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If you didn't catch Shoptalk, you missed out on the networking but you can catch up on the retail industry coverage here. What a Shoptalk it was. 8,500 attendees, meaning that Shoptalk has more than tripled in just 2 years and for good reason. NRF may be bigger, but Shoptalk reigns supreme in terms of the quality of attendees - and for good reason. The talks are much more substantive and have more impressive speakers. And while that may mean less booth traffic for exhibitors such as ourselves, it makes for the #1 networking opportunity in an industry undergoing such rapid change that knowledge sharing may be the key to survival.
Here are my big Shoptalk 2018 takeaways:
Leaders Are Adopting Retail Technology at Platform Scale
Joshua Shulman of Coach talked about the Tapestry strategy of consolidating operations and platforms and using them across the brands. Ultimately, the brands are targeting different shoppers, so it's less about crossover and more about shared platforms, data and economies of scale.
In another personal conversation I had with key executive of a large cosmetic company, it was clear that it was a big focus to try to consolidate efforts across the brands. Paraphrasing, he said, "we have 4-5 different digital signage platforms and we are struggling to consolidate them under a single CMS. But those days are numbered, and future technology will need to hook into them."
This is one of the reasons the Modiface acquisition made sense for L'Oreal and at the same time sent other retailers reeling. In-store technologies are harder to rip out, so L'Oreal competitors who adopted Modiface are now faced with tough decisions. That's why it is important to adopt interactive retail displays that are an open platform such as Perch. We work with Modifiace, Perfect Technologies (YouCam), Holition and others.
The bottom line is that many retailers are dipping their toes in the water, and not building on successes. It's a paralysis masked as one off trials and is a recipe for failure. In one of my 1-on-1 discussions, a key retail technology executive said to me, "the challenge to true innovation is that most people in the org are playing to survive, not playing to win." We see it all the time. Small bets that don't provide a meaningful amount of data to act. Or an inability to double down on success. The time for meandering is over. Act now or perish.
As Brian Lange said on his FutureCommerce podcast, "If you can't meaningfully invest in retail technology innovation, it's a pretty good sign that you won't survive."
Rapid Experimentation Is The Key To Success And International Is Moving Faster Than the US
My favorite session (or at least tied with Boxed CEO Chieh Huang) was Martin Wild's talk. As Chief Innovation Officer (CINO) of MediaMarktSaturn Retail Group, he talked about the types of innovations he is bringing in store. Robots that greet you and guide you towards products. Digital price tags with NFC that you can tap with your mobile phones to find out more information. Advanced analytics on customers journeys. He said that he expects 50% of his innovation tests will fail, and he is happy with the number. He also mentioned that you have to work with startups, because innovation is unlikely to come from within, and that retailers need a team of people to help mediate between them and retail executives, who don't get them and don't move fast enough. This is a much more empowered vision of the Innovation departments than what I see in the US.
Perhaps no company embodies this better than Alibaba, who is driving in-store retail rapidly into the future. Alibaba is investing $10 billion in brick-and-mortar retail and recently invested nearly $500m in retail data company Shiji. "We are seeing the early results from our efforts to integrate online and offline with our New Retail strategy, and consumers have benefited from access to high-quality products, improved customer experience and the tremendous convenience of shopping anytime, anywhere," Daniel Zhang, chief executive officer, said last November. They also have gone deep with payments as Alipay is now a worldwide phenomenon, announcing partnerships with Visa and First Data. Alipay now offers loans, investing, banking, insurance, wealth management, credit, security, risk and cloud computing. Alipay has over 600 million active users and is used by over 10 million merchants in over 30 countries and 27 currencies. Imagine a retailer in the US being its own currency ... Amazon is taking steps in that direction.
As Fung Global wrote in their Shoptalk summary: "Radical Retail Thinking Requires Being Uncomfortable, Feeling Wrong and Having “One Foot in the Boat and One on the Dock,” According to Walmart’s Incubator Store No. 8, Williams Sonoma and Home Depot."
This was a common theme and few have been given the margins of error of Walmart, and few have the organizational commitment to truly test radical new technology. For Walmart, sometimes it's about blocking and tackling and focusing on techniques to increase store traffic. Walmart and FedEx have been testing the concept in roughly 50 locations across the US. The results showed—more often than not—that customers have shopped in the Walmart store after visiting FedEx, boosting foot traffic to the store, according to Walmart. We are seeing something similar with Aldi in Kohls.
Wall Street Financing Is Handcuffing Retailers and Stifling Meaningful Innovation
We've all seen the stories of store closures and most recently Toys R' Us. What's often under-reported is that what is putting so much strain on retailers and limiting their runway to pivot is the immense amount of debt they have taken on. In good times, greed and "easy" access to money was too tempting for the balance sheet. Now that the company is under strain and interest rates are going up, there isn't enough margin of error to be able to truly innovate. This was best summarized by Joe Jensen, VP General Manager of Retail Solutions Division for Intel who said, "Retailers know they are on a track that leads to the edge of a cliff, but Wall Street won't let them switch tracks."
That's why Nordstrom is so desperate to go private. It's their only path to survival. In a Jason Del Rey interview, Erik Nordstrom talked about how hard it was to manage the eCommerce business that's growing so quickly but not making money while meeting the expectations of Wall Street on the flat but profitable business of in-store. "Have you thought about going private," joked Jason Del Rey. Not as easy as it seems...
Price is Giving Way to Convenience As Retailers Are Focused on Same Day Delivery to Make Store Networks Valuable
I have long argued that great products are increasingly being driven by convenience and removal of friction. Amazon reset consumer expectations on shipping, with 2-day shipping and then same day shipping in urban markets. And sure enough, retailers are following suit. Walmart's Marc Lore announced 40% of U.S. population will be able to receive same-day shipping this year through their networks of stores. That's no small logistical challenge.
Target’s CEO, Brian Cornell, defined objective is to be “America’s easiest place to shop,” and the physical stores play a key role in their strategic plan. That's why they bought Shipt for $500m, to be able to enable same day delivery across their stores. That's a big investment for Shipt, a company that is 2 years old and had raised ~$60m, but also confirmation that innovation is hard to breed from within.
But is it the right strategy to think of stores as distribution centers? Are they meant to be warehouses for delivery? As retail real estate is threatened, will it be a winning strategy?
CEO of British online grocer Ocado, and Jason Ackerman, CEO and co-founder of Fresh Direct said store fulfillment is a natural first step for grocers, but is ultimately too expensive. “We vertically integrated manufacturing of products on a made-to-order basis rather than a made-to stock basis, which gave us huge variety and better quality,” Ackerman said.
The role of the physical store is open and important debate. Definitive advantage if tech enabled, or liability to the ideal solution? Time will tell. Just take a look at Ocado's retail fulfillment and logistics center and see why they think being tethered to physical stores is a hindrance.
Loyalty Clubs Are Helping Brands Identify Their Best Customers and Deepen Relationships Powered by Data
Brands and retailers are increasingly launching loyalty clubs to increase average value of a customer, collect first party data and develop a deeper relationship with the customer. Taking a page from Amazon Prime, many are charging for access to the programs to reward their most loyal customers. Mary Dillon, CEO of Ulta announced that their loyalty program now has over 29 million (!!!) members, and other executives echoed they considered 29,000,000 a small part of the market. As an aside, she also announced that their eCommerce grew at 60% YoY. Beauty is on fire as a category based on margins and growth rates right now.
Adam Sussman, Chief Digital Office of Nike, also put up big numbers. NikePlus now has 100m members and members spend 4x as much as other guests. Becoming a member and downloading their apps give you access to custom celebrity-guided runs, sneaker apps for die hard sneakerheads and more. Nike recently announced that they are vastly limiting their number of wholesale retail partners from 30,000 to 300, a 99% reduction. They are investing in direct relationships with their customers, superlative experiences at every touchpoint and digital and data being at the core. Go to a Nike store and compare to Foot Locker to understand why Foot Locker's store closures are a self inflicted wound.
The Rise and Fall of the AR / VR Hype
As Kelly Goetsch, Chief Product Officer of commerceTools wrote in his LinkedIn summary: "While there are a few legitimate use cases for AR/VR, I don't see many. The use cases aren't that compelling, the complexity is too high, people's devices don't have the hardware support, and people don't easily install new apps. Now that AI is peak hype, I think people have moved on."
You can definitely see this in the sparse numbers of exhibitors listed in the Shoptalk brochure:
But make no mistake, bringing digital in-store is still a massive priority. Brian Cornell of Target discussed the need to embrace change and to offer consumers a more connected physical and digital experience. Great news for Perch, of course.
For us, we are emphasizing the merging of digital and physical as a platform for scalable delivery of "mixed reality" experiences. It's augmented reality without the need for apps, and thus actually ready to use now. But based on what we are seeing, we may back off that messaging a bit and focus more on scalable platform for digital product experiences in store. What do you think we should do?
The Future of Brick-and-Mortar Retail Is Digital and Experiential
We are deeply thinking about the future of the in-store retail experience and uniting digital content with physical products. New camera based technologies are finding uses in retail analytics, checkout and loss prevention - but it's time that they be used to drive engagement, sales lift and customer loyalty through product marketing.
For the first time, retailers can message every product on the shelf with digital content and experiences, and we announced our open platform for agencies, technology providers and retail fabricators to embed our IoT platform everywhere in retail, exposing the next generation of retail experiences at scale. Expect more big announcements coming from us in the coming weeks. Lots of big customer traction, partner announcements and something else that's big ... all soon to come.
2018 will be a massive year in retail. We will continue to see as many closures that fuel the Retail Apocalypse story line as winners who continue to expand their reach, customer base and physical presence. Shoptalk continues to be the place where the thought leaders that define that future gather. I hope to see you at Shoptalk next year.