NRF 2023 shifted away from nascent, white-space technology, with an emphasis on shrinking inventory to maximize profits, being more disruptive in supply-chain planning, and investing in workforce and physical storefront technology.
This year, Slalom’s retail experts were back in person at the Javits Center in NYC to engage with clients and partners from around the world and learn from inspiring Fortune 500 CEOs who spoke at the event. It was a refreshing experience to return to the action, and we look forward to attending again next year.
1. Macroeconomic trends: Cutting costs/inflation
“Permacrisis” and “polycrisis” are the terms being used to define the future of the economy. (Permacrisis refers to the extended difficulties spurred by COVID-19, and polycrisis refers to simultaneous environmental, geopolitical, and economic crises.) A combination of COVID-19, political conflicts, and climate change—the 3Cs—will continue to have long-term impacts globally.
Between inflation and adjusted income, shoppers’ affordability is projected to remain flat. They’re shopping based on price, loyalty or rewards programs, and delivery options. Along with price sensitivity, retailers are also working to manage contradictions as shoppers continue to prioritize health- and climate-conscious products.
In 2022, retailers observed shrinking seasons and the need for faster planning timelines. This is a result of COVID-19 recovery, supply -chain impacts, and inflation. This trend will continue into 2023, requiring retailers to become more agile in their planning efforts.
Stores continued to make a comeback in 2022 as more shoppers went in-store shopping, compared to 2020 and 2021. Retail sales will continue to grow at 4%-5% for the next five years. Sales shifted back to stores in 2022, but are still on track to increase online, hitting 50% by 2027.
According to the wisdom of keynote speaker James Cash, PhD, retail’s new normal is the same as it’s been for the last few years: “Make it cost-effective, make it easier, and make it personalized for me.”
Retailers can manage these economic trends by focusing on customer experiences and maintaining customer loyalty. In the grocery sector, we see growth in private labels as consumer budgets begin to tighten and there is a stronger interest in cutting costs. With retailers, there will be greater emphasis on agility in managing pricing and promotions based on demand signals and targeting at the store level. New technology will continue to help retailers manage these trends while improving the customer experience.
New technology will continue to help retailers manage these trends while improving the customer experience.
There’s been a shift in consumer awareness regarding environmental, social, and governance (ESG). Consumers hold brands and government most responsible for driving progress, even though many speakers agreed that other entities play a key role, such as manufacturing, raw material sourcing, and supply chain. One suggestion was to standardize sustainability requirements across suppliers, enabling retailers to streamline their sustainability efforts. However, accomplishing this is a complex task that involves aligning many different groups.
There’s a clear desire to shake up the traditional retail model and corporate organizational structure, such as “adding nature as a board member“ to the traditional C-suite. Faith in Nature, a British skin-care brand, is an example of one of the first companies to appoint “nature” to its board of directors.
The conference also showcased other examples of innovation, from smaller companies to large tech firms making efforts to drive impact and change in the industry. One example was the addition of QR codes on clothing tags so that resellers could more easily identify the origins of the garments and use brand tags and images to help in the resell stage of the life cycle.
Consumers are becoming increasingly conscious of where they spend their time and money, and they are looking for brands to take a stand in creating a more sustainable future. We’ll see more retailers expand their resale programs in a continuous effort to drive customers to make more sustainable purchases.
3. “Phygital” stores: Making a comeback
With sales shifting back into physical stores post-pandemic, brick-and-mortar strategies are more important than ever. This change has given rise to phygital—the blending of digital technologies and physical spaces to facilitate seamless customer experiences and brand storytelling in addition to experiential and emotional connections with consumers.
Some notable examples of phygital were:
- Return of experiential retail: CAMP in NYC has created a format that combines play with product education.
- Frictionless payments and checkout experiences: Amazon Go’s Just Walk Out technology empowers customers to grab merchandise and pay without using cash registers.
- Connected experiences: At Harrods, customers can speak to stylists from home and put items on their wish lists before trying them on in the store, ultimately streamlining their shopping experiences.
- Rise of the creator economy: Shopify’s NYC storefront gives exposure to small brands, allowing them to meet customers in person for the first time.
Retailers are rethinking their presence in the consumer market and the connection between their digital and physical spaces. To chart the best course forward, retailers need to answer the question “What makes you legendary?” by hyperfocusing on the uniqueness of their brands and value propositions for consumers.
Retailers are rethinking their presence in the consumer market and the connection between their digital and physical spaces.
4. Supply chain
This year, panelists discussed some key strategies on how to leverage technology and partnerships to create a more agile supply-chain network and manage future inventory planning.
Retailers are looking at virtual fulfillment networks as a key tool for maintaining agility in the supply chain. Virtual fulfillment networks operate as public utility companies for the supply chain and empower retailers to compete with the scale and capabilities of the Amazon model. These networks rely on retailers coming together and creating standards and KPIs to lower costs, create efficiencies, simplify processes, and streamline reporting. However, generating enough support to scale adds complexity.
Another key trend was “friendshoring,” or partnering with like-minded companies. This enables retailers to work with countries and brands that share their values, helping them build resilience and scale operations.
Global supply-chain disruption has impacts on the end customer experience. A more distributed supply chain empowers resilience for smaller brands to create their own networks and avoid the pitfalls of mass shortages.
In today’s competitive retail landscape of blended ecommerce experiences, in-store shopping, and rising consumer expectations, personalization is key.
A key phrase from this year’s conference was “synthetic creativity,” or automated applications that combine customer data and other source material into new arrangements. AI enables new possibilities for personalization—both in-store and online—from product marketing pages and contact center agents to virtual influencers.
AI brings retailers closer to learning what unique experiences their customers are looking for. This process is driven by algorithms based on their lifestyles and current purchases, aiming to predict what people want to buy next, when they want to buy it, and at what price.
6. Employee experience
C-suite executives are focusing on employee experience more than ever, and this is paying huge dividends for the customer experience. With the right digital tools, employees can help customers throughout the buying journey, including finding the correct size, shipping, providing product information, completing the checkout process, and more.
Investment in employee experience was top of mind at NRF. Joe McFarland—executive vice president of stores at Lowe’s—mentioned that after investing in new tools for their associates, they’ve seen a 20% improvement in associate productivity. Cara Sylvester, chief guest experience officer at Target, discussed the importance of looking for ways to make the associate experience easier and reduce friction in their tasks.
Employees who once had to log in to multiple systems and walk to terminals or the back office to perform their jobs now have one simple, intuitive technology on their wrists that allows them to see task lists, search inventory, print prices, view their schedules, and more, leading to increased productivity and more time to interact with customers.
Companies with C-suites that are making strategic investments in the in-store experience are helping their employees be more effective, and they will also see a return on investment through happier customers and increased revenues. These investments include everything from wages and compensation to tools, wellness, upskilling, and reducing friction in daily operations.
7. Retail media networks
Data monetization and collaboration was clearly a priority for retailers attending NRF 2023, utilizing traditional retail media networks (RMNs) and marketplaces like Amazon and Walmart to build in-store, digital commerce-based RMNs with the help of solutions like Stratacache. RMNs allow for new brand formats and off-site platforms to compete with market rivals.
RMNs were all the buzz at NRF, but left more questions than answers for attendees, including:
- “What is the opportunity for my brand?”
- “How might we test and learn?”
- “What partnerships can unlock my first- and second-party data strategy?”
- “What tools and talent are required to execute and deliver on the promises of data monetization?”
As the retail area continues to evolve, Slalom is working alongside our clients to strategize and capitalize on opportunities in the world of customer data. Retail has shown its resilience throughout many challenging periods in history. This year’s NRF highlighted, once again, how companies continue to address changing consumer needs across an increasingly diversified landscape.