Top 10 Takeaways from the NRF Retail’s Big Show Day 2 ...€¦ · Top 10 Takeaways from the NRF...
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1 January 17, 2017 Deborah Weinswig, Managing Director, Fung Global Retail & Technology [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2017 The Fung Group. All rights reserved. Top 10 Takeaways from the NRF Retail’s Big Show Day 2: Technology Tools Abound, but Using Data is Still a Combination of Art and Science 1) On Monday, January 16, we attended the second day of the National Retail Federation (NRF) Retail’s Big Show 2017. A major theme throughout the day’s sessions and discussions was the recent disruption in Washington, DC, and the potential implications of the incoming administration’s tax, trade and healthcare policy on the retail industry. 2) There was also much discussion about tech tools that can help retailers adapt to the rapid changes in the retail environment. Retailers are now more focused on using and analyzing existing data to improve their bottom line. 3) As in-store traffic continues to decline, brick-and-mortar retailers need to focus on converting in-store customers and meeting their needs, especially as intent-to- purchase metrics have increased of late. 4) Target CIO Michael McNamara talked about the significant changes Target has made over the last 18 months in the area of technology. The company has moved from laggard to leader in technology by focusing on ruthless prioritization, bringing engineers in-house and setting the group’s culture, and encouraging teams to be agile in the way they work. 5) In the final keynote presentation of the day, Danny Meyer, CEO of Union Square Hospitality Group, related what he has learned in hospitality to retail, noting a number of similarities between the sectors. He said that in his restaurants, 51% of the “recipe” is the service the customer experiences and the emotional feeling they have when leaving the restaurant. The remaining 49% is the quality of the product. We believe the recipe for success in retail is quite similar, requiring curated assortments with a point of view coupled with knowledgeable employees who want their customers to leave feeling they had a good experience.
Transcript of Top 10 Takeaways from the NRF Retail’s Big Show Day 2 ...€¦ · Top 10 Takeaways from the NRF...
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January17,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Top 10 Takeaways from the NRF Retail’s Big Show Day 2: Technology Tools Abound, but Using Data is Still a Combination of Art and Science
1) OnMonday,January16,weattendedtheseconddayoftheNationalRetailFederation(NRF)Retail’sBigShow2017.Amajorthemethroughouttheday’ssessionsanddiscussionswastherecentdisruptioninWashington,DC,andthepotentialimplicationsoftheincomingadministration’stax,tradeandhealthcarepolicyontheretailindustry.
2) Therewasalsomuchdiscussionabouttechtoolsthatcanhelpretailersadapttotherapidchangesintheretailenvironment.Retailersarenowmorefocusedonusingandanalyzingexistingdatatoimprovetheirbottomline.
3) Asin-storetrafficcontinuestodecline,brick-and-mortarretailersneedtofocusonconvertingin-storecustomersandmeetingtheirneeds,especiallyasintent-to-purchasemetricshaveincreasedoflate.
4) TargetCIOMichaelMcNamaratalkedaboutthesignificantchangesTargethasmadeoverthelast18monthsintheareaoftechnology.Thecompanyhasmovedfromlaggardtoleaderintechnologybyfocusingonruthlessprioritization,bringingengineersin-houseandsettingthegroup’sculture,andencouragingteamstobeagileinthewaytheywork.
5) Inthefinalkeynotepresentationoftheday,DannyMeyer,CEOofUnionSquareHospitalityGroup,relatedwhathehaslearnedinhospitalitytoretail,notinganumberofsimilaritiesbetweenthesectors.Hesaidthatinhisrestaurants,51%ofthe“recipe”istheservicethecustomerexperiencesandtheemotionalfeelingtheyhavewhenleavingtherestaurant.Theremaining49%isthequalityoftheproduct.Webelievetherecipeforsuccessinretailisquitesimilar,requiringcuratedassortmentswithapointofviewcoupledwithknowledgeableemployeeswhowanttheircustomerstoleavefeelingtheyhadagoodexperience.
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January17,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Monday,January16,wastheseconddayoftheNRFRetail’sBigShow2017,andmembersoftheFungGlobalRetail&Technologyteamattendedconferencesessions,metwithretailersandwalkedtheshowfloor.
Wewillpublishadditionalwrap-upsandreportsastheshowprogresses.Inthisnote,weprovideourtop10takeawaysfromtheseconddayoftheshow.
1. TheUSRetailIndustryIsCautiouslyOptimisticAbouttheIncomingAdministrationNRFPresidentandCEOMatthewShayexpressedgeneraloptimismaboutthepotentialimpactofnewregulationsontheretailindustry.Hecitedtherepatriationofcorporateprofitsfromoverseas,therelaxationofbusinessregulationsandafriendlyinvestmentenvironmentaspositivefactorsthatcouldhelpUSbusinesses.However,ShaysharedsomeconcernsaboutPresident-electDonaldTrump’srecentcommentsregardingbordertaxregulation.Sincemostretailersimportthemajorityoftheirproductsfromoverseas,anysharpincreaseinthecostofimportingcouldpotentiallyimposetremendousburdensonretailers.ThosecostswouldeventuallybepassedontoUSconsumers,whichcouldhindereconomicgrowth.
2. GenZRepresentstheNextWaveofSpendingPowerandanOpportunityforRetailersIBMdefinesGenZconsumersasthosebornafter1995(so,thosewhoarecurrentlyages13–21).ThisdigitallynativegenerationisconstantlyconnectedtotheInternetforentertainment,socialandlearningactivities.IBMconductedaglobalsurveyofmorethan15,600GenZconsumers,andfoundthattheyhavelittletolerancefortechnologyglitchesandminimumbrandloyalty.TheyoungercohortofGenZers(thoseages13–16)usetheInternetmostheavilyforentertainment,whiletheiroldercounterparts(ages17–21)useitmoreforsocialmedia.ThesurveyrevealedthatGenZersinfluence93%ofpurchasesintheirhouseholdsandrepresent$44billioninbuyingpowerintheUSalone.
Source:FungGlobalRetail&Technology
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Whilethemajorityofretailersarenotreadyforthisnewgroupofconsumersandarestillfocusedonbabyboomersandmillennials,somecompanieshavestartedtotargetGenZ.BillyMay,SeniorVicePresidentofMarketing,E-CommerceandCorporateDevelopmentatAbercrombie&Fitch,notedthatthecompanyhaslaunchedanexperience-drivenloyaltyprogramandlocation-basedlensesonSnapchatinordertobetterengageGenZcustomers.PatrickDuncan,SeniorVicePresidentofMarketing,E-CommerceandDistributionatHelzbergDiamonds,saidthathiscompanyhasbegunofferingcustomizationofproductsandhasincreaseditssupplychaintraceabilityinordertoaccommodateenvironmentallyconsciousGenZcustomers.
3. PurchaseIntentIsRisingandConsumersAreComingtotheMallwithaPurposeConsumerintent-to-purchasemetricshavebeenmovinghigher,ashaveconversionrates.Moreconsumersarecomingtothemallspecificallytomakeapurchase,afterhavingconductedresearchonlineinordertoeducatethemselvesabouttheirpurchase.Still,theyarefrequentlyfindingthatitemsareoutofstockorcannotbefoundinstores.Whenfacedwithsuchbarriers,consumersmaydecidethattheirtripwasnotworthitintheend,whichmayjeopardizefuturevisits.Technologywillhelpretailerscombatthesechallengesandconvertmoreshopperswhodovisitstores.
4. RetailersNeedtoOffertheProductattheRightPriceConsumershavemoreinformationthesedaysandmoreofthemaredecidingontheirownwhattheywanttowearandhowtheywanttorepresentthemselvesinsteadoflookingtoretailerstotellthemwhattheyshouldbewearingfromafashionpointofview.Valueperceptionishighlyimportantregardlessofprice,asconsumerswanttoseethevaluewhetheraproductispositionedasultrahigh-endormore“disposable,”asfastfashionis.Howretailersandbrandssettheinitialpricepointalsomatters.Insomecases,markdownscanbeplannedtogivetheperceptionofvalue,asmanyconsumersdonotlikepayingfullprice—andsomemarkdownscanbefundedthroughmarketingbudgets.Inothercases,particularlyifaproductisconsistentlymarkeddown,itmaynotbeseenasvaluable.Inordertomaintaintheirproducts’perceivedvalue,manyluxuryretailersnevermarkdownorpromotetheirproducts.
Source:FungGlobalRetail&Technology
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January17,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
5. TargetImprovedItsTechnologyCapabilitiesbyFocusingandReprioritizingTarget’sCIO,MichaelMcNamara,sharedhowTarget’scapabilitiesandfocusontechnologyhasevolvedinthe18monthssincehejoinedthecompany.Hesaidthereweretoomanypeopleinthetechnologydepartmentwhenhejoined,andtoomanyprojectsandpriorities,whichnumberedmorethan800.McNamarafocusedonfewerprojectsandbetterexecution,ruthlesslyprioritizingtechinitiatives.Healsosaidhebroughtemployeesin-houseandsetthecultureforthetechnologydepartment.Priortohisarrival,techstrategywassetbythird-partyconsultants,and70%ofemployeeswerenotfulltime.Now,thatnumberisdowndramaticallyandiscloserto30%.Finally,hesaidhefocusedonmakingthecompanyagileinthewayteamswork.Thisallowedthemtotestnewthingsandlearnfromthemquickly.Targethasreduceditsoverheadexpensessignificantlyandproductivityhasskyrocketedasaresultofthesechanges.
6. TechnologyIsBringingChangestoShoppingExperiencesandPhysicalStoresataFasterPaceAtvarioussessionsweattended,presentersdemonstratedtechnologiesthatarebeingappliedtoretailstoresandshoppingexperiences.IntelCEOBrianKrzanichshowcasedhiscompany’slatestrobot,Tally,whichhashelpeddrugstoresandconveniencestoresbetterauditshelfstocklevelsandproductpricing.TheinformationTallycapturesisdirectlypluggedintoastore’ssupplychainmanagementsystem,whichhelpsthestorerunmoreefficiently.Intelhasbeenworkingwithmajorgrocery,drugandvalueretailerstoimplementthistechnology.KrzanichalsodemonstratedAlibaba’slatestVRcommerceexperienceandwarehousewearablesasexamplesoftechnologyapplicationsintoday’sretailenvironment.Henotedthatthechallengeistodevelopcost-effectivetechnologysolutionsthatcanbedeployedatscaletosolveretailers’businessissues.
7. CombingArtandSciencewithArtificialIntelligence(AI)Retailersshouldputtechnicaldatascienceandautomationtoolsinthehandsoftheartistsinmarketing,assuccessreliesonacombinationofartandscience.Inasessiontitled“BridgingtheGapBetweenMarketingArtandSciencewithAI,”theCEOofcustomer-marketingcloudcompanyOptimovediscussedthechallengeofmakingthepowerofdatasciencemoreaccessibletoCRMpractitioners.Marketersneedtounderstandthatautomatedmarketingcampaignscarryacostofgeneralization,hesaid,assomecustomerswillbedisappointedwhentheyreceivenonrelevantmarketingmaterials.
8. E-GiftingSolutionsOfferPersonalizationandConvenienceTheincreasingpenetrationofe-commerceisdrivingthegrowingpopularityofe-gifting(sendingagiftviaemail,textorsocialmediaplatform).E-giftingismorepersonalthansendingagiftcardandprovidesthegiftgiverwiththeconvenienceofbeingabletosendagiftinstantly.CashStarisastartupthathaspartneredwithNordstromtoprovideanewkindofe-giftingexperience.Therecipientreceivesanemaildenotingthegiftitemthatincludesapersonalmessagefromthegiftgiver.Therecipientthenhastheopportunitytochoosethecolorandsizeoftheitemorexchangeitforastoregiftcardbeforetheitemisshipped.Thissolutionhashelpedremovegiftgivers’anxietyovergivinganunwantedgift.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
9. ServiceIs51%oftheEquationBrandsarebeingcommoditized.AccordingtoDannyMeyer,FounderandCEOofUnionSquareHospitalityGroup,consumerscravehospitalityandagreatproductwherevertheygo,notjustatrestaurantsandhotels.Meyerdescribedretailasbeingmadeupof49%productand51%hospitality,whichincludesprovidinggreatserviceandmakingpeoplefeelbetter.Hesaidthathospitalityisthereasonconsumerschooseoneretaileroveranother—howaretailermakesconsumersfeeliswhatkeepsthemcomingback.Likedepartmentstores,menusandstoreofferingshavebecometoobigandundifferentiated,Meyersaid.Hesuggestedthatretailersandstoresofferamoreeditedassortmentandadistinctpointofview.Doonething,butdoitbetterthaneveryoneelse,hesuggested,notingthataretailercannotbeeverythingtoeveryone.Consumerswanttobelongtoatribeandacommunity,andretailersthatmakethemfeelessentialwillbesuccessful.
Source:FungGlobalRetail&Technology
10. RetailersNeedConstantReinventionintheAgeofDisruptionSirRichardBranson,FounderofVirginGroup,saidthatbrandsandbusinessesmustconstantlyreinventthemselvesinordertostayrelevant,especiallyintoday’sageofdisruption.HispersonalexperiencebuildinganempireofdifferentbusinessesincludesreinventingVirginMegastoresandcreatingthemobilebusinessinthefaceofdecliningtraffic.Henotedtheimportanceofstayingagileandflexible.Healsoshareddetailsonotheradventuresthatheiscurrentlyundertaking,includingtheGalacticspacetravelprogram,asheencouragedretailerstokeeptheirbrandsfreshandtoexplorenewpossibilities.
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January17,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnHarmonSeniorAnalyst
ShoshanaPollackSeniorResearchAssociate
JingWangResearchAssociate
HongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com
