Introduction

The Coresight Research team is attending NRF 2023: Retail’s Big Show in New York City during January 15–17, 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 highlights from the second day of the event, framing 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 consumers needs while securing long-term success. In order to brace for headwinds in the coming year, including high inflation and interest rates, the RESET Framework calls for retailers globally to be:

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

Turnout at NRF 2023 (left) versus NRF 2022 (right)
Source: Coresight Research

 

NRF 2023 Day Two: 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 and exercising greater basket fragmentation in the coming year.

During the second day of the conference, Deborah Weinswig, CEO and Founder at Coresight Research, discussed the future growth, utility and benefits of drones to respond to complex challenges in last-mile delivery. We also noted interesting discussion concerning retailers’ shift in primary focus from product to consumer.

Can Drones Solve the Last-Mile Dilemma?

Retailers are increasingly searching for ways to increase supply chain resiliency, particularly after several years of costly and ensnarled supply chains. During the session “But will it fly? The lowdown on drones,” Weinswig explored opportunities in drone delivery with Yariv Bash, CEO and Co-Founder of Flytrex; David Guggina, Executive Vice President of Supply Chain Operations at Walmart; and Harlan Bratcher, Global Business Development Head of JD Fashion. The session covered where and how drones can be used to solve the last-mile dilemma and what the future of drone delivery holds.

Guggina emphasized that Walmart’s drone delivery services are fast, at about 30 minutes, and cater to consumers’ increasing desire for immediate consumption. Although drone delivery is currently still quite expensive, Guggina believes that community hubs for delivery have the potential to greatly drive down these costs.

Bash spoke to the popularity of Flytrex’s drone delivery services, while Harlan highlighted that JD.com’s drone delivery service was particularly popular in China during lockdowns. JD.com was able to deliver through air drones/land drones to make sure people had essential items. The company delivered more than 2.5 million parcels (including medical and food packages) during the pandemic via drone.

Weinswig concluded three main takeaways from the session:

1. Drones will see exponential growth by mid-2024.
2. From a sustainability perspective, drones can help save energy and protect the environment.
3. The “retailization” of drones is happening, with autonomous delivery expanding into the grocery and fashion sectors, as well as to community services such as hospital services.

Weinswig explored opportunities in drone delivery with Bratcher, Guggina and Bash (left to right)
Source: Coresight Research

 

Retailers Shift Focus from Product to Consumer

Retailers are increasingly putting the consumer at the center of their strategies, in order to more successfully respond to consumer demand. Danny Knopp, VP of Core Retail Technology at sportswear and footwear retailer Foot Locker, and Corey Tollefson, President of Worldwide Field Operations at software company Blue Yonder, discussed how Foot Locker’s adoption of technology has transformed the customer experience.

Knopp noted that the transition began with a shift from product-led to consumer-led investment. Foot Locker has invested in technologies that enable it respond to consumers’ needs, building e-commerce, mobile app and digital capabilities through its partnership with Blue Yonder. Blue Yonder enables real-time inventory visibility, which Foot Locker extended to its customers. The retailer also leveraged real-time store data to improve its delivery capabilities, offering BOPIS (buy online, pick up in-store) and ship-to-home.

Foot Locker is now experimenting with larger-format concept stores, which offer a greater product assortment of sneakers and apparel and feature dedicated areas to performance wear, athletic apparel and accessories. These stores also have more digital content to increase shopper engagement.

Knopp (left) and Tollefson (right) discuss the success of the Foot Locker x Blue Yonder partnership
Source: Coresight Research

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 day two at NRF, as retailers highlighted how they expected emerging technologies, such as voice, to become an integral feature in immersive shopping experiences.

Voice Tech Is Transforming Retail Engagement

Increasing competition, among other challenges, is causing retailers to search for new features and solutions to increase engagement with consumers. The session titled “Voice in retail: it speaks, it listens, it’s impacting our real world businesses” how “voice” is ubiquitous and its incorporation as an engaging and interactive feature in retail is part of a natural evolution that retailers should embrace.

Vicki Cantrell, CEO of Vendors in Partnership, shared that already, “90 million people daily are 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 AI (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.

During the session, the panelists—which also included Donald Buckley, Co-Head of Lullaboo Studios and Founder of Treehouse Consulting, and Mirko Soul, Head of Innovation at Schwarz Digital—discussed their predictions for data collection with voice and to offer relevant store responses as a new marketing channel. With “the consumer in the store, returning to malls—not the malls of old but new malls containing lifestyle experiences”—Cantrell sees voice as a promising tool for retailers to provide a more immersive shopping experience.

Left to right: Cantrell, Allison, Buckley and Soul
Source: Coresight Research

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. During the second day of NRF, we heard executives share how their companies are prioritizing inclusion and sustainability as part of efforts to become leading retailers in 2023.

Inclusion and Diversity Are Must-Haves To Be a Leading Retailer

An inclusive, flexible and diverse company culture is crucial to attracting top talent and facilitating a positive and productive working environment. At NRF, Brian Cornell, CEO at Target, and multiple female Target discussed the company’s 15-year history of implementing DEI (diversity, equity and inclusion) strategies, putting people at the core to ensure that employees feel supported. Target has demonstrated that inclusion and diversity are now must-haves for retail companies. The retailer’s DEI initiatives include supporting children’s education and the Black community.

Sustainability Initiatives Need Greater Automation

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

Lawrence and Sanchez discussed the need for enhanced automation when it comes to laws and regulations related to sustainability—for example, EU (European Union) proposals on recycled plastic in packaging. Although these are beneficial, retailers don’t want such regulations to affect how products reach the consumer. In addition, the EU has proposed and, in some cases, already passed legislation that requires apparel and textile manufacturers to provide more transparency, which could be challenging despite the positive intentions. Retailers see a need to introduce greater automation here 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 retailers be “expansive” in 2023 by identifying and pursuing alternative revenue streams. This was a key theme during day two at NRF, which highlighted areas of growth in omnichannel, overseas markets and the marketplace business model.

Retailers’ Omnichannel Capabilities Have Room for Improvement

“Omnichannel” is not a new buzz word, but many retailers still lag far behind in omnichannel capabilities, hurting their revenue and growth. Kathy Kimple, Executive Director at OSF Digital, spoke to several retail executives about key trends in omnichannel retail and where retailers can improve their services—including Matt Blonder, President of Global E-Commerce at Wolverine Worldwide; Rob Garf, GM & VP at Salesforce; and Kacey Sharrett, VP of E-Commerce at GoPro.

Kimple also shared several insightful findings from OSF Digital’s Omnichannel Retail Index:

1. There is high adoption of best practices in search: 33% of retailers have an accessibility link on their homepage and 31% show customer service information to promote assistance.
2. Product listing pages still lack useful features: only 28% allow shoppers to filter by curbside pickup.
3. Only 24% of retailers offer back in stock notifications, which hurts customer conversion. “Back-in-stock” features are helpful for time-of-need, budget-based consumers who are willing to wait to purchase products.
4. Removing friction during purchase should be top-of-mind: only 40% have save-for-later functionality, and only 33% have a section for wish list or saved list items. In addition, the average number of checkout fields that need to be filled out is 11–12, which is far too many.
5. Better customer service can be a significant revenue booster, as it provides a channel to advocate for the brand and products, leading to higher sales and loyal customers.
6. BOPIS is table stakes: although curbside pickup has slowed, it is still a best practice, yet only 13% of retailers offer curbside returns.
7. Sustainability is becoming a practical program.

Left to right: Kimple, Garf, Blonder and Sharrett
Source: Coresight Research

Considerations for Online Marketplace Expansion

During a session titled, “Marketplace, dropship, or hybrid: strategies for multi-vendor e-commerce expansion produced by McFadyen Digital,” Tom McFadyen, CEO and Author at McFadyen Digital, walked through the company’s “5 Levels of Marketplace Maturity Model (MMM),” which assesses an e-commerce operator or marketplace’s maturity or readiness level (see the image below).

Despite the growing popularity of global online marketplaces, the panelists also discussed considerations that businesses should undertake when expanding and implementing online marketplace capabilities, covering category expansion, vendors’ time-to-market and markdown costs.

McFadyen Digital’s “5 Levels of Marketplace Maturity Model (MMM)”
Source: Coresight Research

 

McFadyen (left) discusses online market expansion with Janae Pasquinelli, Senior Director of Digital Merchandising at Walgreens
Source: Coresight Research

Global Luxury Continues To Look for Success in China

One of the ways in which brands and retailers can be “expansive” is to seek opportunities in overseas markets. In a session titled, “Re-imagining online holiday shopping: how luxury brands are innovating holiday shopping experiences,” Renee Klein, Vice President of Global Digital Experience and Customer Marketing at Coach, discussed with Mei Chen, Director Fashion and Luxury North America, UK, and Northern Europe – Globalization at Alibaba, how Coach has partnered with Alibaba’s Tmall Luxury Pavilion to successfully reach young digital savvy consumers in China.

Coach was a pioneering brand on Tmall Luxury Pavilion, which launched in 2017, as it sought to connect to hundreds of millions of Chinese consumers. Tmall Luxury Pavilion served as a useful partner in a foreign market, assisting Coach with using technology, understanding Tmall Luxury’s various consumers segments, and product and marketing testing to grow quickly on the platform.

Chen explained that holidays are particularly important shopping occasions in China, making them an important time to connect with Gen Z consumers, either by launching limited-edition products or partnering with influencers for special brand campaigns, among other activities.

The panelists concluded with an outlook for luxury in China in 2023, which they agreed usually serves as a looking glass into the future for the West. They predicted that luxury brands would upgrade and elevate digital value-added services, reinforcing the concept of luxury as a lifestyle.

Tmall Luxury’s six strategic consumer segments
Source: Coresight Research

 

Left to right: Sheena Butler-Young, Senior Correspondent at The Business of Fashion, Klein and Chen
Source: Coresight Research

Tech-Enabled

Coresight Research defines “tech-enabled” as the deployment of technology across business units to increase business productivity and customer conversion and retention. In particular, we expect retailers in 2023 to leverage technology to improve inventory management and empower store associates to deliver higher-quality retail experiences.

How Retailers Can Transform Data into Actionable Insights

By now, retailers are aware that data can be a powerful resource, but data are not useful without effective analysis. The session “The devil’s in the data: AI-driven allocation in a world of constant change, produced by Impact Analytics” explored how retailers can leverage technology solutions to turn data into actionable insights for successful allocation and supply chain management. The participating executives were Prashant Agrawal, CEO and Founder of Impact Analytics; Jeremy King, Senior Director of North America Allocation at Coach; and Brian Price, VP of BI & Strategic Data Insights at PVH Corp.

King discussed Coach’s challenges with allocation, explaining that the company has many different distribution locations across the US. He emphasized that technologies such as AI and ML (machine learning) are not automatically useful on their own. Agrawal highlighted that humans need to be integrated into these technologies. Impact Analytics is able to turn data collected into insights through its cloud-based product and constantly trains its models in order to help retailers understand the location and movement of their products.

Executives from Coach and Impact Analytics discuss the importance of data analytics in generating actionable insight
Source: Coresight Research

Leveraging Technology To Refine Consumer Touchpoints

With increasing competition and brisk economic headwinds, retailers recognize the importance of understanding and optimizing the entire customer journey. During a session titled “Gain key insights into how retail leaders are driving growth and innovation, produced by SAP,” panelists considered how technology can enrich every touchpoint in the customer journey.

Linh Calhoun, CMO at china, crystal and silverware retailer Replacements, explained that understanding customers’ behavior patterns and individual interests has enabled Replacements to create a more seamless customer journey.

Samir Desai, Chief Digital and Technology Officer at Abercrombie & Fitch, shared an interesting example of how Abercrombie & Fitch is leveraging technology to ameliorate pain points in the customer journey: in October 2022, the retailer launched Share2Pay, enabling younger consumers to share their shopping carts with parents or caregivers to approve and complete their orders. This aims to reduce idle shopping carts and potential lost orders, as teenagers would often need to wait to be able to show their parents their carts as they are not financially independent.

Left to right: Kristin Howell, Global Vice President of Retail Marketing & Merchandising at SAP, Desai and Calhoun
Source: Coresight Research