XRC Labs Founder on How Retailers Can Position Themselves for the Future

By Kaitlin Milliken

Amazon introduced Prime in 2005, offering the convenience of two-day shipping to customers willing to pay an annual membership fee.

The world of bricks-and-mortar retail is still feeling the aftershocks of that innovation.

Stores are closing at an unprecedented pace. The investment bank Credit Suisse estimates that over 8,000 will shut their doors in 2017, and this year has already seen bankruptcy filings from retail brands like RadioShack, Wet Seal, Limited Stores, and BCBG Max Azria.

Despite the impact of online shopping, retailers are still acting conservatively and moving slowly, says Pano Anthos, managing partner of New York-based retail accelerator XRC Labs.

“The transactional world is going away to the internet,” he says. “And stores haven’t changed in 50 years.”

In an interview with Innovation Leader, Anthos discussed the pain being felt by the retail industry — and the importance of trends like on-demand manufacturing, augmented reality, and text messaging.


The shift to online shopping has changed the landscape for traditional stores. Customers can order and pick up products without ever leaving the couch. In the early days of ecommerce, this convenience came with a caveat: slow shipping time, ranging from five to 10 days.

Amazon’s two-day delivery has created a bigger challenge for retailers. As more online stores guarantee expedited shipping, the urgency of picking up a new outfit at the local mall has begun to diminish.

“Can you condition yourself to change the way in which you shop so you can shop [online] two days ahead?” Anthos says. “The answer is yes.”

But while stores could compete by focusing on entertainment and the thrill of the hunt, most provide a predictable shopping experience. “Stores are boring,” Anthos says. “The user experience is the same.”

Those factors are driving this trend:

XRC Labs Pano Anthos


Anthos says there are five new kinds of roles that stores can play in consumers lives:

XRC Labs Pano Anthos

"Store to Consumer" suggests that stores can't wait for consumers to walk over their threshold as often as they once did. "The premise of the store of the future is that time is a precious commodity," Anthos says. "E-commerce is a big time-saver, and that's why it has gotten a lot of the traction it has. If you can bring the store to the customer, you've neutralized one of the big powers of e-commerce." That may mean delivering items to homes and offices; creating pop-up shops or vending machines, as Benefit Cosmetics has done; or offering in-home styling services or manicures in offices.

"Store as Experience," he explains, "is the idea that retail isn't about just transactions anymore. That's what Amazon and e-commerce are about. Retail has to convey an emotional connection with the brand, a sense of loyalty and aspiration and affiliation. If you want the cheapest price, you go online. We like to say that 'scarcity is the new inventory," and retailers like Kith and Supreme play off that scarcity, offering products in limited quantities at specific times.

"Store as Platform." Itunes is the largest store in the world, and Amazon has a marketplace that other companies and individuals can sell on, Anthos observes. "Brands need a marketplace mentality, carrying products that fit the brand, but might not be made by the brand, just like Theory sells Common Project shoes."

"Store as Services & Rentals." Startups like Rent the Runway and Thredup have grown quickly by renting or selling apparel, Anthos says, while retailers ignore that market. "Brands can create more loyalty by bringing customers back over and over again, like a car dealership that leases you a vehicle and services it and then leases you another one," Anthos says. "Why can't you lease apparel like you lease a car? There's a whole continuum of rental, purchase, and resale activities happening online that brands are missing entirely."

"Store as Plant." Currently, retailers estimate how many articles of clothing are needed to meet in-store demand. Anthos sees a future where 3-D printing and other on-site production technologies will remove the guesswork from manufacturing. "If you can match supply and demand perfectly, you have no waste," Anthos says. "In the on-demand manufacturing world of the future, the product is made in front of you, not in China and sent by ship. We all know that inventory from China often winds up on the shelf in TJ Maxx, anyway."


"Keeping shoppers entertained starts the moment they walk past a storefront. When asked to pinpoint the most impactful parts of the the retail experience, Anthos points to the first and last three minutes.

Anthos says display windows must be designed to pull in customers, dawning products that entice shoppers. "[The windows] are informative and evocative...The product may be scarce so you feel privileged to be around it," Anthos says. "That has to be conveyed..."

Time at the cash register is another key part of the user experience. Lines aren't the only thing customers remember - interactions with employees linger on their mind. However, Anthos says that many retailers miss the opportunity to create meaningful interaction, or perhaps discuss a past purchase, by encouraging clerks to collect an email address or up-sell other products.



“Consumers don’t want or need more apps from retailers,” Anthos says. “Retailers trying to build them are wasting their time.”

Instead, he suggests focusing on ways to use text-messaging or voice as part of the shopping experience. Those, he says, are increasingly important user interfaces for retails who want to answer questions and build relationships over time. “The texting world is the preferred UI of choice for consumer,” he says. “Inside Facebook or WhatsApp, they’re texting. And voice obviously has its play,” with Siri and new devices like Google Home and the Amazon Echo, “though it’s still inaccurate at times.”



How will augmented reality — using phones or glasses to create a digital overlay on the real world — affect brick-and-mortar retail? Anthos suggests it will become a way to present dynamic content — like reviews, ratings, and product tutorials — in a way that traditional signage just can’t. “If you overlay an augmented reality experience on the physical world, you’ve got that combination that everyone wants.”


Anthos also says he sees opportunities to improve how the retail workforce is managed.

Many in-store employees juggle multiple jobs, and Anthos believes retailers need to think more seriously about rewarding and retaining their best employees.

“Now, everyone is paid the same amount of money regardless of how terrible you are or how great you are,” he says.

He envisions a system akin to Uber, where employees have the liberty to choose their own hours. Ratings from customers and willingness to work certain hours might also be factored into pay.

At the corporate level, Anthos suggests that executives spend more time in stores working alongside employees to develop a better understanding of emergent customer preferences and behaviors.

“We believe that our executives should be running cash registers in stores once a month, or folding clothes,” he says. “[That’s what] the great pioneers of retail would do.”

“You have to get close to the customer and listen,” he says. “Stop talking to them. Two ears one mouth. That’s what we were given.”

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