Crowds, Big Names,Optimism
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T he 102nd Annual NRF Convention & EXPO was NRF’s largest ever, with some 27,000 attendees from all over the United States and countries around the world. In his address prior to keynote speaker Kofi Annan’s presentation, NRF president and CEO Matthew R. Shay noted the federation’s recently released Annual Report was the best “we’ve ever done because it tells the story of the best year we’ve ever had. We’re starting to get people’s attention – and fortunately, for all the right reasons.” In sharing highlights with the audience, Shay said NRF has never been in a stronger financial position. “We finished last year on budget; in fact, we beat our budget last year, thanks in large part to conferences and programs like this one, which continue to attract new attendees, supporting the NRF financially while delivering tremendous value to our members.” Membership in the NRF, Shay noted, continues to expand. The organization added 1,000 new members in 2012, bringing total membership to an all-time high of 9,150, drawn from all 50 states and 36 countries. Shay also spoke about NRF’s efforts in Washington on behalf of its members, as well as a public relations campaign, “Retail Equals Careers, Community, and Innovation,” a follow-on to the “Retail Means Jobs” effort launched in 2011. Walmart CEO Vows Jobs for Vets, Greater Domestic Sourcing During his keynote presentation at Retail’s BIG Show, Walmart U.S. president and CEO Bill Simon highlighted his company’s efforts to support good jobs and shore up U.S. manufacturers. Among the initiatives he announced: hiring a projected 100,000 vets over the next five years by offering jobs to anyone who wants one within 12 months of honorable discharge, and purchasing an additional $50 billion in U.S.-made products over the next decade.
“Today after 10 years of war, there’s a new group of men and women ready to help write the next chapter of American prosperity,” said the 25-year veteran of the U.S. Navy and Navy Reserve. “Sadly, too many of those who fought for us abroad now find themselves fighting for a job when they get home…. They’ve given us a land of freedom and it’s our responsibility to give them a land of possibilities.”
Veterans, he said, are typically quick learners, team players and disciplined workers, and “We need that in our business, in our industry and in our country today more than ever.”
As for domestic manufacturing, Walmart approaches the issue on two fronts: increasing what’s bought in the U.S. (Simon said despite misconceptions, about two-thirds of what the company spends on products for the U.S. is made, sourced or grown here), as well as helping onshore U.S. production in high-potential areas.
“I hope again that many of you will join us in this effort, because our work is only the start,” he said. “We think we can get to $50 billion on our own, but… if we as an industry set our sights higher, we can drive $500 billion … in new American-manufactured purchases over the next 10 years. Folks, that’s what an American renewal looks like.”
Simon also charged the crowd with doing a better job of conveying the opportunities retail presents. “Everything I’m saying here is built on one conviction: Retail jobs are good jobs, and retail plays a critical role in the economy. No matter what you’re looking for, retail has a place for you…. This industry is the greatest engine of opportunity in the United States today.”
Global Politics, Participation Coalesce in Keynote
The twin hopes of peace and prosperity shared top billing when former United Nations secretary-general Kofi Annan addressed the NRF crowd with a sober look at world politics and some strategies for future success.
Annan, joint winner of the 2001 Nobel Prize for Peace with the U.N., began with insight on situations in Syria, Egypt, Iran, Europe, Afghanistan and other areas, from economic crisis to political chaos. He then transitioned to the “direct impact” that these issues have on economics and retailing.
“Political conflicts and wars affect the environment in which one does business,” he said. “A bad environment creates problems for you and for the people living in that region.”
We have a tendency, he said, to look at a crisis on a country-by-country basis, but it is essential to focus on regional impact — as well as the underlying elements — that can resolve instability and other issues long-term. “I have come to the conclusion that stable, dynamic and democratic societies have to depend on three pillars: peace and stability; development; and rule of law and respect for human rights,” he said. Of retailers who operate internationally, he asked that “when you are making geopolitical assessments as to what is going on and what is likely to affect your business, please think of the third pillar. As businessmen and women, you do have influence ... in the communities in which you operate. You do create jobs. You do bring prosperity to your communities, and you also have the influence to be able to talk to political leaders.” Following his talk, Annan sat with Macy’s chairman, president and CEO Terry Lundgren for a Q&A session. Annan said public and private partnerships are “the way to go” to solve the problems of our day; that retail has an important role to play in creating jobs and bringing small and independent businessmen and women into supply chains; and businesses should work with their clients to ensure operations are socially responsible. Do Good, Do Well K ip Tindell, chairman and CEO of The Container Store, led a conversation with two of his peers, Walter Robb, co-CEO of Whole Foods Market, and Howard Schultz, Starbucks chairman, president and CEO, on the need and potential for businesses to take a larger role in societal leadership. All three panelists touched on what they described as the need for leadership on the part of all major participants in the federal government. Schultz invoked the enormous challenge posed to retailers by digital technology and social media, but offered, “I think there is a greater threat, and that is the dysfunction we are all witness to in Washington, D.C. A year and a half ago we watched with profound disappointment the inability to deal effectively with the debt ceiling.” Last month, “the same people displayed the same rhetoric and the same level of dysfunction as they brought the country to the brink of the fiscal cliff. The whole world was talking about what would happen if we did go over the cliff, but no one was talking about the way this spectacle is sapping the lifeblood, the conscience and the soul of the country.” The solution — or at least the beginning of a solution — proposed by the panelists is that business leaders step forward and embrace wider areas of responsibility than they have traditionally done. Tindell set this up by citing the late economist Milton Friedman, who held that the sole responsibility of business leadership is to maximize return to the stockholders. Departing from Friedman’s view of the matter, Tindell advocated the need for “conscious capitalism,” which balances the needs of all stakeholders — employees, customers and suppliers, along with the stockholders. “Companies that have emerged as dominant in their niches,” he said, “have tended to do that.” Robb said that “When government steps back, business can step up.” Like the other panelists, he regards embracing a widened circle of responsibility as a competitive strategy, and also regards his company’s employees as vital to its success. “Labor,” he said, “is not a unit cost. It’s the engine that drives the company.” Two centuries ago, “ninety-odd percent of the people in the world lived on the equivalent of about a dollar a day,” Tindell says. “Today, that number’s right at 20 percent. In our children’s lifetime, that kind of abject poverty will be eliminated. Business and capitalism — the efficient mobility of goods and services in a voluntary framework — that’s made that happen. It’s just a matter of all of us recognizing what we have the potential to do for our country — with no tradeoff. You can do good while doing well.” Authenticity Key to Reaching Millennials K rispy Kreme Doughnut Corp. CMO Dwayne Chambers and Jeff Fromm, executive vice president of ad agency Barkley, covered the importance of simplicity, authenticity, transparency and a little bit of fun in reaching the younger set in a session entitled “The Millennial Moment of Truth.” “The most important thing for us is that our purpose is not about selling more doughnuts,” Chambers said. “That’s probably a bit of a surprise. But … our belief is that if we touch and enhance people’s lives, then we’ll sell doughnuts… And the nice thing from a Millennial standpoint is that these things ring true because they’re heartfelt.”
Millennials are not necessarily loyal, and are perhaps most interested in the co-creation of products and experiences — as well as the ways those products and experiences are marketed to them.
As such, said Fromm, co-author of the upcoming book Marketing to Millennials, the most successful brands of the future will be the ones that plot high on the graph in both participation and “shareworthiness.” The new model includes engagement, interaction, personal gestures and active co-creation.
“Is this the language in your board room?” he asked. “If it is, then you’re in a good spot.”
Krispy Kreme appears to have found the balance between reaching Millennials and maintaining relationships with everyone else. The key to that, Chambers said, is in being true to itself. Best known for its traditional glazed doughnut –which customers can watch being made — and its iconic “hot now” sign, Krispy Kreme found that one of the best ways to incorporate Millennials into the experience was to create a “hot sign” app that alerts users within seconds of the light being turned on.
Krispy Kreme’s fundraising efforts tap into their interest in causes — the company helped raise more than $32 million last year. Even here, Krispy Kreme appeals to the Millennial need for individuality by allowing customers to choose their own causes.
Chambers said Krispy Kreme understands the emotional connection that people have with its products; customers see doughnuts as a reward, whether times are good or bad.
It’s not uncommon to hear tales of special moments the doughnuts have been a part of: tender requests for the comfort of Krispy Kreme in the final moments of life, and even a couple that camped out for days prior to a new store opening before one of them shipped off with the military.
“We take those things very seriously,” Chambers said. “That’s something we don’t own…. In many cases, people become more protective of our brand than even we are.”
Owning Mobile Payments
Merchant Customer Exchange (MCX) was founded last summer by a consortium of retailers to develop a new mobile payment solution and formally introduced to BIG Show attendees at a breakout session moderated by MCX executive Dodd Roberts.
“Very soon,” Roberts said, “the status quo of today’s payment system will be challenged by a better way.” One of the key missions of MCX, whose members include roughly 20 percent of the nation’s top 100 retailers, is to make certain that the forthcoming way works as well as possible for the retail industry.
To that end, he and a panel of retailers discussed the solution’s six core principles.
Provide a superior customer experience. Shelley Bransten Perelmuter, vice president of CRM for Gap, Inc., said Gap’s thinking about selection, experience and value, not payment modality. A mobile solution, she said, will have to appeal to those parameters. Kate Jaspon, vice president, controller and corporate treasurer for Dunkin’ Brands, said customers like mobile payment and Dunkin’ decided to join the MCX consortium to help make certain that this solution worked well for small-item-payment retailers.
Ensure robust security. MCX offers a real opportunity to take sensitive credential information out of the transaction entirely — instead of having to take on the burden of firewalling it, said Jamie Henry, senior director of payment services for Wal-Mart.
Preserve and enhance customer relationships. Treasurer Jay Culotta said Wawa “really looked at MCX as providing us a way to create a solution for us and by us. We own our data, and MCX will give us access to better data, down to the SKU level.”
Provide balanced operating rules. “From our perspective,” said Henry, “the rules of today’s payment systems are anything but balanced. They’ve been formulated by one party and forced on the rest of the stakeholders.”
Employ a cost-based approach to pricing. Noting that she is answerable both to Dunkin’ Brands leadership and the company’s base of franchisees, Jaspon said that, “Over the past few years, we feel that our small-ticket business has been unfairly penalized. The fear of adding another layer of cost as we moved to mobile was enough to encourage us to step up and get involved.”
Limit stakeholder burdens. Several panelists commented that they see MCX as a way of reducing cost in a complex payment situation. Culotta observed that what is needed is a systemic approach, rather than point solutions. “Some of our convenience stores handle around 15,000 customers a day,” he said. “If we get our associates and our customers confused, it will kill our speed of service.”
Competing in a Multi-channel World
I n true universal commerce, opportunity arises from understanding of the consumer. Key ingredients in realizing that opportunity are infrastructure, devices, applications, actionable intelligence and a “partner ecosystem” that will require technology companies, retailers and product manufacturers to work together for their own mutual good, said Dom Morea, senior vice president of advance solutions and innovation for First Data Consumers.
Alisa Maclin, vice president of IBM smarter commerce marketing for IBM Software Group, talked about the need to make shopping a seamless experience from presale all the way through to post-sale. Turning to a demographic category identified by IBM as “digital natives” (people 13 to 19 years of age), Maclin reported that more than 50 percent of digital natives say the post-sale stage of a transaction is more important than the presale stage in forming their opinion of a retailer.
Melody Roberts, senior director of experience design innovation at McDonald’s Corporation, reminded attendees that cross-channel affinity cuts both ways. As an example, she offered the good experience she’d had shopping at Macy’s the day before — largely because of the friendliness and helpfulness of the sales associates. “This,” she said, “will definitely drive me back to Macys.com in the future.”
Asked about the next step in payment technology, Morea said, “Human issues are key. Lots of things will come on the market that look technologically compelling and will fail — this is not an exact science. Another issue is relevance. These are early days. I sign up for new stuff all the time, and I get tons of data — hardly any of which is at all relevant to me or my life.”
The Great Convergence
A lison Paul, vice chairman and U.S. retail and distribution leader for Deloitte, kicked off a keynote session titled “The Great Convergence” by saying, “There are no channels any more. It’s only you and the customer.”
In size, scope and possible long-term impact, Paul likened the digital/social revolution to the Industrial Revolution of the late 18th and early 19th centuries. “I know a woman who has 40,000 followers on Twitter,” she said. “She sends several tweets a day about her shopping experiences. Like it or not, she’s now part of your marketing department.”
Tim Belk, chairman and CEO of Belk Department Stores, says the motivation behind his company’s convergence efforts was a study of purchasing habits. Consumers who shop with Belk online exclusively spend an average of $100 per year; those who only shop in-store spend $352 annually. But consumers who do both spend an average of $1,064 per year. “That got my attention,” he said.
Belk is making a $600 million investment in itself, allocating expenditures among rebranding, services, IT and store updating and upgrading. How’s it going? “We haven’t mastered the omni-channel,” Belk said. “Innovation is a skill we must build.”
Susan Jurevics, senior vice president of global CRM and brand marketing for Sony Corporation of America, noted that in addition to manufacturing, her organization owns stores and multiple e-commerce channels and has thousands of sales and distribution alliances around the world.
“Mobile,” Jurevics said, “is not just a channel. It’s an intrinsic part of consumer behavior.” She cited a number of statistics in support of this, including a finding that 73 percent of men and 63 percent of women don’t go a single waking hour without checking their phones.
Like everyone else, Sony is trying to develop strategies to deal with the great convergence. In this context, Jurevics poses a distinction between multitasking and what she calls “multi-processing,” during which people are using different screens to carry out different but more or less simultaneous mental processes. “We don’t have this all figured out,” she said, “and for an engineering-led company, this change is hard.”
A panel of visionary entrepreneurs gathered on the BIG Show’s closing day to discuss how what they are doing today could be a harbinger of the retail industry’s future.
Rachel Shechtman decided to open an emporium that would have a point of view like a magazine, change its appearance like a gallery and sell things like a store. STORY does all these things, completely revising itself several times a year. Ignoring standard retail metrics like sales per sq. ft., she has focused on what she called “experience per sq. ft.” by, among other things, hosting special events and providing online retailers a physical outlet.
Square’s flagship product is a mobile card reader that plugs into a smartphone. This was followed by Square Register (a mobile phone- or tablet-based POS device) and Square Directory, which offers Square-using customers a kind of search engine optimization capability. CFO Sarah Friar said Square has recently entered into an agreement to handle all non-cash payments for Starbucks. When doubts were raised as to Square’s ability to do this, the Square team pointed out that Square now processes $10 billion in payments a year — more than the ubiquitous coffee purveyor.
Co-founder Neil Blumenthal recounted Warby Parker’s origins in the discovery of an untapped market. “We found that less that 1 percent of eyeglasses were sold online” and most of those units were overpriced. So he and his three co-founders established a price point — $95.00 — that is a fraction of what glasses typically cost from a boutique optical shop.