People attend Shoptalk, a retail and technology conference in Las Vegas. What’s the future of the physical store?
If you weren’t at Shoptalk in Las Vegas last week, you missed a great conference. Shoptalk has evolved into a must-attend retail event with more than 8,000 attendees and growing, a destination where retailers and brands go to learn and collaborate and where networking opportunities are key. The conference included content on the latest retail trends around technology, data, and wins and losses in the online vs brick-and-mortar battle. Here are my key takeaways from the conference.
Smarter AI
During Shoptalk in Las Vegas last week, a predominant theme was Artificial Intelligence. Yes, most retailers know about AI and the importance of it – but do they know how to embrace and leverage this powerful technology? As technology innovation grows at such a rapid rate and huge amounts of data are being produced every second, machine learning and artificial intelligence can help sort through and decipher the clutter. Retailers need to learn to utilize AI and data analytics to improve customer service by anticipating behavior and allowing the data to come to life to impact the customer on an emotional level to drive business. The consensus of the week was: if you’re not using AI, you’re way behind.
Oliver Chen of Cowen & Company reported that with artificial emotional intelligence, “Fake Gets Real.” The promise of personalization continues to unfold. Practical uses of AI include harnessing data to drive personalized visual and written advertising, driving better customer satisfaction. That purchase data needs to intersect with emotions through feelings, identifiers, and factors such as cognitive style, beliefs/skills, happiness or anger. Cowen believes that “connections” are imperative for retail to drive a consistent shopping experience no matter how a shopper prefers to shop, including pre- and post-purchase conversations versus just transactions.
Getting Personal
The importance of engaging with the customer on a deeper level and getting ‘personal’ was a recurring theme at Shoptalk. Retailers are focused on creating a more personalized customer experience, concentrating on what defines personalization and offering the most relevant content for each customer. I sat in on the session presented by Mike Smith, COO of Stitchfix (NYSE: SFIX), where he discussed personalized marketing as a focus for them. Stitchfix believes they must have a test-and-learn culture where their main metric is lifetime customer value. Their goal is enhancing customer experience through personalization and authenticity.
Beyond Data
As retailers continue to collect big data, they’re realizing that it’s not enough. It’s what you do with it that counts. Data isn’t just data anymore, it’s people. Retailers are collecting and analyzing the data and information on their customers because big data can now help them predict winning new products vs. underperformers, target new customers and foster brand loyalty. But are retailers protecting their customers’ data and abiding by data privacy laws? According to Thales 2018 Data Threat Report, three-quarters of US retailers have experienced a data breach. Data protection will continue as a defining theme for the retail industry, especially with GDPR in Europe which went into effect last May. The US is not far behind in data privacy regulations; similar changes are likely coming and retailers should beware and add data privacy into their strategy.
Digital gets new Digs
The Shoptalk exhibit hall was packed with digital vendors. An article from AdAge said the number of startups—firms that dabble in facial recognition software, or applying robots to production, for example – was more plentiful than in previous years. Physical retail stores are not going extinct; to the contrary, direct-to-consumer brands are beginning to open stores, similar to traditional retailers. Oliver Chen of Cowen & Company reported that a new focus for future retail should include connecting the entire shopping experience, linking data to personal “context” and using every interaction to drive a better future experience. The shopping experience as a whole is converging, not diverging. Online is simply an extension of the in-store experience (or vice-versa), and retailers are learning to leverage this by creating a connected shopping experience for customers.
Digitally native brands are continuing to grow but are beginning to reach a tipping point where a physical presence is needed. As I wrote in an earlier article, brick-and-mortar retail isn’t dead, but it is evolving. As these small, niche brands are gaining success, they are beginning to expand using the clicks-to-bricks method. Many are leveraging pop-ups, another Shoptalk theme. Retailers need to optimize their store footprint and learn how to leverage stores (and store associates) as a competitive advantage. I previously wrote an article on the importance of engaging and embracing the knowledge of store associates and how they play a critical role in the customers experience.
In-store is Still In
First Insight’s most recent consumer spending report reveals that foot traffic is still critical for success. Achieving conversions requires flawless execution and access to the right product at all points, whether online or in store. Listening to the voice of the customer helps retailers and brands drive conversions by offering the right assortment at the right time. Retail Touchpoints covered Erik Nordstrom’s interview with Courtney Reagan of CNBC, where he explained that retail stores no longer exist just to display merchandise. They are a place for engagement, faster returns, pickups and alterations. Nordstrom (NYSE: JWN) Local is their strategy to enhance their ability to adapt to retail’s continued changes.
Sustainable Growth
As sustainability and recycling continue as a top trend in the retail industry, new shopping destinations like ThredUp are evolving. ThredUp is a fashion resale website for consumers to buy and sell secondhand clothing online. A survey published by Element Three and SMARI reported that sustainability was a product attribute that 87% of US Millennial internet users would be willing to pay more for. ThredUp targets millennials with incomes over $100,000. Their data shows that people wear only 25% of the clothes in their closets, so there is a big opportunity to recycle the other 75%. They now carry 35,000 brands and are growing fast.
A report by the Retail Industry Leaders Association (RILA) found that an estimated 68 million adult Americans base purchasing decisions on their values – personal, social, and environmental – and say they will spend up to 20% more on environmentally-sound products. Uncommon Goods CEO David Bolotsky spoke about how the company strives to minimize its impact on the planet. He explained that their carbon footprint “will never be zero but we strive to make it as small as possible”. A significant percentage of their products are made from recycled material. They are a certified B Corp and use recycled material in their packaging and in their catalogs.
Shoptalk put a new spin on tried-and-true themes, from the key role of brick-and-mortar retail, to making data actionable, to the importance of really understanding what your customer wants and needs – and delivering it. Now, as always, retailers and brands need to continually reinvent themselves or be left behind.