Wharton faculty on the future of retail

“Ripple Effect,” the Wharton School’s faculty research podcast, tackles the world of retail, featuring experts in marketing discussing latest trends, AI in customer experience, loyalty programs, and the future of brick-and mortar businesses.

In “Rethinking Retail,” marketing professor Barbara Kahn explains the latest trends in retail, how AI fits into the customer experience, and what’s to come for brick-and-mortar.

“One way to think about customer experience is spend more time with your consumer. Now, that’s not, in and of itself, a good thing. It’s got to be valuable time with the consumer,” says Kahn. “How can you provide value? Through entertainment, through learning preferences, you can do more customization, etc. The other way you can offer value through customer experience is by spending less time with the consumer, making it more efficient. That’s, of course, what Amazon learned in spades. That really brought them to the front of retailing, because they made shopping so easy, so frictionless.”

Are loyalty programs worth it for retailers? Marketing professor Peter Fader says yes, but only if they are designed for customer lifetime value.

Fader argues that companies are challenged in measuring the value of loyalty programs on their bottom line. “They don’t measure it particularly well. Very often, they’ll just say, ‘How much stuff did we sell through the loyalty program?’ But it’s hard for them to measure [if] the customer is actually going to stay with us a little bit longer, they’re going to do more with us, not only when they’re getting or redeeming points. But truly, if we can measure the way we deepen relationships, and if the loyalty programs are letting us do that, they can be enormously profitable.”

In “The Luxury of Counterfeits,” marketing professor Z. John Zhang explains how luxury brands may actually benefit from the existence of counterfeits.

“The knockoffs become more and more profitable for the manufacturers. Not only you see a lot of very low quality knockoffs on the streets of New York, for instance, and you also see some of the super fakes. They look just as real as the real ones,” Zhang explains. “For those manufacturers, they make a tremendous amount of money because they don’t invest in the advertising. They don’t invest in the branding for those products. If you produce knockoffs, over time you’re going to get better at it. And in fact, you can do reverse engineering. You do a lot of innovation to catch up with real thing.”

In “Bad Things, Good Business,” Patti Williams, Ira A. Lipman Associate Professor of Marketing, explains why we like things that are so bad, they’re good.

“This paper ultimately got published with just a handful of the studies and the kinds of mechanisms we looked at. Here, we looked mostly at entertainment value,” explains Williams. “We also had some studies where we looked at curiosity, and we definitely find that sometimes people are more curious about bad things. What is it that makes it bad? In what way is it bad? And so maybe there’s a curiosity mechanism that sits here. We think that maybe there’s some storytelling value with things that are bad.”

And in “The Future of Labor in Retail,” operations, information, and decisions professors Marshall Fisher and Santiago Gallino look at how labor affects the grocery industry.

“Labor—in retail in general, and grocery is no exception—is one of the main expenses that retailers have, together with inventory,” says Gallino. “I think that over the years, there has been a lot of effort in optimizing inventory and thinking about that. But relative to inventory effort, staffing has been understudied. And that’s where we thought it was an opportunity to help retailers.”

“I think that we are going to see a revival of the physical store in grocery,” Gallino adds. “I think that some of the players … are able to leverage the scale and play a game that incorporates not just the fulfillment of the order but some kind of advertisement revenue that comes from their online efforts. But others, the smaller players, will lean on the physical store and experience.”

For a full list of podcast episodes, visit the “Ripple Effect” website.