10 Takeaways From NRF 2018

It's a wrap! As I head home from another educational, enjoyable, and tiring NRF, I wanted to take a few minutes to summarize my top 10 takeaways from the event.

For those of you not familiar, NRF is the annual gathering of the National Retail Federation, which is the world's largest retail trade association representing most of the world's mid to large size retailers.

Before I go too far, it's worth quoting the New York Times's review of NRF:

It was a conference about shopping that looked more like an expo for tech, as if the electronics trade show CES had decamped from Las Vegas and moved to the Javits Center in Manhattan.

With the focus so squarely on technology, I'm frustrated that retailers aren't moving faster. Retail is going through a once-in-a-generation transformation, yet many of the retailers in attendance are essentially re-arranging the deck chairs on the Titanic. I don't mean to be too pessimistic in my assessment of retail but from everything I've seen I'm not too optimistic where many retailers are heading.

Here are my 10 takeaways:

1) Where Was Amazon?

The company that threatens the very existence of every one of the retailers in attendance was 100% missing from NRF. I didn't see any Amazon attendees, Amazon wasn't mentioned in any of the talks, and Amazon didn't present anything. With Amazon capturing 90% of 2018's holiday spend in the U.S., I fail to see how the National Retail Federation could so thoroughly go out of its way to exclude them. It's almost like the organization and its member retailers think they can make Amazon go away by not talking about them. Clearly, that is not a sustainable strategy. This isn't 2005 anymore.

My colleague Art Lawida has more on the lack of Amazon presence at https://www.dhirubhai.net/pulse/elephant-room-arthur-lawida/.

2) Clienteling is Still Early

I'm surprised that clienteling vendors like NewStore and Tulip Retail aren't being adopted by every retailer on the planet. As a shopper, it's clear to see that most in-store retail encounters are broken. Store associates have no access to extended product knowledge, ratings & reviews, inventory outside of the store, and many of the other value adds offered by eCommerce. These new clienteling vendors put power in the hands of these store associates in a way that can greatly improve the shopping experience for customers, increase revenue and leverage the only asset that many of these retailers have going for them - many good stores in prime locations.

In my discussions with retailers and vendors offering these solutions, the problem with adoption is pretty clear - retailers can't move fast enough. They're encumbered by legacy technology. And more worrisome, the retailers themselves don't have the organization structure, policies or people to support this newer breed of technology.

3) Buzzwords Still Cluttering Marketing

"AI," "Machine Learning," "Blockchain," and any number of other buzzwords being slapped on just about every legacy product on the market. While there are a few products that are truly leveraging these technologies, they were relegated to NRF's Emerging Technology Showcase buried in the back corner, up two flights of stairs from everything else. On a positive note, that little showcase area was completely packed all the time.

The only area where I saw AI being meaningfully used is in inventory control and fulfillment. I didn't see blockchain being used anywhere at all, besides some buzzword-laden banners that looked thrown up at the last minute.

4) Commerce Platforms Still Own the Glass - And Don't Plan to Give It Up

Salesforce.com, IBM, Oracle, SAP and all of the other legacy commerce platform vendors are still aggressively pitching their commerce platform-led vision of the world, whereby they own the glass. Much of this is for historical reasons - when these platforms were first built in the 1990's, content management systems were nascent and commerce platforms simply had to provide this functionality. As a result, most large commerce platforms are managed by IT rather than marketing or other line of business. In the age of Amazon, this just doesn't work anymore. 

Gartner, Forrester and others have been increasingly calling for Digital Experience Platforms (DXP) like Adobe Experience Cloud, BloomReach/Hippo, Magnolia and others to own the engagement with the customer. These new DXPs are a substantial evolution over the traditional content management systems and are meant to be used directly by business users. Commerce is then injected into these experiences through APIs. 

Only Sitecore has truly embraced this philosophy by buying Microsoft Commerce Server in 2013. DXP vendors were aggressively pitching their commerce partnerships, but I have yet to see a legacy vendor change their marketing to support this new approach. 

5) Old Software Prevails

Most of the software on display was built in the 80's, 90's or 2000's. Very little of the software was built in the past 10 years. Very little of the software leverages any cloud principles whatsoever. Retailers are by their nature conservative. Vendors who sell to retailers are also conservative. I understand intellectually but was really hoping to see a crop of all-new software. For example, I'd love to see an end-to-end CRM suite built from the ground up. Or an OMS suite. Retailers who continue to buy old software are going to be at a severe competitive disadvantage relative to Amazon, who has built all of their software by hand over the past few years and has literally defined cloud computing through AWS. 

6) "Things" are Finally Becoming Smarter

After years of hype, it's great to see real production-ready products that are internet-connected and add value to the shopping experience. Smart shelves, smart shopping carts, smart cash registers, etc were all on display. While adoption is still a work in progress, it's encouraging to see grocers like Kroger implementing some of it.

With things becoming "smarter" there's a whole new breed of network security vendors offering products and consulting services to secure all of those devices. Can you imagine the fallout if someone hacked one of these new smart shelves?

7) Marketplaces Still Not Being Implemented

The marketplaces being offered by existing commerce platforms and standalone vendors like Mirakl aren't seeing much reception out there yet. With Walmart, Target, Walmart and of course Amazon making a substantial share of their online revenue through marketplaces, I'm surprised to see that nobody below that tier is really taking the concept seriously yet. Maybe 2019 will be the year that marketplaces are given more visibility.

8) Integrated Suites Remain Dominant

The largest vendors at NRF were again hawking large integrated retail suites, often assembled through dozens of acquisitions over dozens of years. These vendors sell primarily to technology laggards who lack the ability to build their own software, or buy best-of-breed and then integrate. While these suites can offers substantial value, in the age of Amazon, it's worth evaluating whether these big one-size-fits-all suites are worth investing in. From the foot traffic I saw, it's clear these vendors are still leading the market.

9) Technology Talent Remains a Barrier

Retailers are often unattractive places to work. The headquarters of many of the world's largest retailers are in boring cities, the offices are reminiscent of scenes from the movie Office Space, and pay can be substantially less than other industries. It's only natural that retailers complain about a talent shortage that's impacting their business.

Executives from Walmart to Bain lamented the shortage of technical talent, but it's largely a self-made problem.

In private 1:1's with retailers, I hear the same complaints - "There's nobody we can hire." The solution is simple - pay above market rates, set up offices where talent is available, and make your companies a nice place to work. The going rate for a top data scientist is probably 10x what a mid-level merchandiser makes - but think of the value of that type of person can bring to an organization. Inertia and conservatism will continue to perpetuate this problem until these retailers are put out of business entirely by Amazon.

10) Retailers and Vendors Still Don't See Mobile

At least 90% of the demos I saw were built for desktop shopping experiences.

Even products from the new startups were mostly desktop-oriented.

I find this remarkable given that mobile long ago surpassed desktop traffic.

I think vendors are selling desktop-only products because many of the products were built in the 1980's, 1990's and 2000's when mobile wasn't really available yet as a channel. It's hard if not impossible to retroactively add mobile support to products built back then. A product built today for a mobile first or mobile-only world has a very different architecture than one built for a desktop-first world.

I think it's also a generational problem. The decision makers at vendors and retailers grew up in a desktop-first era. Today's 18 year olds intuitively understand mobile yet they're not making multi-million dollar purchasing decisions.

Final Thoughts

In general, I'm extremely disappointed with the pace of innovation. Even a casual observer of the industry would be quick to point out that Amazon and other massive changes are reinventing retail. Yet many of the retailers, attendees and vendors are all acting as if it's 1998, not 2018. I hope to see retailers truly innovate in 2018. I will be back with a 2019 summary, which I hope is very different from 2018's. I'm not holding my breath though.