NRF 2024: From Omnichannel to AI, the Key Takeaways
Some 40,000 people descended on Manhattan last week for the National Retail Federation’s annual Big Show. Artificial intelligence reared its omnipresent head in the expo hall and in panel discussions, but AI isn’t the only theme coloring the year ahead. Here’s what thought leaders had to say about stores, e-commerce, recommerce and more.
What’s in store for stores
NRF 2024 made an urgent case for retail’s physical and digital reinvention. Today, most people—63 percent—prefer shopping online over visiting stores, said WD Partners’ Lee Peterson, executive vice president of thought leadership and marketing, citing the Ohio customer experience company’s survey of 2,500 U.S. consumers.
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Despite those numbers, retailers can’t make the mistake of treating brick and mortar as a functional box for uninspired transactional moments; rather, stores done right can spark joy and move merchants toward the elusive holy grail: brand love.
“For far too long we have thought of the store as having to become the most efficient logistical node in our logistics infrastructure,” said David Roth, CEO of WPP – The Store, a global consultancy advising retail and CPG brands. But now the “pieces of the jigsaw” are coming together, he added, giving retailers the tools they need to transform their stores into influencers.
Data suggests there’s a clear upside to the companies that win in this metric. Influential brands command 1.5 times the pricing power versus less-loved peers, according to WPP data, which called out Amazon, Carhartt, Coach, Disney, Levi’s, Nike, Timberland and The North Face as some of 2024’s North American leaders.
Take Yeti’s Austin store, for example. The Texas outpost shows that brick and mortar doesn’t necessarily need fancy technology to create an engaging experience, Peterson pointed out. Instead, thoughtful visual merchandising cultivates emotional storytelling moments at the cooler and tumbler brand’s 8,600-square-foot flagship, housed in a transformed warehouse. There’s a rugged Jeep stationed outside, a towering bear statue beckoning to the brand’s explorer ethos, and a welcoming bar where the company’s iconic coolers serve as clever seating. And The Wild Ones wall of fame almost makes product secondary to people. Prominent photos of adventurers who achieved something great in the outdoors hang above the coolers they carried on their notable exploits. The store illustrates Yeti’s creative approach to compelling commerce, according to Peterson.
Opportunity online
Nearly two-thirds—some 64 percent—of the planet is now part of the internet-using population, according to Euromonitor International’s Michelle Evans, global lead of retail and digital consumer insights for the market research giant. Spending projections put these 5.2 billion consumers’ outlay at $11 trillion this year across goods and services, signaling a gold mine of opportunity for anyone selling online.
But getting a piece of that pie might not be smooth sailing when many are worried about how economic gloom will muddy their personal fortunes, Evans said, despite Census Bureau data showing 2023 holiday sales rose 3.8 percent to a record $964.4 billion. These forces are driving online shoppers to milk the very best deals out of digital platforms, she added. With more than half of Gen Z and millennials—a respective 59 and 53 percent—claiming they wanted to save more money in the past year, per Euromonitor research published this month, e-tailers should rework their websites to persuade the penny pinchers persuing for bargains.
This budgeting behavior, said Nikki Baird, vice president of strategy for industry software giant Aptos Retail, also keys into another trend poised to play out in 2024: microdosing gratification. Just as the drug-culture coinage signifies taking small amounts of psychedelics to limit unwanted side effects, consumers who want to avoid beating up their bank accounts will splurge on little luxuries instead of bigger buys. That could mean springing for a high-end wallet instead of a purse, for example, or indulging in a grocery-store dessert versus blowing Benjamins on a big night out. Baird bets on beauty and food as the no-brainer beneficiaries of consumers desperate for a low-budget dopamine hit.
Though e-commerce has its upsides, retailers still struggle to address the elephant in the room: returns. Cosigning the recent trend of e-tailers ripping up their “free returns” policies, some 15 percent of the brands working with Extend, the e-commerce warranty and protection plan provider, now charge for returns shipping, said chief revenue officer Rohan Shah.
Retail professionals are all too aware of the clunkiness around returns. According to Euromonitor data from July, 63 percent said their companies will continue or speed up investments around product returns. Of note, Gen Z prefers returning items in a retailer’s store (40 percent), followed by mail (35 percent) and a retailer or shipping partner’s location (33 percent).
Shrink and retail crime routinely make headlines, but they’re a “newer problem” for e-commerce companies, Shah added, claiming 90,000 packages are stolen daily just in New York City. He is concerned that organized crime will inflate porch-level theft into a “huge” issue in the next decade. Whereas brick-and-mortar customers can walk into their nearest location to make a store return, for online retailers returns encompass the cost of shipping, replacements, call centers and carriers—”way more costs” to solve this headache, Shah said.
Recommerce ramp-up
Get ready for resale to kick into high gear this year.
ThredUp data shows the resale market approaching $351 billion worldwide by 2027, with the U.S. alone contributing some $70 billion. Nearly 60 percent of thrift-loving Gen Z, credited for driving resale’s rosy outlook, bought secondhand items several times last year and close to 30 percent aim to up pre-owned spending in 2024, said Euromonitor’s Evans. Though teens and 20-somethings use viral TikTok DIY videos and hauls to lend a bit of cachet to the resale movement, companies can’t ignore the reality that secondhand goods help resource-strapped shoppers get more for less.
But resale has some obstacles blocking its true potential.
For one, some corners of recommerce are rife with “fraud and forgery,” said Richard Kestenbaum, a partner at New York investment bank Triangle Capital Partners, pointing to authentication’s heavy cost as among the “biggest problems in resale.”
That’s where innovators like Coach and H&M supplier Eon come in. Digitizing care labels into a consumer-friendly QR code reduces costs, cracks down on fakes and helps secondhand sellers prove the legitimacy of their goods, a key element on the path to these platforms making money, Kestenbaum noted during a media briefing hosted by Berns Communications Group.
He believes authentication technology—plus differentiation—will spur resale’s evolution.
“What we’re starting to see now is that while the big [resale players] are not close to making money, we are seeing the smaller resale sites that are narrow and deep in a category and type of product are about to hit profitability, or hitting profitability,” he said. Eon’s digital product IDs “will help everybody in the market if it propagates,” which is essential, he added, because otherwise resale is “just a charity.”
While Kestenbaum points to specialists as the ones to watch in resale, Evans mentioned that scaleups are branching out beyond their founding categories. Vinted, the Lithuanian fashion resale unicorn, now hawks gaming consoles, dog leashes, throw blankets and shot glasses alongside apparel from women’s jumpsuits and men’s blazers to toddler dresses and infant onesies. LVMH’s Nona Source, born in 2021, stands out by flipping premium materials from the luxury giant’s 75 storied maisons.
All things AI
Generative AI is fueling retail’s dreams of a brave new world. What makes GenAI so tantalizing, said Evans, is that unlike artificial intelligence, where machines learn from experience, this new era characterized by ChatGPT gives retail tools with the ability to “create” in a way that’s closer to how humans do it.
“Retailers are taking a variety of approaches when it comes to how to use generative AI,” she said, from producing “killer” marketing campaigns to optimizing supply chains and elevating the customer experience.
But retailers should be on the lookout for “AIwashing,” or tech providers misrepresenting their use of AI, warned Baird, the Aptos executive, similar to how fashion brands have been castigated for exaggerating their sustainability claims. She is wary of companies muddying the waters by interchanging AI and GenAI when the former is a “much bigger umbrella.”
Amid all the excitement around what GenAI can do for retail, Baird believes merchants will use this year to see what really makes sense for their business.
“I think everyone is trying to figure it out,” she said of retail’s fervent interest in GenAI. “I think we’ll see a lot of experiments and proofs of concepts in 2024.”
Much of this ambition will stagnate in the experimentation stage this year because many companies lack the data organization to support wide-scale GenAI deployments, Baird said. They’re finally realizing why they need to invest the time in adding product attributes, which is why Baird expects 2025 will be a “heavy year of data investments.”
“I don’t think we’re going to see a lot of scale [with GenAI] in 2024 because the data’s not ready,” she said.
