Mark Tarchetti of Alchemy-Rx: The Future Of Retail In The Post Pandemic World
An Interview With Jilea Hemmings
I think there will be more advances to help us avoid crowds — knowing exactly when to collect your order by text, chatbots that help you understand when stores are more or less crowded to plan your visit, or simply more digital ordering experiences as “grab and go” touches every category we buy.
These examples, particularly those enabled by technology, will grow in the coming months. You are also seeing the early days of pivoting the physical infrastructure of retail much faster to online sales fulfillment. A lot of what used to be known as retail stores will become focused on last mile delivery to manage the shift from bricks to clicks and lower the cost and lead times of scaling online order fulfillment.
As part of our series about the future of retail, I had the pleasure of interviewing Mark Tarchetti, Alchemy-Rx, Co-founder.
A rare C-suite strategist and business leader, Mark Tarchetti has over 20 years of experience designing and implementing business transformations with household name brands. Mark specializes in growth strategy and as a former corporate executive at Unilever and Newell Brands, he built growth functions in design, marketing, innovation and eCommerce. He quit corporate life in 2018 and founded Alchemy-Rx, a consulting agency focused on business development. In summer 2020, he published “Pick a Lane,” advising how to accelerate business growth in a fast-changing world.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?
I grew up in England in the 1980s with an unemployed dad. I saw first-hand the consequences of business failure and a challenging economy. This gave me a raw passion for business to be a solution through growth and innovation. When businesses fulfill their potential, they create great benefits for society and families. Business strategy is what makes me tick. Solving complex problems. Seeing opportunity others have missed. It all stems from a passion to build something and to nurture progress. The world wasn’t designed to stand still, nor should any business attempt to live off past successes. Business builders make an opportunity of the world and move us forward. Those beliefs and values define my career and where I thrive.
Can you share the most interesting story that happened to you since you started your career?
I have been privileged to work with some of the industry’s best executives in my corporate career. Yet, a real turning point for me was working with business founders, whom I’ve learned from the most. I think of Brendan Lindsay at Sistema, Sami El-Saden at Contigo or Mei Xu at Chesapeake Bay Candles. I got to know them personally through our work together and found great inspiration from their stories about how their businesses were created and scaled. I saw how much more was achieved with a fraction of the resources of the bigger brands. Passion, purpose, and perseverance were the keys to success. A “life or death” necessity to focus almost exclusively on the interests of the customer and consumer. In contrast, so much of what is learned in big corporations is about navigating the organization and working out how to move jobs quickly to climb the promotion ladder. These things matter a lot internally, but they are meaningless externally. Lessons from founders have really dictated what I intend to do in the second half of my career as an advisor and investor in growth businesses.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson or takeaway you learned from that?
Prioritization is a fundamental discipline of strategy. You always look to create focus on what matters most. I learned the 80–20 prioritization principle the hard way! My first job for Unilever was cost accounting at a food packing plant. I spent eight weeks on the shop floor working with the team, developing how to identify, measure and manage waste. At the end of the project, I had built an incredible data set and model to track exactly what was happening and lasering in on areas for improvement. Unfortunately, this was also the moment where I found all the elements added up to a trivial amount of money. I had an incredibly detailed study for my boss that didn’t add to a hill of beans! It was my first lesson in one of the fundamentals of business. You can measure inputs and outputs all you like, but it is outcomes that matter. I have never forgotten that.
Are you working on any new exciting projects now? How do you think that might help people?
I co-founded a business strategy agency, Alchemy-Rx, working with a team of people I have known for many years. The exciting thing for our firm is that we focus on growth. That means always looking to the future and making an opportunity out of change. With organic growth in the consumer products world at a 20-year low, many businesses are working hard to simply stand still. We saw a meaningful opportunity to form an agency made entirely of proven leaders with direct operating experience. I consciously didn’t want to create a traditional consultancy where strategies lacked practicality, ending in PowerPoint instead of implementation.
We have worked on early stage businesses, assessing investments and defining business plans for emerging high growth brands. At the same time, we are working with household name mature brands on bolder innovation and greater integration of technology. We are also putting our merger and acquisition experience to work advising on business transformations and deals.
The current virtual work environment has been a catalyst for us to help businesses change further and faster. While companies have come to us requesting solutions due to current COVID-19 limitations, we’re able to provide a long-term impact with reimagined ways of working and strategy development using virtual tools and collaboration. We’ve had the chance to prove new techniques even on a large scale, engaging hundreds of people from across the globe within large companies.
We saw a lull with the initial stages of lockdown and I used this time to write my first book, Pick A Lane, which I published in July. The book explains how to accelerate business growth in a fast-changing world. That was a fun project and a lifetime ambition achieved, as it was something I always wanted to do!
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
This is the age-old conundrum: burn out versus bore out. Doing something with purpose and that you love, gives you energy; doing something when you have little or no emotional attachment is mentally draining. Covid-19 has been unsettling for everyone, but it has also been a real opportunity to grow and think afresh. My advice is to focus on the positives of change and look forward with purpose. If we have learned anything this year, it is life is too short to waste time on anything that doesn’t light you up. We spend a third of our lives at work, and following your passions is the most important life decision you can ever make. We should all look beyond work to friends, family, health and the ways we love to spend our spare time. Yet, the hard reality is that work is the single biggest use of your time — next to sleeping! It’s simply too big a gap to compensate for if you aren’t doing what you love and what brings out the best in you. What’s true in business is true in life. Make conscious, bold choices. Create your moment and seize it.
None of us are able to achieve success without some help along the way. Is there a particular person to whom you are grateful, who helped get you to where you are? Can you share a story?
I have been fortunate to have six or seven mentors so far, and I am probably only at halftime in my career. I am grateful how much they have invested in me to help me succeed. I think most fondly of a Unilever Finance leader back in England in the 1990s, Steve Morlidge. He was the first to see my potential. He challenged me and gave me roles that I could grow into, but he also patiently nurtured me through the frustrations and immaturity of youth in my early career. He set me up for success. That first step is often what unlocks all that follows. Through this first-hand experience, I learned from Steve a passion to identify and nurture potential. It stuck with me. Later on, when I ran big organizations, we were obsessive about talent development and growth. My fondest career memories are of helping businesses, individuals and teams realize untapped potential. I ended up making a career out of what he taught me. Strategy is all about potential and possibilities and developing what a business and a team is capable of. It’s a journey of growth in all senses. If he’s reading this, thank you, Steve!
How have you used your success to bring goodness to the world?
I was lucky to be Head of Strategy at Unilever when we were resetting the corporate mission to the Sustainable Living Plan. We took our Top 50 leaders back to the actual starting point of Unilever: The Port Sunlight factory and village. We had dinner in Lord Lever’s home and, from deep in the history of Unilever, we found the inspiration for the company’s bright future. It was an incredible moment. The audacious goals of that mission have only grown since. A decade ago, the business committed to significantly reduce all aspects of environmental impact while growing the business. The goals were quantified and annually reported against. It’s an inspiration and in many ways a provocation to the industry. More broadly on all the brands I have worked on, I have tried to help the business play its full role in the lives and wellbeing of consumers. Brands are a vehicle to make a difference, not simply to make a profit. Our team is obsessed with putting the consumer first in business strategy. Easy to say, hard to do. Innovation is at the heart of this, in ways that meaningfully improve consumer’s lives. I think that’s what is different about me and my team. A passion for the consumer and a passion for progress. Where many seek the comfort and familiar, we actively seek out new and better ways, somewhat restlessly!
Ok super. Now let’s jump to the main questions of our interview. The Pandemic has changed many aspects of all of our lives. One of them is the fact that so many of us have gotten used to shopping almost exclusively online. Can you share five examples of different ideas that large retail outlets are implementing to adapt to the new realities created by the Pandemic?
Obviously one of the extraordinary reflections of 2020 is the speed with which we have all adapted to the implications of COVID-19 in what is really a very short period of time. We are nine months into this, and the changes we have seen to date will be the initial phases of some longer-term consequences and habit changes.
So far, the biggest changes have been the rapid adoption of contactless commerce. Online sales have about doubled, retailers have put great focus on scaling models like order online/pick up remotely. Contactless experiences and payments have been rapidly adopted — look at businesses like CarMax that have created a touchless end-to-end experience in a rapidly growing used car market.
“Scan and go” in grocery stores will grow quickly from trial to scale adoption. Trends already underway, where about 2/3 of consumers wanted to buy without human interaction, are going to grow further.
We are seeing some increasing examples of augmented reality recreating visual experiences digitally. For example, trying on at home for clothing and eyewear. Visualizing furniture in your home environment. Virtual showrooms for bridalwear. Levi’s went as far as developing a collaborative shopping experience where you can try on clothes at home with friends as if you were in the store together.
I think there will be more advances to help us avoid crowds — knowing exactly when to collect your order by text, chatbots that help you understand when stores are more or less crowded to plan your visit, or simply more digital ordering experiences as “grab and go” touches every category we buy.
These examples, particularly those enabled by technology, will grow in the coming months. You are also seeing the early days of pivoting the physical infrastructure of retail much faster to online sales fulfillment. A lot of what used to be known as retail stores will become focused on last mile delivery to manage the shift from bricks to clicks and lower the cost and lead times of scaling online order fulfillment.
In your opinion, will retail stores or malls continue to exist? How would you articulate the role of physical retail spaces at a time when online commerce platforms like Amazon Prime or Instacart can deliver the same day or the next day?
There are quite a few aspects to this. Most consumers are already “omnichannel” in how they browse for key purchases. This means they use a mixture of online research and browsing, coupled with some in-store visits before making a final decision. People like to look everywhere, but there has been a reduction in how much people want or value human contact, which has made specialty channel business models struggle.
The pandemic hit when online sales were only about 15 percent of sales overall. It looks like this has almost doubled to 25–30 percent in the months since, and I expect wider online shopping habits to sustain, in part out of reluctance to visit potentially crowded stores.
The strategy of the largest eCommerce platforms has been about widest possible assortment and “infinite aisles”. While this seems positive, the reality is the shopping experience is becoming increasingly complex and frustrating, especially when you are looking for impulse ideas like gifts or you really aren’t sure what to buy. Here, the complexity is a barrier. By contrast, habitual purchases can be transacted in seconds with almost instant availability and best cost. In theory, technology should help consumers. However, online retail infrastructure has been expensive to build and most retailers have focused on selling search and advertising to increase profits. The technology is less in service to the consumer and more in service to retailer margins.
That’s why you get a ton of poor recommendations or struggle to get quickly to the brand you searched for — because someone has paid to manipulate that search. It’s a huge part of the advertising industry now but it is not objective, it is “pay to play,” and who spends more gets more.
In the bigger picture, many believe that online will one day be about 50 percent of retail sales. Brick and mortar will significantly shrink, as each point of online growth is the equivalent of 8,000 stores. With online sales only at 15 percent last year, we have a long way to go. I have worked in categories that went to 70 percent+ of sales online, and the shift in online sales from 15–20 percent to 50 percent can be very rapid. The greatest legacy of the pandemic is likely going to be the acceleration of this shift. I think physical retail will concentrate on the categories where consumers most want to browse and physically interact. They will focus on curated and branded experiences that are much deeper connection with the consumer than the complex, transactional marketplaces. Stores will also deliver the majority of impulse sales, which will mean large brands that have big impulse opportunity continue to overinvest in physical retail. My guess is in 10 years’ time its 50/50, but the reason why you go to a store or go to Amazon will be quite different shopper journeys.
The so-called “Retail Apocalypse” has been going on for about a decade. While many retailers are struggling, some retailers, like Lululemon, Kroger, and Costco are quite profitable. Can you share a few lessons that other retailers can learn from the success of profitable retailers?
First and foremost, the economics of retail have always been highly challenging due to a great deal of fixed cost in rent and staffing as well as high demands of capital for inventory and store layout. Profitability is really only achieved for most retailers in the final few % of foot traffic and the busiest periods of the year. As a result, the industry is structurally disadvantaged for change, and the majority of retail innovation comes from new players that start fresh with a blank canvas. Growth makes the most profound difference to the bottom line, generating significant marginal profits. In contrast, if you are declining even 2–3 percent, this can be enough to wipe out your entire profitability. The winners that can grow quickly are able to strengthen competitive advantages through their additional financial capacity to invest in change — more stores, revamped stores or online fulfillment centers and digital experiences for example.
The retail apocalypse feels a cliché, but in reality, it is only just beginning. In 2019, retail opened five stores for every one that was closed. The US has twice as many stores as Europe on a comparable basis. Online sales last year were 15 percent of sales and are likely to go to about 50 percent in the next decade, it’s just a matter of how quickly. As a result, we should expect substantial reductions in the retail footprint and a repurposing of physical footprints to fulfilling online orders. While the bankruptcies have started to increase in 2020, we have lost the businesses with high debt levels as they couldn’t withstand the drop in profit from the lower retail traffic. Many retailers are making big losses and using their balance sheet to fight for survival and reinvention. They have limited time to deliver changes in performance.
The examples of winners you gave are all growing healthily. There is no one formula — Lululemon is on trend and creating trends in health & wellness. It is a vibrant brand and has developed a great omnichannel offer, so they succeed whether you want to buy online or in store. They diversified to wide adoption through athleisure and were not exposed to gym closures. Kroger has been a leader on digital and data and is succeeding with a huge focus on buy online/collect in store. Their investments are being rewarded in market share and, obviously, retail sales in many staples categories have grown as people stocked up for the pandemic and eat at home much more regularly now. Costco has yet to scale digital, but they have an incredible retail formula and kept people visiting stores by making it a safer experience and maintaining the trust of members. One of the main reasons to invest in Costco is if you believe, over time, they can be equally successful online.
Retail in the pandemic is really a story of winners and losers but tied to the industry economics. The bigger players are winning at the expense of smaller stores, which often were not able to stay open or ran out of financial capacity. Debt laden companies don’t have the cushion to weather the short-term disruption. The winners, meanwhile, are seeing heightened returns from prior investments and market share gains as retail sales rise and are reinvesting much of that to fuel further progress. Scale and growth will reinforce competitive advantage and create quite a different landscape with a shorter list of big retailers in five years’ time.
Amazon is going to exert pressure on all of retail for the foreseeable future. New Direct-To-Consumer companies based in China are emerging that offer prices that are much cheaper than US and European brands. What would you advise to retail companies and e-commerce companies, for them to be successful in the face of such strong competition?
I have worked with brands my whole career. A brand is so much more than a basic product and should never be a commodity without a point of difference. Brands are built on unique insights and bringing new functional and emotional benefits to the consumer. A low-price tier with basic features will always be a portion of the category, but this will usually be modest if the leading brands are doing their job well. What you see is new suppliers filling many niche categories where leading brands have either stopped investing in product and advertising or done SKU rationalization and walked away from pieces of business.
These easy gaps to fill were created because many brands moved to sourcing from overseas in the last 30 years and gave up proprietary manufacturing. It is easy to find people to make product, and manufacturers can launch brands easily themselves. The online marketplaces offer immediate distribution and low-cost advertising to new brands. You can build out business with very little fixed cost as there are a ton of partners to help with everything from warehousing to managing the digital shelf.
The way I see it, many brands got lazy in the old days when 80 percent of sales were in a few retailers and a few suppliers. Barriers to entry were high — traditional advertising was expensive and it took years to win distribution in big box retail. The established brands could fight to keep new brands off the shelf in the finite space available because they had deep pockets. Now, we are seeing an open marketplace and brands can’t be lazy anymore. They will be knocked off and copied, and category margins will drop. Cash cow strategies aren’t viable in today’s marketplace, even in niche categories.
However, the way to win with a brand is as timeless as ever: deep understanding of the consumer, winning product development on what matters, consistent innovation and advertising to develop trial, repeat and loyalty. When brands do this and focus on all the channels where the consumer wants to buy their categories, they will win over the fragmented competitors every day of the week. If they sit back and act as if they are entitled to loyalty from the consumer or choose not to focus on the growth channels where the consumer wants to buy, they will be obsoleted quickly.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I come back to where I started. Business can be a driving force for good in society. Entrepreneurs should solve the greatest challenges faced by society. New thinking, fresh ideas and innovation move us forward. The planet was simply not designed for how many people are going to be on it. While academia and the public sector may solve some of the science, it is the private sector that will create and drive adoption of new solutions that change the way we live every day. There are so many platforms for innovation that can build new business and enable a fairer, healthier, less wasteful, more sustainable, more connected and more collaborative society. If I could champion one thing it would be to challenge business to move forward, sometimes in steps and sometimes in leaps. I see so many brands purely focused on efficiencies and doing more of the same for a little less cost rather than looking beyond budgets and bonuses to their full potential. The power of building something is profound, which is why I have always been so inspired by the founders of businesses.
How can our readers further follow your work?
My book entitled Pick A Lane, available on Amazon, is about what is changing in the industry and how to make an opportunity of change. I wrote it as a quick read on growth strategy in a dynamic market, which has become even more topical as the pandemic accelerates change.
You can find out about our team and what we do at Alchemy-Rx.com. We always love to hear from businesses that want to grow.
This was very inspiring. Thank you so much for joining us!
About the Interviewer: Jilea Hemmings is a staunch believer in the power of entrepreneurship. A successful career revamping Fortune 500 companies was not enough for her entrepreneurial spirit, so Jilea began focusing her passion in startups. She has successfully built 6 startups to date. Her passion for entrepreneurship continues to flourish with the development of Stretchy Hair Care, focusing on relieving the pain associated with detangling and styling natural black hair. For far too long, people with tender heads have suffered in pain. Until now.
