The National Retail Federation’s annual convention and expo was held in New York City last week, and had almost 40,000 attendees, with hundreds of exhibitors, speakers and sessions. The industry continues to invest heavily in technology innovation, supply chain and fulfillment solutions, and engaging physical store experiences, and we saw continued incremental progress in all these areas. As always, there were plenty of engaging discussions and compelling exhibits to take in. Here are some key areas that retailers should pay extra attention to this year.
Data and AI Solutions Are Here to Stay
Data and artificial intelligence (AI) was one of the major themes at this year’s conference. We saw numerous applications that made use of some of the latest technology, and Publicis Sapient released new research in partnership with Adobe on how companies are using data and AI within their enterprises. One key takeaway from our research is that while 69 percent of executives say that their No. 1 use of data is in personalization, less than half are using algorithms to optimize that data.
The research also noted that opportunities are being missed for more systematic and transformation applications of data elsewhere in the enterprise (e.g., fulfillment optimization, demand forecasting, and workforce optimization). A second takeaway is that 61 percent of executives said they were "ahead" of their competitors in AI/data, which seemed overly optimistic. Lastly, silos remain a major problem for organizations, with the largest group of respondents (44 percent) saying that while they’ve implemented algorithms, they've done so in a siloed manner only.
Elsewhere at NRF, data and AI was widespread, with facial recognition applications at checkout, improving pathing/tracking data in-store to enable better analytics and optimize store setup and pathing, and on-shelf cameras to identify stock outages and planogram issues.
These developments reinforced that perhaps the key management challenge of the next decade is evolving retail companies to become algorithmic companies, and redesigning retail organizations to be agile, network-type companies, not traditional bureaucracies.
Physical Retail Continues to Evolve and Transform
Physical retail spaces have always been used to bring brands to life and cultivate customer awareness, engagement and loyalty. However, shoppers’ expectations have evolved way beyond simply buying and retailers continue to make substantial investments in new spaces that have stunning design and architectural elements, high degrees of technology integration, and, in many cases, a seamless blending of the two.
Dozens of examples were discussed at NRF, from Filson’s reclaimed 1850s Douglas Fir barn to Petco’s upscale kitchen for pets to Nike’s House of Innovation. Nordstrom’s lavish New York City flagship is another wonderful representation of a cutting-edge retail experience. The store features a stunning glass wave facade that maximizes natural light, numerous restaurants and bars, original artwork installations, and a variety of personalized services and fulfillment options. Publicis Sapient also ran a curated retail safari this year that visited eight innovative stores in Columbus Circle and in Soho, with standouts including Nike 21m, Glossier, and Nordstrom Men’s store.
Beyond store design, retailers are leveraging their retail footprints more thoughtfully and strategically to support their back-office operations. They're developing capabilities that facilitate data collection, omnichannel assortment planning, supply chain fulfillment, and reverse logistics in an effort to compete more effectively with the digital pure players. We anticipate more retailers will embrace this trend going forward.
Values and Social Responsibility Are Becoming More Important in Purchase Decisions
Company values are increasingly becoming an important factor in shoppers' purchase decisions, advocacy and loyalty. There’s a growing body of research suggesting that shoppers perceive a company’s values as a differentiator, and are more likely to purchase products from companies that share similar beliefs. Conversely, shoppers may avoid brands that aren’t transparent about their values or don’t support issues that shoppers are passionate about.
There was a lot of discussion at NRF about how consumer sentiment is changing and how retailers are responding. Examples included Starbucks’ commitment to eliminate plastic straws by the end of 2020 to Alipay’s Ant Forest project that has resulted in the planting of over 100 million trees in Northwest China.
Starbucks CEO Kevin Johnson made the point in his keynote that the pursuit of profits doesn’t need to be in conflict with the pursuit of social good. Ultimately, retailers must establish cultures within their organizations that are authentic and true to their brand’s values. They must be transparent about the sustainable business practices and ethical sourcing processes they’ve established.
Frictionless Checkout is Still a Work in Progress
Retailers continue to experiment with ways to streamline and simplify the checkout process for shoppers. One interesting self-checkout experience is the solution from Chinese manufacturer Hisense, which leverages cameras to recognize items rather than requiring shoppers to find and scan barcodes. Additionally, the solution utilizes facial recognition technology to identify shoppers who had previously set up an account and payment method to streamline the checkout process even further.
A number of other vendors were showcasing click-and-collect, self-checkout, and mobile point-of-sale solutions, but there weren’t any true breakthroughs. Many of these solutions require significant investments to deploy at scale or in some cases add additional complexity to the customer checkout experience. Yet with usage of click-and-collect growing 43 percent over the 2019 holiday season, expect to see more of these solutions in the future.
So what can we expect to see in 2020? A lot more of the same: continuing progress in leveraging data more effectively across all aspects of the business, from customer engagement to managing the enterprise; more focus on transparency and values as a way to differentiate and drive deeper connections with shoppers; and ongoing investment in creating physical spaces that deliver immersive shopping experiences.
Hilding Anderson is Publicis Sapient’s head of retail strategy, works with Fortune 500 companies and top global retailers to advise them on digital business transformation and how to drive higher performance in the changing digital landscape.
Neil Hubbard is a director of customer experience and Innovation and is part of the retail industry team at Publicis Sapient.
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Hilding Anderson, Publicis Sapient’s Head of Retail Strategy, works with Fortune 500 companies and top global retailers to advise them on digital business transformation and how to drive higher performance in the changing digital landscape. Particular strengths are in digital business transformation, retail strategy for the data-driven retailer (CDP, algorithmic retail), engineering modernization, and growth strategy.
Hilding’s 20-year career started as an entrepreneur, founding a technology consulting services firm in Cambridge, Massachusetts focused on the retail and healthcare spaces. After a brief stint at a dot-com, he pursued an MBA at the University of Texas in Austin graduating in 2005 with a 3.8 GPA and specializing in Management and the entrepreneurial growth.
Following graduate school, he joined Publicis Sapient’s management consulting practice, working with boards and CEOs in the retail and financial services industries to transform their business. Partnering closely with clients, he developed digital and omnichannel business strategies, working closely with technologists to define and execute business strategy.
In addition, over the past decade, he has researched and published 5 books that document the changing digital landscape and consumer behaviors for retail. He also conducted annual in-depth evaluations of 70+ retailers omnichannel strategies in North America. Building on that expertise, he now leads the business strategy for Retail North America, guiding 40+ accounts on the right business strategy and path forward. His recent indicative work includes shaping a business transformation road map for a large department store, engaging with the chief digital officer of a top luxury apparel retailer in NY on GTM digital strategy and business justification, as well as partnering with a large home improvement retailer on the East Coast in experience strategy and innovation.
Neil Hubbard is a Director of Customer Experience and Innovation and is part of the retail industry team at Publicis Sapient. Based in Chicago, he leads the direction and development of digital transformation initiatives by providing industry insights, best practices, and thought leadership with an emphasis on customer experience and the products, services, and touchpoints that drive value. He has over 20 years of experience and has worked with industry leaders across a variety of retail categories including home improvement, fashion, grocery, convenience, and QSR.
Prior to Publicis Sapient, he was the Director of Product Marketing at Tribal Brands, an industry leader in mobile marketing around consumer passion points including music, entertainment, sports, and causes. Neil also held management positions at Motorola where he was responsible for envisioning and executing their multimedia content strategy and SkyTel where he led their Advanced Applications Group. He holds a MBA with a concentration in Marketing from DePaul University.