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NRF 2019: The WhichPLM Report

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Ben Hanson returns to New York to report from the presentation sessions, the expo halls, and the streets surrounding “Retail’s Big Show,” which ran from the 13th to the 15th of this month.

Doomsayers told us retail was dying.

Sparked by the global financial crisis, people had suddenly started earning less in relative terms, and national economies were being shaken to their foundations. Worldwide, but particularly in America, loan and mortgage default rates had zoomed upwards thanks to unscrupulous lending practices. And as a result, those ludicrous collateralised debt investment vehicles had brought down banks on both sides of the Atlantic.

In the face of all that, with families from the breadline to the bourgeoisie feeling the pinch, what hope did indulgent spending have? Food and beverage, sure. After all, everyone’s got to eat. But footwear, apparel, and accessories? It seemed logical that their share of consumer’s wallets would keep dwindling unless the world turned a corner and did it quickly.

But somehow retail made its way out from under that shadow. The National Retail Federation, which organises the industry’s de facto gathering in the NRF “big show” every January, and also serves as a lobbying group and unified front for American retailers, predicted sales growth of 4.5% in 2018. And while actual growth may have been a percentage point or two lower, retail – at least in America – has now outpaced overall GDP growth for the past two years. All of which flies in the face of expectations that shoppers would be tightening their purse strings never to loosen them again.

So while the world did indeed turn a corner, economically speaking, retail seems to have done more than just weather the storm. It appears to have come out the other side in better health than before.

It was with all this in mind that I filed into New York City’s Javits Center alongside more than 30,000 other delegates, speakers, and exhibitors this January. I wanted to see for myself where retail was heading. I wanted to find out where this remarkable resilience came from. And, more importantly, I wanted to know how much of it could be credited to technology.

Before we get into the meat of the show, though, you might be gearing up to disagree with the rosy picture those earlier statistics painted. And I wouldn’t blame you. After all, retailers still seem to be dropping like flies, so where is this growth coming from?

It’s true that we’ve seen some high-profile casualties domestically and internationally. Everyone has a store or a chain they remember from their childhood that met a tragic end in the last few years and triggered an outpouring of sentiment on social media. But if we take a real, clinical look at each of these, there’s always a rational cause behind the calamity. One department store simply fell behind the times; another made a meal of its ecommerce ambitions and went into administration. America’s original catalogue company filed for bankruptcy under a hail of blows to price, variety, and convenience coming from big box competitors and online giants. And a multinational toy chain I remember fondly fell foul of simple financial mismanagement – although there were plenty of other ailments waiting in the wings to bring that particular Savannah giant down.

We have had very few retail collapses where we could justifiably say: “great business, still relevant, shame the economy killed it.” For every tear-streaked emoji shared over the demise of an out-of-town chain, there were countless other people in the same demographic who saw it coming because they’d ceased to shop there – sometimes decades ago.

The point being: it may be sad when a retailer with some sentimental value closes down, but in the vast majority of cases, we probably saw it coming. Because they stood still while the world turned.

It stands to reason, then, that the retailers who have survived – and even thrived – are the ones that moved on. This doesn’t mean they abandoned the core tenets of shopping; people still visit physical stores to share in a lifestyle, to be inspired, and to buy into something larger than themselves at the same time as buying things they need. Instead, these retailers kept up with the pace (and even led the charge) by innovating in the ways they deliver that experience – whether the customer is in a store or on their smartphone.

Continuing the omni-channel discussion

This evolution in the way retailers reach their customers was the core of NRF Chairman Christopher Baldwin’s opening remarks at the dawn of the first day of this year’s show. He cited several examples of retailers who he believes have successfully changed with the times. Walmart, who pivoted from being known as a brick-and-mortar powerhouse to being seen as an online innovator. Target (whose CEO spoke during a separate keynote that I’ll cover a little later), which reoriented itself to become a multichannel hub and a hive of technical excellence. And Macy’s, which has built on its status as a tourist destination by deploying new tools like virtual and augmented reality.

But at the same time as these retailers were re-evaluating their own customer engagement models to readdress the balance between online and offline shopping, a helping hand was waiting in the wings. As Baldwin explained, the NRF helped to spearhead an initiative that resulted in the US government ruling that online-only stores would now be required to collect local sales tax – something he saw as levelling the playing field between physical and ecommerce-only businesses.

I should say, though, that I see this as a temporary reset at best – a halt until battle lines are redrawn, or else blurred beyond recognition. Here in the UK, where flat-rate value added tax (VAT) is applied to all sales and services country-wide, ecommerce remains a frightening prospect for retailers who have yet to master it as part of an overall, multi-channel retail strategy. Here, almost 20% of all retail sales in 2018 were online, according to Deloitte, and while our biggest ecommerce-only retailer had a headline-grabbing nightmare of a holiday season (with a serious impact on its share price) this is still far softer a blow than the one faced by primarily physical retailers, who are closing stores at a much higher rate than last year.

As Target CEO Brian Cornell explained during his session on the main stage on the show’s second day, though, to continue to look at physical stores and ecommerce as separate, competing channels is to ignore what customers actually want.

“I think people are recognising that physical and digital have already begun to merge,” Cornell said. “We know that a lot of shopping starts on mobile devices, for instance, but more than 85% of actual sales still happen in-store. This is something analysts are seeing, too; now we’re over the fear that everything is going to move to digital, we’re realising that it didn’t have to be an either / or conversation in the first place. Whether customers get their products through single day shipping, same day shipping, or store collection, they’re agnostic to the actual channels. What they expect from the retailers of tomorrow is a great experience that combines the best aspects of physical and digital.”

Is this not just the same conversation about the importance of omni-channel being recycled for another year? In a sense, yes: omni-channel has become so talked about it’s almost background noise. Rather than something for retailers to pursue, it’s now accepted as the standard mode of operation. Fail to deliver it, and you have essentially failed to deliver the standard of retail that people expect in 2019.

That’s the vision, of course, rather than the reality. Practically speaking, most multi-channel retailers are still working towards truly smart, cross-channel inventory allocation, distribution, fulfilment, and customer engagement. Indeed, a lot of the technology that crowded this year’s NRF expo space (all two gigantic floors and dedicated innovation lab of it) was pitched at solving precisely these kinds of problems.

But the continuing omni-channel discussion, as Cornell suggested, should really be more about execution than vision. Everyone agrees that blending of channels so shoppers can reserve through one, pay through another, and return through a third is the goal. To serve consumers who see beyond those channels, though, companies must start focusing on delivering seamless results. Because make no mistake, the models of retail that are thriving today trade on convenience and continuous engagement to devastating effect.

Physical & digital: a happy co-existence

It may be true, as Cornell says, that a large number of final sales are still handled in store, but it’s equally true, according to Baldwin’s opening address, that this past Thanksgiving saw more than 90% of all shoppers under the age of 35 use a smartphone or tablet to make a purchasing decision – even if the final transaction happened elsewhere. And in conversation with Eli Finkelshteyn of AI search company Constructor – a fascinating company I met at the show – I discovered that almost half of all product searches begin on Amazon, which is backed up by 2015 statistics from BloomReach. Sounds like a lot, right? Now bear in mind that the figure stood at around 30% in 2012, according to Forrester – a gain of 20% share of the product search market in just three years. Even if we assume that the mega-retailer has only made modest gains since, it wouldn’t be unreasonable to assume that figure might sit closer to 55% today. And if a single online retailer being the first port of call for the majority of all product searches isn’t the picture of convenience, I don’t know what is.

Cast any concerns of a monopoly aside – valid as they may be – and we start to see that even for the rulers of online shopping, cross-channel excellence is still considered the objective. After all, even same-day shipping sometimes can’t compete with the experience of grabbing something off a shelf. Only in the case of the small number of Amazon Go pilot stores, that shelf is overseen by cameras and monitored by a highly-trained computer vision model that allows shoppers to use their existing Amazon account to walk out with their items, no checkout required.

But beyond the world’s biggest retailers – Amazon, and the aforementioned Walmart and Target – there are companies doing arguably more interesting things to blur the online / offline experiences. Bonobos may be a household name in menswear in the USA, but they’re not yet active in the UK, and as far as I know we have no equivalent – so American readers will need to indulge me for a minute while I explain their model to our international audience.

The company has five destinations in New York City alone, but you cannot actually leave any of them with a product in-hand. Instead, Bonobos (which joined the Walmart family in 2017) uses these locations as “guideshops,” where customers can try on items from the retailer’s vast ecommerce inventory, and if they’re satisfied a sales associate will place an order for them, for shipment to an address of their choosing. I see this as a very interesting approach, since it effectively sidesteps the issue of reconciling and optimising store and online inventory in a category – well-fitted essentials and affordable suiting – that does not require the instant gratification of leaving the store with a new product in-hand.

In one gesture, Bonobos was able to ensure that customers can always sample the style they want, in their exact size, and have their order arrive quickly afterwards, shipped from the closest node in an enviable distribution network.

And this kind of excellence in blended-channel execution is hardly in short supply elsewhere on the streets of Manhattan. Because while the Javits Center itself is as gigantic and glittering as ever, and just as packed with retail invention, the real star of NRF has always been its ties to the host city itself – which stood to benefit from the event to the tune of $45 million in economic impact over just three days. And as exciting as seeing new technology in isolation can be, the real proving ground is when it meets the buying public.

Now, I’m no stranger to the big, wide world. But every time I visit New York, I’m struck by just how much excitement, passion, and sheer investment retail still generates. Threaded around my commitments during the show itself, I made a point of visiting as many Fifth Avenue flagship stores (and some smaller pop-ups further afield) as I could, to see how the future of retail was being put into practice. Luckily for you, this report is not a travelogue of my shopping outings, but the sheer variety of experiences available at destinations like Adidas, Nike, Uniqlo, Louis Vuitton et al was almost overwhelming.

From app ordering with dedicated pickup lines, to multi-story monuments to opulence; from lab-coated sneaker scientists covered in dye from the shoe customisation process, to a level of service that bordered on the psychic, it’s difficult to put into words just how different retail feels at this point of convergence between digital experiences and physical products. And when you see it done right, the concepts of waiting in line, fumbling through crowded racks, or finding something out of stock with no recourse but to come back another time seem totally antiquated.

A new sort of society

Luckily, one of the show’s speakers, Kara Swisher (a co-founder of tech publication and podcast Recode) managed to articulate this difference for me. On stage, she was asked by Steve Liesman, a Senior Economics Reporter for CNBC, to define how the future of retail is likely to look. Taking a step back and using an example of a pop-up store her children convinced her to visit – a place where the experience ruled, and where products did not have published prices – Swisher explained that, “economies change all the time, which is how we evolved from farming to manufacturing to service-based models.” She went on to say that we are now moving into what she referred to as “a completely delivered society, where vibrant services and experiences grow naturally from the infrastructures we’ve built, and from the data relationships that businesses are able to have with their consumers.” Stores, Swisher said, are being consolidated around the vision of becoming “event-driven, experiential destinations – places where retailers will need to deploy the perfect blend of data, technology, and creativity to deliver what consumers want.”

If that sounds a bit woolly, think of it like this: when it’s executed well, modern retail feels different because it is, essentially, a new kind of business, and it sits at the sharp end of a new sort of society.

It’s no coincidence, then, that the creative use of technology to deliver standout experiences characterised almost the entire expo floor. From their dominant booths, companies like Salesforce, SAP, Oracle, and Microsoft all commanded attention with their promise to revolutionise the cross-channel experience. And while all of these companies have robust, enterprise-grade solutions for solving complex business challenges, their most eye-catching attractions were immersive experiments like a virtual reality hammam aromatherapy session and hand massage – complete with an assistant spraying scents towards the headset-wearing guest at set intervals. And no, I didn’t get a go. Although towards the end of the final day I could certainly have used the time off my feet.

This imbalance between the showy side of retail and the less immediately arresting work that happens in the background, really, is the crux of a problem that’s common to many trade shows. As compelling as the return on investment from a supply chain may be, it’s hard to demonstrate in a way that captivates tired delegates on their fourth coffee and donut of the day. In amongst all that light and noise, static screens and menus are a poor substitute for 3D images being projected onto high-speed fans, literal robots roaming the expo aisles or stocking shelves in cordoned-off, controlled environments, and illusionists collaring passers-by with card tricks.

And in a way, this divide between the downstream glitz and the upstream graft is a symptom of what I see as a broader problem facing retailers who want to seize their share of the new, experience-driven economy. Having VR headsets may bring people into stores, but unless you have the right products in stock (or available for next day shipping), with the right margin, you won’t keep them there.

Or, to put it more bluntly: doing the sexy stuff is pointless if you don’t have the systems to support it.

Fortunately, these kinds of back-end systems were there at NRF – just a little harder to find. Most major PLM vendors (although not all) were present, and while more attractive components like augmented reality and collaborative storyboards took pride of place, nobody was shying away from the core business of bringing design, development, sourcing, and manufacturing processes into the same digital era as the customer experiences seen elsewhere. Speaking to several vendors in confidence, it was encouraging to hear that interests remains high in core PLM functionality, and that true multi-tenant solutions (about the least obviously sexy thing to try and advertise at a show like this) are now a reality. Look for more on this subject from WhichPLM this spring.

And of course, WhichPLM readers know that PLM should also be at the centre of any fully-fledged digital ecosystem. For brands or retailers who want to deliver virtual reality try-on sessions, leverage intelligence from connected stores, or power collaboration across a multi-channel, multi-category business, PLM remains the best way of consolidating, centralising, and serving up the essential product data.

So, outside of my meetings with core PLM vendors, I also set out to speak to companies who offered one component or another of that broader, data-driven vision for the future. I could never hope to cover everyone, of course, but I found the following to be note-worthy.

I spoke with Elastic Path – who are active in various different verticals – about the potential for the future of B2B and B2C ecommerce platforms. I met Nextail and chatted with a former executive of Zara Inditex about the use of artificial intelligence (AI) to manage and optimise inventory across channels. I sat down with Emarsys to discuss the next generation of machine learning for marketing automation. I spoke with Blue Bite about how NFC-enabled products can power both new customer experiences and authenticity and anti-counterfeiting programmes. I saw a new way to bridge digital loyalty programmes and CRM systems with paper receipts at the Ecrebo stand. I got into the specifics of how private blockchains can power revolutionary customer experiences as well as radical transparency with companies like Wordline and BlockV. And as I mentioned earlier, I learnt a lot from Constructor about the importance of contextual, intelligent product search engines.

What’s in a name?

One area I took particular care with, though, was AI. While all the examples above are genuine, visitors to NRF 2019 were absolutely inundated with messaging around AI, machine learning, and deep learning, and a lot of it was, honestly, nonsense. Since I covered the true state of AI in the WhichPLM Report 7th Edition (now freely available to download from this website) the buzzwords have run absolutely rampant. Walking the expo halls, every other booth promised some level of AI-driven insight, personalisation, or process optimisation. Some of that, as I mentioned, stands up to scrutiny, but I also saw everything from off-the-shelf consumer hardware to basic relational databases being referred to as AI. Today more than ever, any brand or retailer looking to understand the potential of genuine machine learning or to make investments in this area need to be extremely ruthless when it comes to dismissing software providers who are just riding on the coattails of the latest “big thing”.

And, sadly, the Internet of Things hasn’t been spared this kind of spin either. Always a difficult concept to grasp – see the WhichPLM 6th Edition for some grounding – the IoT label has now been repurposed to mean almost anything people want it to. This is especially frustrating when real applications are already delivering real value both upstream and downstream, through connected stores and industrial automation.

Regular readers will already be familiar with PTC’s high-profile work in IoT hardware and services, but during the show I also had chance to catch up with the VP of IoT Strategy at hardware giant Arm, and we spoke at length about the roles of RFID, computer vision, and other tools for obtaining insights from stores and supply chains – as well as the software layers needed to turn those insights into usable intelligence. I had similar conversations with two senior representatives from Impinj, whose demonstrations showed clear value in IoT hardware and monitoring systems both up and downstream, and with packaging giant Avery Dennison’s VP of Global RFID, who appear to have both the reach and the vision to deliver some exciting initiatives for retailers by using the products themselves as nodes in a store network.

To say there was something for everyone in the expo halls would be putting it mildly, and I couldn’t cover half the ground I wanted to. In the space of the decade I’ve spent analysing and writing about it, retail technology has become an enormous industry, with solutions to every conceivable challenge, and new tools to help brands and retailers seize any emerging opportunity.

The business case for diversity

But the diversity certainly didn’t end there. One of the major themes of this year’s presentation sessions – and a subject that’s been given a lot of attention across industries and society as a whole in the last two years – was inclusivity. I was able to catch Lars Petersson, the President of IKEA USA, speak about their strong positive stances on LGBTQ issues, and their commitment to valuing families of all kinds. I heard Carolyn Tastad, Group President at Procter & Gamble, tackle the false narrative that we’d have more female leaders if only women would conform to what we expect from executives, when in fact retail should stop trying to impose a one-size-fits-all model on its senior teams.

This might seem outside the purview of an article focused on the technology side of retail, but we should remember that technology buying decisions and the overall vision for the future of brands and retailers belongs in the hands of leaders who reflect the state of the real world. It’s been easy for people to dismiss diversity and inclusion as soft, social issues, where in fact, as Petersson put it, “it’s a no brainer: we get a bigger talent pool, more customers, and more sales, as well as it being simply the right thing to do.” And as Jamie Fripp, Chief Diversity and Inclusion Officer for Yum! Brand (which owns KFC, Pizza Hut, Taco Bell and other chains) explained on stage, the business case for more diversity at every level of retail and brand operations has been proven time and time again. “The purchasing power of the LGBTQ community now tops $1 trillion, which is nearly the highest of any demographic,” Fripp said, before going on to cite some other high-impact statistics about the kind of consumer base that today’s retailers need to address. “Black consumers are strong influencers, and Asian communities spend almost twice as many minutes per day using multimedia devices than the total population. But what’s most important, all future population growth in the USA – not some, all – is going to come from multicultural or blended populations.”

For me, Fripp’s presentation really resonated. Because if the future of retail relies on creating a sense of community across our channels, it will be essential for the communities we build in-house to reflect the ones we see in the real world.

To wrap up, I’m going to turn to Target CEO Brian Cornell, whose company WhichPLM has interviewed before about the importance of spearheading new technologies like 3D. The 2018 financial year, it turns out, was Target’s best in a decade: store sales were up multiple percentage points, and the company introduced several new, successful brands. But as Cornell explained, the real results come from somewhere deeper than just better assortment planning or more efficient sourcing, and technology should always be employed in service of the overall experience:

“We made big changes and significant investments across the board, all with the vision of not forcing people to come into store, but making them want to be there […] Our stores are our biggest asset, because they allow us to showcase the value, quality, and sense of surprise that creates communities. It doesn’t matter whether we’re in an up market or a down market, a big company or a small company, we have to focus on what’s important to people. There will always be a next generation of consumers, there’s always going to be new technologies, so the only sure-fire way to stay ahead is to put the customer at the centre of every decision you make.”

It’s a persuasive picture: a retail experience where excellence comes as standard, across every channel, and everyone feels valued. And while retail can’t quite afford to rest on its laurels, it seems as though more businesses than ever will soon be in a position to make the kind of investments in technology that will allow them to deliver part or all of that vision. Because whether you’re looking at the best-run business, Manhattan’s brightest flagship store, or the industry’s biggest gathering, technology is always running the show.

Ben Hanson Ben Hanson is one of WhichPLM’s top contributors. Ben has worked for magazines, newspapers, local government agencies, multi-million pound conservation projects, museums and creative publications before his eventual migration to the Retail, Footwear and Apparel industry.Having previously served as WhichPLM’s Editor, Ben knows the WhichPLM style, and has been responsible for many of our on-the-ground reports and interviews over the last few years. With a background in literature, marketing and communications, Ben has more than a decade’s worth of experience, and is now viewed as one of the industry’s best-known writers.