In a panel discussion yesterday at the Shoptalk conference in Las Vegas, a trio of retail executives discussed how their businesses are evolving to account for changing consumer behaviors, positioning their businesses for growth in the process. Billy May, CEO of Sur La Table; Carrie Ask, executive vice president and president, global retail, Levi Strauss & Co.; and Ken Worzel, president, Nordstrom.com, offered their thoughts on the changes currently taking place in retail, as well as their outlook for the industry. The panel discussion was moderated by Gilbert W. Harrison, founder and chairman emiritus, Financo, and chairman, Harrison Group, Inc.
On the Changing Role of Brick-and-Mortar Stores
Carrie Ask: Levi's invested in a global customer journey mapping exercise. We learned that our stores had to remove friction points, and we've done that. They're performing really well — more experiential, more inspirational, more engagement than ever before.
Ken Worzel: We've made a number of changes. For example, we no longer report results by channels — e.g., stores, e-commerce. We now report sales based on full-price and off-price stores. Also, we've done a lot of research on our customers. They're just shopping Nordstrom, and they don't care about the channel. [Product] Returns is a great example. We make it free to ship back online orders to us, but 65 percent of our returns are done in-store because customers feel it's easier.
Billy May: I think stores are a form of retail theater. We must give the customer a reason to come into our store. We're a brand that focuses on expertise and solutions. We want to be able to meld that from a digital perspective, even if the purchase occurs in-store. Ultimately we're in the business of selling competence in the kitchen.
On Creating Experiences In-Store
CA: The industry is pivoting. Isn't either or anymore [physical or digital], it's just shopping. Retailers know we have to add more experiences. For Levi's, it's fit, sizing, fashion. Having tailors in-store is an example of that guest experience. Customization of product, old and new. Conversion, average order value, and gross margin are all up in all the stores where we have tailors.
In addition to tailored shops, the fitting room experience is an area we've invested in. Trying on jeans, especially for women, is often not a fun experience. Up to 70 percent of our sales flow through the fitting room. With that in mind, we've doubled the size of our fitting rooms as well as added other comfort features to the spaces.
KW: A store needs to be more than a repository of inventory. For example, we introduced a pilot in Los Angeles, Nordstrom Local — the store doesn't have any product living it. It's just a hub for services — for example, returns; buy online, pick up in-store; alterations. Focus less on the individual visit, and more on engagement. That's what works for us. Over time, it's been proven that's what matters for us. In addition, hyperlocal works. We've found that this new concept has been really engaging for customers that live within three miles of the Nordstrom Local store.
BM: Cooking in-store makes the experience exciting. Sur La Table is the largest avocational cooking program in the country. Our cooking class is a way to acquire new customers, while also providing a relevant, authentic experience that differentiates the brand.
Marketing is Changing
BM: Sur La table was a traditional direct marketer with a catalog, with digital tacked on. We looked at the market, on an individual customer basis, to determine not only the the best way to reach and retain, but also to reach and acquire. The result of this research was that we reindexed our marketing spend. We used to be in market with 10 million to 12 million catalogs, now we're in 25 percent less. Furthermore, social has been good for us in terms of product discovery.
KW: Social — which is really word-of-mouth on steroids — has been great for us. Nordstrom has a reputation for service, and we want to be listening to customers on social. We've also shifted to embracing fashion discovery. They discover fashion through friends, influencers — we're embracing social as a way to get out there in fashion discovery.
CA: We used to allocate marketing spend by channel. We've now shifted to one budget for all channels. It's one brand that we're marketing.
The Impact of Omnichannel
KW: Increasingly it became a distraction to do the accounting channel-specific. Consumers are switching back and forth between channels during the purchase journey. An example of how we've adapted to this behavior is personalized recommendations from sales associates sent via email. That sales person gets a commission for those online sales. Our metric of success [for omnichannel] is are we gaining market share. You better be investing in digital and omnichannel.
BM: Don't make company problems customer problems. Let them shop the way they want; you can figure out the back-end pieces on your own.
On Selling to Generations (Millennials, Gen X)
BM:One of the fastest-growing parts of our business is our kid's program — get them into the fold early. Solutions and experiences are authentic, not about technology. Bringing culinary experiences to life; it's a hands-on experience.
KW: For Nordstrom it starts with our products. We've embraced digital-native brands — for example, our partnership with Topshop. We've forced ourselves to take risks partnering with brands, particularly those in early-stage development.
CA: Levi's is a very democratic brand, not prescriptive. You don't have to buy into a look — very differentiated look depending on the customer.
On Future Challenges and Opportunities
KW: There's been a lot of talk of the retail apocalypse — it's on us. But in periods of big disruption, there are opportunities for outsized winners.
CA: Levi's is flourishing. Sales last year were up 8 percent, and direct-to-consumer sales were up 15 percent. We're very confident that our mojo is back. Put your customer at the center of all decisions. Those that do will win.
BM: Start with the customer and work backwards, evaluating priorities based on that. That's where heritage brands have an opportunity. Brands matter, and that's where being authentic matters in terms of payoff, both digitally and in-store.
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