CHAPTER 8

THE SPINE: LOGISTICS

I think from a consumer standpoint, people have lost sight of whether they’re shopping in a physical environment or digital environment. In most cases, their shopping starts with that mobile phone in their hands, and it’s how they decide where they’re going to shop. . . . They get the best of both.

—Brian Cornell, CEO of Target

Logistics is the spine of any company, holding the rest of the body upright, enabling the limbs to work together and take direction from the brain. Because it’s not flashy, it’s easy to forget how essential your spine is . . . until an injury leaves you completely incapacitated.

Logistics can be defined as the art and science of producing and moving goods and components, getting the right things to the right places at the right times. It includes sourcing raw materials and equipment, often from around the world. It also comprises creating and managing inventories, warehousing them, and shipping them wherever they need to go, whether that’s across town or around the world. Conventional wisdom holds that being an expert in logistics and supply chains will never get you on the cover of Fortune (again, unless you’re Tim Cook). But these skills are essential to delivering great experiences to customers no matter which industry or sector you’re in.

In this chapter, I’ll focus on retail because it’s an industry where logistical excellence is especially important, and where there’s a huge gap between companies that have healthy spines and those that don’t. It’s also the industry where the myth of start-up/digital superiority is especially strong: specifically, the idea of the so-called retail apocalypse. In Silicon Valley and other brainy outposts, you’re likely to hear that the retail apocalypse is inevitable—that it’s only a matter of time before e-commerce completely obliterates physical retail. It’s true that thousands of physical stores have shuttered in the past few years, after losing huge chunks of their business to Amazon and other e-commerce options. Several famous national retail chains have either gone into bankruptcy or have lost most of their value, including Sears, J.C. Penney, Macy’s, Circuit City, and K-Mart.

But as ESPN football analyst Lee Corso often says, “Not so fast, my friend.” Those out-of-business or financially crippled retailers didn’t fail merely because they operated physical stores in a digital age. They failed because they didn’t adapt to changing consumer trends, and because they focused on cost cutting rather than on growth. Reducing expenses is a good way to maintain short-term profits when revenue begins to decline. But in the longer run, you can optimize yourself into starvation. If you can’t persuade more customers to buy more stuff, all the efficiencies in the world won’t save you. Nor will the pure brawn of having hundreds or thousands of stores and a sophisticated logistics operation.

The retail chains that are defying the apocalypse focus on adding brains to their brawn, applying innovative new strategies to appeal to customers. Instead of counting on their already-strong spines to save them, they’re giving their spines greater fortitude by blending the best aspects of physical retail with new approaches to delivering great online experiences. Instead of slashing costs in a desperate attempt to maintain profitability, they’re investing heavily in upgrading their logistics, as part of an overall strategy to improve their offerings.

After a brief look at Warby Parker, a brainy start-up that has been growing a surprisingly strong spine, this chapter focuses on three brawny retail giants: Best Buy, Home Depot, and Target. I chose these three (unlike the other chapters that have a single featured case study) because they’re taking different approaches to beating the conventional wisdom about the retail apocalypse. What they share are far-sighted leadership teams that have leveraged superior logistics to deliver flexible and deeply satisfying customer experiences, differentiated by Amazon and other rivals.

Warby Parker: A Digital Start-up Grows Its Spine

Large incumbents have a natural advantage over start-ups in logistics, because of economies of scale. But that’s not to say small disruptors can’t make logistics a competitive advantage. Warby Parker upended the market for eyeglasses by solving the logistical challenges of e-commerce for a product that people need to try on before buying and then need to customize with prescriptions after buying.

Founded in 2010, Warby Parker was designed to disrupt an industry dominated by one monopolistic conglomerate (Luxottica) that maintained artificially high prices across multiple branded chains (LensCrafters, Pearle Vision, Sunglass Hut, and others). Warby’s business model was simple, in theory: win customer loyalty through a combination of low prices and great service, and slash overhead costs by selling online instead of paying all the expenses of Luxottica’s brick-and-mortar chains.

Warby offered to ship five frames at once, for free, so a customer could try them on at home, without any sales pressure, for up to five days. The customer then mails back the box of frames with a prepaid shipping label and a prescription for the lenses to be put into the chosen pair. (There are also options if the customer needs a prescription from an optometrist.) Before long, new glasses with the prescribed lenses arrive, for a base price of $95 instead of three or four times that much at a typical eyewear store.¹ No aspect of this model would have worked if Warby hadn’t solved the logistical challenge of making it easy and affordable to ship all those frames back and forth.

What’s especially interesting is how Warby has gone beyond its original process to adopt a hybrid strategy. It opened its first brick-and-mortar showroom in 2013, barely three years after launching its online business model, and now operates more than 120 physical stores across North America. In 2015 it also established its first national retail partnership with Nordstrom, setting up six pop-up shops inside Nordstrom’s locations.²

Customers immediately loved the stores, in part because glasses are a significant enough purchase as to be worth the time and effort to leave home. Customers also like getting expert opinions about what looks good on them; they just hate paying vastly inflated prices for an in-store experience. As cofounder Dave Gilboa told Inc. in 2017, “When we launched, we said that e-commerce would by now be 10 or 20 percent of the eyeglasses market. It’s grown a lot since then, but it’s not as big as we anticipated, and that is one of the things compelling us to do more stores.”³

Physical stores soon became the company’s biggest source of growth, without cannibalizing its online sales. Gilboa added, “Once we open a store, we see a short-term slowdown in our e-commerce business in that market. But after 9 or 12 months, we see e-commerce sales accelerate and grow faster than they had been before the store opened. We’ve seen that pattern in virtually every market.”⁴

Getting good at physical retail required an increasingly sophisticated reliance on big data and high-tech inventory management. Warby Parker built its own point-of-sale system, so salespeople with iPad minis could quickly see customers’ favorite frames from the website; past purchases, if any; and shipping, payment, and prescription information—and use that information to deliver better service. For instance, if a customer liked a pair of frames in the store, a salesperson could snap a picture on the iPad and send the shopper a personal email, making it easy to order those glasses later on. According to Gilboa, more than 70 percent of customers who got that email would open it, and more than 30 percent would end up buying.⁵

This kind of Brains-and-Brawn integration is as powerful as anything developed by the major retail chains, despite their deeper pockets and vastly larger number of locations. Now let’s look at how three of those much bigger and brawnier chains are driving their own innovations.

Best Buy: Redefining Value and Service

Best Buy CEO Hubert Joly spoke to my Stanford class in March 2019 about his company’s impressive turnaround. Over the previous decade, e-commerce in the electronics/TV/computer market had driven the bankruptcies of CompUSA, RadioShack, Circuit City, and others. When Joly took over in August 2012, things looked almost as dire for Best Buy. But he saw hidden opportunity in his rapidly shifting market.

While the company was being discussed, both internally and externally, exclusively in terms of the headwinds it faced, Joly reframed each of those headwinds as a tailwind. He recognized that the overall consumer electronics market was booming, with the Great Recession subsiding by 2012 and a slew of new product categories catching on. People were loving smart speakers like Alexa and smart thermostats like Nest. Smartphones were trending toward near-universal consumer adoption, in both their iPhone and Android flavors. But to take advantage of these and other trends, Best Buy had to do a lot more than put products on shelves and wait for customers to show up. It had to redefine its value and service propositions.

Joly’s team came up with two major strategies to shift Best Buy’s mindset and apply the company’s scale and logistical strengths to harness those tailwinds. The first was reinventing the physical stores, accepting that customers were already using them in part as showrooms. The second was redefining customer service as a broader and more intimate relationship that could enhance long-term customer loyalty.

Reinventing the Store Floor

One headwind facing Best Buy was the rise of “showrooming”—the consumer practice of looking at products in a physical store before ordering online to get a cheaper price. If Best Buy could improve the in-store shopping experience, and get closer to matching other people’s online prices, maybe shoppers would complete a purchase right in the store instead of redirecting it online.

One idea to improve the experience was to section off stores-within-stores where customers could explore items from various manufacturers, including major brands like Apple, Samsung, Sony, and even Amazon. Best Buy’s in-store experts helped customers compare features and mix-and-match components to meet their goals, such as a home entertainment system or a desktop computer plus printer, a tablet, or smart speakers. As these and other categories became more complex, the need for sophisticated, brand-neutral help would continue to increase.

Although many of Best Buy’s suppliers were starting to operate their own stores, Joly realized that none of them, not even Apple, could completely satisfy customers with just their own branded merchandise. Technology had gotten too sprawling for any single brand to fill every niche. And people increasingly needed expert help to choose the ideal components for their unique needs and to make everything work together. Joly made a convincing case to his major suppliers, including Apple, that allowing Best Buy to create branded sections of the store for their products was a win-win that would increase sales of their products. Within each mini-store on the floor, the brand’s products were merchandised to look as appealing as possible.

Companies like Apple benefited from investing in a mini-store display, even though Best Buy was directly competing with their own stores. Unlike many retailers that responded to disruption through the development of private label brands, Best Buy decided to become extra helpful to their suppliers, even playing a critical role in orchestrating product launches and setting product standards. Treating suppliers like customers and ensuring that they receive value out of every exchange suddenly made Best Buy more relevant.

Joly and Best Buy even helped suppliers that competed directly with them, such as Amazon. He explained that if he excluded any key suppliers from his stores, his own consumers would be the ones to suffer. So Best Buy had to feature products like Amazon’s Alexa-based Echo smart speakers and work to make the Amazon mini-stores as desirable as possible, to encourage his rival to build part of its distribution strategy around Best Buy.

As Joly put it, “So many of us buy the easy stuff online. If we’re going to take the trouble of going to the store, it has to be worthwhile. What does the store within the store uniquely do? If you’re not sure what you want, to be able to touch, feel, experience the new technology and then talk to a human being is incredibly valuable. We also provide a unique service to the vendors, which need a place to showcase their stuff.”⁶

The mini-store strategy depended heavily on logistical and supply chain excellence, to make sure all these products from all these brands were in the right places at the right time. Joly also noted that half of the orders being placed at BestBuy.com were being picked up at the store, usually within an hour of the online order being placed, by buyers who didn’t want to wait a few days for delivery. That’s another essential skill for retailers that want to avoid the apocalypse.

Wing-to-Wing Service

Joly’s second major initiative was turning a headwind of increasingly complex technology into a tailwind of a more advanced approach to customer service. Most businesses have IT departments that are responsible for choosing components, installing them, connecting them to other products, troubleshooting problems, and fixing anything that breaks. But individual consumers were on their own with their connected products, and many were floundering with home technology. If Best Buy could become the trusted provider of that kind of wing-to-wing service, the potential was enormous.

He summarized the goal as, “I want to help you figure out how technology can help you live a better life and then help you make sure that things keep going. If Netflix is not working tonight, is it because of Netflix? Is it the piping to the home? Is it the Wi-Fi, the TV, the streaming device? Irrespective of where you bought your products, we have this wonderful offering that will support everything you have in your home.”⁷

To implement this strategy, Joly ramped up Geek Squad, a previously underutilized asset that Best Buy had acquired a decade before he became CEO. Founded as an independent company in 1994, Geek Squad originally offered computer-related services and accessories. But now it does far more. A service contract will get you unlimited diagnosis and repairs not just for your desktop or laptop computer, but for your smartphone, tablet, internet-enabled TV, Wi-Fi router, smart speaker, and pretty much any other kind of electronics or appliances. And if you don’t want to schedule a visit at home, you can get 24-hour assistance online or by telephone. That peace of mind might be well worth $199.99 for an annual “Total Tech Support” service contract.

Joly noted that Best Buy is constantly expanding its service offerings. “We’ve launched a number of initiatives like the in-home advisor program, where we go to your home to see what you need and create a solution for you. We support everything you have in your home, irrespective of where you bought it. And we have a number of initiatives around aging seniors which will help monitor their health, so we can help them live longer in their home independently with the help of technology. We’re combining the human touch and the use of technology.”⁸

I saw firsthand how this works, and how much it depends on great logistics, when I purchased two televisions from Best Buy. A team brought them into my house, set up the wall mounts exactly where I wanted them, and installed the TVs. Then they stayed long enough to set up my web-based TV services (Netflix, Hulu etc.) and to make sure everything was working perfectly with my remote controls. Delegating those challenges to experts was well worth the extra $100 fee. I also signed up for a one-year contract for Total Tech Support, which came branded with the names of both Best Buy and Geek Squad. The TV installation process reassured me that these people know what they’re doing and have the logistical skills to deliver what they promise.

Focus on Customers, Not Competitors

Joly pointed out to our class that if Best Buy had focused on its competitors, it would have probably missed the opportunity to leverage its logistical resources toward becoming more service-driven. But by relentlessly zeroing in on customer needs, it was easier to spot ways to simplify customers’ lives.

Joly retired as CEO in June 2019, and the new CEO, Corie Barry, continued the company’s successful strategies. Despite the added costs of hiring skilled employees for Geek Squad who were good at both tech support and customer interaction, the service contracts seemed to reinforce product sales. The happier customers were with their tech support contracts, the more likely they were to buy future products from Best Buy.

Even more encouraging, online and offline sales continued growing in tandem, not cannibalizing each other. Despite the pandemic and recession, Best Buy reported 4 percent overall sales growth in the second quarter of 2020, exceeding analyst estimates. As the Wall Street Journal reported, “As Best Buy started reopening stores, heftier categories such as large appliances and home-theater components sold better, highlighting the importance of in-person shopping for such products. That doesn’t mean e-commerce slowed down, though. Domestic online revenue grew 242 percent last quarter from a year earlier, reaching over half of all revenue—the highest it has ever been in a single quarter. Online sales didn’t falter much after stores reopened, staying 180 percent higher than year-earlier levels.”⁹

As Barry shared when she visited our class in January 2021, a company cannot fall in love with how it does business today. It needs to continue to reevaluate how it will change its way of engaging with customers if it will succeed in the future.

Home Depot: Don’t Fight the Inevitable

Home Depot faced a different set of challenges from Best Buy, but likewise used strategic innovation to leverage its existing advantages in supply chains and logistics.

Craig Menear was a 16-year Home Depot veteran before becoming CEO in 2014. He had spent the majority of his career dealing with complex logistics, the expectations of builders and home renovation professionals, and the details of running large retail operations. But just a few years into his tenure as CEO, he told an interviewer, “The thing that keeps me up right now is the amount of change that’s happening in our business and being able to continue to make the changes we need to have happen to stay ahead of where the customer is taking us.”¹⁰

While many other major retailers resisted e-commerce or tiptoed into it, Home Depot embraced it wholeheartedly. Menear stressed to his leadership team that there was no upside in fighting the inevitable—doing so would only waste time and give the competition the opportunity to get ahead. Instead, he emphasized, you have to meet customers where they are now, not where they used to be. That means reevaluating your business’s core strengths to see what unique abilities you can apply toward filling customer needs.

One goal for Menear was continuing to make the Home Depot in-store experience as good as possible, by frequently upgrading the selection of products and investing in training and development for service employees. As he told my class, “We’re in the business of delivering great product. That means we need to care deeply about and invest in innovation in our product.” He explained that customers go to a Home Depot store for quality products, great advice, and a satisfying experience. But if a retail company offers a crummy in-store experience or bad products on its shelves, no amount of digital innovation will differentiate it.

Having cleared that fundamental bar, Home Depot was able to go after a more ambitious goal: mastering a hybrid model to give customers the best of both online and offline shopping, making the most of its strong spine.

It’s Hard to Ship a Kitchen Sink

One fundamental truth about e-commerce is that the bigger and bulkier a product is, the harder and more expensive it is to ship. That’s partly why Amazon started out by selling books and CDs, two categories that were small and light. But imagine ordering a supply of lumber for a construction project, or a set of lighting fixtures, or even a kitchen sink. An Amazon van probably can’t leave those on your doorstep. But you can swing by your local Home Depot at a specific time and let their workers load up your pickup truck or SUV.

A few months after Menear became CEO, Home Depot began to restructure its supply chain to integrate the experiences of online and in-store shopping. This included developing and deploying a network of distribution centers for store replenishment and direct-to-customer fulfillment. It was a huge logistical challenge to make sure that every Home Depot store could be replenished quickly, without disappointing any customer who would be promised a specific time for pickup.

As Scott Spata, vice president of supply chain direct fulfillment, told a trade publication in 2015, “We prefer to take the ‘e’ out of e-commerce and just call it commerce. A high number of in-store transactions start online, where we can drive customers to the store armed with all the information they could need. Alternatively, they might want to see and touch a product in a showroom before ordering a specific size or color online. However the customer wants to transact, we’ll make it happen on the back end.”¹¹

The company began building its first direct fulfillment centers (DFCs), designed to support “omni-channel” capabilities like direct-to-consumer fulfillment and store pickup for online orders. The first three DFCs (in California, Georgia, and Ohio) had advanced warehouse control systems to synchronize order fulfillment activities. As the trade publication noted, “Although the DFCs are the spearhead of Home Depot’s response to the omni-channel revolution, they would not be possible without a massive remodeling of the company’s supply chain.”¹²

Spata described the DFCs as the third key phase in a supply chain evolution that had begun in 2007. Phase one was creating centralized replenishment. Phase two was building Home Depot’s rapid deployment center (RDC) distribution network for store replenishment. Now, in phase three the company was adding greater flexibility for a future with more online orders resulting in pickups at stores. Said Spata, “We knew what we had for e-commerce volume at that time, but we also knew we would double, triple or quadruple that in coming years. This is not just growth, but hypergrowth.”¹³

As Menear put it in December 2017, “It’s what we call interconnected retail. The front door of our store is no longer at the front door of our store. It’s truly in the customer’s pocket. It’s on the job site. It’s when they’re sitting on their couch. The shopping experience in most categories starts in the digital world, even if it finishes in the physical world. People go and browse and then they swing by the store. . . . 45 percent of the orders that customers generate on HomeDepot.com, they actually choose to pick up in our stores. . . . Over the past several years, we’ve built a supply chain that moves goods very efficiently from our suppliers to our DCs and stores.”¹⁴

A Hybrid Model Breeds Flexibility

By June 2018, Home Depot had announced plans to spend $1.2 billion over five years to continue to speed up delivery of goods to homes and job sites. It planned to add another 170 distribution facilities so it could reach 90 percent of the US population in one day or less, according to Mark Holifield, EVP of supply chain and product development. The new sites would include dozens of DFCs for next-day or same-day delivery of popular products, as well as 100 local hubs where bulky items like patio furniture and appliances would be consolidated for direct shipment to customers. As Holifield told a logistics industry conference, customers “expect delivery to be free, they expect it to be timely. Sometimes they want it fast and are willing to pay for that. Sometimes they want it free, and they’re willing to wait for it. We need to have the right options there. This is part of an $11 billion overall plan to reengineer our company to ensure that we are prepared for the future in retail.”¹⁵

Like Best Buy, Home Depot found that its hybrid model helped it weather the pandemic of 2020. It reported sales of $38.1 billion for its second quarter, a 23.4 percent increase from the second quarter of fiscal 2019. Same store sales in the United States were up 25 percent. Menear noted in his earnings announcement that “the investments we have made across the business have significantly increased our agility, allowing us to respond quickly to changes while continuing to promote a safe operating environment. This enhanced our team’s ability to work cross-functionally to better serve our customers and deliver record-breaking sales in the quarter.”¹⁶

Target: Running Toward the Disruption

Our third major retailer, Target, has had one of the most interesting comebacks of recent years. After thriving during the 1990s and early 2000s—the “Tarzhay” era, when stylish private brands made Target much cooler than Walmart or Kmart—the company struggled during and after the Great Recession. Sales dropped, many stores fell into disrepair, and the leadership struggled to recapture market share from Amazon and other competitors. The board went outside the company to hire a new CEO, Brian Cornell, in August 2014. He spoke to my Stanford classes in April 2019 and again in January 2020 about the company’s multifaceted resurgence.

Cornell told us that the key elements were improving Target’s use of big data, improving its in-store value proposition, and building a hybrid model for blending traditional sales and e-commerce. Like Best Buy and Home Depot, Target leveraged its core competencies, especially logistics, in ways that its competitors didn’t. Cornell described how he threw down the gauntlet: “In February 2017, we laid out a vision for the company. We said we’re going to spend $7 billion over three years to reimagine our stores, build new, smaller stores in urban centers and on college campuses, reinvest in our brands, invest in technology and fulfillment capabilities, and make a big investment in our people. The success we’re seeing now is really a combination of all those elements starting to mature. We’re executing at scale and they’re all starting to work together. That’s driving great top line growth, market share gains, and more traffic in our stores and visits to our site.”¹⁷

Wall Street slammed Target initially when it committed to invest that $7 billion on in-store upgrades, supply chain improvement, and other elements of Cornell’s plan. But he was right that you can’t save your way out of a downturn. As my former boss Jeff Immelt often says, “You have to run towards the disruption, not away from it.”

Using Big Data to Strengthen Target’s Spine

Big data was the foundation for all the other aspects of Target’s turnaround. Surprisingly, prior to 2013 the company had no centralized data governance and no department dedicated to overall data strategy. As online sales continued to grow, Target needed to ramp up data science and analytics to further drive its online business. It formed a new dedicated team to build an increasingly data-rich capability. Tech veteran Paritosh Desai was recruited to lead the new group, Enterprise Data, Analytics and Business Intelligence (EDABI). As Desai recalled, “The company had a tremendous opportunity to gather data to improve decision making and how the business was run. And I figured if I could start with helping the e-commerce activities, longer term there would be an opportunity to impact the whole organization—in stores, across the supply chain—everywhere.” ¹⁸

Cornell stressed the importance of EDABI to Target’s turnaround, calling it “an investment in understanding the consumer and what they were looking for. . . . While I can talk a lot about strategy, the other thing we’ve recognized is how important it is to have the right capabilities in place, whether that’s technology or supply chain capabilities, or product design, or our focus on execution at store level. Data and analytics have been important guideposts for us as we’ve gone through this journey. On an average week we get 30 million consumers shopping our stores, a similar number going to Target.com. So we have all this rich data, and now we understand where consumers are shopping, what they’re looking for.”¹⁹

Improving the Stores

Cornell put a priority on combining EDABI’s big data analysis with Target’s logistical excellence to reconfigure the stores, while still keeping prices competitive with both Amazon and Walmart. Over the last several years, Target has also broadened its offerings by adding groceries, adult beverages, an increased selection of toys, and other products that are staples for young families. It got better at adjusting inventory from store to store based on what local customers really want, even keeping toilet paper in stock when people started hoarding it during the coronavirus pandemic. Target also reinvented its private label brand portfolio, adding more than two dozen new brands (like Cat & Jack and Good & Gather), a quarter of which are now generating more than $1 billion in annual sales, according to Cornell.

As the Wall Street Journal noted in October 2018, after Target posted its best results in more than a decade, “The company has been shedding some of its stalwart brands and launching new ones. Stocking exclusive merchandise is part of [Cornell’s] strategy to fend off competition from Amazon and other chains. Private-label brands also tend to be more profitable for retailers.”²⁰

The company has added a wide variety of smaller footprint stores in lucrative urban markets like New York and Los Angeles, as well as on college campuses. These stores cater to millennials and Gen Z, different demographics than the young suburban families who were company’s traditional core customers. These new stores not only broadened Target’s customer base but have been hugely successful, with sales per square foot up to four times greater than Target’s older, larger stores.

Meanwhile, Target is being more innovative about partnerships, and not merely with major consumer brands like Disney and Levi’s. The company is creating showrooms for rising direct-to-consumer brands such as Harry’s (shaving supplies), Casper (mattresses), and Quip (toothbrushes). And Target’s acquisitions of delivery services Grand Junction and Shipt have enabled it to offer the same-day delivery options that many online shoppers are beginning to expect.

“There’s a Blurring and Blending”

Like Best Buy and Home Depot, Target has embraced a different kind of e-commerce that makes the most of its unique spine—the back-end strengths that its competitors can’t match. The logistical challenges of seamlessly blending digital purchasing with in-store fulfillment are harder than you might assume.

For instance, imagine that you’re browsing Target.com, planning to get a curbside pickup at your local store in a couple of hours. What if the store doesn’t have enough staff to gather and pack your items in the time allowed? What if the inventory software is slightly off, and instead of having two in stock of the lamp you had your eye on, the last one just went to an in-store shopper? What if the cash registers are too backed up for any staffers to have time to run outside with your curbside order?

Solving those and other challenges wasn’t easy, but tackling them gave Target a strong competitive advantage. As one analyst noted, “Known as ship-to-store, Target’s e-commerce platform turns physical stores into mini-warehouses for online customers. That makes it possible for customers to order a product online and then pick it up in a store on the same day. Ship-to-store reduces Target’s shipping and handling costs and takes advantage of already existing space in physical stores. And if a customer decides to do some shopping while already there at Target, the benefit is two-fold.”²¹

Cornell thinks that asking customers to choose between online and in-person shopping is increasingly a false choice. “I think from a consumer standpoint, people have lost sight of whether they’re shopping in a physical environment or digital environment. In most cases, their shopping starts with that mobile phone in their hands, and it’s how they decide where they’re going to shop, what they’re looking for. They’re looking at their latest Pinterest, or they have their shopping list there. I think more and more there’s a blurring and blending that’s taking place. And I think the consumer today is enjoying the fact that shopping has become really easy. They get the best of both. They get a physical experience when they want it. When they don’t have time, they can shop from their desk or from their classroom. And we’ve made it really easy now for them to interface with our brand on their own terms.”²²

Getting Logistics Right

Let’s face it: logistics isn’t sexy. But just as plumbers and electricians quietly keep our water running and our lights on, logistics experts are critical for delivering great customer experiences. Any company that excels at logistics will have a competitive advantage in a world where customers demand the right products in the right places at the right times. Great operational excellence is a priceless asset, especially when combined with strong digital capabilities.

Pundits repeatedly predicted the demise of Best Buy, Home Depot, and Target in the age of e-commerce. But all three were fortunate to have Systems Leaders who invested resources intelligently to blend the best aspects of digital and physical. All three used their access to capital to enhance and expand their logistics and supply chain infrastructure, as well as their websites and other points of consumer contact. All three doubled down on shoring up their brawny capabilities, while adding brainy new capabilities. As a result, all three have been able to defy the pundits, using their healthy spines to pull away from their competition.

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