Tony D’Onofrio is the global CEO of Prosegur’s Global Retail Business, where he regularly engages with the world’s largest retailers to provide innovative and holistic security solutions. D’Onofrio is consistently listed as a Top Global Retail Influencer and publishes on multiple global platforms. His career has extended decades and includes executive roles in both security and information technologies companies. This article originally appeared in Authority Magazine and is reprinted here with permission.
Can you tell us a story about what brought you to the retail security industry?
I often tell audiences that I was probably was born in a retail store. My first real job during high school and university was working in a retail store for nine years. In that environment I was exposed to running multiple departments across the entire store and learned retail operations from the ground up.
Following this in-store experience, I transitioned to working with technology companies on both traditional IT and security for improving store operations in a career that I have enjoyed every single second.
Can you share the most interesting story that happened to you since you started your career?
I arrived in the United States as an immigrant child from Italy. I discovered early in my career the power of continuous learning and leveraging technology to expand your personal and professional value. A major promotion that I did not get about 10 years ago led to a personal reset on creating a personal brand focused on innovation and transformation. I have had the privilege of sharing the future of technology and retail on many stages around the world and spent much time in Silicon Valley immersed in digital transformation models. I am honored to be recognized by many industry groups as a Top 100 Global Retail Influencer. Concurrently, I am now transforming the retail physical security industry at Prosegur, leveraging lessons learned from engaging retailers and innovation leaders around the world. Not getting that promotion changed my life and was a reminder of my favorite view of how to live your life. It’s not where you start, it’s where you finish that makes all the difference.
Are you working on any new projects now? How do you think those solutions might help businesses and eventually consumers?
I am working on multiple new transformational products that address core concerns of the retail industry. From a research and analysis point of view, my focus is understanding the key trends that will be critical for success as we emerge out of COVID-19.
At Prosegur, I am focused on next generation solutions. An example of this is our latest release of the EVO platform. Using lessons from Silicon Valley, we announced and currently are working on deploying a next generation electronic article surveillance solution. If you examine closely some of the most successful business models in Silicon Valley, at their core is consumer engagement through advertising.
With the EVO platform, we evolve traditional tagging systems into a cloud-based advertising engine that can pay for the security technology. Its successful deployment actually increases sales for the retailer through advertising campaigns that engage consumers at one of the most critical areas of the store—the entrance or exit.
EVO includes AI data analytics that can count people entering stores, helping increase conversion rates; can identify gender to help customize advertising; and has built-in security features to deter and identify shoplifting crime.
As a second wave, a next generation set of solutions targeted at the aggressive growth of self-service/ self-checkout solutions is underway. It’s a nano start with our new nanotag, but it’s already having a dramatic positive impact on the market.
The pandemic has changed many aspects of our lives. One of them is the increased use of e-commerce solutions for retail. From your perspective, how are large retail outlets adapting to the new realities created by the pandemic?
The pandemic accelerated digital transformation trends that were already underway by five to 10 years according to McKinsey. Retailers that were investing heavily in omnichannel experiences prior to the pandemic thrived and will emerge stronger out of the pandemic. New services extending retail into the parking lot are here to stay.
E-commerce is just another channel. Pure play online retailers including Amazon are aggressively opening physical stores. Turns out the most profitable place for retailers was and remains the physical store. Online commerce adds substantial logistic costs and without free shipping limits engagement with consumers. Physical stores are now becoming micro-fulfillment centers for e-commerce, bringing shipping capabilities closer to the consumer, and reducing logistic costs.
The supply chain crisis is another outgrowth of the pandemic. Can you share a few examples of what retailers are doing to pivot because of the bottlenecks caused by the supply chain crisis?
Large retailers have engaged directly with shipping companies or organized direct shipping to keep their stores stocked. Amazon and Walmart are direct examples of this strategy.
Retailers that had greater focus on inventory visibility and trends where products were selling actually anticipated some of these supply chain issues and pre-bought ahead of this issue.
Inventory distortion (out-of-stocks and over-stocks) is a $1.8 trillion problem according to the IHL Group. The most critical focus that the pandemic has highlighted is inventory accuracy. Being out-of-stock increases the chances that consumers will try other brands. This has elevated the importance of RFID and computer vision to increase inventory visibility.
How do you think we should reimagine our supply chain to prevent this from happening again in the future?
Greater inventory visibility, i.e. bringing the right products to the right stores that are selling them, and diversification of the supply chain including a refocus on onshoring are key strategies that will need increased focus as we emerge out of COVID-19.
Major brands are also increasing their direct access to consumers versus leveraging retail consolidators that were prevalent in the past. Taking a continuous pulse of consumers directly from brands and offering more options during supply chain challenges mitigates competitive product switching.
Equipping store associates and managers with mobile tools that can instantly advise consumers on alternate locations where products are available and even arranging shipping directly increases customer satisfaction.
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?
Changes in retail with stores and malls closing were taking place before the pandemic arrived. COVID-19 accelerated the demise of struggling malls and retailers that were too highly leveraged.
Amazon recently acquired Whole Foods, which has accelerated the pace of opening Amazon Fresh physical stores. They are also growing their portfolio of Amazon 4-Star stores and are even rumored to be opening department stores. The reality of the pure online models is that the logistics costs to get the goods to your home are expensive even with an Amazon Prime program. Analyze Amazon’s financial results and you will soon discover that a substantial portion of their profitability is from their AWS web services, not from all those products that they sell online.
The store is expanding to the parking lot with Buy-on-Line-Pick-Up-Store (BOPIS) and curbside pickup, which consumers adopted during the pandemic and are here to stay. The most expensive and margin negative program for retailers is direct delivery to your home.
Retailers will adopt a variety of services, including reinventing the store to fulfill product deliveries faster, if customers want this model at a fee. In China as an example, Alibaba has adapted their physical stores to deliver fresh prepared meals to consumers in 30 minutes.
We are social beings. We like to touch and engage with knowledgeable store associates. The nirvana of retail will be immersive consumer experiences being delivered by passionate associates, which I label brand ambassadors.
Consumers are walking into stores with smartphones and often online pre-research for their shopping journey. A savvy digitally empowered consumer meeting an equally digitally connected store associate, both loving the brand they are shopping, is what will carry retail forward to a brighter profitable future.
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?
The United States has one of the highest shopping spaces per capita in the world. In the 1970s we built too many malls, and sectors such as apparel opened too many stores.
Yes, store closures took place pre-pandemic which came to be labeled as the retail apocalypse, but it was more hype than reality. A study published by the IHL group in 2021 found that in the last five years, major chains closed 49,123 stores, but also opened 51,513 stores, for a net gain of 2,390 physical store locations.
Profitable retailers are focused on closely engaging their consumers with strong branding strategies including extensive focus on continuously improved loyalty programs. Branding and immersive consumer experiences are the future of retail.
Successful retailers adopt technology faster than their peers. Retail winners are investing more aggressively in mobile devices for their store managers and associates, are adopting self-checkout solutions faster, leverage geo-location marketing to engage consumers, are expanding fulfillment options, invest heavily and optimize last mile delivery services, are all in for 5G to widen their data gathering capabilities, and more importantly they are focused on getting to accurate inventory. Check out my recent 2022 Future Predictions webinar recently completed on this topic.
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?
Direct to consumer is not a strategy isolated to Amazon. Strong brands such as Nike, Lululemon, etc. have recognized that they need to take direct control of their sales channel.
It starts with strong branding and consumer engagement increasingly through digital tools. When China went into lockdown early in the pandemic, Nike pivoted to their digital ecosystem and Nike expert trainer tools to engage consumers to stay active at home. Weekly usage of the Nike activity apps increased 80 percent. Strong engagement with the activity apps translated into strong engagement with the Nike commerce apps. Digital business when physical stores were closed increased 30 percent and remained strong throughout these initial difficult phases of the pandemic.
Walmart was investing in BOPIS and in-store pickup robots prior to the pandemic. When the pandemic arrived, and they were deemed as an essential retailer, they had lots of stores ready for the new normal and accelerated deployment to all the others.
Create and nurture a strong brand. Stay ahead of the competition, which today means leveraging technology.
China will have some economic challenges in 2022. They are not your major threat. The major threat to your business is falling behind to where consumers want to go next.
Based on your experience and success, what are the five most important things one should know in order to create a retail experience that keeps bringing customers back for more?
The five key strategies that I believe are critical to the future of retail are harmonized shopping channels (physical stores and online), frictionless commerce, digital empowered managers and associates, enterprise inventory visibility, and increasingly real time analytics and engagement.