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Introducing the NRF Big Show

The 2024 edition of the NRF Big Show took place on 14 – 17 January. The four-day event was fully back on track, with more than 40,000 attendees and several exhibitors surpassing last year’s attendance (1,100), which was already a record. Overall, the event felt overwhelming, not so much due to the number of exhibitors and the energy in the fair section, but through the lines at the entrances of the conference rooms, which were often crowded and had to turn down people. Excitement was palpable, and the international crowd, as well as brands (and not only vendors), were back. The message was that the event was back to its pre-pandemic heights.

The overall mood of the show was buoyed by the positive end-of-the-year outlook: on average, the Q4 2023 reports grew +3% on average for US retailers. While it is generally admitted that the US economy will not go into recession, as spending levels remain stable, it was initially feared that it might crash. Combined with the slowing of US inflation, this gave a sense of optimism that drove many conversations with the intention to invest.

AI was of course the major topic across the room, both in the fair and on stage (last year’s star theme, retail media, was big on stage but few exhibitors were proposing solutions linked to it), but not only, with a mix of US-specific concerns and international issues:

US specific:

• The resilience of customers and a disconnection between their attitude (as every poll mentions that they are afraid of the future) and their actions (spending remains high),
• The level of shrinkage due to organised retail crime, a topic addressed by John Furner, the CEO of Walmart, in the kick-off conference. It was notable during store visits at CVS or Walmart that hygiene and everyday items were often sold behind plexiglass protection, making it necessary to call a salesperson to buy deodorant.

International topics:

• The capabilities to build additional revenue through retail media were often quoted by several international retailers, showing that, while the US still leads the race, retail media networks are expanding.
• New models were often also quoted, including resale (even though questions remain about the profit potential of the business model), as well as the fact that experience (restaurants, travel) is booming at the expense of discretionary spending.

There was a sense of satisfaction from many players to see how resilient retail has been, and how it has managed to engage transformation. Marc Metrick, the CEO of Saks, for instance, explained that the bet of separating stores from dot.com businesses paid off, as online is the true centre of gravity. Such a positive view was also notably echoed by the CEO of Tractor Supply, an operator of retail farm and ranch stores across the US, which topped $1 billion in e-commerce sales and started using AI for marketing copy, replenishment and customer service (including an AI-powered bot).

Aside from AI (which we will report separately later on), general conversations were all about adapting product offers to customers’ tastes, and how to do that in a productive but speedy way, making meaningful partnerships and making sure they add some value for the final customer, and, finally, the recognition that price is not everything and experience should be redesigned to make stores interesting again (this is reflected by the selection of 3 interesting stores available in this report). We believe that when it comes to tech, the most interesting quote came from Thierry Cotillard, CEO Les Mousquetaires (Intermarché): “In 2024, we will ask our tech partners to commit on the ROI promises they make. It might go as far as to start paying them when the expected ROI starts to be delivered.”

Monetizing personalization through retail media

The exchange started with a review of retail media now that the practice is well implemented in the industry. The concept can be assimilated to content-driven commerce, significantly influenced by customer behaviour shifts, particularly since the pandemic. In markets like China, consumer journeys increasingly begin with media-led interest, incorporating content creation within retail spaces. This trend reflects a growing convergence of retail, media, and entertainment sectors, which is becoming increasingly visible. It is proven now that retail media strategies can enhance traffic and sales, and ultimately augment customer lifetime value.

Retailers need to keep in mind that achieving this requires the injection of new competencies within their organizations. The question that looms is to understand what and who will drive, lead and influence the customer journey.

As a leading food grocery organization, GPA (the largest food retailer in Brazil) has integrated retail media through its extensive loyalty programme and robust online presence. They have adopted a two-pronged approach:

• Customer Focus: Utilizing their comprehensive loyalty programme data gathered both online and offline for personalized customer engagement.
• Data Utilization: They realized that they needed to clean and qualify their data better, which is why they relaunched their programme to include tiered segmentation, enabling more targeted communication and monetization opportunities through their app (the top-tier customers have a tenfold longer lifetime value than entry customers).

This approach allowed them to become a real bridge between brands and consumers, making sure that they push the right product at the right moment to the right customer. Incidentally, this has opened a significant avenue of income on the way.

Now Brazil and Latin America's largest marketplace, Mercado Libre started with e-commerce, and then expanded in logistics and fintech, before embracing retail media with Mercado Ads. It has already become a significant business: in Brazil, 70% of the ad spend is digital and 25% goes to retail media. Their leading position is facilitated by the fact that in the country, 7 out of 8 customers looking for a product start their search on Mercado Libre. In addition, 80% of the searches are unbranded, as they are searching for a product type. As a consequence, this has opened a huge opportunity for Mercado Libre to sell visibility to brands.

When asked about the complexity induced by the fact that retailers need to become content producers now that they have the data on the target customer and the tools needed to reach them, both GPA and Mercado Libre acknowledged that this is a challenge. Retailers are not content creators by definition. GPA focuses on generating interest through engaging app content and non-sales-oriented live streaming. Mercado Libre notes that in Brazil, and more generally in the West, it is unlikely that super-apps such as the ones found in China could emerge, however, it is more probable that different platforms might combine themselves to serve the customer differently. This is why Mercado Libre partners with content companies (Disney, Paramount, HBO…) and encourages customer interactions.

When asked about the tools used to monetize their data, and what other retailers need to know, GPA emphasized the need for technical infrastructure, full leadership commitment, and recruiting individuals with growth potential (retail media being relatively new, the perfect candidates do not exist, and for this reason, leaders must identify individuals with a vision and potential). GPA also stresses the importance of diverse support systems (like in-app and in-store media) and considers for the future sophisticated data utilization for more nuanced recommendations (for instance, instead of recommending meat, beer and charcoal to a customer purchasing a barbecue, suggesting a coffee machine based on individual preferences).They also note that retail media, in their case, has also contributed to increasing instore traffic, by increasing online orders with in-store pick-ups to a rate of 50% (this suggests also that special attention needs to be given to the instore pickup point in store and the process). Mercado Libre, on its side, highlights the necessity of a dedicated ads unit with its own resources and infrastructure, real-time data access, and collaboration with brands and agencies for both performance and awareness campaigns.

Key Takeaways:

• Understanding the customer through quality data is crucial for long-term success in retail media.
• Developing new capabilities related to content management, media, and redefining brand partnerships is essential.
• Retail media presents a significant opportunity, but it requires a blend of technological prowess and innovative marketing strategies.

The great transition: redefining retail and modern commerce

The retail landscape is witnessing a significant transformation. SSENSE, a fusion of fashion and creativity bolstered by technology, epitomizes this change. They build their e-commerce components in-house, and aim to embody a blend of fashion with tech. Furniture retailer Wayfair, initially an online-only DTC entity, expanded into the physical realm with its first store in Boston in 2022 (they now operate 5 stores and a new flagship is planned to open on 15,000 sqm). This move signifies a strategic shift from a series of microsites at the inception of the company in 2011, to a more integrated retail approach now that the turnover is reaching $12 billion.

The conversation started by redefining the terms, as the concept of unified commerce has overtaken the traditional omnichannel approach. It's about harmonizing the customer experience from end-to-end. Wayfair, for instance, strives to ensure customer enjoyment across all platforms, including its app, website, and physical stores. This unification is key to meeting evolving consumer expectations while giving them enough options and leeway to make decisions when it comes to furniture.

When asked about what changed in the past few years, both companies were very clear about what had been at stake:

• SSENSE decided to focus on customer understanding and focus its tech approach to that focus. For that reason, they decentralized the data production at the team level: each tech team is also a data team (for instance, the payment team owns the payment data). This allowed the granting of real-time data access to every stakeholder in the company and an infusion of a deep sense of understanding the customer.
• At Wayfair, since Covid-19 was a significant shift in terms of customer journeys in the furniture space, which nowadays start more often online, it was all about interconnecting each interface (stores, app, website) to reach the customers where they are and when they want.

For both, customer acquisition also goes with frictionless checkout. SSENSE's focus on performance and speed led them to develop a single-page checkout that aggregates and pre-fills customer preferences. This innovation allows them to process up to 2,000 orders per minute, while reducing checkout time by 70%. In a similar manner, Wayfair knows that when customers are ready to place an order, it often comes at the end of a long consideration journey. For that reason, when they are ready, they are offered an easy, auto-populated and trusted checkout process, complete with financing options. This process is available in each and every channel (store, app, website) and can be completed in each of them.

A significant challenge comes with the need to combat fraud, while at the same time not discriminating against loyal customers having their cards rejected for whatever reason. SSENSE has adopted dynamic payment routing to select the best payment provider in real time, aiming to enhance customer experience and minimize frustrations like card declines (this incidentally also grew the business by +5%). Wayfair reports a rise in organized fraud, necessitating continuous vigilance and adaptive strategies. They are currently exploring instant payments, and are also looking at simplifying checkout process.

When it comes to customer retention, Wayfair considers that their selection is their main asset (do they have interesting products at the right price?), and then they complete this with AI-based product filters and styling services, financing options, easy returns, and loyalty perks. SSENSE just launched its loyalty programme, but bases its retention on being a cultural player: customers are part of a community. This is illustrated by the fact that their website landing page is editorial content-only, not products. They then leverage their customers’ tastes and cultural points of interest with the help of AI to propose hyperpersonalized options.

Key Takeaways:

• Technology integration and customer focus: SSENSE and Wayfair are integrating technology deeply into their operations to enhance customer understanding and experience, shifting towards a unified commerce approach.
• Streamlined checkout processes: Both companies have developed efficient checkout systems, with SSENSE offering a single-page, fast process and Wayfair providing an easy, multi-channel checkout experience.
• Fraud prevention and customer retention: They are actively combating fraud while maintaining customer trust. SSENSE uses dynamic payment routing, and Wayfair is exploring new methods. For retention, Wayfair focuses on product variety and services, while SSENSE builds a cultural community around its brand.

Uncorking luxury retail experiences: a conversation with Philippe Schaus (CEO, Moët Henessy)

According to Philippe Schaus, Moët Hennessy, the years 2021 and 2022 showed varying trends in the US and Asia. While the US experienced a period of post-pandemic normalization after the immediate YOLO effect, Asia witnessed exuberant sales. These differences influenced stock allocation at Moët Hennessy, with resource reallocation taking place in response and sometimes making harsh choices, for instance by diminishing available stores in the US to the profit of Asian countries.

Inflation was a hotly discussed topic:

• Schaus acknowledged the lack of inflation experience within his team. However, he believes it is possible to do a thriving business even in inflationary times, provided people are ready to learn. He cited an example of doing business in Argentina, where inflation can reach three figures, emphasizing the need for constant pricing adaptation.
• To adapt to this context at the global level,  Moët Hennessy established a revenue growth management team two years ago to simulate the impact of price changes on customer demand. This team helps adjust pricing based on evolving costs and predicts demand fluctuations
• A critical point in luxury business, consideration for customer elasticity in response to price changes, is crucial. Overpricing can lead to reduced demand, necessitating careful review and product improvement.  Moët Hennessy invested in retail to transfer their product improvements to customers, through efforts on production (greener sourcing) but also experience on the point of sales.

Moët Hennessy aims to transform the way alcohol is sold by integrating luxury retail into their boutiques, focusing on conveying history and quality through presentation. They've placed Hennessy bars in prestigious locations like Harrods and KaDeWe. In short, they want to bypass liquor stores.

Chandon has elevated its brand by offering a unique experience encompassing nature, craftsmanship, and food, creating a club-like atmosphere distinct from traditional liquor stores. This approach allows for communication of craftsmanship and justifies higher prices.

When asked if he believed that Americans were prepared to pay higher prices for this experience, Schaus answered that he believes that consumers are willing to pay more for better quality and a guarantee of enjoyment (even though he does not forecast a price increase in 2024 as steep as the one that took place in 2023).

The conversation ended with his views for this new year:

• He is optimistic about the demand in the US and South-East Asia, as well as in travel retail. This will be helped by the fact that supply and inventory levels have balanced out since the initial post-COVID demand surge.
• He has noted a shift from nightlife to restaurant experiences which also explains why  Moët -Hennessy increasingly invests in local wines & spirits to become a global alcohol hub.
• Social media is key for wines & spirits, even though this could be seen as very counter-intuitive. Collaboration with artists and celebrities, such as Jay-Z and Alicia Keys, helps infuse energy and a fashion element into their social media presence, and, as a consequence, make sure they constantly have ways to interact with customers.
• His main source of concern is the geopolitical situation and the potential consequences on sea transport (100% of the LVMH wines & spirit transportation method).

Key takeaways:

• Inflation response: Moët Hennessy established a revenue management team to adapt pricing strategies in light of inflation, focusing on managing price changes and customer price sensitivity.
• Retail experience transformation: The company is moving towards luxury retail experiences, like Hennessy bars in upscale locations and Chandon's unique atmosphere, to enhance value perception and justify premium pricing.
• Future trends and optimism: Despite logistical concerns, Moët Hennessy is optimistic about growing demand in key markets and is capitalizing on social media and celebrity collaborations to enhance brand engagement.

The golden age of retail media networks: how physical retail is unlocking RMN’s full potential

In 2023, retail media revenue reached the same amount as TV in the US, and is expected to double it in the next two years. Lipsman quoted Jeff Bezos “when we win a Golden Globe, we sell more shoes” to explain that, in his views, Amazon is the model that many retailers will follow in blending content and media in their retail models in order to sell more ads. This is something that Walmart already does, with much financial success.

Offsite retail media is significantly growing, with a projected 37% Compound Annual Growth Rate (CAGR) over the next seven years. This growth can be attributed to the many strategic partnerships retailers are inking with various media companies, aimed at content creation and generation.

The fact that in-store attribution is now possible also makes in-store media extremely appealing to brands: measurements make markets. Instore retail media now brings to advertisers what TV does not do anymore: scale, brand safety and customer targeting.

Walmart shared insights about their Walmart Connect initiative. Over the past 18 months, they have been revamping their display business andemphasizing programmatic advertising, self-service options, and API-driven solutions. A notable addition is programmatic display capabilities, as well as in-store app products designed to facilitate connections between brands and in-store experiences.

Walgreens, with its vast network of 9,000 stores, found its niche in the retail media landscape. Taking inspiration from Walmart, they highlighted their unique strengths in the offsite landscape. Walmart's shopping app, which also serves as a marketplace, has been instrumental in their journey. Advertising within the app plays a pivotal role in driving search and discovery, with media partnerships rapidly growing. Transformation is then made at the counter. They emphasized the integration of retail media as an additional means to engage with customers, rather than treating it as a separate channel.

Regarding attribution, Walmart has been providing online and in-store attribution for the past four years. They also offer insights into sales lift for display advertising, allowing advertisers to measure the impact of their ads on purchasing behavior. Search advertising at Walmart focuses on direct sales attribution, providing comprehensive insights into impressions and sales, even at the product group level.

Key Takeaways:

• Offsite retail media growth: The sector is projected to grow at a 37% CAGR over the next seven years, driven by collaborations between retailers and media companies.
• In-store media developments: Retailers like Walmart and Walgreens are enhancing in-store media, offering targeted advertising and customer engagement through programmatic solutions and in-app features.
• Enhanced Attribution Analytics: Retailers are providing detailed insights into the impact of advertising on sales, both online and in-store, allowing for more precise measurement of ad effectiveness.

Interesting stores:

Note: we will add the locations below to the New York City Guide.

Wegmans, 770 Broadway

Petco, Union Square

Crate & Barrel, 881 Broadway

Credits: IADS (Selvane Mohandas du Ménil)