Shoptalk 2018

The Coresight Research team is in Las Vegas this week, attending and participating in Shoptalk 2018. Described as the world’s largest conference devoted to retail and e-commerce innovation, more than 7,500 attendees are expected at this year’s event, up 40% from 2017’s Las Vegas event. The conference, which runs March 18–21, is expected to draw executives from established retailers and brands, startups and technology companies, as well as investors, media professionals and analysts. From new technologies and business models, to changes in consumer preferences and expectations, attendees are exploring disruption in the retail industry, particularly how consumers discover, shop and buy. The event focuses on topic such as the shopping experience of the future, the evolution of the retail store, on-demand delivery and logistics, shifting e-commerce trends, the next generation of direct-to-consumer startups, engaging customer experience, the impact of artificial intelligence (AI)in retail, and more. The event features more than 300 speakers, representing a broad cross section of countries and companies, including Allbirds, Ascena Retail Group, BJ’s Wholesale Club, DoorDash, Google, Houzz, Instacart, Macy’s and Rent the Runway. Below, we summarize our key takeaways from the second day of Shoptalk 2018.

1. Macy’s to Add Mobile Scan and Pay Checkout to all Stores by the End of 2018

Macy’s CEO, Jeff Gennette, unveiled new features coming to Macy’s mobile app, most notably mobile checkout. Shoppers will be able to scan product bar codes with their smartphone as they add the merchandise to their shopping carts. Gennette described checking out as the “single biggest pain point” in stores today. When customers finish shopping, they head to a dedicated counter for mobile checkout, where a store associate removes the security tags and makes sure the number of items scanned adds up to those paid for. Relevant discounts and rewards are applied, via a shopper’s loyalty account, according to Gennette. The feature is expected to be available in all of Macy’s full-line stores by the end of 2018. Most of the merchandise in-store will be made available for mobile checkout, except for a few product categories such as jewelry, according to Gennette.

2. Facebook Reinforces Focus on Retail Brands, Unveils Three New Ad Products

Facebook announced three new offerings to drive mobile and offline retail sales, all of which utilize Facebook and online behavioral data with varying degrees of personalization. Last September, Facebook added the ability for retailers to build custom audiences of Facebook users who have previously made offline purchases from the retailer, as well as the ability to create lookalike audiences. The social network took this one step further with Monday’s add-on of the store sales optimization tool, which uses machine learning to display ads to shoppers most likely to make an in-store purchase, even if they are not an existing customer. Michael Kors tested the tool with a video ad campaign on Instagram and reported an 11% incremental lift in in-store sales when compared with its test group of shoppers who were not served ads incorporating the new feature. Facebook also updated its Canvas full-screen mobile ad product with the addition of tabs that offer personalized catalogs to users. Eva Press, Director of Global Marketing Solutions at Facebook, said users will see a collection of ads with “category-level” images. The first tabs shown will be categories that best fit their interests. Finally, brands can now incorporate category-level images into their dynamic ads, reaching people who have expressed interest in general categories (based on browsing activity), but not specific products, enabling retailers to reach consumers earlier in the shopping journey.

3. What Amazon Has Learned in Its First Three Months of Amazon Go

Amazon’s cashier-less store, Amazon Go, opened to the public on January 22, 2018, in Seattle. Customers scan a smartphone app to enter the store, and then cameras and sensors track what they remove from the shelves. Amazon then bills shoppers’ credit cards that it has on file after they leave the store. At a keynote session, Amazon Go executives Gianna Puerini, VP, and Dilip Kumar, VP of Technology, revealed early insights and some nuances that went into building the Amazon Go store. Amazon decided to use computer vision to monitor the movement of products around the store, rather than RFID tags. According to Kumar, the operational costs of RFID were too high, due to the fast-moving nature of a convenience store where every product would have to be manually tagged before stocking to the shelves. While Amazon Go is a convenience store, Puerini said the inventory turnover was one thing that surprised her. Due to the efficiency of a store visit, shoppers can enter and leave quickly, requiring shelves to be constantly restocked. Puerini said store associates spend much of their time restocking shelves or helping customers on the floor. Puerini also said a surprising finding is that many first- or second-time customers are not comfortable just walking out of a store. They tend to ask themselves whether it is really “OK to just leave” before exiting. The presenters declined to discuss expansion plans for Amazon Go and said there were no plans to add the technology to Whole Foods Market.

4. Kroger Says Augmented Reality Could Be Used to Help Customers Navigate the In-Store Shopping Experience

Yael Cosset, Chief Digital Officer and Group VP at Kroger, discussed how augmented reality (AR) can be used to improve the in-store grocery shopping experience. According to Cosset, grocery shoppers have developed a greater desire for data about food products—they want to find out more information other than just price; they want to know the place of origin, whether the product is organic, and more. “AR will create opportunities to digest the abundance of data,” he said. “Online it’s easy and customers have an unlimited way of accessing the data, in-store it’s a lot harder.” Cosset suggested that AR should be leveraged using the shopper’s smartphone. He discussed an example of a shopper at a fish counter asking the store assistant for advice on how to cook salmon. The shopper could use their smartphone camera to scan products and receive more information about the product they are interested in, including recipes and nutritional information.

5. Macy’s Customer Is Looking for Fashion, Inspiration, Key Values and Great Experiences

Jeff Gennette, CEO of Macy’s, said that the company’s long and iconic heritage is not enough to guarantee success. Gennette said that 2015 and 2016 were challenging years for Macy’s and the company was losing market share and customers. The customers that it did have were spending less. This spurred the company to launch a forensic mapping to determine what the Macy’s customer liked. Macy’s found out its customer wanted four key things: fashion, inspiration, key values and great experiences. The company launched its North Star Strategy based on these customer findings and has since revamped each of the four areas, producing positive comps in 2017. In its fashion and inspiration business, Gennette said that the company is editing the “sea of sameness,” with the plan of increasing its private-label products from 29% of the total portfolio to 40% over the next few years. In the area of “key values,” the company is editing and reducing its promotional cadence, and has revamped its loyalty program. Gennette added that Backstage, the company’s discount store offering, is a clear value for the customer, and the company has seen a 7-point lift in each Macy’s store where a Backstage store has been added. To improve the customer experience, Macy’s is adding AR for the home to help consumers view how items will look before purchase, and mobile checkout will be added to Macy’s stores, where consumers can scan and go.

6. Same-Day Delivery Is Becoming the New Normal; Target Will Be Offering Same-Day Delivery Nationwide

In a keynote panel moderated by Oliver Chen, Managing Directorat Cowen and Company, Target Chairman and CEO Brian Cornell discussed the company’s December 2017 acquisition of Shipt, a company that will enable Target to provide same-day deliveries nationwide. Cornell said, “There are customers that want the same-day shipping offering and the same-day component is very important. We wanted to be able to provide this service to customers nationwide. We thought it was a great step for us to make it easier to shop.” Bill Smith, Founder and CEO of Shipt, said that the Target acquisition was “jetfuel” for reaching customers, because over 30 million customers visit Target every week. On March 16, Target announced that it is offering free two-day shipping and is piloting free same-day delivery in certain cities. Smith said that he and his wife determined that there was an opportunity for Shipt after they had a baby—they continually needed items, but could not leave the house, and realized it was no longer convenient to dash into the store with a baby.

Brian Cornell, Chairman and CEO, Target Source: Coresight Research

7. The Amazon Innovation Approach Is to “Start with the Customer,”and Work Backwards to Figure Out a Solution

In a keynote session on Amazon Go, Jeffrey Dastin, Technology Correspondent at Reuters News Agency, interviewed Amazon Go executives Dilip Kumar, VP of Technology, and Gianna Puerini, VP. Puerini discussed the innovation mindset at Amazon, and said that the company writes a press release, and then determines how to execute it.“It is spectacular to invent on behalf of the customer, and that is what we draw energy from at Amazon. The customers decide if it is successful or not,” she said. For Amazon Go, Kumar said that the customer solution was how to solve for adding items to a cart while checking out seamlessly. Amazon chose computer vision for its technology solution, and Kumar said that the solution is quite challenging. He said that the holy grail of computer vision is to take an arbitrary scene and to understand and interpret the video (in Amazon Go’s case, this scene is understanding who took which grocery items and put them into a cart) and translate them into algorithms. Puerini added that while Amazon Go’s solution is technical, most of her time is spent focused on solving for traditional aspects of retail and real-world customer-centered opportunities. For example, she said that many customers are very interested in food, and learning about customers’ preferences helps to inform Amazon’s decisions. For example, the Amazon Go store is 1,800 square feet, so with limited shelf space, the company has had to think carefully about product selection—and so customer insights are critical. When asked, Puerini said that there are no plans for Amazon Go technology at Whole Foods.

8. Brands Are Using Social Media Communities to Build Engagement and Revenue

Manish Chandra, Founder and CEO at Poshmark, spoke about the power of social media communities to build brands. Poshmark is a social marketplace focused on fashion and style. Chandra said that Poshmark was built on empowering people, and that Poshmark is a “new kind of fashion mall” where the content and SKUs are created by individual users, with items uploaded from their own closets. The Poshmark marketplace platform is built around the foundation that every seller is required to promote other sellers; growing other sellers helps individuals to grow their own following in a community of stylist-sellers. Poshmark has live virtual shopping parties, and stylist-sellers are a network and community of friends. Stylist-sellers provide customers with personal advice, give personalized styling experiences and curate looks in virtual dressing rooms. Chandra emphasized that the freedom of the community network is what has made it successful, and that these communities should not be constrained. Seller-stylists are one of the largest generators of pins on Pinterest. The average user spends 25 minutes on the Poshmark app, per day, and opens the app 7–9 times a day. Chandra credited this with both the community and newness of the merchandise. He said, “Every time a user opens the app, they find something new.”

Manish Chandra, Founder and CEO, Poshmark Source: Coresight Research

9. Panera Is Using Technology to “Anticipate Great Experiences”

In a session titled, “Mobile Experiences in the Customer Journey,” Mark Berinato, VP, Digital Experience at Panera Bread said that Panera has grown to become a large e-commerce company, with $1.2 billion in digital sales in 2017, over 30% of which are through digital, and over 3 million MyPanera loyalty members. Berinato said that with these numbers, the company started to ask itself, “Are we a technology company that serves great food?” He said, no, the company is still focused on its roots of anticipating the customer desire for great experiences.The core customer has been evolving, and Panera is evolving with the customer and using technology to enable them to order from work, pick up their lunch in minutes, skip the line, provide nutritional value information and remember favorites. Berinato said that Panera starts with the customer’s everyday needs and determines how the company can use technology to improve and personalize customers’ needs at every step. For example, for customers that want to skip the line, the company offers“rapid pickup” in-store where the customer pre-orders on a mobile device. The company is offering in-store kiosks for consumers that want to order at their own pace and view the nutritional information of each product. For those customers that cannot leave their home, Panera is offering home delivery, and has hired its own staff of over 10,000 drivers to ensure an “elevated customer experience.” Berinato said that the digital implementations are increasing in-store sales; after Panera launched the kiosk, the company saw an increase of customer in-store visits of one to two times per year, which,over millions of customers, has added real value to the company, he said.

Mark Berinato, VP, Digital Sales Experience, Panera Bread Source: Coresight Research

10. Future Retail Trends Heard at Shoptalk

Throughout day one, panelists were asked about their predictions for retail trends. Here are a few of the notable ones:

• New business models are emerging in VR and AR, and this area will get more exciting within the next 18 months. — Gihad Jawhar, VP, Digital Development, Lowe’s
• Voice is the fourth sales channel, with digital assistants such as Amazon Alexa and Google Assistant gaining traction. — Steve Koenig, Senior Director of Marketing Research, the Consumer Technology Association (CTA)
• AR is trending in the areas of furniture or fixture shopping, apparel shopping online and providing in-store product information. —Steve Koenig, Senior Director of Marketing Research, CTA
• VR narratives are growing in the areas of brand marketing and developing brand experiences. For example, the technology is being used to help consumers explore holiday destinations, virtually explore products or services and shop online. —Steve Koenig, Senior Director of Marketing Research, CTA
• Consumers eating habits are changing. People are eating more often. This will impact the food industry to support this new consumer. —Mark Berinato, VP, Digital Sales Experience, Panera Bread