NRF GUIDE 2021

NRF 2021 is the industry-leading event that connects professionals across the commerce landscape - from manufacturers to tech providers. Held entirely online this year, January saw the first in a series of seminars with experts addressing the questions facing brands today.

VMLY&R COMMERCE has collected the themes that dominated, along with insights and some predictions on the future of commerce.

What is clear, COVID has leveled the playing field like never before, with all companies eager to learn from each other and prepare for what lies ahead. We found there to be distinct trends around the challenges and opportunities - read on to learn more!

Theme #1

Photo via Shutterstock

Consumer Centricity

As a result of increasingly heightened expectations, it is important to allow individuals to consume on their own terms

At the tap of a button, billions of people have the power to summon whatever they want at a great price - and delivery is often free. In some cases, retailers have decreased fulfillment time to 30 minutes or less. With millions of products available to consumers and steep competition for the last mile, there’s never been a better time to be a shopper.

Marvin Ellison, CEO of Lowe’s, always asks the question, ‘what is in the best interest of our customers?’, with the vision to ‘provide a total home solution for customers’. He sees effective technology as the key driver of this, yet it's technology that no one sees. “All the customer knows is that the transaction was easy; all the associates and supply people know is that the system works well.”

Sumit Singh, CEO of Chewy said he spends early mornings reading reviews on websites to understand customer issues and inquiries and find solutions; “to live inside the details, listen closely, and have mechanisms that allow you to work backward from customers. Additionally, “it takes seven trials to form a habit and 12 to form permanence.” A year into the pandemic, retailers that are meeting consumer expectations are finding their consumers have formed lasting habits.

Theme #2

Photo via Shutterstock

Customer Experience from the Inside Out

Companies have been forced to go back to the basics.

In many ways, 2020 has become a time of rebuilding. Retailers are recognizing the importance of focusing on fundamental areas of the business and excellence in retail. Appropriately, as Marvin Ellison, CEO of Lowe’s put it, “like a home, once the foundation is in place, the structure goes up relatively quickly. Without this, the structure is unstable.”

Lowe’s made investments for long-term solutions, defining its foundational priorities and focusing on operational excellence.

Similarly, upon the pandemic, Chewy immediately invested in stock management, inventory, its supply chain and optimizing the website to manage the high demand. Sumit Singh, CEO, said that he leaned into focusing on the core mission of the business and importantly, the customer need.

We are seeing this take flight across verticals, including both smaller D2C and behemoth luxury retail brands. Lauren Chan, CEO of Henning, a plus-size luxury womenswear brand, doubled-down on what the business wanted to do and say from the start: we don’t need all the things that fashion sells us (seasonal styles, cheapness and newness). Henning manufactures products on-demand locally based on customer preferences; this agile, data-driven approach to inventory has shown its gains in 2020.

Though quick decisions and strategic actions were underway, Saks Fifth Avenue never lost sight of what placed Saks as the premier luxury shopping destination in the first place. CEO Marc Metrick said the company focused on three pillars within its ‘luxury distripted’ strategy: using new technology to provide exemplary ease, personalization, and ‘don’t forget the fashion’. Metrick stressed the importance of the final pillar, as it is the foundation of the brand’s heritage and key to its customer base.

Theme #3

Photo via Shutterstock

The Store Advantage

With more shoppers migrating online, stores are playing a new role.

In 2019, analysts were predicting the store of the future would offer inspirational experiences that couldn’t be replicated online. Fast forward a year and store associates are live-streaming events for shoppers at home and mobile app features are being designed to reduce in-store dwell time. This new mindset is driving capital investments that will unify in-store and online experiences.

Increasingly, retailers are reconfiguring floor plans to provide more space for online order fulfillment; adapting parking lots and transforming service desks into pickup desks. Salesforce believes the store associates’ role is evolving into trusted agents that operate on behalf of retailers, both in-store and via digital channels. They are seeing digital enhance physical store offerings, with growth coming from these blended experiences.

Fifth Avenue CEO Marc Metrick has shown success in putting technology in the hands of the associates; in-store stylists have generated more than $150M in revenue through the use of technology to fulfill a customer need both before and after stores were opened.

Seeking to boost the store advantage, retailers are “reimagining how their physical assets can be used” to balance discovery and online fulfillment, says Michelle Evans, Senior Head of Digital Consumer, Euromonitor International.

Theme #4

Photo via Shutterstock

Business Athleticism

Structuring your organization to be adaptable for change is now table stakes.

Retailers can no longer afford to be in wait-and-see mode. The pandemic required companies to constantly adapt to change and uncertainty, nonetheless preparing them for the future. Sumit Sigh, CEO of Chewy, calls this “business athleticism and agility”.

The online dog food brand launched an initiative called ‘Connect with a Vet’ amidst the pandemic that was not originally on the roadmap until 2-years out. Sigh accelerated the program and built a solution, having recognized there was not only an increase in pet ownership, but also a greater need for access to vets from home.

This forward thinking and ability to capitalize on an opportunity amongst chaos should now be expected as a core part of a businesses’ strategy. As Sigh said, “anticipating change is an essential tool in a leader’s toolkit. Prep your organization of people today to reach the demand of customers 3-5 years out.”

In similar fashion, Lululemon recognized the need to maintain ongoing customer contact and made its first ever acquisition in 2020 of MIRROR, an interactive ‘home gym’ and fitness startup. This move indicated the brand’s push into digital experience and commerce. Celeste Burgoyne, President, Americas & Global Guest Innovation, said the ambition is to “create a deeper and more connected relationship with guests”.

One thing we know for sure is that technology will continue to develop in ways we never thought possible. Lowe’s, for example, is building a technology that allows customers to run their hand over a screen to actually feel the texture of the product. Though the technology is far too expensive today, the estimation is that it will be advanced and eventually live on smartphones.

The consensus is you can’t predict the future, but you don’t know the future until it comes.

Theme #5

Photo via Shutterstock

Brands with purpose will win

The strength and values of an organization’s culture has been called to task.

Last year saw significant upheaval within society, something that resulted in consumers increasingly looking to brands to make an impact and show that they shared strong values. Customers were asking companies to demonstrably put purpose above profits - a call to arms that many reacted to, from joining movements on social media to pledging resources and profits to fighting causes.

Marvin Ellison, CEO of Lowes believes this groundswell spurred brands into action: “You can’t solve all problems, but we took enormous steps to make this year a better one for people who needed it most”. Indeed, the company committed more than $1.2B to serve its associates and communities in 2020.

Similarly, Marc Matrick, of Saks Fifth Avenue said he felt energized by “a call to change” within the industry, and sees this as a chance to drive real change by working amongst those in fashion.

Lululemon meanwhile doubled down on its values of inclusivity, action and equity, ensuring that employees can see themselves in all levels of leadership. As a company with 77% women globally, the senior leadership team now reflects this. Not least, Lululemon has 55% of women sitting on its board of directors.

2021 Retail and CPG Supplier Predictions

Alongside the findings from the seminar, at VMLY&R COMMERCE we foresee some interesting changes in the industry. Here are some of the top ones for 2021.

Brian Owens, SVP VMLY&R COMMERCE Strategy

Consumer-to-Manufacturer (C2M) models will scale and gain traction

CPG brands that can scale personalized content and product needs will grow the fastest. The rise of Consumer-to-Manufacturer (C2M) models are gaining traction and becoming a new disruption model to retail. C2M provide significant capacity for brands to offer a large number of designs directly to consumers, which can be produced locally. Manufacturing facilities are pivoting to produce items after the order is received, not before, shifting from Design-Make-Sell to Design-Sell-Make.

Prediction: More retailers like Macy’s will no longer buy in bulk from manufacturers through wholesalers anymore. This could signal the further bifurcation between luxury or low-end brands.

Micromarketing and micromanufacturing will go mainstream

As younger adults leverage more micromarketing to personify their lives, brands are creating, purchasing and curating products from different locations and sources to meet this demand. Finding new ways to monetize brand experiences with social media and Instagram. Ben & Jerry’s, for example, develops new flavors each year based on customer suggestions. They also partner with companies outside their niche to create ice cream flavors that appeal to shoppers new need states, like Netflix & Chilll’d ice cream flavor.

Prediction: Expect more smaller manufacturers to form supplier coalitions to scale made-to-order innovations faster and more profitably. The smaller supplier miromanufacturing coalitions will be squarely focused on creating new experiences and producing custom products on demand.

Dynamic pricing comes to the physical store

E-commerce and COVID has accelerated retailers’ investments into dynamic pricing. Dynamic pricing is particularly valuable to online retailers, but more in-store formats are leveraging Electronic Shelf Labels (ESLs), to personalize pricing on shelf. Now promotions are becoming dynamic and in-store technology is forcing retailers to keep pace with same experience shoppers have online.

Prediction: COVID has made shopper behavior increasingly unpredictable, expect more CPG brands to invest more around the science of automated promotion decisions – online/offline.

Contributors

Brian Owens

SVP, Commerce Strategy
at VMLY&R COMMERCE

Logan Hassig

Senior Strategist
At VMLY&R

Charlie Wade

EVP Business Development NA,
Head of D2C at VMLY&R COMMERCE

Ythan Pratt

Director, Commerce Strategy
& Retail Intelligence at VMLY&R

Michele Fournier

Global Director Events & Partnerships,
VMLY&R COMMERCE

For more information about our services and offering, please contact Charlie.Wade@vmlyrcommerce.com