NRF 2023: Retail’s Big Show Wrap-Up—Business Agility, Purpose, Technology and Personalization Characterize Retail’s Future

Introduction

The Coresight Research team attended NRF 2023: Retail’s Big Show in New York City, held from January 15 to 17, 2023. NRF is an annual event hosted by the National Retail Federation, bringing together retail technology innovators, industry experts, brands and retailers to participate in panel discussions, present on key topics in retail and showcase their solutions.

In this report, we present our top 10 key insights from the event. We frame our insights around the Coresight Research RESET framework.

The Coresight Research RESET Framework

As part of Coresight Research’s Retail 2023 series, we released our Global Retail in 2023: Five Forces and Five Trends report, which reiterates our RESET framework for retailers to respond to short-term consumer needs while securing long-term success. To brace for headwinds in the coming year, including high inflation and interest rates, the RESET Framework calls for retailers globally to be:

1. Responsive… to accelerated structural frugality
2. Engaging… to drive long-term loyalty
3. Socially Responsible… as a buttress against trading down
4. Expansive… to pursue alternative revenue opportunities
5. Tech-Enabled… to empower a productivity push

Coresight Research Insights

Responsive

As part of our RESET framework, Coresight Research defines “responsive” as being tuned in to consumers’ shifting needs and expectations. “Responsive” encompasses the strategic agility that retailers need in the current uncertain and volatile macroeconomic environment as we expect to see more consumers trading down in the coming year.

Inflation and Economic Uncertainties Drive Consumers To Become More Cautious and Value-Focused

Consumers are more cautious and value-focused because of economic uncertainties including labor market changes, volatile interest rates, the inflationary costs of living and goods, geopolitical conflict and the consequent uncertain future GDP growth. They are looking for less expensive options. This presents opportunities for private labels and alternative selling models such as resale. Product ranges and assortment will increasingly become important for companies to gain optimal margin mix.

Christina Hennington, EVP and Chief Growth Officer at Target, discussed the company’s opportunities in the session “Retail redefined: 2023 and beyond.” Target currently boasts a $30 billion private-label business, which it believes will continue to be important in the future.

Resale, especially fashion (accessories and apparel) resale, is a hot spot that will continue to gain share of the retail industry in the upcoming years. Coresight Research is seeing signs of growing consumer demand for fashion resale. We believe that the resale trend will continue to grow alongside consumers’ increasing awareness of sustainability and demand for pre-owned luxury. The US fashion resale market has evolved from a single-billion-dollar market in 2008 to a $28.1 billion market in 2022, Coresight Research estimates. We expect the market to continue its momentum in 2023 and 2024, with year-over-year growth of 14.6% and 13.0%, respectively.

Paige Thomas, President and CEO of Saks OFF 5TH, discussed the company’s expansion of its fashion resale business in the keynote session “Off-price luxury writes path to success in uncertain times.” Thomas stated that 80% of customers want Saks OFF 5TH to participate in resale and the company will continue to leverage partnerships to gain market share in the space. Thomas sees its partnership with Rent the Runway in 2022 as a success and believes that bringing in additional partners in 2023 will be a huge win. Some popular categories she sees in the fashion resale space include handbags, sunglasses and apparel. Thomas also stated that the first half of 2023 will be more challenging than the second half and that we will see more promotions due to excess inventories. She is optimistic about the fashion resale market and pointed out that value proposition is critical in how brands show up in the market.

Brands and Retailers from Groceries to Fashion Are Improving Supply Chain Agility and Transparency

From demand forecasting to inventory management and last-mile delivery, we are seeing brands and retailers focus on improving supply chain agility and transparency to weather disruptions.

On the demand side, companies including Albertsons, Chipotle and H-E-B are working with technology partners such as Planalytics to forecast demand, report performance, understand in-store replenishment and make progress in other areas such as digital marketing. Companies want to understand the factors that impact traffic, conversion and sales so they are using data to examine various factors. Tyler Scott, Senior Director of Demand Planning and Retail Support at Albertsons, used solutions from Planalytics to find out that peanut butter can have incremental sales based on weather.

In the field of inventory management, we are seeing companies try to improve visibility and agility. Inventory management and allocation is getting smarter with the assistance of machine learning. But humans still do and should play an important role in the process, especially when facing factors such as seasonality that requires human judgement and projection, according to Jeremy King, Senior Director of North America Allocation at Coach and Brian Price, VP of BI and Strategic Data Insights at PVH Corporation. They both agreed that flexibility is crucial for inventories to move across their ecosystems with accuracy and visibility.

In the field of last-mile delivery, we are seeing the rise of drones. Deborah Weinswig, CEO and Founder of Coresight Research, moderated a panel discussion on drones with Yariv Bash, CEO and Founder of Flytrex, Harlan Bratcher, Global Business Development Head of JD Fashion at JD.com and David Guggina, Executive VP of Supply Chain Operations at Walmart. Weinswig offered three key takeaways. First, drones will see exponential growth by mid-2024. Second, from a sustainability perspective, drones can help save energy and protect the environment. Third, drone retailization is happening now in grocery and fashion and is extending to community services such as hospital services. Guggina disclosed that Walmart is working with partners to take returns back through drones. He also pointed out that the costs of drones can be brought down substantially if usage scales and is applied in alternative services such as healthcare.

Engaging

Coresight Research recommends that retailers be “engaging” in 2023 by providing shoppers with new experiences that are interactive, social and full of discovery. This was a key concept during NRF 2023, as retailers highlighted how they expected emerging technologies, such as voice, to become an integral feature in immersive shopping experiences.

Voice-Supported Commerce and Livestreaming Represent New Engagement Opportunities

Increasing market competition and consumer demand for interesting and engaging experiences are driving brands and retailers to look for new solutions such as voice-supported commerce and livestreaming.

In the session titled “Voice in retail: It speaks, it listens, it’s impacting our real world businesses,” Vicki Cantrell, CEO of Vendors in Partnership, shared that 90 million people daily are already using voice in the US, and it is three times faster than typing. The use case for voice expands far beyond digital assistants such as Alexa and Siri, generating significant marketing opportunities powered by its potential for personalized interactions. Glenn Allison, VP of Customer-Facing Applications at Tractor Supply Co, discussed how Tractor Supply is already leveraging voice in its mobile app by integrating natural language with artificial intelligence to enable its customers to find products quickly. Tractor Supply leverages voice for assisted curbside pickup, notifying a team member to meet the customer on arrival. This tool enhances convenience and efficiency, reducing the time of curbside pickup from seven minutes to a few seconds, according to Allison. Tractor Supply is also leveraging voice in stores, changing the role of the store associate, assisting with training, onboarding and sales plans, and even introducing gamification into these tasks.

Brands and retailers, especially those in the beauty sector, are leveraging livestreaming to create more engaging experiences for consumers. During a session titled “Beauty’s blush with technology,” featuring Nicolette Bosco, VP, Divisional Business Manager Beauty at Macy’s, Ophelia Ceradini, VP, Digital Technology and Innovation at The Estée Lauder Companies, and Kelly Kovack, CEO and Founder of BeautyMatter, the executives shared how livestreaming is being used to create engaging experiences.

The rise of livestreaming e-commerce in the US is accelerating. We expect more brands and retailers to use livestreaming as a key promotional or sales channel moving forward, particularly as consumers have increasingly shifted online. We estimate that the US livestreaming e-commerce market will grow from $20 billion in 2022 to $68 billion in 2026—at which point, it will account for over 5% of total e-commerce sales.

Brands and Retailers Are Reimagining Retail in the Metaverse

The metaverse is set for growth and retail’s role will grow increasingly prominent. Although retail in the metaverse is not yet a big earner compared to traditional retail, using the metaverse as a tool to redirect attention to actual goods is adding value to brands and retailers. Companies can establish their presence in the metaverse early to capitalize on user traffic.

Anish Melwani, Chairman and CEO of LVMH for North America, took to the stage at NRF to discuss luxury’s engagement with technology and Web 3.0, and how this engagement reinforces the heritage and DNA of the brands and the Maisons at LVMH. Tiffany’s 250-piece Cryptopunk NFTiff collection, for example, is one of the most successful NFT projects, generating $12.5 million in less than a year.

Ophelia Ceradini, VP of Digital Technology and Innovation at The Estée Lauder Companies, stated in her session that Estée Lauder has created pilot projects to see how consumers interact with the metaverse.

Jana Schuster, VP of Digital Innovation and Ecommerce of The Honest Company, also disclosed that the company is looking to build more experiential retail in metaverse.

Socially Responsible

Coresight Research has identified multiple ways in which brands can strengthen brand value by investing in socially responsible markets and initiatives, such as sustainability, wellness, inclusivity and more. Companies should prioritize inclusion and sustainability as part of efforts to become leading brands or retailers in 2023.

Diversity, Equity and Inclusion (DEI) Must Be Integrated into Organizations

DEI must be integrated into organizations to promote fair treatment and care for people, including populations who have historically been underrepresented because of their background, identity and disability. Leaders of retail businesses talked about their visions of DEI and what companies can do to empower their communities at NRF 2023.

Brian Cornell, Board Chairman and CEO of Target, brought together a group of colleagues to talk about inclusivity and community. The leadership team touched upon the importance of building a culture of care and the core value of inclusivity in everyday activities instead of just moments.

Hamdi Ulukata, CEO and Founder of Chobani, shared his story of hiring refugees in the keynote session “The win-win of embracing refugee talent in business” and disclosed that he saw more innovation, creativity, loyalty and work ethics in the whole workforce after hiring refugees. He said that hiring refugees is a win-win action.

Sustainability Is a Must-Have To Be a Leading Brand or Retailer

The environmental sustainability and sustainable business practices of consumer-facing industries have material implications on a firm’s value, its opportunities and its relationships with consumers. It is important that brands and retailers turn sustainability commitments into real sustainable practices.

Amitabh Mall, Chief Analytics Officer from Woolworths Group, shared that he sees sustainability as an opportunity to create long-term value for its shareholders through innovation that will deliver benefits for decades to come.

Morgan Lawrence, Program Manager – PIM (product information management) at Urban Outfitters, and Miriam Molino Sánchez, Head of Global Retail Practice at Stibo Systems, discussed how sustainability has become integral to the company’s brands, reflecting the evolving values of consumers and retailers. For example, Urban Outfitters offers its Nuuly clothing rental subscription service and Urban Renewal line of vintage, recycled and reworked clothing.

Lawrence and Sanchez discussed the need for integrating sustainability with technologies. Brands and retailers see a need to introduce greater automation so that sustainability initiatives—including enhanced transparency—do not slow down services.

• Read more Coresight Research coverage of sustainability in retail.

Expansive

Coresight Research recommends that brands and retailers be “expansive” in 2023 by identifying and pursuing alternative revenue streams. This was also a key theme during NRF, which highlighted areas of growth in omnichannel and the marketplace business model.

Omnichannel Presents a Resilient Business Opportunity

Omnichannel shopping trends, such as researching online and purchasing offline and vice versa, continue to prevail among today’s consumers. The shopping journey is becoming more complex with multiple touch points, forcing brands and retailers to rethink how they are engaging with customers. Both offline- and online-focused brands and retailers are making efforts to firm up their offerings in their respective primary channels. In addition, they are also making significant investments into building an omnichannel presence to meet customer expectations. It is important to note that omnichannel is different from multichannel. In multichannel retail, online and offline channels typically operate as independent silos, while omnichannel retail offers a seamless experience and accounts for spillover between channels.

In the session “Connected commerce: Building a customer experience to survive and thrive,” Paige Fitzgerald, General Manager, Business Strategy and Partnerships at Afterpay and Cash App highlighted the business opportunity with expanded omnichannel capabilities, sharing that omnichannel customers spend three times more than single-channel customers. Roshan Jhunja, General Manager at Square for Retail and Arianne Parisi, SVP and Chief Digital Officer at JD North America, pointed out that brands and retailers should continue to experiment with new channels, while also trying to better understand customers’ preferences in order to successfully pursue omnichannel experiences.

Jeff Gennette, Chairman and CEO of Macy’s Inc., referred to the importance of capturing the demand of omnichannel consumers. He mentioned that offline visits, sales and experiences should be able to drive online sales. Macy’s is adjusting its physical store plans, including closing big department stores and opening small off-mall locations.

Nicolette Bosco, VP and Divisional Business Manager for Beauty Macy’s, shared that the company is using multi-channels including TikTok, Instagram, Facebook, physical stores and e-commerce stores to engage customers and create personalized experiences such as styling sessions to increase conversions.

Rodney McMullen, Chairman and CEO of The Kroger Company, addressed the importance of creating a seamless omnichannel shopping experience for customers. He sees more consumers using the Kroger app to prepare a shopping list, order groceries online and download digital coupons which can be used in stores as well. He mentioned that consumers don’t talk about online on in-store, but they care what’s easy for them at a particular point of time.

Marketplace Strategy and Drop-Ship Models Enable Business Agility and Expansion

Brands and retailers are using alternative models such as marketplaces and drop-ship models to achieve more agility and uncover business opportunities. The major benefit of using these two models is the lower inventories and carrying costs compared to the traditional first-party retail model.

In the drop-shipping model, where retailers sell products without keeping them in stock, brands can increase profit margins (compared to products bought and stored by retailers) and can test new products. We see drop-shipping as a good model for luxury brands as they typically generate higher inventory management and shipping costs.

The marketplace model will outperform the drop-ship and first-party retail model because its scale and revenue can grow exponentially in the long term, according to Tom McFadyen, CEO and Author at McFadyen Digital. Despite the growing popularity of marketplaces, Janae Pasquinelli, Senior Director of Digital Merchandising at Walgreens, discussed considerations that businesses should undertake when expanding and implementing online marketplace capabilities, covering category expansion, vendors’ time-to-market and markdown costs.

Tech-Enabled

Coresight Research defines “tech-enabled” as the deployment of technology across business units to increase business productivity and customer conversion and retention. We expect retailers in 2023 to leverage technology to empower everything from marketing to sales to returns.

Data Underlies Everything, Powering Analytics for Decision-Making

In five to seven years, data in the cloud can strengthen brands’ and retailers’ abilities to understand customers and business across every perspective including sales, marketing, inventories, logistics and more according to Weinswig, who moderated the session “Creating a data-driven culture of innovation at Woolworths Group.” She also pointed out that the need for omnichannel is driving the growth of analytics, which fuels top-line growth and growth of shareholder equity.

Brad Banducci, CEO and Managing Director of Woolworths Group, said that consumers are becoming savvier and it is vital that brands and retailers understand customer data to identify what they buy, where they buy and why they subscribe or unsubscribe. Amitabh Mall, Chief Analytics Officer of Woolworths Group, said that data is the core of everything. Advanced analytics roadmaps (from customers to merchandising to store operations to supply chain and customer support) are catalyst for creating success.

From Marketing to Sales to Returns, Technology Helps Drive Personalization and Customer Conversion

Brands and retailers hammered home the importance of personalization across categories, retail formats and more.

Sean Turner, CEO and Co-Founder of Swiftly, discussed the benefits of leveraging digital tools to provide a personalized shopping experience across channels, driving customer engagement and enabling “omnishoppers.” Turner shared some insightful statistics, including that personalized experiences capture 48% more of customers’ spend if personalization is done well and that 82% of in-store purchases are influenced by online channels, long before a shopper comes into the store.

Art Sebastian, VP of Digital at Casey’s, spoke about the advantages of customer data platforms (CDPs), such as Salesforce’s Genie Customer Data Cloud, which organizes data into one unified stream that can be augmented and added to, enabling Casey’s to achieve better conversion and loyalty. Sebastian emphasized the importance of retailers’ agility, stating that personalization should happen in real time.

Christina Hennington, EVP and Chief Growth Officer of Target, hopes to be able to deepen connections with its guests, including incremental promotions, tailored communications and a more personalized digital experience.

Al Lettera, SVP of IT at Tractor Supply, discussed how in-store technology is helping Tractor Supply provide its customers with more personalized in-store shopping experiences, such as by helping consumers understand what they are looking at and providing higher-level product insights/attributes and description to support purchase decisions.

During “Winning over your customer at every touchpoint of the shopping journey, produced by Riskified,” we heard from Shani Gadot-Klinger, VP of Customer Growth at Riskified, about the important of frictionless, secure checkout as well as a generous and tailored refunds and returns policies. Gadot-Klinger recommended that retailers tailor their returns policies by being more accommodating to more loyal customers, as this can increase customer retention.

What We Think

There are three pillars of growth strategies brands and retailers can adopt to fuel future growth. First, as consumers are becoming more financially focused and savvy, brands and retailers should meet them through multiple channels and offer seamless, engaging and personalized shopping experiences. Technologies such as analytics, voice commerce and livestreaming can help brands and retailers realize their visions. Second, businesses need to improve agility, including owning flexible business models, improving supply chain transparency and resiliency and powering both offline and online channels to respond to potential disruptions. Third, purpose matters. Brands and retailers should include diversity, inclusivity, equity and sustainability in their agendas and care for employees, especially store associates, to foster a community with more stability and motivation