The Coresight Research team attended NRF 2022: Retail’s Big Show in New York City, US, from January 16 to 18. The event, hosted by the National Retail Federation (NRF), brought 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 our top 10 insights from the full three-day event.

NRF 2022 Wrap-Up: Coresight Research Insights

1. The Economy Looks Strong and Retail CEOs Are Optimistic The sentiment going into 2022 was positive from industry executives. A rise in consumer spending will continue to lead the US economy in 2022, according to Carla Harris, Vice Chairman and Managing Director of Morgan Stanley. Despite some softening, the consumer economy remains strong. The ratio of personal consumption to income is at a historic low since the 1970s, and interest rates are still low. Most of all, monetary and fiscal measures still accommodate stimulus. Dollars in the hands of consumers are a very strong multiplier, she stated. CEOs from major retailers are optimistic about the future.

• Pepsi CEO Steven Williams said that he is optimistic about what companies are doing to make the world a better place.
• Target Chairman and CEO Brian Cornell said that the retailer remains optimistic: Consumers continue to show up and shop all categories and all channels, proving that retail is a “really important part” of their daily life.
• Ralph Lauren President and CEO Patrice Louvet spoke of occasionwear product shortages and tuxes and evening gowns selling out as reflecting strong consumer demand and a desire to celebrate.

[caption id="attachment_139861" align="aligncenter" width="700"] Carla Harris, Vice Chairman and Managing Director of Morgan Stanley, discusses the retail environment since Covid-19
Source: Coresight Research[/caption]   2. Brands from Beauty to Luxury Are Entering the Metaverse The metaverse was the biggest buzzword at the NRF this year. There is excitement as well as questions about the metaverse and retail opportunities. Deborah Weinswig, CEO and Founder of Coresight Research, joined Liz Bacelar, Executive Director of Global Tech Innovation at Estée Lauder, to discuss the rapid consumer adoption of the metaverse (a digital reality that can include elements from virtual and augmented reality) in the “Metaverse and NFT: Creative Catalysts for New Experiences in Beauty” session. The Covid-19 pandemic forced the widespread adoption of new technologies and ushered in the convergence of physical and digital worlds for many US families over the last 22 months, with video-conferencing app Zoom becoming a household name. The metaverse is an extension and the natural progression of current digital enablement, with a fun, creative and imaginative aspect. Bacelar said that Estée Lauder’s tech and digital strategy is considered within its framework of decision-making: Will it add value to the brand? At Clinique, NFTs (non-fungible tokens) and the metaverse are seen as relevant to the brand’s future. Clinique’s recent Meta Optimist campaign featured its Clinique Smart Rewards members competing based on the optimism they bring to those in their lives. As prizes, Clinique introduced its first three NFTs, which capture the spirit of its iconic products. Bacelar emphasized the importance of the metaverse and NFTs to brands’ virtual identities. [caption id="attachment_139862" align="aligncenter" width="700"] Deborah Weinswig, CEO and Founder of Coresight Research, and Liz Bacelar, Executive Director of Global Tech Innovation at Estée Lauder, discuss the metaverse
Source: Coresight Research[/caption]   Louvet highlighted that there are a lot of parallels between Ralph Lauren’s strategy and brand vision and the metaverse: Ralph Lauren is in the dreams business, and in the metaverse, one can project oneself however one wants. He said, “You have to be there.” The younger consumer is very engaged and comfortable in the metaverse. “It is an opportunity to create experiences. You can have coffee with your avatar and hang out with your friends,” Louvet said. He added that the metaverse is a new revenue channel that Ralph Lauren is experimenting with. The company is on metaverse platforms Zepeto and Roblox, where consumers can dress their avatars. Louvet said that the company sold over 100,000 units on Zepeto in only a few weeks. Ralph Lauren has not launched NFTs or purchased real estate yet, but Louvet said that the company will consider all options. 3. Video Commerce and Livestreaming Are the Future of E-Commerce Video e-commerce and livestreaming are transforming the shopping experience by blending entertainment and engagement with instant purchasing. Deborah Weinswig, CEO and Founder of Coresight Research, spoke with Jason Sigala, Director of Events and Experiences at The Avon Company, and Brian Beitler, CMO of QVC and HSN US, about livestreaming e-commerce. Weinswig emphasized that, by integrating live video sessions into e-commerce platforms, brands and retailers can enable viewers to make a purchase without having to leave the livestream experience, addressing the biggest pain point of video commerce: payment. Livestreaming is making digital shopping social by taking e-commerce as close to physical retail as possible. This enables livestreaming to add a human quality to online shopping that appeals to many consumers. For instance, communities develop around livestreaming hosts and their brands as shoppers engage with key opinion leaders (KOLs), sales associates and other consumers in a livestream and grow to trust their recommendations. As such, livestreaming supports the interactive element of shopping that e-commerce largely eliminated. Beitler said that HSN hosts develop strong relationships with shoppers and that the most successful livestreams offer great product and engaging hosts. Moreover, Sigala explained that livestreaming aligns firmly with the foundation of Avon in working with reps with friendly personalities. The panelists agreed that “the imperfect is perfect” on a livestream, creating real authentic moments that cement relationships with humor. Sigala and Beitler stated that livestreaming is not just a selling tool; it is a platform for engagement. The panelists cautioned retailers not to be left behind in livestreaming adoption, remarking that they had seen retailers that delayed e-commerce implementation lose mind and market share in the past. Weinswig summed up the additional benefits of livestreaming, including returns rates reduced by up to 50% as consumers are more confident in their purchases.

• Read about livestreaming through Coresight Research’s extensive coverage of this major retail trend.

[caption id="attachment_139863" align="aligncenter" width="700"] Deborah Weinswig, CEO and Founder of Coresight Research, discusses video commerce with Jason Sigala, Director of Events and Experiences at The Avon Company, and Brian Beitler, CMO of QVC and HSN US
Source: Coresight Research[/caption]   4. Supply Chain Challenges Require Data Transparency and Infrastructure Investments Retail leaders across the three days addressed the supply chain challenges that have created industry-wide merchandise delays. John Furner, President and CEO of Walmart US, said that supply chain disruptions have led to inflationary pressures, and the industry should remain innovative to find solutions. Cornell proposed two different approaches to supply chain challenges. In the short term, data transparency must improve, allowing logistics data and analytics to be shared more promptly and efficiently to reduce port bottlenecks and truck shortages. In the long term, US infrastructure should be updated to modernize ports and bridges, as pursued by the recent $1.2 trillion infrastructure financing package. The supply chain of the last generation was built to sustain 3% growth, and we have had 30% growth, Cornell said. Lastly, he added that we need to incentive more Americans to work in supply chain. Ken Natori, President of The Natori Company, said the supply chain is one of retail’s most significant challenges—for example, there has been congestion at the Los Angles port, and mills where fabrics are made that have not reopened. He posited that the supply chain will remain a major source of concern this year, incurring cost pressures, product delays and high freight costs. 5. Customers and Employees Are in Charge Across many of the sessions, panelists described a noted shift in behavior among Americans, both as consumers and as employees. Harris referred to this as “the amplification of choice and voice.” First, there is a shift in the contract between the retailer and the consumer, and the second shift is between the employee and employer. In the future, according to Harris, choice will trump loyalty as consumers can choose what they want, when they want it and how they want to get it. They will develop a new appetite for choice due to diverse payment methods, delivery channels and brands. This will require a new understanding of understanding of consumers. Furner laid out his understanding of what listening to consumers should mean: Retailers should listen to consumers not to earn loyalty, but to better cater to their ever-shifting expectations; the industry should put customers at the center of everything it does. “Loyalty in retail is the absence of something better,” Furner said. “When they find it, they’re gone.” Harris described “The Great Resignation” as “The Great Contemplation,” explaining that people were offered an opportunity to rethink their lives and livelihoods during two years of the pandemic. She said that employers can no longer offer employees the same contract that they were offering, as employees have and want more choices and flexibility. Organizations need to think about what they stand for, too, as younger generations also need different feedback and want to be inspired by the organizations that they work for, Harris said. 6. Stores Are Still Important Retailers at NRF 2022 affirmed that stores are more relevant and important than ever.

• Best Buy CEO Corie Barry highlighted that the store is very important for many consumers, not just for physical shopping but as a convenient place to pick up their products. She said that 40% of what the company sells is picked up in its stores, despite the company offering free next day-delivery.
• Target believes that the pandemic has proved the relevance of physical retail stores, which had been considered a dying breed, said Cornell. A physical store can double as a fulfillment hub, and a variety of brand partnerships—including with Apple, Disney and Ulta—made shopping at one location more attractive and beneficial to consumers during the pandemic.
• Louvet said that Ralph Lauren believes in the role of physical stores. He said that in the absence of pandemic restrictions, when consumers were able to return to stores, traffic went up considerably, affirming that the consumer wants to shop everywhere the brand is. Last year, Ralph Lauren opened 80 stores, including some that included hospitality and immersive services like coffee bars and virtual try-on technology. Louvet added that, over the past few years, there has been an industry-wide question of whether consumers will migrate online and the role of stores will diminish. When asked about Ralph Lauren’s place in department stores, Louvet said that the company believes in the department store and the wholesale channel.

7. Achieving Sustainability Results Requires Collaboration, Expertise and Innovation Brands and retailers emphasized that, in order to achieve sustainability goals and results, companies must enter partnerships, as sustainability goals and targets impact many aspects of the supply chain. “You don’t need to start at ‘zero’ to reach net zero emissions if you build cooperation among stakeholders.” This is how Scot Case, Vice President of Corporate Social Responsibility and Sustainability at NRF, summed up the forum on sustainability. Walmart plans to achieve net zero emissions by 2040, but the complex network of suppliers, partners and contractors has tied Walmart’s sustainability fate to the rest of the retail industry, according to Zach Freeze, Senior Director of Sustainability at the company. Indeed, supply chains are responsible for 95% of Walmart’s carbon footprint, he said. About 15 years ago, when Walmart inaugurated its first energy-renewal program, it formed a council of external experts to identify “what the company had to do and what it should not,” Freeze noted. With the assistance of outside expertise and the company’s own commitment, more than 3,000 suppliers are now part of the program, up from an initial 300. Saskia van Gendt, Head of Sustainability at Rothy’s, a manufacturer of washable shoes and bags, said that the company also engaged outside expertise to roadmap its idea of circularity—designing products to reduce waste and improve durability and longevity. She emphasized the importance of a collaborative approach. Rothy’s sets medium targets and tries to be as practical as possible, with shared values that are good for business and society, van Gendt said. The company’s current three-year goal is focused on circular production and carbon neutrality. Louvet said that Ralph Lauren is partnering to achieve sustainability in its brand. In October 2021, the company partnered with Dow to improve the dyeing process that significantly reduces the amount of water, chemicals and energy required for cotton dyeing. The company is open-sourcing the process so that to encourage adoption in the textile industry and help standardize a more sustainable and efficient cotton dyeing system for positive environmental impact. [caption id="attachment_139864" align="aligncenter" width="700"] From left to right: Scot Case, Saskia van Gendt and Zach Freeze
Source: Coresight Research[/caption]   8. Data Is the Currency of the Future, Powering AI for Decision-Making Multiple sessions focused on the strength of artificial intelligence (AI) in helping retailers to inform decision-making across every aspect of the organization based on data. We heard several times, “Data is the currency of the future,” meaning that organizations that are investing in their AI capabilities will have a competitive advantage. The session “Applying AI at Scale in Large Organizations” produced by Impact Analytics aimed to help retailers understand the power of AI and ML (machine learning), and the ways in which this technology can help support retail operations. AI can improve demand forecasting and forecasting accuracy, drive lifecycle product promotions and clearance/end-of-life/none-go-forward product decisions, improve consumer segmentation and even inform new fashion assortments. Chris DeFuria, Senior Director of Global Analytics at Tapestry, and Juan Hernandez, Director of Omnichannel Pricing at Dick's Sporting Goods, discussed applying AI at scale at their firms with Prashant Agrawal, CEO and Founder of Impact Analytics. Hernandez explained that, when using AI, retailers must isolate the problem they want AI to solve and determine whether they have high-quality and accessible data. Defining the problem that drives the most value is the best place to start, Hernandez said. Dick’s Sporting Goods encountered difficulties trying to solve numerous problems simultaneously—spanning item-level productivity to using AI to handle other merchants, building an approval system and forecasting across 56 different buying teams within the company. Dick’s is in the early stages of using AI with pricing and expects that, by demonstrating the value of using science internally, it will be employed gradually across the organization. Agrawal also addressed retail executives’ reluctance to turn over decisions to a “black box.” AI is relatively new, and Tapestry (a modern luxury company consisting of Coach, Kate Spade and Stuart Weitzman) is partnering with vendors to implement AI at scale, while experimentation is done by the internal data team to test, learn and identify the best opportunities. In this way, Tapestry is seeing the results of a “black box” in allocation, and forecasting accuracy has improved as a result. At the session “AI Demand Planning: A Game Changer Redefining Traditional Practices,” speakers discussed how they are leveraging AI technology in their organizations. Andy Kettlewell, VP of Inventory Management at Walgreens, described how the company used AI to predict regional variation in seasonal illness. Walgreens’ AI technology performed a geographic analysis down to the zip code, allowing the company to understand local patterns, such as when school comes in and out of season, and holidays. Walgreens now tracks both category demand, such as trending products, and local store traffic demand, based on local events such as concerts or parades. Kettlewell provided three pieces of advice for retailers beginning an AI journey: start with a question, not the answer, start with quality data and finally: get started. 9. DEI Must Be Integrated into Organizations Day two of NRF coincided with Martin Luther King Jr. Day in the US and opened with a conversation focused on DEI (diversity, equity and inclusion) between Ken Chenault, Chairman and MD of General Catalyst (and Co-Founder of OneTen), and Maurice Jones, CEO of OneTen, titled “The Evolving Role of Business in Society.” Chenault highlighted that DEI has to integrate into all of an organization’s processes and the tone from the top is essential. There needs to be an understanding of and focus on representation within the company. If people don’t see a change in representation, then words aren’t enough. He said that it is a business imperative, with metrics, outcome and compensation. He said at American Express, the company ties these together, and organizations need to have broad representation and people need to be accountable. There has to be a commitment to diversity and it needs to be inculcated into the organization. He added that in the leadership group there is often a mixed commitment to DEI and in an organization one cannot tolerate a mixed commitment just as one would not tolerate a mixed commitment to business objectives. OneTen is a coalition of leading executives committed to upskilling, hiring and advancing 1 million Americans of color over the next 10 years into family-sustaining careers with opportunities for advancement. Some of the changes that can be made to facilitate this are obvious: Many jobs do not require university degrees at first, yet a four-year degree is a barrier for 66% of Americans and 76% of Americans of color, Chenault explained. Upskilling and reskilling is therefore central to OneTen, but it also requires a societal commitment, from coaching and mentoring to childcare and reliable transportation. Jones concluded by reiterating OneTen’s ambitions: In a few years, it will have a goal of 5–6 million family-sustaining jobs. On the panel, “Recruit, Advance and Retain: Scaling DEI Efforts in Today’s Talent Landscape,” panelists discussed DEI in the workplace today, emphasizing that diversity and inclusion initiatives are really about having deeper conversations with employees and understanding them. Jason Fripps, Chief Equity and Inclusion Officer at Yum! Brands (one of the largest fast-food restaurant franchises with over 40,000 stores), said that the company is using multicultural Employee Resource Groups, and that these are working out very well. Fripps said that the purpose of the groups is to solve issues for others and help individuals to understand the issues and challenges that others are facing. Paige Thomas, President and CEO of Saks Off Fifth said that DEI is about having open conversations with employees; Saks Off Fifth conducted in-house surveys that resulted in a hybrid work schedule because the company found that flexibility was paramount to its employees. 10. Retailers and Brands Are Innovating To Stay Relevant, Including by Launching New Services, Categories and Partnerships Across NRF 2022, we heard many retailers and brands highlight new services, categories and partnerships that they had launched to stay relevant with consumers as the pandemic has shifted consumers buying preferences and channels.

• Chewy launched Practice Hub, an online pharmacy platform for veterinarians in September 2021. Practice Hub provides vets with a complete e-commerce solution for their clients, leveraging the benefits of Chewy’s quick and reliable delivery, customer care team and Autoship subscription service. Veterinarians can set prices, create pre-approved prescriptions and earn revenue when customers place an order in-clinic or on Chewy.com. Sumit Singh, CEO, said that the platform enables veterinarians to focus on their practice while Chewy handles the back-end logistics.
• Nordstrom entered into two partnership agreements—with ASOS and with Fanatics licensed sportswear. Pete Nordstrom, President and Chief Brand Officer, said that these partnerships are opportunities to offer more products that today’s consumer is interested in. He said that the company is in the early days of learning for both partnerships, but he sees these partnerships as a win-win for both the brands and the consumers. Nordstrom also expanded into the home category online and in store. Nordstrom launched a home store in its New York City flagship in the last year, offering pieces that are “uniquely New York” that support the spontaneity of brick-and-mortar shopping.
• Old Navy launched BODEQUALITY in August 2021, a size-inclusive brand for women that promotes democracy of style and access to high-quality products at great prices. The launch comes from the company’s desire to cater for all women—Old Navy’s customer base reflects the diversity of the US where the average women’s size is 14–16. Two years ago, Old Navy embarked on a study of what true inclusivity looked, discovering that consumers want to shop extended sizes in the same areas of the store as standard sizes and want the prices to be the same; extended sizes are often sold at a higher price point.
• Ralph Lauren entered into new categories including footwear, home and outerwear. Louvet discussed the imperative of innovation in product and go-to-market strategies to engage new shoppers. The heritage of the 50-year-old brand is not enough, he emphasized. The pandemic provided an opportunity to reset the brand to the vision, purpose and values of Ralph Lauren, which Louvet describes as a mission “to inspire the dream of a better life through authenticity and timeless design.”
• Target has launched partnerships with Apple, Disney and Ulta. Cornell said that consumers love inspiration and newness and partnerships help to provide ease and convenience for the consumer, as it consolidates shopping into one trip.