Download - Top 10 Takeaways from the NRF Retail’s Big Show Day 2 ...€¦ · Top 10 Takeaways from the NRF Retail’s Big Show Day 2: Technology Tools Abound, but Using Data is Still a Combination

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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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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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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.


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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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9. ServiceIs51%oftheEquationBrandsarebeingcommoditized.AccordingtoDannyMeyer,FounderandCEOofUnionSquareHospitalityGroup,consumerscravehospitalityandagreatproductwherevertheygo,notjustatrestaurantsandhotels.Meyerdescribedretailasbeingmadeupof49%productand51%hospitality,whichincludesprovidinggreatserviceandmakingpeoplefeelbetter.Hesaidthathospitalityisthereasonconsumerschooseoneretaileroveranother—howaretailermakesconsumersfeeliswhatkeepsthemcomingback.Likedepartmentstores,menusandstoreofferingshavebecometoobigandundifferentiated,Meyersaid.Hesuggestedthatretailersandstoresofferamoreeditedassortmentandadistinctpointofview.Doonething,butdoitbetterthaneveryoneelse,hesuggested,notingthataretailercannotbeeverythingtoeveryone.Consumerswanttobelongtoatribeandacommunity,andretailersthatmakethemfeelessentialwillbesuccessful.


10. RetailersNeedConstantReinventionintheAgeofDisruptionSirRichardBranson,FounderofVirginGroup,saidthatbrandsandbusinessesmustconstantlyreinventthemselvesinordertostayrelevant,especiallyintoday’sageofdisruption.HispersonalexperiencebuildinganempireofdifferentbusinessesincludesreinventingVirginMegastoresandcreatingthemobilebusinessinthefaceofdecliningtraffic.Henotedtheimportanceofstayingagileandflexible.Healsoshareddetailsonotheradventuresthatheiscurrentlyundertaking,includingtheGalacticspacetravelprogram,asheencouragedretailerstokeeptheirbrandsfreshandtoexplorenewpossibilities.

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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