NRF 2020 Vision Retail’s Big Show Round Up
A new year brings new challenges and new solutions for retailers that want to keep their customers coming back
A new year brings new challenges and new solutions for retailers that want to keep their customers coming back
Billed as the world’s largest conference dedicated to all things in retail, the National Retail Federation’s NRF 2020 Vision: Retail’s Big Show – to give it its full name – attracts over 35,000 attendees from 99 countries. And, if the event is the best way of checking retail’s pulse rate, then the vital signs are good.
Thanks to a buoyant economy, total retail sales in the U.S. continue trending upwards hitting $3.68 trillion in 2018 and a projected $3.8 trillion for 2019.
However, it’s not all rosy. Physical stores are closing. Traditional retailers are struggling with their channel strategies and with meeting heightened customer expectations. Meanwhile, the rapid growth of Direct to Consumer (D2C) brands is disrupting everyone from consumer goods brands to established online retailers.
Companies are also beginning to question their advertising spend, especially in the digital space. There is real fear that with all the noise being generated through every channel, only those that can shout the loudest and be heard over this noise will be able to connect with new customers.
Yet, by the time this year’s show came to a close on January 14, it was also clear there are ways and means for overcoming each of these challenges and to address the latest consumer trends set to shape the industry in the decade ahead.
Embrace data, reject the online advertising monopoly
Microsoft CEO Satya Nadella kicked off this year’s event with a keynote that felt more like a call to arms. “We have to change the dynamics here. Today, when you look at online advertising it’s a monopoly,” he said. “There’s death, there’s taxes and there’s ever-increasing online advertising spend.”
Nadella’s solution is data. Retail generates 40 terabytes of it every hour and what businesses do with it is going to shape the future. If they use it to understand customers and empower their employees, they can reinvent their business model while delivering greater customer satisfaction.
Like many thought leaders on the subject, Nadella also stressed the importance of sharing data within the business. “Giving data to employees is the single most ROI-intensive thing you can do,” he noted. “It increases your conversion rate by 15% and your satisfaction rate by 10%.”
By embracing technology and data, retailers will have everything the need to target and keep customers without pumping even more money into traditional online advertising. “You have, as retailers, the most valuable asset: commercial-intended consumer behavior data,” stated Nadella. “The question is, how can you, through your marketing efforts, convert that into effectively new online advertising channels that could benefit every brand, every supplier?”
The D2C data difference
What Nadella is proposing is already in action for a new breed of retailer. D2C businesses are demonstrating how data can be a brand’s best friend. Companies like Dollar Shave Club and Bonobos owe much of their success to having a single view of their customers. Because they are the only entities interacting with their customers, 100% of their customers’ data is flowing directly into their business rather than via partners.
This sets them apart, even from other online retailers. A recent CommerceNext study found 52% of digital retailers in North America are unsatisfied with their ability to achieve a single view of the customer.
The death of physical retail?
But is this move to embracing data and marketing direct to the customer part of another less positive trend in retail? There was a record number of physical store closures in 2019 – 9,300 in total. Some closures were due to reducing physical footprints, but most were due to bankruptcy or bankruptcy protection.
As the number of physical retail channels recedes and as online storefronts like Amazon become too powerful, consumer goods brands need to find new ways of engaging with customers. This brings us back to the D2C model. According to Salesforce research, 99% of consumer goods leaders are considering a D2C strategy and 42% cite challenges in the brick-and-mortar retail space as their motivation.
The rebirth of physical retail?
But is this is a short-sighted view? NRF data shows the fastest growing areas of ecommerce are click and collect and buy online and pick up in store (BOPIS) – services that must have a physical location. What’s more, over 2019, 36% of NRF members actually increased their store counts.
Even D2C brands are plotting a move into brick-and-mortar to the tune of 850 stores over the next five years. Why? Because it’s actually cheaper to acquire new customers via a physical location than via advertising alone.
“Physical retail is more effective than a billboard,” said Matt Alexander, co-founder and CEO of Neighborhood Goods. “People don’t like getting too many emails. They don’t like being sold to.”
When asked about how his company is reconfiguring its physical and digital channels, Nordstrom co-president Erik Nordstrom quipped: “I’ve yet to have a customer use the word ‘channel’ with me. They don’t do that. Those lines are completely blurred [to customers].”
Nordstrom pointed out that more than one-in-three of the company’s online sales have an in-store component and over 50% of its overall sales feature an online touchpoint.
A physical presence is still a very important part of the retail mix, especially when it comes to discovery.
Time to experiment
But the question still remains. What should established retailers with a foot in the online and offline spaces do about their physical stores to make them work?
The consensus at NRF 2020 Vision is that stores have to deliver an emotional experience and a form of customer engagement that simply isn’t possible via digital alone.
A number of leaders spoke on this subject, including Ben Kaufman, who as CEO of Camp, is attempting to create an in-store experience the whole family can enjoy and actively look forward to.
A family adventure
Camp markets itself as a toy shop, but each store also offers a series of experiences, each of which runs for two-to-three months. “Being part of a family’s schedule is a big opportunity,” Kaufman said. “We believe we can build an enduring brand, and if you do this right, you can build a brand that the kids who are being brought to Camp today will grow up and want to bring their own kids to.”
Embracing technology to increase human interactions
But you don’t have offer secret magic shows to elevate your in-store experience. One of the standout talks at this year’s show came from Starbucks CEO Kevin Johnson. He highlighted how technological innovation and access to data is enabling the company he oversees to increase the possibility for a customer to have a positive interaction with a Starbucks employee.
“As human beings, we were meant to interact with one another,” Johnson said. “It’s how we get support when we’re dealing with adversity. It’s how we share joy and successes in our lives. I think one of the common themes going forward is finding ways to create human connection.”
This is why Starbucks is embracing intelligent automation. Eliminating mundane, repetitive and administrative tasks gives employees more time to make connections with each other and with the customers they serve.
A business with Starbucks’ footprint – 31,000 stores and 400,000 employees attracts more public scrutiny than most – especially online. During his talk, Johnson noted that when the company announced it would abolish plastic straws before the end of 2020 the social media reaction equated to “billions” of positive posts.
All retailers agree social media is going to be crucial to their businesses moving forward, but how exactly no one is certain. Yet, what is already obvious is that brands can harness positive posts and, more importantly, directly engage with customers through social channels for mutual benefit. And, once the conversation has started, companies such as Rent the Runway and Under Armour who know how to talk with their customers, are building their brands, increasing advocacy and creating strong-knit communities.
Creating a community
“Our community is everything to us,” Alicianne Rand, VP, Growth Marketing at Rent the Runway said. “We firmly believe that our ability to harness the power of our customers and amplify their voice — that is our growth strategy.”
The community generates tens of thousands of customer testimonials every day. But as well as authentic word-of-mouth promotion, it also provides a service to users – helping them choose and cultivate the right looks based on the situation or the event.
Under Armour’s community differs in that it is more overtly about aspiration. “The world did not need another competent apparel or footwear manufacturer,” explained Kevin Plank, founder and executive chairman and brand chief of Under Armour. “What the customer needs is a dream.” The company’s community delivers on that by giving members access to the digital tools and information they need to boost nutrition, improve workouts or hit other fitness goals. And, at the same time community members provide the support and encouragement needed for people with a goal to achieve it.
Brands with a strong community have a head start when it comes to being aware of and acting on customers’ changing values. But as the decade progresses, all retailers will need to pay attention to the fact people are increasingly picking brands that take a clear stance on environmental, social and political issues.
When many people think of a sustainable retail business they think of Patagonia. It has been offering repair services for its clothing since the company was founded in the 70s, but in recent years it’s taken this idea to another level with its campaign urging people not to buy its own products for the sake of the environment and instead buy used clothing. In doing so it is at the forefront of the circular economy. “Historically, these circular supply chains and business models used to be a competitive edge,” said Patagonia’s Head of Corporate Development Phil Graves. “But, going forward, I firmly believe that they are going to be a means for companies, brands and retailers to survive.”
The employee experience is the customer experience
In terms of sustainability and aligning with customer values, this is also the year retailers realize the customer experience is the employee experience. Business have to attract and retain a mix of talent that is as mixed and diverse as the customers they serve. This was the overriding theme of Walmart U.S. CEO John Furner’s message, that retail jobs should be good jobs.
“The work that we do does matter. I started in retail working in a garden center at a Walmart store and I realized that serving people and making their lives better made a real difference,” explained Furner. “I think our role, leading big organizations, is to make sure our teams have the resources, the clarity and really a whole system and process around them to make the environment work, so they can feel successful.”
To elaborate on what this would actually mean for any employer, not simply a retailer, Furner outlined the business transformation he oversaw before moving to Walmart, when he was president and CEO of Sam’s Club. As well as giving team leaders genuine pay rises to reflect the responsibility inherent in their roles, employees were shadowed to understand any pain points and areas of friction that could be removed.
Employees who had no front-office experience were also trained up so they could work in and understand customer-facing roles then draw on that experience in their existing roles. As part of a wider transformation, it has increased customer retention and satisfaction levels and boosted the bottom line.
“There’s no better investment you can make than in the people you have on your team, who are serving the people that are paying you to be there,” Furner stated.