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Retail Trends

Record Crowds, Former President Clinton Mark 101st BIG Show

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Approximately 25,500 participants from 85 countries attended Retail’s BIG Show in New York City last month, which NRF president and CEO Matthew Shay formally opened by addressing the state of NRF and the retail industry.

Shay outlined NRF’s multi-year, multi-million dollar Retail Means Jobs campaign and noted that the retail industry’s 18 consecutive months of growth have been “a source of strength during an otherwise sluggish economic recovery.” Shay announced that NRF is forecasting retail sales to rise 3.4 percent in 2012 – a slower pace than was seen in 2011, but well ahead of the estimated 2.1 to 2.4 increase in real GDP.

As part of the Retail Means Jobs campaign, NRF is launching a nationwide “This is Retail” video contest. “We’re on a hunt to find the best retail stories in America – from marketing geniuses to customer service superstars to small business owners, who are the fabric of every local community,” Shay said. Retail employees or business owners are being encouraged to submit a two-minute video sharing their retail story – highlighting how their company positively impacts shoppers or the community, their role in the creation of an innovative product or technology or how an initiative will generate new jobs to boost the economy. A total of $50,000 will be awarded to the top three finishers, with the contest winner receiving $25,000. NRF will accept video submissions from March 5-16; for more information, visit www.retailmeansjobs.com/contest.

Shay touched on key policy wins the industry enjoyed in 2011 – most notably the reduction of/cap on debit card interchange or swipe fees – and outlined NRF’s lobbying agenda for 2012. Issues of particular importance include developing “smart” trade policy that eliminates barriers at home and abroad and facilitates international commerce to help American companies grow and be more competitive; reforming the corporate tax system; promoting sales tax fairness, an even playing field where all retailers collect sales tax regardless of the channel through which a product is sold; and eliminating visa delays, making it easier for more overseas travelers – who spend an average of $4,000 per visit — to come to the United States.

Sharing the Future
Former president Bill Clinton delivered a keynote address entitled “Embracing Our Common Humanity” to an overflow crowd. Noting the national holiday being celebrated that day, Clinton observed that, near the end of his life, Martin Luther King Jr. had shifted his focus from laws guaranteeing equal opportunity to the importance of economic opportunity.

“I think that’s important now,” Clinton said, “because he recognized that work is at the core of human dignity. He said, ‘The dignity of an individual’s life will flourish when decisions concerning life are in his own hands — when he is assured that his income is stable and certain, and he has the means to seek self-improvement.’”

That concept, Clinton said, has traditionally also been at the core of the American dream, and has been shaken by the current economic crisis. “Years ago I embarked on a career in politics, which is a highly precarious and uncertain field,” he said. “I never felt guaranteed I would be successful at it, but I never — not for a moment — doubted that I could make a living.

“Most people of my generation grew up feeling the same way, and that’s something we’ve lost. People don’t feel certain of being able to make a living anymore.”

Clinton offered his views on the global economy. “We live in a world today where all the borders look more like nets than walls,” he said. “We are interdependent to a degree we have never been before. That’s worked out pretty well for most of us, or we wouldn’t be here today.”

To create a stable and sustainable world, “Poor countries need to build the sort of systems that enable work to be rewarded and life to be relatively predictable,” meaning the electricity comes on and you can drink the water without getting sick, Clinton said. Prosperous nations like the United States need to reform their systems with an eye on the long-term, and countries in the middle — expanding economies like China, Russia, India and Brazil — need to do both at once.

“The one thing sure about the future,” Clinton said in conclusion, “is that we’re going to have to share it with a lot of people. We can share the prosperity, or we can share the misery. It’s up to us.”

On Being the Boss
Angela Ahrends of Burberry, Brian Devine of PETCO and Marty Albertson of Guitar Center, led by moderator Stephen Sadove of Saks, convened for the closing Super Session, “Retail Never Sleeps — Delivering Transformative Leadership.” Joining them was Brenda Malloy, who heads up the global retail and apparel practice for executive search firm Russell Reynolds Associates.

Sadove asked each to articulate his or her leadership philosophy.

Ahrends noted that she led a major culture shift at Burberry, and adhered to two precepts. One, addressed to everyone in the company, was “The brand is No. 1. Not you, not your region, maybe not even your customers.” The other was that at the bottom people work for people; there has to be an atmosphere of trust.

“Three things,” said Marty Albertson. “Conviction: Once you have all the information, you have to form a strong conviction around your decision. Courage: You have to take risks, not only with capital but with people. Integrity: You have to stay committed and follow through.”

Empowerment, said Brian Devine. “You have to let [employees] do it themselves, and you have to allow them to fail. And always tell the truth.”

Asked to offer her perspective on effective leaders, Malloy cited Adam Bryant’s new book The Corner Office, in which he distills, from interviews with successful CEOs, five indispensable traits: passionate curiosity; battle-hardened confidence; team smarts; the ability to articulate a vision in simple terms; and fearlessness.

Above all, Malloy said, a CEO must fit into the company’s culture. “Everybody has the skills and a good track record — we wouldn’t be looking at them if they didn’t,” she said, “but the cultural meshing has to work.”

Creating Community from Fragmentation
Moderator Bob Thacker, executive director of Adopt-A-Classroom, kicked off “Engaging with Shoppers in a World of Fragmentation and Change: How to Connect, Differentiate and Grow” by asking attendees to say hello to a neighbor in a language not their own. The request was a fitting start for a session that introduced examples of world-wide innovation.

Consider Magazine Voce, a new effort by Magazine Luiza, one of Brazil’s largest durable goods retail chains. (Magazine is a Portuguese term for “store.”) Users create their own virtual stores within social media networks, choosing up to 60 Magazine Luiza products to recommend to friends. The sellers, who sign up for free through the Magazine Luiza website, earn a commission directly from the store for their efforts, and Magazine Luiza handles stocking, distribution, shipping and the like. The campaign is only open to employee family members so far, but within three months more than 1,000 virtual stores had been created, with conversion rates 50 percent higher than on the website.

“We believe that through this process, everyone wins,” said Frederico Trajano-Vendas, Magazine Luiza’s sales and marketing general manager. The seller has the opportunity to earn extra income, and the buyers can purchase from trusted recommendations.

Indian snack brand Hippo used social media to track stock and reinforce sales and distribution. The general public is asked to tweet when they can’t find the products in a store, helping the company easily identify empty racks across India’s fragmented market system. In return, the company promises to restock within hours. Sales have increased by 76 percent.

Gwen Morrison, CEO, The Americas and Australasia for The Store, told Hippo’s tale and also mentioned Macy’s Backstage Pass concept. QR codes been placed throughout stores, offering exclusive information and advice from celebrity designers tied to merchandise. It’s delivered to customers’ phones; customers also have the opportunity to purchase immediately via their phones.

Unstructured Data for $200, Alex…
During a Super Session called “Critical Developments in Retail Marketing: Understanding Consumers, Building Brands,” IBM’s Watson artificial intelligence computer system demonstrated how retailers can use unstructured data to anticipate winning solutions.

Watson doesn’t work by being fed answers in advance and spitting them out at the correct time. It’s not structured data, said David Ferrucci, IBM Fellow, principle investigator of Watson Technologies. In a retail setting, this would be akin to data culled from reviews, descriptions and interactions.

“Building Watson was about building the technology that allows us to better understand that natural language dialogue,” he said. “It’s not about looking things up.” Watson works instead by looking at the question, considering many possible sources, meanings and answers, gathering evidence for each of those and then working with algorithms before responding.

That ability is increasingly essential in retail. Jon Iwata, SVP of marketing and communications for IBM, said that 90 percent of the world’s data has been generated in the past two years — and 80 percent of that data is unstructured data like videos, music and social network interactions.
“That will grow by 800 percent over the next five years,” Iwata said. “We need new tools to make sense of it.”

Alexis Maybank, founder and CMO of Gilt Groupe, said her company gained data from its five million customers through a registration process that must be completed before they can begin shopping. Every time those customers visit the site thereafter, their behavior is closely tracked, allowing Gilt to create targeted e-mail campaigns.

Billy May, vice president of e-commerce and cross-channel marketing for Abercrombie & Fitch, spoke about interacting with his company’s 12 million-plus customers through social media.

“Everything focused on the ongoing dialogue on platforms like Facebook, as well as curating the right message,” he said, “and the content of that message can be segmented according to things like location or time of day.”

Conscious Capitalism’s Bottom-line Benefits
Kip Tindell, chairman and CEO of The Container Store, and Walter Robb, co-CEO of Whole Foods Market, addressed the ways their companies cultivate loyalty through employee focus, strong core values, synergistic partnerships and the creation of alignment between team members, customers and everyone else.

Linking it all with common goals, Robb said, “allows you to reach your deeper aspirations. Individuals have aspirations and dreams. So can companies.”

Whole Foods, for example, works not only to increase healthy eating, but to change the country’s agricultural system, ensure high-quality animal welfare and to help reduce poverty through fair trade and microloans.

Jonathan Sokoloff, managing partner of private equity firm Leonard Green & Partners, said companies that adopt conscious capitalism outperformed the S&P 500 by a ratio of 9:1 between 1996 and 2011.

Tindell said he truly believes that by taking care of employees better than anyone else, those employees will take better care of their customers than anyone else. “And when the employee and customer are both ecstatic, the shareholder will be, too,” he said.

Tindell believes that “the universe conspires to assist you when you behave this way. Employees are fiercely proud… and customers feel exactly the same way. I think customers are demanding more and more, with their pocketbooks, to love and agree with what a company stands for. And vendors, as well — they want to see that kind of company win.”

Growth Requires Relevance, Customization
Connecting with today’s consumer means offering customization in addition to convenience, according to panelists in a session called “New Merchandising Strategies for Retail Growth.”

Craig Riner, vice president of marketing for Rite Aid Corp., and Michele Klingensmith, shopper marketing manager for GlaxoSmithKline Consumer Healthcare, offered six strategies for improving upon traditional merchandising and driving sales.

Be relevant, personal and solution-oriented. Rite Aid meets the call for customization through its wellness+ loyalty program. A subset of the program for diabetes patients has seen more than 115,000 enrolled during the past few months.

Create a digital habit for off-line behavior. Rite Aid offers Video Values, through which consumers gain discounts after watching informational videos; the new Load2Card program allows customers to search for coupons to be loaded directly to their wellness+ card.

Advanced planning makes a difference. Make sure manufacturers and vendors understand where you want to go long-term, and incorporate their tools to get there.

Combine content with value. Video communicates more than just product and price — and customers like it, Klingensmith said.
Adjust strategies intelligently. Choice, relevance and value equal engagement, Riner said: It’s possible to know how many videos are being watched and what the word of mouth is with particular campaigns. Use that data to ask questions and move ahead.

Use customers as a source of strategic advantage. Listen to them, and train the entire organization to do the same.

The second portion of the session, which covered strategies to attract fanatic customers, featured Kerry Cooper, COO/CMO of ModCloth, which works with 700 independent designers to offer clothing for “the girl who doesn’t want to look like anyone else.”

ModCloth was built “around the idea of letting the consumer decide and be engaged in what she thinks is on trend,” Cooper said. It offers programs including Be the Buyer, in which the community is asked what ModCloth should offer and another where community members can directly tell designers whether they’d pick or skip an item.

“This is a consumer that wants to be listened to,” Cooper said. “She wants to be part of the conversation.”

What’s Working in Social Media
A breakout session on the successful use of social media featured presentations from Pinny Gniwisch, founder of Ice.com; David Gilboa, founder of Warby Parker; Dan Mecchi, director of digital media for Under Armour; and Ethan Holland, director of online marketing and analytics for American Eagle Outfitters.

Moderator Gniwisch began with the observation that the inability to “control” social media makes many retailers “feel vulnerable, particularly when it comes to product reviews.” These fears are misplaced, he said: “A product with a negative review converts at a rate 30 percent higher than a product with only positive reviews.”

Gniwisch went on to articulate three rules for social media engagement: Don’t talk down to people, give them something to talk about and make it fun.

Warby Parker doesn’t market through social media. “We create the customer experience,” Gilboa said, “and they use social media to talk about us.” It’s working: Warby Parker has a net promoter score of 88; half its business comes from word of mouth.

Under Armour used social media for two low-cost, high-visibility campaigns last year. Ultimate Intern gave members of the company’s target demographic (12- to 24-year-old athletes) a chance at an internship at Under Armour headquarters. The other was a high school competition to have varsity teams completely outfitted in Under Armour athletic wear. Both generated enormous online traffic and news coverage.

Ethan Holland of American Eagle described his company’s five-point social media program: conversation and service; third-party services (shopkick, foursquare); branding and engagement; mobile content and commerce; and mobile wallet. “Mobile wallet is new and we’re just getting into it,” he said, “but we think it has a lot of exciting potential.”

Envisioning the Store of the Future Alison Paul, vice chairman and U.S. retail & distribution leader for Deloitte, discussed a recent Deloitte research study of retail executives’ views of the store’s evolving role in the retail ecosystem. Joining her were David Jaffe, president and CEO of the Ascena Group, and Bonnie Brooks, president and CEO of Hudson’s Bay Company. According to Deloitte, the average growth rate of online sales is about 20 percent annually; growth for traditional retail sales is averaging around 3 percent. Retailers, according to The Next Evolution: Store 3.0, “have come to a crossroads where they need to rethink their stores, strategies and operating models into a store of tomorrow … to attract the loyalty and larger share of wallet of their customers.” The key elements of this transformation as identified by the retail executives surveyed are talent (store associates), the physical store itself and the technological infrastructure. Respondents identified the three current primary responsibilities of store associates as POS assistance, purchase selection assistance and specialized product knowledge. In five years, however, the top three will be technology savvy, brand ambassadorship and product knowledge. As to the physical store, there is general agreement that footprints will become smaller, and many retailers will reduce store counts. There is less agreement about technology, except that it’s important, and there’s not going to be much room for it in budgets over the next few years. There’s strong interest in anything that enhances the customer experience, including mobile POS and social/mobile media. The panel retailers seem to be working hard at all three elements. Ascena Group has apparel chains aimed at women ages 35-55 (dressbarn), 17-35 (maurices) and tweens (Justice), and each associate base, technology and store environment needs to be demographic-appropriate, Jaffe said.

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