If you’ve ever gone to a carnival, you’ve likely seen the horse race game. You know, that game where the horses move across the field a certain distance depending on how hard you throw the ball (similar to skeeball, a classic)? Ok, now imagine the wavy layers of green that span across the visual field as the business landscape; the horses are different industries. Retail is typically at the front of the pack when it comes to technology, innovative ideas, and processes. Always at the forefront of the customer’s needs and experiences, retailers respond quickly to ensure no marketshare is lost. We experienced this first-hand at this year’s National Retail Federation (NRF) conference, or what is affectionately called “The Big Show”.
What we also learned, however, is even with that forward-thinking approach, retailers were still left reeling from the accelerated growth over the last three years. Changing customer expectations hit a velocity rarely seen in the industry and the resulting digital transformation meant that organizations needed to build, prioritize, and monetize all at the same time. Now that the majority of the world has started to recalibrate, retailers are left with metaphorical scrambled eggs of systems, ideas, and data.
To add insult to injury, customers are reducing their spending thanks to a looming recession and it’s time for retailers to ruthlessly prioritize to ensure that they’re able to responsibly keep up. At least that’s what we heard from our team who cruised the halls of this year’s NRF conference. This year’s event was all about getting back to basics so they could navigate the complexity of the past few years while still planning for the future.
Let’s talk about the customer
“The Customer” was the main theme of this year’s NRF content. Getting back to the basic buyer meant that terms like “ecommerce”, “app”, and “store” weren’t the focus as with years past. This year conversations along brightly colored hallways were digging deeply into personalizing the shopping experience regardless of the channel or property. To do that, however, you have to truly understand the customer and their needs. The good news is that all retailers are already collecting the information they need. Between web statistics, customer profiles, loyalty program information, or support information, the key to a contextual future is unifying the disparate data and turning them into useful fuel for personalization engines.
The real reflection here is captured beautifully in an article by Coresight Research quoting Art Sebastian, VP Digital at Casey’s, “personalization can’t be planned in advance. It happens in real time with contextual behavior.” In a landscape of organizations that often sell similar products, the key to being resilient is about differentiation. If you can make the customer feel like your number one priority, you’ll win. In fact, a session featuring luxury retailer, Neiman Marcus, shared that 2% of their customers generate 40% of its revenue, and that loyal base shops an average of 25 times a year. That generates $27k per shopper.
Brick and mortar is back, baby
With customer lifetime value at the forefront of most retailer’s minds, the impression left by an in-person customer experience can have a lasting experience. In fact, shoppers spend more in the store than they do online. To that end, Ikea is incentivizing shoppers to come wind their way through their cavernous shopping experiences while Lowe's sees their in-person experience as their “biggest central competitive advantage.”
Madison Reed, an American brand of hair care and hair color products, has leaned on their online experiences to grow their businesses. However, in-store virtual try-on tools have helped customers explore all 60 shares of hair color offered by the brand. Those stores that feature these digital experiences reportedly outperform the stores that don’t have these screens by 21%.
What would a retail conference be without mentioning the ever present complexity of omnichannel? Even positive in-person experiences need to be supported by connected digital experiences. Petco, for example, has built a one-stop shop for pet owners that spans digital and in-person shopping.
More profit centers, please
Always on the hunt for more ways to create revenue streams, the number of retailers becoming retail media networks is on the rise. Of course, there are a few “OG players” in the space (think eBay and Amazon), but the practice is being more widely adopted now thanks to new perspectives brought on by digital transformation. The idea of selling advertising to the CPG suppliers on the retailer’s e-commerce platform is now about co-opting attention. Now, companies like Nordstrom can supplement their merchandise revenue with advertising revenue directly on their site. Although this is mostly being leveraged across clothing and collectibles, the potential for expanding this notion across every subvertical is endless.
Artificial Intelligence and automation, still red hot
ChatGPT has brought fresh attention to artificial intelligence and automation in the last few months. We all know that retailers have been leveraging artificial intelligence and automation for the better part of a decade. This positions the whole industry to leverage the next generation of this tech.
In addition to leveling up, it’s a great time to optimize. Re-evaluate the balance and quality of white glove customer service and the self-service offerings that are offered by an organization today. There’s a new tolerance for automated interaction as long as the information is useful and authentic to the brand.
At NRF, we saw big players rolling out their upgraded automation products to help simplify ordering products, product curation, shelf management, tag management, and customer loyalty. If retailers were on the fence about investing in AI and automation, the market is ripe with mature products that will simply make jobs easier. The timing is good to do more with less, considering how many departmental budgets are slashed across the industry.
The Wrap Up
Not only did we have an exceptional time learning about what’s new and hot in retail, but we were able to hear from a few of our customers as well. We saw Shopify, Tulip, Home Depot and Staples. Each conversation helped remind our team a) how to talk to people in person again (so weird!) and b) how important it is for retailers to be able to transform every customer interaction into a VIP experience.
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