Evolving In-Person Commerce with Digital DNA

On this episode of The Shift Change, PMI CEO Pierre Le Manh talks with Flagship founder and CEO Simon Molnar about how digital engagement strategies can revolutionize traditional retail. Learn how e-commerce analytics transform in-store experiences and discover why the future of retail lives at the intersection of digital and physical commerce. Plus, hear Simon’s practical insights for implementing transformation without being too disruptive to business.   

Transcript

Simon Molnar 

We can’t make people leap too fast. Even if our product is at 100, we can’t take a retailer that’s at zero to 100 overnight. So, the best way to manage change management is by just slowly turning on the heat. Then we’re able to say, “Okay, now this is the next feature, and the next feature.” Some retailers today versus yesterday might be a massive leap ahead. Some might be a baby step ahead, but it’s ultimately just every day, we want to be progressive, knowing that once we get to a certain point, we’ll then be able to accelerate. 

Pierre Le Manh 

That is the voice of Simon Molnar, who is the founder of a company called Flagship, which is a technology platform transforming the in-store retail industry. I wanted to talk with Simon because he’s leading change in one of the industries that has been the most resistant to tech innovation, and that is in-person commerce.  

I am Pierre Le Manh, CEO of the Project Management Institute (PMI). Welcome to The Shift Code, a podcast dedicated to the intersection of leadership, change management and real-world impact.  

Now in this episode, I talk with Simon about how he’s applying the lessons of digital engagement to brick-and-mortar retail. His insights apply to any business or industry that is looking to unlock new customer opportunities but at the same time grappling with legacy systems and processes. So Simon shares with me how to implement disruption in a way that is not too disruptive — and that’s a challenge for any CEO, project leader or team member.  

So let’s get to it. This is The Shift Code. 

MUSICAL TRANSITION 

Pierre Le Manh  

I am Pierre Le Manh, and I’m here with Simon Molnar, who is the CEO of Flagship, an innovator in the retail industry. He’s bringing the kind of data analytics that have defined e-commerce to in-store merchandising. Simon, great to have you here. 

Simon Molnar  

Thanks for having me. It’s great to be here to chat with you. 

Pierre Le Manh 

So Simon, Flagship works on visual merchandising for brick-and-mortar stores. Can you explain for our audience what is visual merchandising? 

Simon Molnar  

Yeah, so visual merchandising is the way that a brand or a retailer communicates to their stores where and how they want their products placed. And it’s the function of retail that gives the truest representation or reflection of how a store looks at any given point in time. 

Pierre Le Manh 

So the retail industry has faced a lot of transformation, right, with e-commerce disrupting everything. Almost every brand realizes that they need a digital strategy and a brick-and-mortar strategy.  

Simon Molnar  

Absolutely. I think for a long time, people even thought that e-com was the future, and they didn’t know what the future of brick-and-mortar looked like. And we’re starting to see this resurgence of brick-and-mortar, and it’s becoming a really cornerstone strategy of the majority of brands out there. Even traditional pure play brands are now seeing brick-and-mortar as a key strategy and a key pillar in their processes. 

Pierre Le Manh  

How attached are brands to their own way of doing things? How much resistance do you get from legacy players at the idea of further tech innovation? 

Simon Molnar  

There is a bit of resistance. I think in the grand scheme of things, e-commerce is still relatively new. In brick-and-mortar, it can take a little bit of adjusting to change what they’ve done for decades.  

Pierre Le Manh 

How old-fashioned are their merchandising systems? 

Simon Molnar  

To handle visual merchandising, nearly every brand I’ve spoken to is reliant on a PDF document to communicate to their stores where they want their products placed. Brick-and-mortar retail has been built on processes, PDF documents and spreadsheets. 

Pierre Le Manh 

I remember lots of innovation 20 years ago — planograms, digital things.  

Simon Molnar 

Any innovation that’s existed has required hardware. It’s been a data creation platform with no real meaningful way to do anything with the data that’s been captured. So you can understand how many people will walk into my store. You can understand how many people are converting. You can understand what inventory I have through RFID (radio frequency identification) tags, but those technologies don’t give retailers the way to do something with the data that they’re being provided. And for us, our main focus has been not only creating the data layer, but also giving retailers a way to do something with it. So when you see an anomaly, when you see something that’s not working in a store, or something that’s working exceptionally well in a store, you can either pivot or you can double down in real time. 

Pierre Le Manh  

Don’t they use cameras to see what people do, where they stop, how long they stay in front of the aisle? Counting the number of footsteps?  

Simon Molnar  

Yeah, I would say the more sophisticated retailers are. But again, it comes down to the fact that even if they know what’s happening, if I could tell a retailer with 200 stores what style should be on the mannequin in all 200 of those stores, they have no meaningful way or effective way to be able to communicate to those 200 stores what those changes should be. 

Pierre Le Manh  

So what you’re really focusing on is the implementation of the changes that stem from the analysis of these data points and the insights that are derived from them? 

Simon Molnar 

Yeah, implementation and then quantification. I was speaking to a retailer recently, and the line that they said was that, “The best retailers in the world are money mapping.” But the irony is that there is no software in the world that allows for retailers to money map. So the way that they’re currently money mapping is a lot of retailers are going around, having the stores go around with pen and paper and writing down the code of an item, go back to the point-of-sale and pull the sales and send that back to head office. 

I come from an e-com, from a digital background, and the whole mindset is how do we take that world and apply it to offline retail? How can we enable someone to make a decision, but then quantify the impact of the decision that they’re making? Again, we had a retailer recently, they had a front window that wasn’t performing, and in real-time, they were able to update the front window of every store. And on average, they saw a 200% uplift in sales per day for their windows.  

Pierre Le Manh  

And how do they communicate those changes to their stores, across thousands of them sometimes? 

Simon Molnar  

It’s all through our platform. So we provide a 2-D digital twin to every store in the form of their floor plan. Even though every store has a different layout, a different floor plan, it’s still built up of the same building blocks, the same puzzle pieces. And we just put those puzzle pieces into their respective home in the store. So we know that your front window might be in a different place. We know that a mannequin might be in a different place. We know that your top-priority table or top-priority wall might be in a different place, but we basically place that into its relative place in every store, and then suddenly you can go in and you can make a change potentially to 10 stores at the same time, or all stores at the same time, and have those changes communicated to the stores, but in the specific areas of every store for where that change needs to be made. 

These PDF documents for a long time included fixtures that not all stores had and included products that not all stores are going to receive. So these stores struggle with the execution, but now, they’re actually receiving their directive for their store. It’s their floor plan. It’s their fixture set. It’s their products, and it’s much clearer for them to know what they need to do. It has completely taken the guess work out of it. 

Pierre Le Manh  

Right, and it must also go much faster, I imagine, than printing out a PDF and sending it around. 

Simon Molnar  

Exactly. One of the biggest retailers in the world, their greatest innovation that they had in the visual merchandising space was about two years ago. They stopped printing out and FedExing those documents to the stores, and they started emailing them. And that was their major innovation that they had brought out. 

Pierre Le Manh  

I heard that your first customer in Australia now has a radically different work life because of Flagship’s product. 

Simon Molnar  

Our first user in Australia, her role Monday to Friday was spent in stores. The role of a visual merchandiser was spent in stores. It was a physical job. You had to go into stores, move products around, see how things looked, take those photos, send those photos around. So her job was spent 9 to 5, Monday to Friday in store. 

And then post-Flagship, her in-store job turned into a desk job where instead of being in a store moving things around, she was in our platform moving products around, and she could use the imagery to get a sense of how the store was going to look. And then now, fast-forward a couple years, she’s now moved over to New York, and she is still doing her job from New York in one day a week. So what used to be a Monday to Friday, 9-to-5 job is now being done in one fifth of the time, completely remote from the other side of the world. And that for me is kind of the pinch myself moment to see the real transformation in this role in retail. 

Pierre Le Manh 

Let’s talk about you a little bit. So you got into the online retail business as a teenager, is that right? 

Simon Molnar 

Yeah. My parents had a brick-and-mortar jewelry store in Sydney for over 30 years, so I was brought up in their store and on retail. I spent weekends in their store. I learned everything about jewelry. I learned metal types, gemstones — it was like my party trick to be able to give insight or tell someone what gemstone their ring that they were wearing was. And then when I was in 11th grade, I started selling my parents’ jewelry on eBay. And then, when I finished high school, my brother and I took that eBay business into a stand-alone e-commerce site, and we grew to be Australia’s largest online-only jewelry retailer. So I was kind of brought up on retail. I say it was in my blood.  

And from an e-com perspective, I was always fixated on my conversion rate. It was the metric that I cared the most about, and the reason for that was I would say if I want to double my revenue, I can either double my spend and double the traffic to my website, or I can double my conversion rate and make the most of what’s already happening on my website and the customers I’m already getting to my website. So I would look at every little micro data point that existed. I would look at every square pixel on my website and work out what optimizations were there to be made. And again, I think that’s kind of the mindset I’m bringing to brick-and-mortar.  

Pierre Le Manh 

Make the best of the traffic you have, right? 

Simon Molnar 

Exactly. I was speaking to another major retailer recently and the line they gave me was that, “With Flagship, we now make every store matter.” And they were saying they can now create an EBIT (earnings before interest and taxes) for every single store. They can now understand every store’s true optimum performance and create targets at a store level.  

Pierre Le Manh  

Yeah, it’s interesting to bring in this thinking from e-commerce — this very rigorous discipline about the metrics, and how you optimize each step of the value chain and bring this to brick-and-mortar stores. 

Simon Molnar 

A lot of things in e-com can be applied to a store. If you’re running a digital campaign and you see that a click-through rate for an ad is decreasing, you know that there’s fatigue around that creative, and you need to change up that creative. Now the equivalent of a creative in the brick-and-mortar world is your front window. Your creative digitally is pulling someone to your website. Your creative or your window in your physical store is pulling someone into your store. And so if we can see that there’s a correlation between your window and a declining window conversion rate, we know that we need to change the window up. So it’s all these little principles that apply from the digital world and extracting those out and applying them individually to the offline world. 

MUSICAL TRANSITION 

Pierre Le Manh  

Now listening to how Simon is applying digital insights to in-person shopping might be a model for any industry. I’m particularly impressed by how he’s decoded a weak spot in the culture of brick-and-mortar stores: this unbelievable reliance on old-fashioned PDFs to implement change. So what’s the next step in his vision to optimize store performance? We’ll talk about that after the break. Stay with us. 

I am Pierre Le Manh, and this is The Shift Code. Before the break, we heard Flagship founder Simon Molnar talk about applying e-commerce lessons to brick-and-mortar retail. Now, we talk about how he helped his brother Nick turn Afterpay, which is a buy-now, pay-later disruptor, into a business sold for $29 billion. Plus, why transformation requires patience but also determination and many more qualities. So let’s get back to it.  

MUSICAL TRANSITION 

Pierre Le Manh  

Simon, you mentioned your brother, Nick — he’s been an amazingly successful entrepreneur. He co-founded a company called Afterpay, a buy-now, pay-later multi-billion-dollar business. So how much did you talk together about the idea behind Afterpay? 

Simon Molnar  

Afterpay, at its inception, was just another idea that was talked about around our dinner table. My parents still have that dinner table. It holds a lot of value to us.  

Pierre Le Manh 

And you worked there, right? You worked at Afterpay yourself?  

Simon Molnar 

I was fortunate. My brother and I work really well together. We worked together in our jewelry days from an e-com perspective, and he was really good at bigger-picture thinking. And I’m really good at problem-solving and executing. So, he would kind of come to me and say, “Hey, we need to solve for X, Y and Z.” I would say, “Okay, here’s the solution.” And he would say, “Great.” And I would go and run with it. And that’s what we did from an e-com perspective, and it’s also what we did from an Afterpay perspective. Even as Afterpay started to grow, he and I would have this external communication channel where he would just come direct to me with things that needed to be done, and I would just go and execute. And I remember the chief operating officer at the time pulled us both aside and said, “We know this works well for the two of you. We know that this works, but we’re starting to become a much bigger company, and we need to have more structure and more frameworks in place.” 

I was very focused on the data and digital marketing side of things, so Nick would say to me, “I want to turn Afterpay into a verb,” and I would have a campaign. Or “We want to drive customers into inverse channels.” So, we’d build a campaign to try and drive customers into inverse channels. And it was really strategic.  

Pierre Le Manh  

It sounds like it was a perfect platform for you to think about how to implement, how to measure, just like project professionals do. 

Simon Molnar  

Everything for me is measurement. What I’m doing now is exactly what I was doing at Afterpay, is exactly what I was doing at Ice Jewellery, is exactly what I was doing when we had our eBay business — just extrapolated away and put into a new environment.  

Pierre Le Manh  

You recently relocated your company Flagship, but also yourself and your family from Sydney to Los Angeles. Why did you do that? Is it something that came from your brother or is it your own personal appetite for adventure or is there a business reason behind that? 

Simon Molnar  

I was here maybe two years ago, and I was sitting with my brother, and I was having a couple of meetings here with some retailers and saw not only the opportunity, but just the scale, like, the sheer scale of the opportunity that was here. And I’m like, “Nick, I’ve got this crazy idea to come to the U.S. straightaway. Instead of getting it right in Australia and then coming here, just coming straight here.” And he looked at me and he said, “If I had gone straight to America, we would’ve been a $100 billion company.” And I was like, “That is all the validation that I needed.” I was also very fortunate. I had the opportunity to hire — he was Afterpay’s first U.S. sales hire — and we brought him on, and he managed to sign Vuori. 

Pierre Le Manh 

It’s a digital-first athleisure brand?  

Simon Molnar  

Yeah, digital-first brand. They’ve now I think [have] got 65 stores. So I was very fortunate I landed here with a customer already. They launched the week that I got here, and in the space of three months, we’ve just seen some really good momentum. 

Pierre Le Manh  

And do you feel that the U.S. market is, generally speaking, easier because so much bigger, more opportunities, or harder because more competition?  

Simon Molnar  

Yeah, I would say Americans are great in the sense that they want to try something new. Americans want to be innovative. They want to be first movers. They want to be early adopters. They want to do what their competition’s not doing. So everyone that I speak to here is prepared to have a crack. They want to try this out because it’s early. Whereas in Australia, when we go to the enterprise retailers, a lot of them wanted to see other people doing it first — proof points and data points and see who was using it before they would use it themselves. But here, I’m speaking to some of the biggest brands in the world, and they’re kind of saying, “Yeah, let’s try this out. This looks great.” 

Pierre Le Manh 

Yeah, there is this obsession with building competitive advantage all the time. 

Simon Molnar  

Exactly. And in Australia, it’s a small market, especially in retail. Everyone knows everyone. And the learning here is that, as big as this market is, it’s equally as small. Everyone seems to know everyone. And if you find your way on to the right people, they can help you find your way on to the next right people. It’s a much wider web to navigate your way through, but it’s the exact same as what is in Australia.  

Pierre Le Manh  

Does it change your thinking about how much money you need to grow your business? Because of course in the U.S., the problem is you have to think big, right? You can’t just think small. 

Simon Molnar  

We’re going through this round of funding at the moment, and the realization is the difference, even myself, the difference in thinking between Australians and Americans. In Australia, we just trust that things will work out. But over here, it’s no, actually, spell it out. Document it out. I want to know how you’re going to figure it out. I want to know how you’re going to make this a massive business. You almost have to come at it with a certain level of arrogance. I had to sell and even to retailers, I’ve had to learn to sell like an American, not like an Australian. Because selling like an Australian will only get you so far. 

Pierre Le Manh 

At least you have your accent, which is distinctive. 

Simon Molnar  

That’s also funny being here is realizing that now I’m the one with the accent. 

Pierre Le Manh  

Do you think about approaching digital-first businesses as prospects differently than you do with traditional brick-and-mortar brands? 

Simon Molnar 

Yeah, we get a much faster cut-through with digital-native brands, and the reason for that is that they’re coming from a world of a lot of data into a world of no data. And for them, they eat up the opportunity. Over the course of the last couple of years, tracking on iOS has been harder, it’s been harder to advertise through Facebook, and as a result, digital acquisition costs have gone through the roof. 

It’s never been more expensive to have a digital-only strategy. And as a result, we’re just seeing more and more of these digital-native brands venture into the offline world. And they’re coming into the offline world a, with no preconceived idea of how things should or shouldn’t be done. They didn’t start here — they came here. But they’re coming into the brick-and-mortar world with so much brand awareness, so much brand reputation, and such a big following that once they open their stores, they’re not trying to find their equivalent of product market fit. They already have it. And as a result, they scale what seems to be overnight. A lot of these brands are just opening a large number of stores in a very small amount of time, and I believe that these digital-first brands will end up being the leaders in the brick-and-mortar space.  

Pierre Le Manh  

Do you think those digital-first companies that opened multiple stores have the same expectations for how things would work in the store? Or are they using the stores more as an extension of their e-commerce operation?  

Simon Molnar  

It’s a little bit of both. They’re using their stores as a marketing channel. It’s a way to create more brand awareness. It’s a way for them to acquire customers in a way that can potentially be profitable. There’s another major retailer I was speaking to recently, and their offline and online stores have two completely separate entities. Like, they’re two separate companies. And these digital-first brands are coming into brick-and-mortar as kind of this one team, one dream mindset. There was a retailer in Australia, and for one of their stores, if you looked at their e-com customers before the store opened and after the store opened, after the store opened, they saw a spike in e-com transactions. 

It’s no longer individual channels. It’s actually looking at retail holistically. You go to most traditional retailers, they are quantifying return on square foot. They’re basically saying, “This is the size of my store. What’s the return on my square foot of this store?” And you go to a lot of e-com companies, and they’re looking at “What’s my return on square mile? How is this store performing both online and offline?” Yes, I might be able to see the sales for a certain dress in my store, but also I know there are going to be customers coming into the store, trying it on, and then going home and completing that purchase. And we still want to be able to attribute that sale to the store. 

Because a customer doesn’t look at a channel. Customer’s not saying, “Oh, I did this online with Vuori, and then I did this in store with Vuori.” They’re just saying, “No, I shopped with Vuori.” For them, it’s one brand, and as long as you have siloed teams, as long as you have competing KPIs, you’ll have store managers resisting click-and-collect or buy online, pick up in store. Buy online, ship from the store.   

Pierre Le Manh  

Are you also seeing a potential impact of AI on your business, your products, the way your clients will do merchandising? How is it going to work?  

Simon Molnar 

I’m in ChatGPT almost every day just trying something different. My poor product manager will get a message from me at 2:30 in the morning because I’ve had this random thought. Even this morning at two o’clock in the morning, I had this idea, and I’ll see, “Does it get it right? Yes? Okay, there’s actually something here.” And I’ll kind of note that down, and if it gets it slightly right, then I’ll say, “Okay, well when the model gets better, or if I can work on my prompt a bit better, then there’s something here.” And if it just gets it fundamentally wrong, then I know it’s a little bit further away. We, as a company, need to be careful. We are bringing science into a traditionally creative world. It’s kind of the frogs in the frying pan. If we try and turn the heat up too much too quickly, they’re going to get scared. So, we need to be careful about how and when we bring science into this world.  

In my mind, there are three avenues from an AI perspective. Number one is internally from a workflow perspective. Number two is externally from an optimization perspective. And number three is externally from a generative perspective. And I think we’re probably the furthest away from the third option, but the exciting opportunity for me is being able to enable a retailer to optimize a store for a specific goal. 

So, if you’re creating a digital marketing campaign, you’re saying to Facebook or to Google, “This is what I’m trying to optimize for. I’m trying to optimize for leads. I’m trying to optimize for clicks or for reach or for ROI.” And then Facebook or Google will have their own AI model that’s optimizing for that for you. And for me, I want to get to that same point where you can say, “What are you trying to optimize your store for? Are you trying to optimize for sell-through? Are you trying to optimize for margin? Are you trying to optimize for deep stock?” And you can have your store starting to tweak itself. The only difference between online and offline retail is that e-com does it automatically — offline needs someone to physically do it. I’m not going to say to a store to completely flip a store every single day, because that’s not feasible. But it’s kind of the 80/20 rule. What’s the 20% of the store that’s driving 80% of the impact? So potentially, we’ll update a window more frequently or update a mannequin more frequently or you’ll have your top-priority wall that will update more frequently.  

Pierre Le Manh 

So with all these changes coming in your products and in your clients’ ways of working, how do you make sure that you hit the next milestone? How do you convert all these ideas into a proper plan and make sure that you deliver? 

Simon Molnar 

By speaking to customers. There’s not a single feature that we’ve built in our product that hasn’t come from our customers. 

Pierre Le Manh  

Do you have a proper methodology here to do that or?  

Simon Molnar  

It’s very structured. We do discovery. So what we’ll do is we’ll show them a prototype of a feature. They’ll give us their feedback. We’ll then show that to another customer who’ll give us their feedback, and then we’ll kind of cycle our way through until everyone is saying yes, this works for them. So we’ll never build something that will only work for one retailer. We’re trying to work out if we’re going to build this, how do we make sure that it works for everyone? And generally speaking, the next six weeks of our road map is airtight. It’s locked and loaded. I might turn around to Roger and say, “Hey, there’s this really cool opportunity. I want to do this.” And he’ll show me the road map and he’ll say, “Okay, where do you want to fit this in?” I’m like, “Oh, no, no. All those things are a higher priority, so let’s do this afterward.”  

It’s really just communication. There have been features that I thought would be home runs with our customers, and they kind of got excited, but not to the same level of excitement as some other features. And then there are other features that we thought would be less impactful that our customers got very excited by. So we’ve kind of had to tackle this with no ego. We can’t come into this with a preconceived idea or preconceived way of how we think things should be done. It really has to be collaborative with our retailers.  

Pierre Le Manh 

Your company, of course, it’s about technology that you’re delivering, data analytics and processes to implement and communication, but it’s a lot about operational processes, workflow, and many of our listeners are in the project world. They’re project leaders, project managers, project professionals. What do you think people misunderstand about transforming workflows? And how do you drive the best possible outcomes? 

Simon Molnar  

Yeah, the realization for us is that we can’t make people leap too fast. If you were to say the most unsophisticated retailer is at level zero, the most sophisticated is at 100. Even if our product is at 100, we can’t take a retailer that’s at zero to 100 overnight. They’re set up for failure. So the best way to manage change management is by just slowly turning on the heat. So every customer that we onboard, we will onboard them in a way that is the most reflective of what they are doing today. So we won’t overcomplicate it. We will say, “What are you doing today?” And we’re going to enable that in the exact same way in our platform, knowing that by moving from where you are to where we are, you will get efficiencies out of the box straightaway. 

 And then we’re kind of able to see through our own metrics, when we can see they feel comfortable and then we’re able to say, “Okay, now this is the next feature that we’re going to push them toward and the next feature.” And over a period of time, we’re able to build them up to the same level as those most sophisticated retailers. But if we were to come in and say, “We’re going to put you at 100 straight away,” they just wouldn’t be able to handle it.   

Pierre Le Manh  

But do you get frustrated sometimes when it gets too slow or obvious stuff doesn’t seem that obvious to them? How do you stay upbeat? How do you keep your optimism? 

Simon Molnar  

It’s the same in business. It’s the same in life. Everyone’s ultimately on their own journey and their own trajectory and their own speed. And the mindset that I have with building this company is I want to make sure that I’m one step further ahead today than I was yesterday. It’s the same mindset I have with our customers. Today versus yesterday might be a massive leap ahead. Some might be a baby step ahead, but it’s ultimately just every day we want to be progressing that little bit forward, knowing that once we get to a certain point, we’ll then be able to accelerate.  

Pierre Le Manh  

Yeah. Every single day, you make a little step at least and that’s what keeps you up.  

Simon Molnar 

Exactly. 100%.  

Pierre Le Manh  

All right, Simon. This has been really great, so thanks for joining us.  

Simon Molnar  

Thanks for having me. This was a really great conversation.  

MUSICAL TRANSITION  

Pierre Le Manh 

Listening to Simon, it is clear that even industries like retail that have already seen dramatic transformation will see further disruption—and further opportunities for improvement. Now as much as e-commerce changed the shopping landscape, the infusion of more and better data, the possibilities for optimizing each store, and the still young impact of AI will all have a part to play. That means new processes but of course also many new projects are ahead.  

I am Pierre Le Manh. Thanks for listening.