NRF 2019 Day 2: Challenging Old Paradigms
The Coresight Research team was on hand for the second day of the National Retail Federation’s (NRF) Big Show in New York City. These are some of the things we found most interesting on day 2:
- Artificial intelligence (AI) is helping retailers across the entire supply chain.
- Bricks and mortar still matter, even in the digital age.
- Retail talent is critical.
- Target CEO Brian Cornell noted four keys to success in retail.
- AI can be used to insert virtual products in media, in a personalized way.
AI is helping retailers across the entire supply chain
Coresight Research Founder and CEO Deborah Weinswig discussed AI in retail with experts from Guess, JD and Markable in a panel discussion called The Intelligence Revolution is Here. Weinswig discussed the massive opportunity in AI in a range of areas from communicating with customers, to optimizing prices and products, to managing inventory and delivering experiential retail.
“AI will become retail’s go-to tech in 2019,” said Weinswig. Finance was one of the biggest AI users, but retail is catching up: In the near term, it will be retailers who have the highest AI adoption rate. With AI, pricing and promotions can be individually targeted, and companies can reduce friction in brick-and-mortar retail.
Edward Park, who leads North America Retail, digital, allocation and logistics at the Guess headquarters, shared AI applications at Guess stores and presented Guess’s concept retail store. The company collaborated with Alibaba, and takes data and process learnings from Inditex and customer service and selling skills from Guess to help to elevate the customer shopping experience. Park played a video of its concept store in Hong Kong in which Guess put smart mirrors in the fitting rooms, which provide more information about the clothes customers are trying on. On the touchscreen mirror, customers choose color and size and then store associates will deliver the item to the fitting room. Guess is taking incremental steps, and in the last three years it has put iPads in the hands of associates in all stores.
Dr Hui Cheng, head of JD-X robotics research center in Silicon Valley, showcased JD’s robotic factory in Shanghai. At JD, AI is not only the brain, but also the eye, the hands and even the heart of retail.
Joy Tang, CEO of Markable AI, presented AI-driven object recognition capability designated for online marketing. AI can recognize products, show similar products, serve ideas up to customers and enable shopping within a video. The algorithm identifies items in a video, so when a consumer clicks “pause,” an advertisement pops up for a product similar to what the character is wearing on the frame. The items for sale could come from different retailers, and the algorithm looks for similarity and provides recommendations within the video frame. Tang recommended that retailers should take baby steps toward in-house AI development and think about technology as an iterative change in a company’s culture.
Bricks and mortar still matter, even in the digital age
Target’s same-store sales growth has been averaging about 5% in recent years — but online sales have been growing over 25% a year. You might think that means online is the future, and physical stores matter less and less. But Brian Cornell, Target CEO, says that Target’s biggest single competitive advantage is its extensive network of stores which it can use to fulfill digital orders.
Aaron Sanandres, Cofounder and CEO of UNTUCKit, a men’s brand that began as an online business in 2010 but now has 51 physical stores, said that he initially launched UNTUCKit online. He’s now opening stores while others are closing stores. “Customers want to see the products and try them on,” said Sanandres. “We found customers spend more when they spend across multiple channels.”
When asked about direct-to-consumer brands moving from online to offline, Coresight Research’s Weinswig predicted:
The world is changing. We’re talking boundaryless retail, New Retail, retail 2.0, and online stores are moving to physical spaces. 2019 will continue to be the year of collaborations and partnerships, even with competitors. With Kohl’s partnering with Amazon, Macy’s partnering with B8ta, retailers are continuing to collaborate to provide great prices and experiences which will be better for all of us. There will be more announcements to come in 2019.
Retail talent is a critical component of physical retail
Tim Brown, Cofounder Allbirds, said they didn’t’ know how hard the move from digital to physical retail would be. Brown spoke to the importance of customer service for the business and making sales, yet the unpredictability and the variability of it. He added examples including, “if a store associate is having a bad day, or if the weather is terrible in a certain area, certain standards of excellence may not be met.” He said Allbirds tries to hire the right people from the start, train them, and set expectations of what a great service experience looks like, but noted that it is challenging.
What is the one thing most retailers overlook? Marie Driscoll, Managing Director, Luxury and Fashion at Coresight Research, echoed the importance of the store associate. When store associates are passionate and care about what they are selling and suggest, “Have you thought about this?” or “Have you seen this?” That is really exciting and meaningful to customers. Driscoll added that it is critical to hire associates who are passionate about what they are selling. If they are interested in beauty, keeping up with the latest beauty products and trends will come naturally.
Keys to success for the future of retail
Target CEO Brian Cornell identified four keys to success for the future of retail:
- Always start with the consumer and put them in the middle of the decision. There will always be a next generation of customers.
- Be willing to reinvest in the business — today and tomorrow.
- Be willing to reinvest in stores — technology, fulfillment, and teams.
- Be willing to disrupt yourself.
AI is starting to realize its potential with personalized media features
On the panel on Experiential Disruption: How Combinatorial Intelligence Enables Differentiation Through Precise Personalization, Rich Chavie, CEO of EnterWorks, talked about some of the cool things AI can do for retail:
We are at an exciting time, talking about the intersection of business of science. Today, AI capabilities are being used in retail, and even in the entertainment industry to make the industry faster, smarter, and more personalized.
Nick Hendra, Executive Director, Head of New Business Development, RyFF, showed one great example of how AI technology is being put to use: His company can place virtual objects into commercials and films, described as “dynamic brand insertion.” Companies can insert their products or brands so consumers view products in a personalized way.