Podcasts

The Great Retail Return with Placer.ai’s Ethan Chernofsky (Part 2)

Ethan Chernofsky, VP of Marketing at Placer.ai, continues his conversation with Terry Montesi about the short and long-term effects of the pandemic on consumer behavior. Plus, they discuss the future of technology in mobile location and retail analytics, what Placer.ai is seeing in the market, and if they believe your next big real estate investment might be in the Metaverse.

Leaning In is published every second and fourth Wednesday of the month. You can find the first half of Terry and Ethan’s discussion on your favorite podcast app. Subscribe to hear future episodes as Terry and other members of the Trademark team speak with experts in the real estate industry.

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Transcript

Terry Montesi: I’m back with Ethan Chernofsky, VP of Marketing for Placer.ai, to wrap up our discussion on consumer behavior, changing retail markets, and what Placer is seeing in the market. We dive into Placer.ai recent projects and what emerging technologies might show up over the next decade. Ethan also shares his 2022 predictions and what he sees for the future of mobile location analytics.

One of the most important queries I have, and I think sort of uncertainties, is how much of the current retail energy and momentum will stick and how much of it is just the result of making up for lost time, pent up demand, and how likely are, after COVID wanes, consumers back to traveling as much as they want to, their back to going to entertainment venues as much as they did, eating out as much as they did, they are back pre COVID, as much as they go back to your point earlier. They may never go back to those. But is what we’re experiencing that’s positive in the retail business, is it still much, in many ways, is it still, Ethan, a result of that pent up demand? Or is it a result of an evolution, and are we going to come out of COVID actually with a stronger brick-and-mortar, omni-channel that’s brick-and-mortar sort of based foundationally environment? Nobody knows, but just thinking about it and putting data to work, like you guys have, is so important. So, what are your thoughts? How much of this is sustainable, and how much of it is a temporary making up for lost time sort of a burst?

Ethan Chernofsky: So, there’s this pent-up demand, which is short-term and fleeting, and maybe it’ll last because of this wave, but it’s not going to be here forever. There are other trends though that are more long-term. So again, migration patterns, shifts to the suburbs. If I’m running a regional mall in a suburb outside of a major city and your eyes aren’t getting big with this recognition that an audience has moved out of the city into more space and is looking for interesting experiences on a weekend when they pack their two kids and their spouse or partner into a car to look for something to do on a Sunday, I think you’d be crazy not to realize there’s something really exciting there. Now, it’s on retailers, mall owners, shopping center owners to create interesting experiences for their specific audience and to recognize how these audience shifts have happened, where these shifts have taken place and how they need to evolve in order to take advantage, 100%.

But there is a longer-term opportunity happening at the same time there’s this shorter-term buzz. And I think, take the grocery sector as an example – the grocery sector benefited from a short-term opportunity of they were the only thing that was open and we still need to eat and we can’t go to restaurants. But grocery numbers were still up in late 2021, and they’re still up in early 2022. And it’s because they were able to turn their short-term opportunity into a long-term advantage. So, if I have all this pent-up demand and I go to a mall and I have an amazing time, I’m not going to not remember that mall a month or two later and want to come back. If I go there and it’s not a great experience, then yeah, I missed the opportunity of the pent-up demand. So, the landlords, the mall owners, the shopping center owners, the retailers that are ready to make this pent-up demand turn into something long-term are going to drive a long-term trend. The ones who don’t appreciate that this pent-up demand can turn into something longer term, they’re more likely to miss the boat.

Montesi: Have you considered politics?

Chernofsky: No. In a world of uncertainty, is there anything more certain than politics is the worst?

Montesi: Well, you answered that with elegance and charm, but you took no risk on that answer. I’m trying to get you to take some risk. Although, you did say a few minutes ago super bullish on department stores. So, you did put a stake in the ground on that.

Chernofsky: I’ll tell you, there’s areas where we’ve always felt very strongly when we look at the data and we say the world is wrong. There’s a couple of them. Macy’s was one we were calling out two years ago as watch out for them. Bed, Bath, & Beyond is still one we feel really bullish about. We talked about fitness at the peak, March, April of 2020, as stop sleeping on fitness. I think we were talking about this in a webinar at that time. Don’t forget that suburban homes are littered with treadmills that are just glorified clothes hangers at this stage.

We’re keenly aware of how lasting consumer demand is and the fact that a brand that achieves a certain status has a second or third wind that arising player doesn’t have. And I think that’s where we get kind of this confidence in a lot of the retail status quo, so to speak. Even theaters – movie theaters have a content problem. The problem with the movie theater is not that people don’t like the movie experience. It’s that they don’t like the movie experience for certain types of movies. I don’t want to watch the House of Gucci with a hundred other people. I want to watch that on Netflix in my house. I do want to watch Spiderman on a big screen or Batman on a big screen. I’m a big football fan. If I can’t go to the game for my team – I’m a big Dolphins fan – if I can’t be in the stadium, I want to watch it with a lot of other people. If I could watch football on a movie screen with a hundred other fans who appreciate the same team that I do, I want to be there. And so, I think that, even think of it, movie theaters is an interesting example because about a year and a half ago, we were having this conversation: Could Amazon buy them? Could it be Netflix? Could it be Disney? If it’s Disney who owns the rights to Monday Night Football, could we start seeing Monday Night Football at movie theaters?

So, I think when you have assets, you have opportunities if you recognize which assets are strong and which are weak. And so, it’s just about taking that step back and having a clear-eyed view of what do I have that is strong? What do I have that’s weak? How do I emphasize the strengths and try to move past the weaknesses?

Montesi: Good. That was good way to explain why you might not just be being political. So, thank you for doing that. What have y’all been working on since we chatted last summer? Any new technology, interesting customer case studies, other areas to apply your technology to that you find super interesting?

Chernofsky: Absolutely. So, I’ll give you a couple. One that I really like is this focus on area. We started off as a company really obsessed over the specific property – what’s happening in each location. And kind of that led to us looking at locations on a chain level and kind of aggregating out. But one of the really interesting things that we launched late last year was this area analysis. So planned developments in a space, crime within a space, traffic patterns within a space. That to me has been really eye-opening in the sense of that zoom out and recognizing how are these factors happening around and what’s the impact of them, that’s been really, really interesting.

I’ll give you another example. We added a new data set into our marketplace called Geo Web, which it basically looks at search data from specific areas and how that index is compared to other areas within the country. So, one area might be in the 99th percentile for searches for leisure. And what does that mean for shopping patterns within the area? So that ability to start bridging the gap between digital and physical world behavior from an aggregate data perspective has been really fascinating. And I think that opens up a lot of potential and opportunity for the way we look at the physical world and the digital influences on that physical world.

Montesi: That last one is very interesting. I know retailers will be all over that. I’m sure they already are. What have you learned and what opinion do you have about how experience and experiential retail will play a role in widening the gap between the survivors and the really successful centers and everyone else?

Chernofsky: I said in the early parts of the pandemic, I felt like experiential retail was going to be one of the casualties of the pandemic. And by that, I meant things like climbing walls and these kind of in-store draws. And then Dick’s Sporting Goods opened their House of Sports, and it proved to be an unbelievably successful thing. And I thought, all right, maybe I’m wrong, maybe I was off on this.

But I heard it put by Billy Taubman really effectively, the core of the shopping experience is, and he’s talking about Chanel, and he’s like the way they open up the box, the way they show you the product, that’s the experience, the way you’re greeted at the door. And I do think that kind of triggered this eureka moment for me for gimmicky with quotations – obviously in some cases, it’s more than just that – but those types of experiences are interesting and exciting, and they can be a one-time draw. And for a very small group, they are a long-term draw. But the consistent delivery of the experience we want in a store is the most important thing. So, the person at Target who helps you find the thing you’re looking for, no one’s writing an article in the Wall Street Journal saying Target launches new program to help customers have a good experience and find the products they want to buy. Like that’s not crazy, but the execution on that is not easy. And I think that execution on the small details of each brand’s true in-store experience, that is the most important thing. That push to execute on that and create that level of compliance, so to speak, that every store delivers on – consistency, exactly – that’s the most important thing with experience.

Montesi: Got it. Look at the future of mobile analytics, will we be able to track in the future what level of a mall a visitor goes to, or are the physical issues with that just something that can’t be overcome?

Chernofsky: I mean, we’ll get there. It’s difficult to overcome now, but that doesn’t mean, like location data that we have today wasn’t something we would have been able to do 10 years ago. So, we’re making pretty rapid progress in these areas. And I think I’m very much not a believer, at least in the next decade let’s say, in the metaverse. I think that is a lovely idea for discussions over coffee, but it has no short-term value. I think a dataset like indoor data is something that’s coming in the very near future.

Montesi: You gave me another one. The metaverse has no short-term value the next 10 years. That plus super bullish on department stores, I got two good ones out of you today.

Chernofsky: Let’s be clear, the metaverse is not new. There were tools like Second Life 10 years ago, more, where people could have an avatar and they could experience it out in the world. But this idea that there’s going to be massive amounts of spending for this avatar, it’s just not aligned with reality. We want to put a filter on ourselves. We want to be the best version of ourselves. We want to soften some of our edges. But we still want to be ourselves. And I think that’s the thing. If you look at whether it’s TikTok, Instagram, any social platform, it was never about not being us. It was about being a slightly different version of us. And the metaverse just doesn’t have the ability to replicate that yet. It’s like if you remember Google glass, everyone was like this is the future, we’re never going to look at our phones. We’re like come on. It’s just these ideas are lovely in theory, but they are not as close as we think they are.

Montesi: Well, I can’t help but follow up on that. So, I must admit, I don’t think of myself as old school, although some people may actually call me old, but I’m not an old school thinker, but I cannot wrap my head around virtual real estate and people paying millions of dollars for a lot next to LeBron James in the retail metaverse. Help me. What the heck?

Chernofsky: Think about e-gaming. E-gaming, I was talking to a colleague once who wanted to start a company in the e-gaming space, and he came up to me and he said, “E-gaming is the biggest thing in sports right now.” I was like, “No, it’s not.” That’s simply not true. Look at Superbowl numbers, look at any numbers from any stadium, and it’s people going to a sporting event as opposed to watching something on YouTube. It’s not comparable. It doesn’t mean it’s not cool. It doesn’t mean it’s not exciting. It doesn’t mean in some areas of the world it won’t succeed. But this idea that everything is being completely disrupted and going virtual, it’s not true. There’s no evidence.

There’s change, and the change is an important metric, but it’s a limited metric. And so, I think it’s always important to- and again, we’ve seen this in the physical world with retail and I think we’re seeing it in other spaces as well. There’s no replacement yet for the real thing. And so, it’s a piece of the puzzle and it could be a very important piece of the puzzle, but we have a tendency to over-exaggerate these new ideas and then get very angry when they don’t reach their full potential. 

Montesi: Well, it’s hard enough to get reasonably good at picking which commercial real estate to buy in the physical world, much less thinking you’d ever be really good at which virtual real estate to buy, which virtual resort development should I buy? So just look at technology, data analytics the next 5 to 10 years. What are some of the key trends you see? And what are some of the things you think will become unlocked the next 5 years?

Chernofsky: So, this is a really interesting question. Let’s break it into two parts. So, the first is data and the next is kind of wider technology. So, from the data perspective, I think you’re going to see more data integrated together. So different data sets being viewed as brought into a single place so that you can kind of have this more holistic, robust view of what’s happening in the world. I think you’re going to see data become more question and answer oriented. So, it will always be in it’s kind of granular form to be kind of utilized by those who have a real propensity for data, but simplified versions of it will be available for those who have a very specific question to ask and want a very clear answer back. And then, it’s going to become more widespread as a result. So, it will not just be this thing that sits within the hands of a handful of data savvy people, but we’ll see it much more widely used.

From a technology perspective, I think it’s all going to center around the omni-channel breakthrough. And so, things like micro fulfillment within locations and the ability to deliver, to distribute products that someone tried on in a store somewhere else is really important. I think the idea of complimentary digitization, so something like imagine going to an off-price retailer and you find the shirt you want, but you need a large, not an extra large or a medium. And they have a kiosk that says, hey, find this, we have this available in the size you want 10 miles away and we’ll have it delivered to you. That’s the type of, I think, big technological innovations we’re going to see. And I think a lot of that centers around this recognition of kind of the triumph of the stores, but the triumph of the stores is not just going to be about how many products we sell from within the store. It’s about how retailers leverage the store to push their digital agenda as well the way we’ve always looked at that compliment from the other side.

Montesi: So, Ethan, was there any good question that you think I should have asked that you would like me to ask? Or any question you want to ask me?

Chernofsky: Actually, I thought this was pretty in depth. I enjoyed this one. I liked being challenged on the big ideas one; that was an exciting one. I’m struggling with this one a lot recently. So, you’re hearing a not fully baked thought. But I think the idea of the shopping center or the mall or the department store as a brand that sells other brands, I think we have a slightly skewed perspective. I think discovery as a brand is really, really important, and we underestimate the role that certain names have in telling me that they’re going to fulfill that promise well.

So, when I go to a mall that I like and I trust, and I see a retailer I’ve never seen before, I have a positive perspective on that retailer because they exist within that mall. If I trust Nordstrom’s or Bloomingdale’s, and I see a power retailer that I’ve never seen before, I have a certain appreciation for them if I have that appreciation for Bloomingdale’s and Nordstrom. And so, I think this idea of malls, department stores, shopping centers owning this need to have a brand in and of themselves, not just about the retailers that make up their center, is something really, really important that’s taking place now. And it demands a degree of strategic thinking in order to maximize that opportunity.

Montesi: Well, I believe that completely and just in the last 24 hours have talked about the importance of a place that we’re working on needing to have more of a brand from a psychological, emotional connection standpoint, a place that is sustainable, a place that cares about them, a place that cares about their community. We’re working on our nationwide Ukraine aid program. And if I think that Galleria Dallas, Market Street Woodlands, wherever it might be, really cares about me and cares about my fellow man and cares about the environment, the value of that brand endorsing a new retailer goes up. Does that make sense to you?

Chernofsky: Yeah. I think you are 100% right.

Montesi: Well, cool. Thank you for your time, my friend. You have become quite the retail industry expert. Remind me where you were before Placer.

Chernofsky: I was at a company called Similarweb that does digital intelligence.

Montesi: Where are you doing this interview from?

Chernofsky: I am calling you from just outside of Tel Aviv.

Montesi: I thought so. So what time is it? It’s late.

Chernofsky: It is 10:20.

Montesi: Well, thank you for working late and hanging out with me today, Ethan. It’s always good to see you. I appreciate our relationship. Keep up the good work, pal. Thanks for spending time with me. Peace.

Chernofsky: Thanks so much. Have a great day. We’ll talk soon.

Montesi: Thanks for tuning in to today’s episode. Be sure and subscribe to this podcast so you don’t miss one. To learn more about Trademark Property Company, visit trademarkproperty.com.

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