Shoptalk - Part Two: 'the rest'
The first keynote was Jeff Gennette, CEO of Macy’s, whom I had the opportunity to have dinner with last year. He was pretty upbeat (a lot more than this time last year) and inspirational and confident that department stores are not only not dead, but rebounding stronger than ever. They are closing stores still to get the numbers right-sized but investing heavily in the ‘experience factor’ in the stores that are left. He emphasized the emotional connection they create with their customer by giving her a sense of inspiration and discovery. They have an initiative this year called ‘Growth 50’ where they are testing out new layouts, new technology, in-store experiences, self-checkout, etc. They’ll take what works and resonates with customers and then roll those things out to all stores in 2019. They’ve had great success with their off-price concept, “Backstage”, and will continue to grow that business. Interestingly, when he described the ‘Scan-Pay-Go’ self-checkout feature (where you still have to stop by a security desk to have to show the app where you paid and have the security sensors removed…) it just reinforced one of the biggest complaints I hear (and have myself) about Macy’s --- that you can never find a human being to help you on the floor much less check you out.
Brian Cornell, CEO of Target was next and he was less tactical, more strategic, talking about their move to digital, enabling pickup in or outside of store, and expansion of in-store amenities like Starbucks. He noted that the stores, which they keep expanding (especially the new smaller-format urban stores), are really fulfillment hubs: 70% of their ecomm orders go out from stores. They recently made a big investment in Shipt, a same day delivery service (obviously a response to Amazon Prime). He also discussed the huge reinvestment in owned brands and the fact that they are negotiating brand exclusives from national brands (limited editions) for exclusivity and greater emotional connection with the customer.
Amazon Go was the third keynote and they kind of made fun of the previous speakers touting scan and go; their customer does not have to scan anything, they just pick it up and walk out.
There were not a lot of new disclosures from what’s been in the press and they gave no idea of when or where they’ll open more Amazon Gos. What was interesting is that they described how they know what you picked up: they use cameras and computer vision technology which is pretty amazing in its accuracy (lower error rate and less expensive than traditional RFID sensors) but, to me, represents a big potential privacy issue.
One of the most interesting sessions was a conversation between a woman from Deloitte and a guy from Goldman Sachs talking about a retail renaissance thanks to ‘digital disintermediation’ and the unstoppable momentum of change. They pointed out that they hosted an ecomm-only conference in NY three years ago and every company there has either been acquired or gone out of business. They discussed Wal-Mart versus Amazon and pointed out that WalMart is particularly well-insulated against Amazon because they have so many stores in rural locations where it’s harder (more expensive) for Amazon to deliver and they’re investing so much in digital. The most successful retail comes down to culture, though, and people; they worried that artificial intelligence could, over time, de-emphasize the human touch; they exhorted retailers to double-down on their people with more and better training (an opportunity for us, with Motif!).
The CEO of Ulta Beauty, like so many other speakers, also spoke about the importance of establishing an emotional connection and creating a memorable experience with every store visit, while continuing to enhance the digital experience. She touched on another common theme: everyone needs to invest in innovation, but to fund that investment they need to be more operationally efficient in everything they do.
Pinterest was interesting in claiming that visual search will eventually replace ‘Googling’ something because you can’t always put into words what you’re looking for but you will always know it when you see it. The Chief Digital Officer of Nike, Adam Sussman, pointed out how personal they can get with their marketing because they now have over 100 million customers who have signed up as Nike + members (and turn over an incredible amount of data to Nike….). On a side note, I met with a really cool visual search company this week called Slyce. Their head of bizdev took a photo of his shoe while we were grabbing a coffee near their offices and, lo and behold, up popped identical and similar shoes with descriptions, prices, where to find them nearby and an option to buy via mobile. Pretty cool.
There was a panel on private label, spearheaded by Molly Langenstein, head of all private brands for Macy’s (and whom I had coffee with two weeks ago in NY). She pointed out the incredible need for speed in developing new products but that the supply chain is still old fashioned, much the same as it was years ago. She called for more R&D and innovation on the supply side. Berlin-based ecomm giant Zalando, whom I’ve met with a couple of times now, has 17 different private brands (Zlabel) representing 10% of their overall business and growing rapidly. They turn new designs into products in under three months because they pre-select and stage fabrics with their vendors, they use blocks, they use data to drive product attributes at the last minute and produce in small quantities (much like Zara) so there is nothing left to markdown. It was interesting that while Molly seemed to complain about the old-fashioned supply chain, Jan Wilmking of Zlabel spoke about the deep, long-term partnerships they’ve developed with their suppliers. He noted that their factories are now owned by second-generation kids who went to Harvard or Stanford and have invested big into digital, 3D, data and AI to help their customers predict what the market will want. And with the smaller lot-size mentality, they can test and learn with much less risk than the retailers stuck in the traditional, long product development calendars.
Joshua Schulman, CEO of Coach, was interviewed by Courtney Regan from CNBC and noted that they are finally confident about expanding more into apparel and creating more of a lifestyle brand. He said department stores were still important but that customers don’t think in terms of channels; that’s just industry jargon. Customers think in terms of brand.
Daniel Alegre, Google’s head of retail pointed out that 61% of consumers walk out and go elsewhere if a store does not have what they want. They have implemented augmented reality solutions for retailers digital platform and one of their customers, Lowes, has seen an 11X increase in conversions as a result. He said “consumers are leaving an awful lot of breadcrumbs” every time they Google something and claimed Google is by far the number one driver of traffic to retailers. By using Google-provided data, Target has seen a 20% increase in basket size by knowing what to suggest when. Facebook’s Martin Barthel noted that retail search is moving rapidly to image versus word search (Pinterest versus Google) but that by 2020, 80% of all online product display will be video.
Lastly, I went to Robin Lewis’s Retail Radicals breakfast briefing on the last day. What a fabulous discussion, hosted by Mark Bozek (who used to be CEO of HSN but now heads media company Live Rocket). Panelists were Katie Finnegan who heads up Store 8, WalMart’s innovation lab; Daren Hull of Williams Sonoma who heads up their West Elm digital business; and Chris Duffy, head of customer experience at Home Depot. Some of the key takeaways:
· The second you’re comfortable, you’re gone
· Culture is the key to innovation but it has to start from the top (in the case of Store 8, that meant not only WalMart CEO Doug McMillon, but also the Walton family)
· Culture has three boxes:
o What you’re doing
o What you’re getting rid of
o What you’re moving towards
· 60% of Katie’s efforts are internal P/R, gaining buy-in
· In person contact is critical for leading change; email is toxic
· If you wait for a signal, or wait for a customer to ask for something, you’re already too late
· I particularly liked Home Depot’s rowing metaphor: they always have “one foot on the dock and one in the boat”
· Whatever made you famous needs to change
· Legacy businesses with strong balance sheets should have a tremendous advantage over startups if they are willing invest in their people and in technologies that create efficiencies and enable change
· The challenge for legacy companies is the need to continually reinvent the brand without losing core values
Well, that’s it for now. If anyone has questions, please let me know.