00:14:06] Yeah, it's all about that. I think there's a really interesting trend that you see is moving to the smallest spaces. It comes back to that whole idea of being closer to the customer. Now we see it with Amazon and with everyone else as well. So it's all about being where the customer is. People are now moving out of the city centers and moving into the suburbs, perhaps because people are starting to work from home more, this really changes the dynamic of retail.

And then perhaps this is a trend we will see other retailers do. And I think what we'll see is that there will be more opportunities for specialization in certain product areas. And I think the thing about being an Omni Channel retailer is about trying to appeal to as many customers as well. We live in an age now where there's just so many different ways for us to communicate with each other and to make purchases that for the best retailers, what they're doing differently from the other retailers is they're making themselves available and they're making it so that their shopfront is everywhere.

Jeremy Au: [00:15:10] Thank heaven for everybody seems to be the word Omni Channel, right, and the question is, how do we get there? What do you feel about the word Omni Channel do you think is overused? Do you think it's still the big place to get to? How do you think about that?

Jan Gliszczynski: [00:15:24] Omni Channel is probably the way to go for a good number of retailers. And I'd say a good number of retailers who they don't think it's all retailers. We look at Amazon now everyone knows Amazon is the online retailer, you can get absolutely everything, but it's only online, but of course, Amazon themselves recognize that, that alone gets you so far. And that's why they did things like they purchased Whole Foods. And that's now why they're experimenting the UK with small store formats that allow them once again to be close to the customer because that's what retail is all about, it's about meeting the customer.

Likewise, from the other angle you go back to that fashion example that I have, for sure there's no brick and mortar fashion retailer that is not going to want to take advantage of the e-commerce sales potential. But at the same time, they have to recognize the costs and the pitfalls and the risks that are associated with that. So whilst like the Omni Channel is going to be a way forward for a lot of retailers, I think they're going to have to be careful about what their aspirations are when they use the word Omni Channel.

Jeremy Au: [00:16:34] Awesome, thank you so much, Jan.

Jan Gliszczynski: [00:16:37] Fantastic, thank you very much, Jeremy. It's been lovely speaking to you and have a great day.

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