25 January 2022
25 January 2022
As the doors opened at the Javits Center in New York, there was a strong sense that, much as the retail industry had reacted to remain available to consumers during the pandemic, the show would go on at NRF 2022 – despite the Omicron wave causing major disruption to travel plans, the retailers and tech providers attending the show remained resilient.
Mike George, Chairman of NRF, opened the three-day show to a packed main stage hall, highlighting that the theme of NRF 2022 was acceleration - in recognition of the need for the industry to keep moving faster to meet customer expectations. He set an optimistic tone, recognizing the continued need for agility, flexibility and adaptability. He was the first speaker, but by no means the last, to draw on the phrase “new normal” – defining it in terms of retail as the delivery of the “integrated seamless experience” consumers expected. And this hybridization of retail – delivering retail experiences to the customer where they are, be it in a physical or digital space – and the technology and human capital needed to deliver was a recurring theme across both the conference programme and exhibition hall.
Here, we draw on the key trends from Retail’s Big Show as we round up our top takeaways from NRF 2022.
Inflation, supply chain issues and labor shortages were the key structural challenges highlighted by several speakers. Ira Kalish, Chief Global Economist at Deloitte, sought to reassure audiences, predicting that surging global inflation wouldn’t be a long-term reality. Rather, he said, it would recede from 2024 onward as pent-up consumer demand for goods, impacted by China’s zero-tolerance policy toward Covid and the resulting supply chain issues, eased.
To future-proof against ongoing supply chain issues, retailers must optimize for today’s new customer-led model of selling, embedding data and artificial intelligence to improve inventory management and predict stock and demand levels, or look to reframe supplier relationships and diversify supply chains to allow for production to move to market very rapidly.
Looking ahead to 2022, Morgan Stanley’s Vice Chairman and Managing Director, Carla Harris, said: “Capital markets hate two things — uncertainty and surprise — and we have a lot of that on the horizon”. However the good signs outweigh the bad, she said, with consumers sitting on record levels of savings. And in her view, money in the hands of consumers means good news for retail, predicting that it looks like a good year ahead.
Patrice Louvet, president and CEO of Ralph Lauren, shared a similarly positive outlook. We still live in a world of stores, he said. For all the talk of a total ecommerce future in the early days of the pandemic, people went back to stores as soon as they could. He shared that Ralph Lauren has focused on offering elevated brand experiences across both product and stores, with recent openings in Milan, Shanghai and Beijing offering a high-touch experience complete with hospitality. “We live in an omnichannel world,” he said. “We need to be wherever the customer expects us to be, and we need to be there in a way that supports the brand.”
On the tight labor market, Harris offered an alternative take on the “Great Resignation”, redefining it as the “Great Contemplation”, as workers reflect on the value their job creates in their lives. Post-Covid, the employee/employer contract is no longer about control with employees simply hired to deliver goods or services. Discussing this shift in the employee/employer relationship, Corie Barry, CEO at Best Buy Inc. said: “They ask: what is my career path? What are my benefits? What does my development look like? So how do I offer this suite of things to my employees that will help them stay sticky to me as a company?”
To engender loyalty, Harris invited employers to actively solicit opinions from their staff to create a collaborative environment, challenging leaders to teach their employees to celebrate failure and thank them for being brave enough to take risks so the wider business could learn from them.
This workforce-led shift away from a “producer culture” means employers need to refresh their value proposition and what they offer workers if they are to attract and retain the best talent. For example, many leading organizations have already made bold bets on reskilling in response to changing workforce requirements, with both Amazon and Walmart investing billions into programmes offering workers access to tertiary education.
Retailers were challenged to acknowledge that diversity, equality and inclusion within the retail workforce wouldn’t simply happen on their own. These must be seen as an ongoing journey rather than a destination, warning that homogeneous representation within an organization meant retailers and brands risked glaring admissions in their go-to-market approach that would rightly impact their brand equity and bottom line.
During his keynote session, Walmart U.S. president and CEO John Furner encouraged transparency and measurement around diversity and inclusion initiatives. "The things that we measure are the things that tend to improve. Pick something where you can make a difference… Our businesses should be the very best of who we are and of our customer base."
Rightly so, sustainability was a key topic across the show, with IKEA U.S. CEO and chief sustainability officer, Javier Quiñones, reframing the narrative to challenge retailers to make sustainability accessible to the many rather than the few.
By 2025, all IKEA products will be circular in some way, with the retailer currently rebuying its used furniture to resell/reuse to ensure it doesn’t end up in landfill. Additionally, IKEA currently has electric delivery vans in operation in NYC, with plans to scale across the U.S. by 2025.
“If you don’t have a strong social agenda, your business will eventually disappear,” Quiñones said. “Less consumers will be willing to purchase from you, and your best workers will leave you".
Universally, retailers at NRF agreed that customer engagement must be at the heart of company culture, with omnichannel experience and personalization based on customer insight being key to survival in an increasingly competitive marketplace.
Christina Fontana, the Director of Strategic Partnerships at Alibaba, explained how it provides the technology and channels brands need to drive consumer engagement in China. She highlighted how luxury brands were hijacking live streaming but adapting it specifically for their highly valued customers as a vehicle to showcase limited edition releases and trunk shows. Rodrigo Bazan, the CEO of luxury fashion brand Thom Browne, explained that while the highly distinctive brand didn’t create specific products for the Chinese market, they had invested in producing localized content, in celebration of Chinese New Year, to communicate the brand's unique DNA in a relevant way for consumers.
In the grocery sector, Sajal Kohli, Senior Partner and Global Leader of Consumer Goods and Retail Practice at McKinsey & Company, argued omnichannel capabilities are now table-stakes in terms of consumer engagement. This meant grocery retailers needed to prioritize partnerships to offer new, innovative value propositions, such as the emergence of instant commerce, and remain relevant in the face of stiff competition from capital-rich tech disruptors.
Sumit Singh, CEO of pet ecommerce retailer Chewy, said balancing growth and a customer-centric culture was crucial, revealing that despite scaling rapidly the company remained committed to its policy of having a person answer all customer service calls in four second or less, and allowing service workers to remain on these calls as long as they felt was appropriate and necessary.
A hot topic across the show was the economic opportunities afforded to retailers by the metaverse – a term first coined in 1992 to describe a blending of digital and physical existence.
Emma Chiu, global director at Wunderman Thompson Intelligence, led a standing room only session acknowledging there is plenty of hype, but warning retailers not to dismiss it as a flash in the pan, citing research that showed 66% of consumers prefer to engage with brands digitally. Indeed, Bloomberg calculates the metaverse represents a $800bn global market opportunity, as the immersive virtual environment unlocks new economic opportunities that redefine brand engagement, product discovery, and online conversions, with augmented reality serving as a stepping stone into the virtual experiences.
And if you think the metaverse is just for digital-first, disruptor brands – think again. Ralph Lauren is one of the heritage brands embracing the metaverse as retail’s next frontier. “We are in the dream business,” Ralph Lauren CEO, Patrice Louvet, told show attendees during a discussion about embracing heritage and reimagination. “There’s a great consistency between our philosophy and what the metaverse brings,” Louvet said.
Second, Chiu highlighted the trend of Gamevertising – a hybrid combination of gaming and advertising – citing examples of both Nike and Hyundai having partnered with Roblox to create virtual experiences. With 67 percent of Roblox users being under the age of 16, this is a clear attempt to reposition how they are seen by a younger audience and start developing customer loyalty prior to purchasing age. Finally, Chiu looked at how the metaverse is up-ending the traditional notion of a retail store, citing the example of Burberry, who have created a digital replica of a Tokyo flagship store to give consumers around the world the opportunity to immerse themselves in this brand mecca. She also noted that many brands are now launching both digital and physical stores at the same time and likened it to the real estate industry where buyers can purchase both the physical house and the accompanying NFT (non-fungible token).
Some people can’t fathom why anyone would spend as much on sneakers for an avatar as they would for a real pair. But Chiu noted Gen Z’s tendency to attach more value to experiences than material objects. In a session about how to reach Gen Z consumers, Meagan Loyst, an investor at venture capital firm Lerer Hippeau and founder of the group Gen Z VCs, agreed. She said that “the metaverse is creating interesting cultural moments” and revenue streams, noting that a digital-only Gucci bag sold for more than $4,000 on Roblox.
As the doors closed on NRF’s first physical show in two years, it was hard not to be left in awe at the extraordinary transformation the retail industry has undergone during that time. The energy, innovation and passion on display at NRF 2022 made clear two things. Not only will retail survive, it will continue to thrive in an increasingly hybridized format that combines the very best of technology and human talent to deliver the retail experiences which we as consumers crave.
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