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The 2023 edition of the NRF Big Show took place on 14 – 17 January. After a virtual edition in 2021 and a limited reopening session in 2022, this edition showed that retail was back on track, with more than 1,100 exhibitors attending, to be compared with the 900+ previous record in 2019. As usual, a wide variety of themes were explored during this somewhat overwhelming event, and it is difficult, if not impossible, to recap all the conversations that took place.

We made a selection of presentations we attended, with a focus on department stores topics. Before doing so, looking at the big picture in terms of topics addressed also help understanding the general mood of the event:

-    The economy was not top of mind even though there were echoes of inflation and recession. Speakers were excited by many other topics and the socio-economic context did not overshadow every presentation,

-    Metaverse was of course not a topic anymore but excitement about Web3 was very much palpable,

-    CSR and ESG were widely discussed and mentioned in almost each and every presentation, confirming that going green is not a choice anymore, as we have echoed in our last White Paper released this month,

-    Social media is becoming more personalized and difficult to operate as customers are torn between their will to log out in order to go on a digital diet, while balancing the fear of missing out on important news if they do so,

-    Exceptional customer experience goes deeper, and it does so through how consumers are treated, what they get, and also the information they are provided with, including informing them about the sustainability aspects of their transaction.

Speakers we listened to during this event discussed retail transformation, physical stores and business models, customer experience, sustainability and retail media.

Table of contents:

-    Leading through transformation and purpose: Macy’s

-    The store of the future is less about the store and more about the business model: Havaianas, Sunglass Hut.

-    Retail strategies for major disruptors: GDR Insights

-    Curated, captivating, contemporary: a blueprint for physical stores: Neighborhood Goods, Studs,  CAMP

-    Building an innovative and personalized luxury experience: Farfetch, Harrods

-    Retail media networks: how the physical store will power retailers’ next phase of growth: Albertsons, Nordstrom

-    Placing sustainability at the heart of retail: Holt Renfrew

Leading through transformation and purpose: Jeff Gennette, Chairman and CEO, Macy’s

Gennette reviewed the actions performed during the pandemic in order to help the company get through the hurdle:

-    Inventory control was key to managing cash, and this led to negotiations with vendors, a review of the supply chain, and deals with smaller-sized operators,

-    Macy’s also learnt to use data and mix it with human forecasting to allocate the stock in the right locations in a quicker way through the use of smaller-scale channels,

-    Geopricing  was also reviewed, in order to geographically match the price according to the location of the customer, and avoid any kind of margin-damaging mistake.

As a consequence, Gennette considers the company to be in a much better position now that the synergy between online and offline is clearer, and works well: stores are needed to support online, as online penetration decreases when there is no brick-and-mortar in the region. The question is indeed not so much about having stores at all, but the type of stores needed:

-    Malls are no longer the main focus, and Macy’s closed a number of second and third-tier locations in favour of off-mall locations,

-    In regions with stores but where densification is needed (Dallas, Atlanta), or regions where stores are exiting malls in favour of smaller locations (Saint Louis), the group opened Market by Macy’s locations (8 locations to date),

-    In new markets where new doors are opened (Seattle), the group opened Bloomie’s locations (2 locations to date).

Even though many locations were closed in the review process, leading to a decrease in terms of square footage, the group currently operates more stores today than in 2019 in net numbers. Genette was very clear that the off-mall, new-format business was his new focus.

He also tackled the notion of talent retention, mentioning that compensation and benefits reviews helped with the frontline workers, but that it was the strength of the group’s brand that helped with specific populations such as data scientists for instance. He also mentioned that while the group had focused for a long time on frontline and boardroom diversity, it led to some gaps in middle-management which were being addressed.

Finally, he also reviewed the current customer’s state of mind. Even though the company enjoyed a great holiday season, Macy’s realized good sales masked a shift in terms of consumption, with the usually slow weeks in November and December (during which customers are not buying gifts but products for themselves), being even slower than usual. Even though the luxury customer is in very good shape, and enthusiastic about occasion wear (as shown by the sales results in dresses, formal men’s clothing and luggage), consumers overall are cautious, as they are under multiple pressure points (inflation, wage inflation, interest rates…).

Macy’s acknowledged this cautiousness in its own operations: reduced OTB, and more open reserves, to limit early season commitments and to be able to respond in a flexible way if and when needed.

The store of the future is less about the store and more about the business model: Alberto Serrentino, CEO of Varese, Alberto Funaro, CEO of Havaianas, Giorgio Pradi, President of Sunglass Hut.

Serrentino explained that the post-pandemic “new normal” places the store at the centre of a new game, by becoming a multi-purpose hub (customer acquisition, logistic hub, service hub, omnichannel hub). Hence, the traditional KPIs do not work anymore and need to be redesigned, knowing that everything starts with the data captured by stores. However, rethinking the store means rethinking the retail business model itself.

This is why Luxottica/Essilor (parent company of Sunglass Hut) acquired stores 27 years ago, a risky move then, as they saw this strategy as a way to collect sales data from customers and control the sales process.

Of course, the Covid-19 pandemic forced the digitalization of the business (from 2% of the business in 2019 to 12% in 2022, mostly on luxury products and through the use of endless aisles), but the store remains at the core of the model, be it in terms of experience (through the increase of omnichannel services allowing to display fewer products and focus on the quality of interactions) or people (with a globally trained workforce connected via a platform allowing the sharing of good practices but also guaranteeing a common culture among every business unit).

Shoe brand Havaianas prides itself on embodying the notion of “Brazilian summer”, as they want to “own summer”. As a consequence, all their stores are designed to be experiential, surprising, and all different. Investments have been performed in customer data analysis in order to manage product development and allocation (each store has a different assortment), the tech underlying sales team trainings, development and tracking, as well as omnichannel capabilities in order to provide a seamless experience.

Summing up, the conclusion of this roundtable did not lead to the discovery of a new business model, but paradoxically emphasized the need for a strong culture and the human factor in order to achieve a differentiation which can not only rely on tech, even the most expensive or up to date solutions.

Retail strategies for major disruptors: Kate Ancketill, CEO, GDR Insights

Like it or not, everyone’s lives are now affected by the 3 C’s: Covid (leading to a reset of many organizations), Conflicts (leading to energy and cost of living increases, as well as shortages of all sorts) and Climate change (with extreme climate events disrupt power grids and supply chains). For Ancketill, a long-time friend of the IADS, this means that we are switching from an economy of abundance to an economy of scarcity, leading to a focus on geopolitics, energy sobriety, no more premiums for convenience, and life extensions of all products.

However, she believes that it is possible to “bloom from the gloom” thanks to the right strategy, according to 3 axes that she exemplified:

1-    Power is shifting from global friction to decentralized resilience: Apple introduced self-service repair, Tesco launched a B2B marketplace for its suppliers to deal with excess or unsold food stock, Tesla allows customers to produce and sell energy, mobile phone network Pollen allows users to buy a mini cell tower and create a signal for peer-to-peer mobile telecommunication, Weshop allows customers to sell their second-hand products and then become shareholders of the company with their earnings.

2-    It is possible to regenerate inclusively by switching from offsetting to insetting. “Offsetting” is based on the idea that business harms the environment and can compensate for this harm by planting trees. “Insetting”, on the contrary, supposes that the damage is fixed at every point of the chain where it appears. Ancketill mentioned a number of sustainable brands (such as the UK-based cosmetic brand Faith in Nature which has placed an eco-lawyer on its board as a representant of Nature), but also the current regulatory trend (the AGEC law in France banning single-use packaging for instance) or new services (Samsoe fashion brand selling its clothes with a QR code granting a prepaid social media credit in order to enable customers reselling the products) as examples on how to “inset” emissions.

3-    We are moving from small indulgences to immersive luxury, to what she calls the “dopamine” economy: it is all about maximizing the use of technology (i.e. metaverse, omnichannel capabilities) to create immersive experiences, be that in the real-world (WOW concept in Madrid) or in the metaverse.

Ancketill’s presentation was, as usual, complete with many examples and very energetic, and welcomed as such by the audience. IADS members can read the latest GDR Report from last July here.

Curated, captivating, contemporary: a blueprint for physical stores: Matt Alexander, CEO, Neighborhood Goods, Anna Harman, CEO, Studs, Amanda Raposo, Chief Experience Officer, CAMP

This roundtable was dedicated to business models placing the physical experience at the core of their offer: fully immersive “shoppertainment for kids” at CAMP (see the IADS analysis of the concept here), custom experience from one store to another and fully meshed into local communities at Neighborhood Goods (see the IADS analysis of the concept here), and niche-specific experience based on the fun factor for Studs (ear piercing lounges).

On average, Neighborhood Goods stores are 1,400 sqm large. When opening the first unit, the company expected brands to take up more space but they realized that richness came from the diversity of the offer instead of having 10-15 brands, they ended up with 50-75. This does not always imply a higher rotation: Asos was expected to rotate but has remained in the stores for the past 3 years. Interestingly, in addition to the width of the offer, Neighborhood Goods also sees private labels as a strong opportunity. In order to funnel customers to stores, people prevail over content as the company leverages the voice of their sales staff, trusted by customers. As a consequence, Neighborhood Goods’ promotional emails have a very high rate of engagement.

Camp, which has a different type of business, has 2 types of store formats: flagship stores (up to 1,500 sqm) with a hidden part which represents 85% of the total surface, and community stores (100 sqm) service as hubs for local audiences. Permanent animation in the whole network, be it generated organically or through paid partnerships, allows the stores to be destinations for families on a regular basis. And just like Neighborhood goods, when it comes to marketing, it is all about allowing customers to share their testimonies and feedback.

Both retailers strongly emphasized their reliance on the human factor in order to remain close to their customers, even though they knew them thanks to data.

Building an innovative and personalized luxury experience: Kelly Kowal, Chief Platform Officer, Farfetch, Michael Ward, CEO, Harrods

Ward shared how Farfetch helped power Harrods’ offering towards its online customers through its white-label technology. Such a decision was made after understanding that Harrods was too small to develop its own tech and would leverage what Farfetch has developed.

This was the opportunity for Harrods to build e-concessions on the one hand (as Ward sees this as an inevitable trend, with brands willing to recuperate as much of their margin as possible), but also to keep a strong focus on experience, which is at the core of what Harrods stands for.

It is not about showing off any kind of tech, which is something customers are not demanding anyways, but truly to maximize every touchpoint and make sure each of them is an experience per se. However, Ward was very clear on two points:

-    The tech provided by Farfetch helped Harrods leverage and scale up its customer analysis and understanding in an unprecedented way, but this forced both parties to learn how to work together. Farfetch is only specialized in apparel and accessories, while Harrods sells every category, and can collect as many as 200 to 300 data points during customer journeys in the store. Farfetch admitted that this kind of scale was somehow overwhelming even for them.

-    Data is a must-have but is not enough to craft a superb and individualized experience: it helps understand and make decisions, but personalization is much more holistic than just an algorithm. For instance, while data helps fine-tune the buying assortment and implementing the brands in-store, Ward still relies on his buyers to make the appropriate choices in showrooms in order to define a differentiating selection.

Ward also shared that he was planning to multiply fourfold the resources allocated to private shopping (people and systems) in 2023. As he put it, it is easy to make an experience come to life in the store, but his goal now is to make it truly omnichannel.

He concluded by stating that in 2023, his main area of attention would not be on tech, but on managing relationships with luxury brands and making sure that Harrods will be able to satisfy the demand for luxury products, which he expects to soar this year.

Retail media networks: how the physical store will power retailers’ next phase of growth: Kristi Argylian, SVP Retail Media Albertsons, Aaron Dunford, senior director of digital markets, Nordstrom

Retailers are facing a triple depreciation of their marketing activities: TV ratings are going down, third parties are not part of the game anymore with the death of cookies, and heavy investments have been funnelled into the digitization of the store. By delivering contextual ads during the purchase process, based on first-party data, Retail Media, the third big wave for digital advertising after search and social is seen as a perfect answer.

It took 14 years for the search market to go from $1 billion to $ 30 billion, 11 years for social media, and only 5 years for retail media. The market is expected to grow $10bn per year and it appears that this will benefit all retailers and not only Amazon: smaller operators are carving out their positions, which can be lucrative when one realizes that 1% of the market represents $450m.

When it comes to starting from scratch, Albertsons explained that the real question was not to consider an in-house or externalized development, but how to phase the launch out. Albertsons launched and scaled up quickly thanks to an alliance with a small group of partners, who are aware that at some stage, Albertsons will be willing to recuperate more control of its operations. But only partnerships have allowed them to grow fast and high, which is why for instance Albertsons teamed up with Pinterest to make their targeting more sophisticated, or Omnicom Media Group to go on the streaming TV market.

Nordstrom launched the first phase of its retail media network in 2019 but with full functionalities in Q4 2021. Through the understanding of the customer experience across many touchpoints, they are able to sponsor products at the right moment, which is extremely attractive to brands when considering the quality of Nordstrom’s customers. Onsite advertising now represents 40% of the total retail media sales.

Both retailers emphasized the fact that the whole process was extremely difficult, as it is all about breaking silos (e.g. Nordstrom’s ecosystem is composed of Nordstrom and Rack stores, or online, stores and apps, all with different systems and people) in order to collect all data in one single spot. This is the reason why Nordstrom developed its Analytics platform which aggregates everything. Now, this platform allows connecting platforms like Instagram with their in-store purchases. For Nordstrom, the next step is to open the retail media network to its in-store stylists and allow them to push specific products and brands.

Finally, both retailers also mentioned that, in order to be attractive to advertisers and stand out from the crowd, it is essential to be able to provide them with quick incrementality measurement tools through a dedicated API. As Albertsons put it, measurement is key and the problem is that there is no standard for now.

Placing sustainability at the heart of retail: Sebastian Picardo, CEO and President, Holt Renfrew

Holt Renfrew as a brand is older than Canada and prides itself to be the first luxury destination in the country. As such, the retailer decided to lead the change and embrace sustainability a decade ago, and as Picardo put it, their mission is “to give their stakeholders the power to express themselves and the opportunity to generate positive change”.

Very well aware of the pollution created by the fashion industry, Holt Renfrew started its journey by engaging in dialogue with brands. For Picardo, the climate crisis is here, regulation is coming, and there is the opportunity to take the lead on sustainability, which the company did.

They are helping brands use new materials by promoting the new items manufactured in that way to their customers (the “Holt Sustainable Edit”) and using tech in order to track progress and results. Holt Renfrew, which started as a fur shop, also decided to eliminate fur products from its offer in 2021, which is a strong move. They have also engaged with their suppliers on Scope 3 tracking, although this is a very complex topic.

However, for Picardo, sustainability used to be a marathon but this is not the case anymore and is transformed into a spring. He concluded by stating that “sustainability is the new digital”.

Credits: IADS (Selvane Mohandas du Ménil)