I’ve just been at the NRF ‘Big Show’ along with 35,000 other visitors and what a show it was. As the curtain drops for another year it's a great chance to reflect on the conversations had and how the show differed from last year. It was probably the biggest NRF that I have been at, and there was a real buzz and lots of energy around the show.
For me, the overriding state of mind was one of optimism coupled with a real pragmatism about the future of the industry, particularly for those businesses who have many physical stores, rather than the bulk of their sales coming from digital channels. Many spoke of making greater investments in technology and seeing a clear way that this will improve their businesses. But also applying the rationale that there is a degree of ‘foundation’ work that must be undertaken to make that a reality. As one person put it to me: "We’re doing great at school, but if we're going to make the A Grade we can’t just take the tests, we also need to get our homework turned in on time."
There were three key takeaways from the show for me: firstly, the basics are more important than ever before; personalisation must evolve; and finally, new technologies are making innovation even more exciting.
Back to basics
Retailers who want to win need to get back to retail basics, which is not to say it’s easy, but fundamentally what worked 100 years ago is still the secret of success today. First, know your customers and the products they want; second, offer a differentiated and curated assortment of products that keep customers interested and reflect their lifestyle; finally, make sure pricing is in line with the value of your brand promise and product offering.
Asked, anyone working in retail will claim they have the basics covered, but what we have seen in recent years is a narrowing as retailers choose to be more risk averse and index themselves limited criteria and emulate each other. Some retailers are allowing themselves to become commoditised and that makes them easy targets to undermine. I have certainly seen examples where this has been fuelled by analytics focused on achieving short-term gains, leading to trade-off decisions that have weakened the retailer in the long-term.
Reversing that narrowing has become so important, because customer delight is back at the centre of the retail experience – exactly what the basics are about achieving. Critically though, there has been an evolution, and that delight must be delivered cross-channel, moving seamlessly between devices and locations, whether online or offline. Omnichannel has been the talk of the town for years, but seamless cross-channel is its rightful successor.
Lots of talk about personalisation – but is it working?
Even though retailers claim to personalise, mass promotions still make up 30-40% of revenue for many. Consumers are targeted because of a previous purchase – understanding them was not the starting point for the promotion, it was the end point. Many consumers simply file those emails until they are ready to buy, then look for the voucher codes that are still valid! Turning this on its head is the key to driving effective personalisation: merchandising departments who focus on product promotion, and marketing departments who generate customer promotions, need to work more closely together in terms of planning, processes and data sharing.
New technologies are making innovation exciting
There was a great deal of exciting technology at NRF this year, much of it addressing the earlier point made about cross-channel. Technologies such as predictive analytics and artificial intelligence are often seen as internal – that is they are used to aid buying, market research or management reporting – however, this is now making its way in to consumer-based apps, such as those using image recognition to allow a consumer to find and purchase a product by simply photographing it on their smartphone.
As with any trade show, there are many predictions about growth and how the market will evolve. But it was clear to me that companies are moving from talking about the need to change, and how they innovate, to having a better understanding of the work they need to undertake to get there. Privately, many admitted the relentless focus on quarterly targets, and year-on-year comparisons makes it very hard to jump off the roller coaster and think longer term. The daunting prospect of moving forward still lies ahead of many retailers because they perceive projects as a huge investment, with payoff many years away. But that doesn’t have to be the case, good planning can bring quick wins that directly improve margins or efficiency.
Talking the talk is the easy part, it will be fascinating to catch up with retailers next year and see if they have started to move the needle.
Channie Mize is the Senior Vice President & Global Sector General Manager for Periscope® By McKinsey. In this role, she is responsible for ensuring success of retail clients in using Periscope and for driving the solutions’ vision to address current and future needs of the dynamically changing retail landscape. Channie is a leader who has “been there and done that” before with more than 15 years of experience in retail.