January 25, 2019

Shopping as we knew it is over!

Jari Kekkonen

CTO, Customer Experience Management, Tieto

Annual NRF Retail’s Big Show conference was arranged once again in the heart of Manhattan, New York on Jan 13-15. Even if the conference is hosted by U.S. based organization National Retail Foundation (NRF) it gathers tens of thousands of visitors representing retailers, brands, solution providers and other people globally interested in the latest trends, ideas, technologies and business opportunities of retail. The conference together its sideline workshops and meet-ups offer also excellent opportunity for networking and meeting new people across the retail world. For the first timer the NRF can be very confusing because there are so many interesting topics to explore and experience. This was my fourth time in the NRF, so I knew well what to expect and how to get most out of it.

 

We had a total of six people team from Tieto in NRF this time representing all our key Nordic markets. I carried the flag of Finland. The NRF Big Show attracts almost 200 Nordic visitors and this year we also arranged a joint Nordic retail round table and common meet-up in Brooklyn together with Silicon Vikings community and few other business partners. The event was great success and it gathered over 100 people to learn and share experiences with others on selected hot topics such as the future of store and data-driven retail, etc. Indeed, there seems to be a clear need for similar meet-ups also in future and overall need for more regular collaboration between Nordic retailers and brands that are not anymore primarily competing against each other but facing the global competition in full force from many directions.


One of the most anticipated session in the opening day was held by Lee Petterson from WD Partners that shared again his latest extensive consumer research results. Well, Lee boldly stated that the war is over. Alibaba won - physical retail is no longer about the distribution of goods but building brand equity. Nobody should question that anymore. Physical spaces are important, but we should forget a term “store” and find more relevant reasons for people to visit our facilities or malls in future, Petterson argued. We as consumers still want to visit to the brick-and-mortar but for very different reasons than before. Petterson presented interesting findings based on WD Partners study about the most relevant formats, categories and services. Very shortly the top ones seem to be a food hall, farmer’s market, click-and-collect pick-up point and a green space together with sports and health activities. Showroom stores ranked also well. Many other bundled services increased the relevancy of physical visit too. My immediate thought was that many new mall formats in Nordics address quite well these bundled formats and qualities which is quite promising indeed. I think the biggest challenge with many new malls and big retail spaces in Nordics is their weak differentiation from others and often the lack of local flavor consisting of same national retail chains and brands. If you are interested in WD Partner’s study and the details, feel free to contact me.

 

If you have listened to retail trends and D-day speeches in the NRF or digital commerce related conferences few years ago, you probably would have predicted all e-commerce to have consolidated under Amazon and Alibaba by now. These giants have certainly conquered the mass part of the market in many categories. However, it is interesting to see thousands of new so-called micro brands with often direct-to-consumer retail model are emerging every year with very own value proposition, product designs and omni-channel retail formats that addresses very niche lifestyles, personal identities, values, common purpose or social communities combined with high emphasis in customer experience and brand engagement. These micro brands address the growing need for us, consumers, to signal our affiliation with specific communities and shared values. On the other hand, it is an age-old way of expressing identity and signaling belonging to a specific community. What has changed is that the signaling occurs on an internet scale through social media and others digital forums - it is not happening only on local scale anymore. What has also changed is that consumers, particularly many millennials, are spending their money on products not only for the functionality they provide, but also for the meaning and purpose they convey.

Hyper-fragmentation of retail market is the name for this phenomenon, and it was well visible in the NRF but also in New York high streets in general. There are many examples of new micro brands that have emerged to challenge the status quo in many existing categories - not just in apparel which is certainly the most popular one. Brandless and Warby Parker are just few nice examples of these new “kids on the block”. Their founders and CEOs Tina Sharkey by Brandless and Neil Blumenthal by Warby Parker were on the stage during last day of the NRF Big Show sharing their inspiring stories and journey. Very strong customer community involvement was essential part of both business models.

It is interesting to see that on the one hand shopping is moving in a big scale to global online marketplaces like Amazon with endless but mostly commodity offerings and on the other hand the consumer spend is more fragmented accelerated by micro brand boom with strong direct-to-consumer model. These are partly conflicting forces and certainly we have not seen the end game yet. For many incumbent retail chains also in Nordics a strategic collaboration with certain micro brands could open totally new opportunities for fighting against the price and brand erosion in their challenging categories. The acquisition of emerging apparel brand and retailer Bonobos by Walmart last year is one example of this kind of strategic collaboration.

Despite lurking monsters in fog, the tone of voice in the NRF Big Show was clearly more positive than during my last visit (2017) to the NRF. For instance, both main stage afternoon sessions in the opening day - the first one starred by Rodney McMullen as the CEO of Kroger, and the another by Jeremy King as the CTO of Walmart - represented nicely future looking positivity and great insight to innovation initiatives and long term thinking behind these two iconic retail chains. You could feel that both have truly managed to make the elephant dance. It is not either only about agility, but true customer-centricity, braveness and curiosity to learn and experiment from top to down that makes the difference in these turbulent times where visibility in fog is weak. In overall, it was great to see that grocery retail was much better present in the NRF both in booth halls and in main stage sessions.

The exhibition space of the NRF Big Show is huge with its own innovation stage. Indeed, you could easily spend all three days only there if you like. Certain topics in the exhibition area got my special attention - voice commerce, image- and video-based analytics, automated drone-powered shelf visibility management, the latest developments of electronic shelf labels, and the last but not definitely least a vendor drop-shipping as a strategic program. I plan to share my reflections about these too in close future. Stay tuned and meanwhile feel free to contact me for more in-depth learnings from the NRF!

Jari Kekkonen

jari.kekkonen@tieto.com

 

 

 

 

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