An Inside Look at the Leaders Changing Retail
This week at the 2019 CEO Summit, hosted by Wharton's Baker Retailing Center, a diverse group of retail executives, startup disrupters, and experts from the Wharton School of Business came together to talk about how to power the future of retail. During the course of the conversations, everything from the importance of investing in data analytics, recruiting the right retail talent, and staying ahead of the staggering pace of e-commerce, was discussed. So what's top of mind? (It's probably worth mentioning that Amazon wasn't mentioned until three hours into the day, dispelling the notion that Amazon is what retail leaders are most worried and obsessed about.) Our recap of the day's talks follows below.
Reinventing Luxury Retail Amid Changing Customer Expectations
During the first session, President of Saks Fifth Avenue, Marc Metrick, started off by discussing how they're navigating a rapidly changing retail environment. Despite the seismic shifts happening around them, they've been laser focused on who Saks is as a brand, who the customer is, and where the two can and should intersect. And these strategic efforts seem to be paying off. Despite the fact there's been relatively flat growth in the US luxury market, Saks' business has been on an upward trajectory. Part of their renewed focus has been infusing data into all their interactions with customers - while at the same time having less of a transactional mindset and more a focus on building a lifelong relationship. For Saks, creating customer "stickiness" is at the heart of their business.
Crafting Tomorrow's Luxury
While "family run" may not be the first phrase associated with a global conglomerate of luxury brands, Laurent Claquin, President of Kering Americas, said it's those very family values that impact every decision they take as an organization. From sustainability initiatives to ensuring a diverse workforce, the Kering formula is one that provides its people "freedom within a framework." The conversation also touched on the topic of how Millennials and Gen Z increasingly wish to access luxury goods. Claquin's views mirrored others we heard throughout the day: these shifts, which include resale and rental, cannot and should not be ignored by forward-thinking retail leaders.
Can Rental Go Mainstream?
On the topic of new channels and markets, during separate sessions there were leaders from both Rent The Runway and CaaStle, a turnkey rental solution, on hand to discuss the market that everyone is looking towards: rental. And while it's a channel that some retailers have been late to see coming, it's time to adapt and get on board. Furthermore, the experts pointed out that even for those of us on the inside of the industry that understand the operational shifts rental entails, we need to remember that the customer doesn't need to know nor care that it's a different channel. It's ultimately a way for them to discover and access new brands.
As far as the data on the shopper, it was noted that many shoppers turn to rental for special occasion and more trend-driven garments they wouldn't normally try, let alone purchase. The market has grown the extent that CEO of Rent The Runway, Jennifer Hyman, noted that she's excited to see other players entering the rental market, as it's the ultimate validation that this is truly a service customers value. She further commented that she believes many of RTR's customers are swapping out their fast fashion purchases for rental - which she believes will ultimately help the fashion market become more sustainable.
CaaStle SVP of Corporate Development, John Donaghue further noted that not only have they proven that rental doesn't cannibalize sales, there are also built-in operating margins of 18-23% on rentals - so each piece is monetizing out of the gate. A win-win for retailers, no doubt.
Building Customer Experiences for the Changing Consumer
Anticipation is building in advance of next week's opening of Nordstrom's flagship women's store in the heart of New York City. On hand to discuss this and other initiatives around customer experience was Shea Jensen, SVP of Customer Experience at Nordstrom who has spent her career managing a fleet of its stores.
The move to open a flagship in NYC was built in large part on the demand data - New York is Nordstrom's largest digital market. And since the opening a few years ago of their men's flagship store, they've learned a lot about the peculiarities of the local market - including how many female shoppers were shipping their orders to the men's store for pickup. With that in mind, the new women's store is built on this type of customer feedback and the notion of creating a place of exploration and discovery.
She also talked at length about personalization in the customer experience and how Nordstrom approaches it - both at the "this brand knows me and what I like" level, as well as the ability to offer customized or tailored products for customers. Her advice on winning at customer experience? Ask and involve the customer at every step of the way.
Keeping E-commerce on Pace with Customers' Expectations
So what exactly are table stakes when it comes to successfully executing e-commerce? Leaders from Clarins, FULLBEAUTY Brands, and eShopWorld talked about their perspectives on what's a "must have" in today's digital world. At the top of their lists were mobile-ready commerce, personalization, and a seamless cross-border experience. There was wide-spread recognition that building the right data sets and architectures and sharing them throughout the organization is one area that is critical - if not at times overlooked. Retailers today need to be investing in their data analytics as ten years from now "it will be nearly impossible to catch up."
Optimizing Retail Talent and Culture
Several times throughout the day there was talk about how "retail needs to rebrand itself," in order to attract the kinds of talent that other industries, like tech and banking, typically do. The skillsets needed - from engineering to performance marketing - have greatly changed and retailers find themselves often not top of mind for top talent. But great retail organizations are also rife with opportunities in areas including change management, marketing, merchandising, and technology. The skills leaders from brands including Warby Parker, Rhone, and Vince said are most valuable included passion, intention, an ability to lead with empathy, and being simultaneously "humble and hungry." So how will retail leaders get people excited about being in this space? It starts from the top.
Powering The Resale Economy
James Reinhart, CEO of thredUP, a resale platform, shared market sizing data that is truly astounding. If you didn't already know, the market is expected to reach $51 billion in five years time, and it's grown 21 times faster than the rest of the apparel market over the last three years. This data sheds light into just how significant this shift in the market is, in fact, it's so significant that nine out of ten retail executives polled said that, somehow, some way, they want to get into resale in the next year.
The reasons for heightened retailer interest in resale is multi-pronged and include improved sustainability perceptions, building customer loyalty, obvious revenue increases, and access to new customers. He admits that when it comes to both visually and digitally merchandising one-off (resale) products - it's not necessarily easy and both new and established merchants are still figuring it out. Nonetheless, it's an opportunity that cannot be ignored.
Interested in learning more about Wharton's Baker Retailing Center? Check out their research and programming here.