The NRF Big Show: Apparel’s Top 20 Takeaways
NRF is a big show. It’s even called The Big Show. This year drew in approximately 36,500 attendees to more than 500 educational sessions. It featured more than 300 speakers and more than 500 exhibitors. There’s no way to cover everything, but here’s a roundup of my insights from the National Retail Federation’s big event, held January 14-16 at the Javits Center in New York City.
1. The sharing economy is here, and it’s full of circular closed data loops that you don’t get from traditional buy-to-own purchases. One of Rent the Runway co-founder and CEO Jennifer Hyman’s biggest challenges was convincing people that she wasn’t crazy ― that women would want to rent clothes, and it wouldn’t cannibalize regular sales. In the early days, when she discussed her idea with designers, they thought it would destroy their business. “We had to show them that we were getting a whole new market of people,” she said. And the company did. “Rental reduces the friction around trial. It enables you to discover something. It makes it about engagement and fun,” says Hyman. While she says not everyone is comfortable working with the company, it has nevertheless grown from working with just 75 brands four years ago to working with 550 today. Two years ago, the brand evolved from being the go-to source for one-off dress-up occasion rentals to also a workaday solution, offering an “unlimited” monthly subscription program for $159 that provides four items of clothing at a time. More recently, it added a less expensive option: one single set of four items per month for $89. One big plus for its designers and brands: Rent the Runway can provide a range of in-depth data over time that traditional retailers cannot. “In the past, all a retailer could really tell you was what your sell-through was, but they couldn’t necessarily tell you if the customer actually wore that shirt, how often she wore it, whether it stood the test of time.” Because RtR’s clothes are returned to the company’s processing facility, the company has an intimate connection with them ― it knows what garments require repairs; it knows how many dry cleanings and wearings a garment can withstand before it needs to be retired. All of this data can be fed back to brands and designers to improve their manufacturing cycles and products and better serve the end consumer, says Hyman.
2. Focus on small projects. Establish separate, independent labs to do this. This is like the new version of “fail fast,” but it’s contained. Particularly at large organizations, which cannot move like startups ― both because of their makeup, and because their consumers do not want sudden change — it’s important to be able to move at different speeds. Organizations need to “really go deep into discovering what’s new. They need to get to know [the] disruptors,” says GE’s former vice chair Beth Comstock.
In fact, sometimes, they need to partner with them (see #6). And sometimes they need to be the disruptors, which is why we see “innovation labs” at companies such as Neiman Marcus (see #12), adidas (see #17) and Walmart, where it’s called Store No 8. (That’s a nod to Walmart’s actual store no. 8, which Sam Walton used as his test store back in the day, to trial new products to see what worked and what didn’t, says Lori Flees, senior vice president, next gen retail and principal.)
Walmart is innovating at Store No 8 and across the enterprise: by buying disruptors (Jet.com, Bonobos, Moosejaw) and by partnering with innovators (Google, on its home assistant). “There is so much innovation in store operations, supply chain and e-commerce. What we’re trying to do in Store No 8 is look more than two to three years out,” says Flees. “If you don’t fund that, you fall behind, and you wind up having to take innovation from others, and fit it to your organization, and that doesn’t work,” she says.
3. You don’t talk like you type. Conversational commerce is a big disruptor, but it’s got some kinks to work out to be a more human-oriented experience. 2018 is going to be the year when conversational commerce starts to break through from novelty amusement to legitimate personal aid. Voice is natural, and it can have a huge impact on retail because it can mirror the real world, says Michael Haswell, director of global business development, retail & shopping, Google. But there are hurdles to getting people to move beyond telling voice-activated personal assistants to play a song or look up an address to real shopping activity. Currently, they can really only handle “low cognitive loads.” If you ask a home assistant to buy peanut butter, it can probably handle that, especially if it already knows your brand preference. “But people speak in sentences instead of lists,” says Haswell. Things get more complicated when you ask, for example, “What should I wear today?” Voice assistants cannot converse like humans. “You cannot [pick up where you left of previously], or reference an earlier part of a conversation,” says Flees, whose Store No 8 has partnered with Google on voice shopping assistant Google Home. Voice assistants do not have the capability to make those connections or understand those fine nuances of meaning, which makes them not particularly useful yet for truly engaged shopping assistance. It’s getting there, though. It’s just a matter of time.
4. AI is like your new bff. Who starts dressing like you. And talking like you. And getting plastic surgery to look like you. And knows you better than you know yourself. Eventually you’re locked in a box that’s sinking to the bottom of the ocean and no one even notices, because your new best friend has picked up where you left off. AI is getting better and better, fueled by smarter data analytics and algorithms, powering everything from chatbots to voice recognition, and allowing retailers to recreate one-to-one relationships with customers.
AI is transforming retail, and we’re only at the beginning. AI helped alibaba achieve record sales on Singles Day, generating 60 billion personalized shopping pages, said Deborah Weinswig, analyst at Fung Global Retail & Technology, while its AI-enabled customer service handled 95 percent of customer inquiries. To illustrate how different algorithms produce different results, she compared recommendation types on alibaba vs. Amazon. “If I buy paintbrushes, Amazon recommends more paintbrushes; alibaba recommends painting classes.”
As John Xiao, senior director of technology, Nordstrom explains, different types of algorithms do different things. At Nordstrom, “stylists help train the algorithm,” he says. “They understand fashion and work with customers all the time. They understand the attributes.” In other words, good algorithms must employ the skills of a combination of different people including technical people who know how to write an algorithm, and people who know the business, who can help those people tweak it to perfection.
At Cosabella, the lingerie brand is using AI in advertising, email automation, A/B testing and product recommendations, says president and COO Silvia Campello. The company used A/B testing to assess different dimensions, fonts and styles of its website design, and the resulting design optimization has resulted in a 30 percent increase in conversion.
Logility recently launched advanced analytics to boost performance through the use of AI, machine learning and social sentiment, allowing retailers to ask and answer, “What should I do next?” says Karin Bursa, executive vice president. The solution, based on the company’s recent acquisition of Halo Business Intelligence, works by using the rich data from Logility Voyager’s Retail Optimization platform ― merchandise, assortment, allocation and replenishment data — and combining it with unstructured data such as tweets and other market sentiment. In the past, merchandise teams didn’t have access to this data, and marketing teams didn’t know what do to with it. Now, retailers can tap into this “word cloud” to find out what comments are coming from different regions of the country about any subjects — say, fashion, color, design or cut. This information could then be used to develop certain brand “personas,” allowing customers to identify with a particular style and fit that suits them, for example. With advanced analytics and AI, companies can better automate planning, correct mid-course and respond effectively to social sentiment. “It’s really making omnichannel, unified commerce happen,” said Bursa.
5. Your front-end problem is actually a back-end problem. Retailers often focus on consumer-facing issues without tackling the back-end of the supply chain necessary to support them, says Matt Rhodus, director and industry principal for retail vertical, Oracle + NetSuite. By eliminating lack of transparency and other problems in areas such as ERP and order management, apparel companies can free up time to truly focus on the customer side of things. This goal is advanced by getting rid of “technical debt” — all the software and hardware that needs to be updated regularly ― and moving onto the cloud.
Spencer Fung, group CEO and executive director of global sourcing conglomerate Li & Fung, shared a similar message: apparel companies must shorten their end-to-end supply chains. “We see retailers and brands putting investment in retail fronts, but not enough in the supply chain, where most time is lost,” he said. The supply chain of the future will be optimized by speed, says Fung, and requires innovation and digitization, including moving into the cloud, and designing in 3D. With 3D, apparel companies can make fewer actual samples and eliminate weeks and months from the product design and development process. “You can imagine whole collections in-store before they are produced,” he said. “Brands can create virtual catwalks.” At Betabrand, which crowdsources and crowdfunds designs before it creates, the company makes all products without producing a sample — a process that previously ate up 10 months ― says Fung.
6. Collaboration is the new loss prevention. When a small LA-based outfit was found to be selling re-styled Levi’s jeans, rather than get its law team busy shutting them down, Levi’s brand president JC Curleigh decided to pay the company a visit. The upshot: RE/DONE became the first authorized vintage partner for the brand. Read the story here.
It’s also the new M&A. When sunglasses brand Maui Jim wanted to make it easy for customers to try on its sunglasses ― it found that $200 was the price point at which consumers were unwilling to order online sight unseen — it partnered with Tommy Bahama (already a reseller of its brand). Now, Maui Jim’s website will direct consumers to a local Tommy Bahama store that carries the pair of sunglasses they’re viewing online. For its part, Tommy Bahama gets a cut, and any upsells that come along for the ride.
“It’s an interesting way for brands to have a physical presence, and it’s an interesting way for retailers to get new customers in the door,” says Jennifer Sherman, senior vice president of product & strategy, Kibo, whose omnichannel solution Maui Jim is using for a range of processes, including buy online, pick up in-store same day.
Collaboration is also the new disruption. Levi’s Curleigh showed up to NRF blasting music from the new Levi’s Commuter Trucker Jacket with Jacquard™ by Google, attire that lets you access your music, navigation, and communication such as texts and calls all with the swipe of your sleeve.
Expect more of this. Why? Because, as GE’s former vice chair Beth Comstock says, “You need to partner. You can’t do everything yourself.”
7. Brands are the new music promoters. Rather than licensing Top 40 songs to market their wares, apparel brands are increasingly making music part of their brand DNA, finding and promoting local or regional talent that jives with their vibe or messaging and becoming the launchpad for musical careers. Some, like Converse, even have their own recording studios. We’ve been seeing this for several years now, with brands such as Levi’s, Burberry, Under Armour and Roots Canada (see #13). Whether working with artists to create live events, or building music into the marketing spots for their brands, it’s yet another collaboration that raises the profile of both parties.
8. Augmented Reality (AR) and Virtual Reality (VR) are not flash-in-the-pan technologies. There’s been a lot of buzz about AR and VR in the past five years, but there’s also been a lot of talk about how it’s all just buzz. Now, companies are seriously exploring these solutions for business purposes that go beyond the novelty experience. Rebecca Minkoff, for example, is working with AR/VR platform Obsess to create a virtual reality store where customers can shop, says Obsess founder & CEO Neha Singh.
Over the holidays, at Tilly’s, which uses the Aptos Singular Commerce Platform, the teen retailer featured an in-store augmented reality snowboarding experience for anyone who downloaded the app, which offered a chance to win prizes, and also gave all players a 20 percent-off coupon. The program achieved an astounding 80 percent conversation rate, i.e., everyone who engaged made a purchase using the coupons awarded in the game. An earlier “Shonduras” A/R back-to-school scavenger hunt that let shoppers search stores for prizes was also a huge success, and achieved a 99 percent opt-in rate. And with its CRM system from Aptos, Tilly’s will be able to cultivate long-term personalized relationships with those shoppers.
At the SAS booth, attendees could experience hands-on AR via “Meet the Andersons,” an AR customer journey viewed through a family’s shopping preferences while furnishing a child’s first college dorm room, an experience that blurs the line between digital and physical shopping, said Dan Mitchell, SAS global director of retail and CPG. The tour gave a view into how analytics can drive digital relevance based on demographics, household preferences, past in-store behavior and inventory optimization. PTC also demo’d an AR solution, part of its ThingWorx Studio.
VR and AR solutions have many applications across the enterprise, not just on the consumer-facing side. Consider how much easier visual merchandising would be with AR or VR ― eliminating the work of actually moving product into place to see how it would appear on the floor.
9. Walmart is learning quickly from its experiences in China. Walmart owns 10 percent of Chinese e-comm company JD.com (also known as Jingdong). “China is off the chain when it comes to e-commerce,” says Walmart’s president and CEO Doug McMillon. “In China, you can get product delivered for about a dollar in less than 30 minutes,” he says. “We’re learning there and adapting here.” And keep in mind that, as Store No 8’s Flees notes, 90 percent of U.S. Americans live within 10 miles of a Walmart store! The world’s largest retailer is also, of course, learning a lot from its heavy investments in e-comm here in the past 18 months, including its acquisitions of Jet.com and Bonobos. Still, online purchases represent only about 12 percent of total Walmart sales.
10. Paint the walls. Hamdi Ulukaya, founder, chairman & CEO of Chobani, is singlehandedly responsible for starting the Greek yogurt craze that’s taken over the United States. Today, his is an established brand found on every supermarket yogurt aisle. His company is a leader in giving back to the community and in providing good jobs to its 2,000 employees (including a profit-sharing program). In 2012, less than five years after it was founded, the brand became the no. 1-selling Greek yogurt brand in the United States with more than $1 billion in annual sales, and in 2017, the company was named by Fast Company as one of the 10 most innovative companies in the world.
But when Ulukaya took a risk and immigrated to the United States from his homeland of Turkey, where his family raised goats and sheep and made cheese and yogurt, Ulukaya had almost no money, no plan, and didn’t speak English. He moved to upstate New York, where he felt comfortable because it reminded him of home, he said. He studied, and worked on a dairy farm making cheese, and one day he saw an ad: “Fully equipped yogurt plant for sale. “ It was an 85-year-old factory owned by gigantic conglomerate Kraft Foods, which had decided to get out of the yogurt business. He somehow convinced the bank to give him a loan for the $700,000 building. He hired five ex-Kraft employees. On the first day, when his employees asked what they should do, he had no idea. But the building was old and depressing, and Ulukaya said, “We’re going to paint the walls.” And that’s what they did. It’s a great message: When you don’t know where to begin, just take the first step. Start by creating a place where you and your employees want to work. And remember the small things matter. And they’re not small. As Arianna Huffington put it in her keynote about unplugging and recharging (yourself, and your phone): “Businesses that prioritize health and wellbeing will be successful. You cannot have great customer experiences if your employees are burned out.”
11. Blockchain is here to stay, and it will transform retail. Pay attention to it. There are many interesting articles about blockchain, and many people talking about it at NRF, and everywhere else. Here’s a great piece on blockchain’s role in retail from RSR’s Paula Rosenblum. Here’s a fascinating piece on the intersection of blockchain and the digital art world from the Paris Review. Here’s one on which major societal structures must fall for blockchain to succeed from Harvard Business Review. Here’s one on redefining trust from Wired.
What is blockchain? It’s a distributed ledger that records transactions between parties in a verifiable and permanent way, managed by a peer-to-peer network. Because of their design, blockchains are secure: each bit of data resides separately, and no one piece can be altered retroactively without destroying the other blocks. One thing most people agree on is that even though blockchain technology was developed to enable cryptocurrencies such as bitcoin, it has many far-ranging applications that will be put to use, which are completely independent from the success or failure of cryptocurrencies.
At its research center in Palo Alto, which houses 250 PhD data scientists, Visa is researching blockchain to try to find “an edge that will help you, on a pragmatic level, to help your business along,” says CEO Al Kelly. “Hire people who can make it applicable in your world,” he cautions, “but don’t get sucked in by its sexy applications.”
12. Like retailing in general, the blending of digital and physical is part art, part science. But it’s 100 percent necessary. Figuring out how to bring the digital experience into the store — and to draw more flesh-and-bone bodies into the store ― is a top priority for apparel retailers, and the best strategy will combine seamless tech experiences with subtleties unique to your brand and consumer. Neiman Marcus, which boasts its own Innovation Lab and was an “early adopter” when it comes to blending etail and retail, tries to build digital capabilities that “translate into experiences in the store that solve real problems,” says Scott Emmons, director and founder, Innovation Lab, The Neiman Marcus Group Inc. The luxury retailer is focused on ferreting out its strengths on the brick-and-mortar side and figuring out how to translate that into a digital experience, so that consumers who only know the department store digitally will still have a true sense of the brand. In the store, Neiman has rolled out iPhones to all of its sales associates and built its own CRM solution to ensure they have all information that used to be in their “little black books, but now even better, because all of that data is now available to everyone,” says Emmons.
For engaging consumers digitally in-store, Avery Dennison launched its new Dynamic Display Window Advertising System, based on technology developed by Gauzy, a provider of liquid-crystal-based materials, with software from YCD Multimedia. The window film tech allows retailers to turn windows into digital screens by projecting campaigns, promos and brand content onto them to engage the consumer.
For helping your sales associates engage with customers in-store, Mad Mobile offers its Concierge clienteling solution that provides them with customer and product information. It’s new feature, “Hello Customer,” alerts store associates when a customer has entered the store location. Talbot’s and VF Corp. are already using it to greet their shoppers.
13. From smartphone-sized to grand-scale screens: this digital-physical blend ain’t your grandma’s marketing. If you’re just trotting out the same old dog-and-pony show, your competition is going to siphon off your customers’ attention. For inspiration, take a look at Roots Canada, which is diving deep into events, music and culture to create memorable experiences for the media and consumers alike. One of its most ambitious productions, dubbed Northern Lights, was a rethinking of its gift guide, typically mailed to half a million folks. Instead, the brand created a digital fashion event to wow press and influencers that was also a piece of content, explained James Connell, Roots’ vice president, e-comm and marketing. The digital fashion show ran simultaneously with live models who walked the catwalk in front of the 50-million-pixel wall-sized screens, all set to a score created by a local musician. The company made about 15 separate videos from the single event, running in length from 15 seconds to 15 minutes, with the content serving as its holiday gift guide. On-site, viewers could download an app that only worked during the event.
14. We live in a really strange, very bifurcated world. On Tuesday morning at NRF, the CEO & founder of charity: water, Scott Harrison, shared the incredibly moving story of how he came to found his organization, which raises money to drill wells to bring fresh water to villages around the world that do not have access to it. (One in 10 people globally lack access to clean water.) During the course of his presentation, he shared the story of one young woman, age 13, who, like the other women in her village in Ethiopia, walked eight hours a day, every day, to fill a jug with water for her family. She dropped her water one day, breaking the jug and spilling the contents, and, devastated at the loss, hung herself from a tree. Two sessions later, in the same room, in a discussion about tapping vs. dipping or swiping as part of a session on commerce and payments with Visa CEO Al Kelly and Neiman Marcus president and CEO Karen Katz, moderator Jon Fortt, co-anchor of CNBC’s Squawk Alley, noted that “the consumer is very unhappy about the eight seconds it took to dip the credit card.” It’s natural here to say, “’hashtag’, first world problems,” and move on. But it’s really something, when you think about those eight hours, and those eight seconds. Which brings me ‘round to:
15. In the absence of real suffering, humans will create problems that need to be fixed. (Luckily, we have retail therapy for that.) Americans have become device-dependent. A few stats, from Rod Sides, vice chairman & U.S. leader, retail, wholesale and distribution practice, Deloitte LLP:
*Americans check their phones approximately 47 times per day.
*89 percent of consumers look at their phones within an hour of waking up.
*58 percent of Americans check social media sites daily.
*66 percent of Millennials value time on social media as much as in person.
There are a few stories here. One is that these stats reflect opportunities for retailers, i.e. connecting to consumers through their phones is crucial if retailers want to engage with them where they are.
A related story is that 56 percent of all in-store purchases are influenced by digital interactions, and retailers need a reset in their thinking, says Martin Barthel, head of global retail & e-commerce strategy, Facebook. Instead of thinking, “digital marketing = digital commerce,” think “digital marketing = commerce.” That’s a significant shift in philosophy. What you do digitally will affect all channels, including your brick-and-mortar locations — and all studies show that omnichannel shoppers (those who shop in more than one channel) are your most valuable customers in terms of lifelong spend. Here’s something else you should keep in mind when thinking about connecting with your consumer: more than 75 percent of the world’s mobile data traffic will be video by 2020. Think about creating experiences such as Roots Canada’s guide (see #13).
But back to that human suffering. In her presentation on the importance of changing the way we work and live, Arianna Huffington highlighted the need for balance and well-being, addressing the severe problems — including an increase in suicides among young people ― we are facing in our families and communities as a result of phone addiction. It’s interesting to think that, less than 10 years ago, this was not a thing. Huffington now has an entire business, Thrive Global, built on finding balance and purpose and unplugging and recharging your phone. Her company offers apps that will allow you to set limits on your usage of social media. She recommends walking your phone out of your bedroom each night — and tucking it in to The Phone Bed Charging Station, which is, literally, a little bed, with a blanket, for your phone. You can purchase it for $49.95. So. We didn’t have smartphones. Then we did. And now we have brand new businesses to manage our addiction to a device that didn’t exist (not in its current fast and feature-rich format, anyway) five to 10 years ago. Struggle always opens the door to new business opportunities.
17. Consumers are overwhelmed by the amount of choice. In every aspect of their lives, consumers have too many decisions to make. Need shampoo? There’s a whole aisle to choose from. Cereal? Ditto. Sneakers? Same. It’s all leading to decision fatigue, and consumers want help in the form of curated product and experience. “We want [to provide] curation, but visual merchandising is costly and inefficient,” explains adidas’ senior director of digital innovation, Gordon Lanpher. The brand’s never-ending mission to create competitive advantage via its in-house innovation group led it to partner with FindMine, whose “Complete the Look” technology creates and recommends complete outfits using AI and analytics against an individual company’s merchandise mix. That improves the offering served up to consumers online and also gives a valuable assist to sales associates in-store.
18. There’s nothing more powerful than actually knowing the customer. This remark came from Neiman Marcus CEO Karen Katz, who shared a comment from a Neiman shopper: “I hate Neiman Marcus. You know my family way too well.” That, says Katz, is the greatest compliment she could get. Perfecting omnichannel and providing a personalized experience, whether in-store or online, rank at the top of the retailer’s list of to-dos. “Product needs to be laid out so it seduces her when she comes into the store,” she said, adding that the consumer needs to find what she sees online in the store, and vice versa. She needs to be able to find the types of things that have influenced her on social media, and to be able to buy online and pick up in store, she says. “Our challenge for next five years is to stay 100 percent focused on what the customer wants,” said Katz. “That’s been our mission for 100 years.”
19. There are many types of talent. Establishing separate business units (see #2) enables companies to transform without throwing the baby out with the bathwater. This also allows a company to hire a wide variety of individuals with different skills and temperaments, and to benefit from what each can bring to the organization. Many people don’t like change, and do not like the thought of going to work for a company whose mission is built on constant change. It doesn’t promote the idea of job security, says GE’s Comstock. “But not every job has to be about change. Some are more static. You need to put different kinds of thinkers on a team,” she says. Others, of course, thrive on change. Because of its size and more traditional operations, Walmart expected that hiring talent for Store No 8 would be its biggest challenge, but, interestingly, it hasn’t been, says Flees. Being able to carve out a budget and have a separate entity that allows people to operate with the speed that they would have in a standalone startup, but with the ability to scale it up with an existing large company, is incredibly exciting for entrepreneurs, she says. “We’ve been pleasantly surprised by the people we’ve been able to attract.”
20. Don’t think outside the box. There are so many great boxes. Why think outside them? The phone is really kind of a box, right? Certainly the brick-and-mortar store. The package delivered to your doorstep. The factory. The DC. The truck. The shipping container. Even a trade show booth is kind of a box. Square, with temporary walls in a box-like structure. And turns out that even a trade-show booth is a perfect spot for a pop-up store. At the Aptos booth, Cole Haan (which uses Aptos’ Enterprise Order Management Solution) set up shop selling its 2.ZEROGRAND shoes for men and women, which turned into an unexpected but rousing success. Why wouldn’t a tradeshow ― with its endless walking and long hours — be the perfect spot to sell comfortable shoes? Go where your customers are.
Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected]