Four Key Takeaways from NRF’s The Big Show 2017
I had the pleasure of attending the National Retail Federation’s The Big Show in January 2017. The key trends that stood out were the necessary evolution of the store, the arrival of car commerce, the need to be ‘glocal,’ and on demand manufacturing in the fashion industry.
The store is not dead, but it needs to evolve
Rod Sides, Retail, Wholesale and Distribution Leader at Deloitte, hosted a keynote session where he presented research from Deloitte about the role of the store in retail. The panelists included Mike Mauler, EVP and President of GameStop International, and Colin Watts, CEO of the Vitamin Shopper, who shared their experiences in store-based retailing.
Deloitte’s research showed that store traffic continues to decline while the penetration of online sales grows. Despite these trends, stores still account for over 90% of total retail sales. The company surveyed consumers about their views on shopping in stores. The survey revealed that 47% of shoppers were satisfied with the transactional aspect of the store experience (product availability, fast check out, good product assortment, easy returns and instant gratification), but only 41% were satisfied with the emotional aspect of the store (high quality and trusted products, exciting product assortment, clutter free store space, loyalty programs and getting a great deal). Diving deeper, Deloitte found that retailers with the highest EBITDA growth in the past five years had a high level of product differentiation and experiential elements.
Mr. Mauler talked about how GameStop’s loyalty program is instrumental in conversing with customers to improve the shopping experience. Based on loyalty members’ feedback, GameStop created compelling merchandising by moving into the licensed merchandise space. This resulted in a US$500 million revenue source with a target of US$1 billion in revenues by 2019.
Vitamin Shoppe recognized the need to evolve due to its core category of vitamins and supplements becoming commoditized with many market entrants. Mr. Watts said that the company started by looking at its loyalty program and customer relationship management data to better understand its customers and their needs. It determined it need to greater investment in its health enthusiasts (sales associates) to set itself apart from the competition. The health enthusiasts now undergo extensive training and are armed with customer profile data in mobile tablets. They’re also responsible for local outreach to build a presence in their communities. The other investment area was into a new store layout, which has performed well. The new format draws in three times as many new customers as the former format. Customers spend twice as much.
Car commerce arrives in April 2017
General Motors and IBM announced at The Big Show that OnStar Go will officially roll out to GM cars in the US in April 2017. OnStar Go is a combination of GM’s OnStar assistance program and IBM’s artificial intelligence program, Watson.
OnStar Go will be part of the car’s dashboard. Within the dashboard, the driver can interact with apps to place orders, receive notifications and make payments. In 2018, drivers will be able to talk to OnStar Go, which will increase its utility by offering drivers more interaction opportunities. Theaim is for global expansion in the future with market entries into Europe, Asia and Canada.
OnStar Go has been developed to be a digital assistant to serve the driver’s various needs states, such as food, fuel and directions. For now, the official partners include MasterCard, Exxon, iHeartRadio and Glympse. A driver will be able to link his financial instruments, loyalty programs and retail accounts to the OnStar Go ecosystem, allowing him to shop seamlessly from anywhere via theOnStar Go platform, which is also accessible on smart phones and tablets.
The inclusion of IBM Watson means that the program will learn the driver’s routes and habits to provide recommendations and reminders. For example, it will know if the driver missed his usual weekly shop and recommend that he place an order. Another interesting use case is for click and collect orders. The program will allow retailers to see the driver’s route to their stores and direct thedriver to the correct collection point.
International expansion needs to be ‘glocal’
Numerous retailers spoke about their experience with international expansion. The recurring advice was that a retailer must identify its global core values but be flexible to adapt to local markets. This takes different forms.
Eataly is a retail format that includes Italian groceries, restaurants and cooking schools. According to Eataly US CEO, Nicola Farinetti, the company views its individual stores as siblings—they all come from the same family, but have different personalities. While each store tells the story of Italian food, the storytelling is adapted to the local market and so is the product assortment.
Darren Williams, International Director for T2, a tea retailer based in Australia, learned quickly that even though Americans and Australians speak the same language, their shopping habits are different. To adapt, the company built a set of global core values and a global training program. Furthermore, it brings international store managers to the original store in Melbourne to understand the company’s global values better. The company emphasizes its global values but allows individuals to adapt to their markets.
Daniel Armstrong, Business Manager for U.K. and international growth at Waitrose, a premium UK grocer, spoke about the need to be ‘glocal.’ The company relies on the expertise of its in-country partners, who are either wholesalers or retail franchisees, to tailor the Waitrose brand to their markets. For example, in South Korea, it has an exclusive deal with Shinsegae for its products. Shinsegae promotes the Waitrose brand with the Royal Warrant, meaning that Waitrose is an official supplier to the royal family, because the cachet of the royal family resonates in South Korea.
The fashion industry continues to embrace on demand manufacturing
Although on the radar for some time, multiple fashion companies spoke about their experiences with custom, on-demand manufacturing.
Jodie Fox, co-founder of Shoes of Prey, which is a shoe customization company, highlighted the many reasons why shoppers like to customize their products, including better fit, originality, and endless selection. The company’s goal is to offer custom, quality products on a mass scale. Fox highlighted an initiative with Nordstrom.com where Shoes of Prey worked with Nordstrom’s buyers to create ‘virtual’ shoes online. This allows for an infinite product assortment without inventory risk.
Indochino’s CEO, Drew Green, talked about his experience scaling the company. He found that it became difficult to maintain quality as the company grew (sales grew 54% in 2016). It partnered with Dayang, a clothing manufacturer to help Indochino ensure a high level of quality and shorten its lead time from almost four weeks to two weeks to better compete with ready-to-wear.
Thursday Finest and Eileen Fisher had 3D printers on hand to show how they can manufacturer apparel items. Thursday Finest focuses custom accessories while Eileen Fisher produced sweaters at the show. Both took less than an hour to produce an item.