Both/And and the True Nature of Retail: Top 20 Takeaways from NRF, Part 2

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Both/And and the True Nature of Retail: Top 20 Takeaways from NRF, Part 2

By Jordan Speer - 02/08/2019

If you missed Nos. 1-10, start here.

11 You should probably be trying to get a piece of the Chinese market. On Singles Day alone last year Alibaba brought in nearly $31 billion, smashing its previous record set the previous year of $25.3 billion. By comparison, U.S. Cyber Monday online sales hit $7.9 billion. Of Alibaba’s 600 million active customers, 40 percent are younger than 20 years of age; almost everything they do is on a mobile phone, they are curious, globally minded, and growing increasingly wealthy, says Michael Evans, president of Alibaba Group. They’re also very story-oriented, and want to understand what’s behind a brand and how it fits into their lives. “Building a relationship in China takes time. If you are looking to impact quarterly results, it’s not the market for you.” It’s a long game, but he wouldn’t bet against that market. Sure, it’s gangbuster growth has slown a little recently, to 6.5 percent, but it would be amazing if you could sustain 7+ percent year over year in a $13 trillion economy. “I can’t tell you what China will look like in 12 to 18 months, but in 10 years … it will not be a market small businesses can afford to ignore.”

12 Despite retail’s constant change, there remain some timeless rules for growth, according to Target CEO Brian Cornell. 1. You must always start with the consumer. 2. You must invest. 3.  You must reinvest. 4. You must be willing to disrupt yourselves. Read more from Cornell on why Target just had its best season in more than a decade.

13 There is still a lot of pain around returns. Which means there’s a lot of opportunity around returns. “No one likes returns,” says Nordstrom’s Anderson. She says the retailer is improving this process from multiple angles, including through an express returns kiosk that is self-serve and processes returns quickly and easily.

King says Walmart has launched “easy returns,” which is making life easier for customers of its marketplace retail partners. “When somebody used to return an item in the store, we would say, ‘You need to ship it back to the supplier.’ Now we’ve integrated it. We can give you your refund and we can ship it back or give you a label to ship it back. That wasn’t impossible before, but it’s so much easier to do now,” he says.

According to a Forrester survey, only 13 percent of companies allow customers to return a product to a different brand store within its portfolio, and just two percent provide an opportunity to return to a non-company store, which leaves a lot of room for experimentation in this area.

Making returns easy removes friction from the entire consumer purchase lifecycle, and when done correctly can build consumer loyalty and even spark more shopping. Among solutions around inventory, loss prevention and shopper traffic, is prototype of an automated returns kiosk from Sensormatic that is designed to make in-store returns self-service and simple. The customer simply scans the item-level RFID tag on the garment (or other item), which is matched to customer purchase history and automatically credited back to her account. The customer then drops the garment into the kiosk, from where it can be re-readied for the store floor.

14 Virtual reality can make real reality go much more smoothly. On a scale of hot-lukewarm-cool in terms of implementation, virtual reality (VR) ranked a “cool” by Forrester (find out where other innovative technologies ranked on the scale here). And while it may not be widespread, it can have significant impact. Often that’s on the workforce side vs. the consumer side. Walmart has been working with a Silicon Valley startup on VR training, and has built 200 training academies around the United States. Via VR training goggles, associates can learn just about everything related to store operations, from using a robot to unload a truck to restocking shelves. “People retain that information much better,” says Walmart’s King. “Frankly most of our associates haven’t had this training before, so there’s also cool factor. We have a million associates in the U.S., and retail has high turnover, you need to be able to train fast.”

On the topic of these more cutting-edge technologies, it’s worth noting that, according to new study conducted by Oracle NetSuite in partnership with Wakefield Research and The Retail Doctor, there seems to be a significant disconnect between retail executives and consumers when it comes to shopper demands and what retailers deliver in areas spanning the overall retail environment, social media, personalization and the use of advanced technologies such as chatbots, artificial intelligence, and virtual reality. “For example, retail executives think they’ve created a more inviting experience, consumers don’t think so,” says Oracle NetSuite’s Matt Rhodus, and 80 percent of consumers do not feel they are provided with a personalized shopping experience both in-store and online. “There’s a lot of opportunity to improve the relationship with consumers.”

15 AI is not a magic bullet, but it really can work wonders, when people can give it the proper time, attention and understanding. People talk about AI like it’s a coin-sorting machine at the grocery store. Bring your 20 jars and it will sort through the pennies, nickels and dimes and spout out a voucher for cash. But AI is not a device you can plug into your network to magically make sense of your complex matrix of customer, product and supply chain data and spit out a path forward. AI requires work. First, you need the talent, and if you don’t have it, you’ve got to find it, and that’s not easy. The ideal candidate is a “unicorn” with “five to seven years of business experience, great in front of colleagues also has tech chops,” says John Hill, CIO and senior vice president of planning at Carhartt. “It’s hard to find those and difficult to put those teams together.” The second challenges is addressing your technical debt with advanced analytics — tackling thousands upon thousands of BI reports to create something usable, he says. And the final challenge is managing expectations. There’s a lot of hype surrounding AI, but results cannot be delivered overnight. In looking for talent, Hill says, it’s good to have statistical knowledge, business acumen and the ability to learn and move quickly, but if he can’t find someone with all three, he’d take the statistical knowledge every time. “You can teach the rest,” he says.

16 Yes, you need a good algorithm, but the most important thing is the data and the human knowledge. A different but worthwhile way to reiterate what was stated above in No. 15: It’s a common refrain that retail is a mix of art and science, but as technology improves, it’s tempting to think that science can handle it all. You still need both, says Walmart’s King. With millions of items on the website it’s important to curate a great shopping experience that goes beyond ‘people who bought this also bought,’ but really understands the customer — the categories she is interested in, her kids’ ages, and so forth. “I get chased by vendors who say, ‘We have a great algorithm.’ Most of the algorithms were developed 30 years ago. What is really valuable is the data we have and our merchants, who understand the category so well, they can help the machine understand why certain data is coming up. Our competitive advantage is we have these incredible merchants, and we have a massive amount of data.” With so much data, Walmart can be so much more specific, he says, across the supply chain, whether that’s for route scheduling (it’s taken millions of miles off of its routes) or anticipating what and when a customer is ready to reorder (shaving time off of a busy mom’s shopping schedule).

18 Second-hand clothing has hit the mainstream. There have always been rough-and-tumble thrift stores (think Salvation Army) and higher-end previously worn stores (think Junior League) but the clash of the internet with a number of other psychological, economic, environmental and cultural forces has shot secondhand shopping onto the map. It’s hard to talk about second-hand shopping in the current moment without mentioning the impact of Marie Kondo and her book The Life-Changing Magic of Tidying Up and show. We’re all cleaning up, saying thank you, and trashing those things that don’t bring us joy. That means a lot of incoming bags to charity stores and likely to secondhand internet retailer thredUP (which now, to point No. 7, has four standing stores). From an economic standpoint, there are of course, always people who are looking for a better price because of financial distress or simply because of the thrill of getting a bargain. And then there’s the sustainability angle: increasingly, consumers are concerned and aware of the toll that the production of clothing takes on the environment and on people. (thredUP expects to “upcycle” 30 million items of clothing this year, says thredUP’s Marino.) Finally, as we evolve into a sharing economy, accepting rides from Uber drivers and vacation rentals from Airbnb, sharing clothing seems less strange.

Still, as with any retailing, the experience is key. The most important moment of the thredUP customer’s shopping journey is when she opens up the box, and she “can’t believe it’s used,” says Marino. We spend a lot of time on that moment, when she receives that Burberry barn coat she ordered for $80 instead of $500. When that moment is good, they typically go right back to thredUP.”

In case you still have doubts about its rise in popularity, here’s something that Marino was never expecting, but is happening: Traditional brands and retailers are now approaching thredUP, asking how they can be a part of the secondhand economy. “It’s a great example of an area where we need to innovate; it’s coming from the market,” he says.

19 On the topic of scale, remember: data has gravity and the cloud is not endlessly elastic. When you’re talking about scaling up, it’s important to think about everything that will be affected by that scale up, and everything that is required to do it effectively. When it comes to Walmart, you’re almost always talking about scale. Most companies cannot deal with the size of Walmart, whether that’s HR, products, technology, etc., says King. When you move data, you have to surround with the systems that are there, and make sure your partners can build to handle it. Walmart last year launched a partnership with Microsoft cloud services to handle its customer-facing businesses. The cloud is not endlessly elastic, he says.  

In thinking about any new technology implementation, scale is an issue. “I hear, ‘You should put beacons in your store.’ ‘That’s a great idea,’ I say about a lot of things, but how do you scale? Even two beacons in each store is 10,000 beacons to manage. Also, (only) 80 of its more than 6,000 stores do not have high-speed internet at this point (there is still just copper line in these rural areas), so any technology implementation for that set of stores will have other considerations. 

Technology and automation do help tremendously. “People forget how big a Walmart is — it’s a 200,000-square-foot building.” To assist, the retailer is using robots that slide into the back of the truck and help sort the items on the palette to get back to shelves quickly. In concert with its shelf-scanning robots, which can report back on items the shelves are out of, “we can quickly shuttle that item off the truck and to the shelves.” In addition to being able to scale up, there’s a big boost when you integrate technologies to work together to share information.

One other thing to keep in mind: “There’s always more work to do than there are people and budget to do it.”

20 The BOPIS evolution is underway, and it looks like 7th grade gym class. The basement of Nike’s House of Innovation, lined with lockers, is devoted to Reserve Online Pick-Up In-Store. Accessible from inside the store or out, customers just need a code and locker number to get to their purchases. With this type of self-service shopping pick-up on the rise, stores are rushing to accommodate, turning to vendors such as Swyft and Bell and Howell for storage solutions, which also include equipment such as large-scale vending machines for purchasing items larger than a pack of M&Ms. When you think about it, this is really quite extraordinary. We've moved from shopping in a store, to ordering online and waiting days for delivery, to fewer days, to same-day, to going back into the store, now without having to encounter a sales associate at any point. 

21 (I lied) You don’t want to remove all the friction from the buying process. While you want to eliminate barriers and pain points, you don’t want a journey so seamless that your customer sleepwalks through their shopping experience. According to Mark Taylor, global lead, customer engagement for Capgemini: “You need some friction to create engagement.”

Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected].

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