The Future Is Now -- #Shoptalk16

For three days last week, Las Vegas was the center of the retail universe as the inaugural Shoptalk conference came to town.  Billed as "the nextgen commerce event," Shoptalk featured over 300 speakers across 100 sessions, 220 exhibitors, 100+ members of the media, and a multi-hundred member startup / VC community.  More importantly, this was first major event to bridge the Retail-Ecom conference divide that's existed for as long as I can remember.   "The clear distinctions that once existed within retailing are fading, with cross-channel and cross-format integration poised to become dominant business strategies" said NRF CEO Tracy Mullin … in 2000!  And 16 short years later, it’s finally coming true.   

The event was both energizing (great presentations and panels, a vibrant, but focused, exhibit hall, and lots of interesting side conversations that lasted too late into the evening) and exhausting (a 40-hour agenda from Mon AM thru midday Wed).  With so much content (much of it spanning 4 concurrent tracks), it's impossible to provide an exhaustive recap, but here are my highlights of Shoptalk's key themes.

The Customer is King
Customers were the common thread that ran through every session.  From 400 year-old department stores to early-stage startups, VCs to vendors, and media companies to mall owners, everyone was talking about the need to make customers' lives (or at least their shopping trips) better.  And it was encouraging to hear discussions that went beyond the normal corporate-speak:  a brand that's "thinking about how [our customers] live their lives, outside of when they're shopping;" recognition that apps "have to provide enough information to allow customers to complete their journey;" that "all tech has to serve a customer purpose -- filling a gap or enhancing the experience;" and that "channel silo'd teams don't work."  And it was nice to see company executives talk (brag?) about the amount of time they spend with customers (on the sales floor, online, in the contact center) every day / week / month.  As one department store executive put it, "the reaction of leadership to customer feedback determines whether the organization" really puts the customer first. 

Mobile Mobile Mobile
If there was any doubt about the ubiquity of mobile, Shoptalk put it to rest.  A sampling of claims included "mobile accounts for 75% of our traffic," "mobile is part of 70% of all shopping journeys," "mobile influences 80% of purchases," and "mobile cured my lumbago" (ok, I made up that last one).  But even as consumers use mobile across multiple stages of their shopping journey (let alone their long-term relationship with a store/brand), the industry is still figuring out how to use mobile beyond shopping, ads, and offers, and how to measure its impact (hint - it's not comparing desktop vs. mobile vs. in-store conversion rates). 

There were two underlying threads that ran through many sessions that should be noted: (1) Mobile is not a "thing," it's a behavior.  Customers are mobile, not phones.  The goal is to serve their (increasingly mobile) needs, not to build a mobile app; and (2) Mobile is part of the natural evolution of things, at least if Marc Andreesen (and others) are to be believed that "software is eating the world."  Just think about your cell phone. 10 years ago, the phone was synonymous with the device itself.  Now it's just one of many apps.  The same with the camera, the music player, the address book.  Each used to be hardware. Now they're all software.  The retail industry is a bit late to this game, but appears to beginning to play serious catch-up. 

Shopping Everywhere
Shopping has historically been a destination activity.  Consumers make active decisions to go to a store, launch a web browser to go online, open an app, or search for products.  Retailers have always made us come to them -- physically first, and now digitally.  But we think about shopping all the time: seeing a cool jacket on a TV character (or on someone you follow on IG); always being on the lookout for new shelves (Kallax, your days are numbered); learning we're out of toilet paper ... at the wrong time.  And going from thinking to doing still requires multiple disjointed steps -- shopping lists, mental notes, saved carts, etc.  In VC speak, this is an activity that still has a lot of friction, which makes it ripe for opportunity.  

The collective discussions on what Pinterest, Facebook, Google, Amazon (Dash and Alexa) and others are doing made me realize that the shopping is going to become a lot more integrated into our daily lives -- both online and off -- than it's ever been.  Shopping will be able to take place anywhere anytime: in social media, texting with a friend (or a bot), speaking to Siri (or Alexa, or Cortana, or Google), thru your VR goggles, in your game system, in your car, and perhaps when walking through malls or down the street.  Of course, this means that each of these will also be an advertising medium.  But that just creates more business opportunities for ad-blockers.

Stores Still Matter ... People, Too
While Shoptalk was definitely oriented more toward the digital side than, say, NRF (I didn't see any booths showcasing the latest in receipt printing technology), stores were still a centerpiece of many sessions.  And just like in real-life, there were a lot of different viewpoints -- on the need for stores, on what constitutes a store, on the role of stores in the broader retail landscape, and on the different ways a brand can gain physical presence.  Andy Dunn, while proclaiming that Bonobos is a Digitally Native Vertical Brand (DNVB), said they may eventually have 80-100 Guideshop locations (in addition to their presence in Nordstrom).  More importantly, he said that when they measure the impact of a Guideshop in a local market, they see 12-18 months of cannibalization (stores cannibalizing Ecom!) but after that "sales start to take off."   Between Amazon opening bookstores, Birchbox testing locations inside The Gap (as well as their own pop-ups), or Greats and AYR opening their first stores, "bricks and mortar" presence is becoming de riguer among the Ecom crowd.  Stores are no longer the only game in town, but they're still a major part of the equation. 

The challenge for each retailer / brand is think through their own store equation.  It's more than just "re-thinking the role of the store;"  it's the role of each store. Some stores will emphasize the immersive experience; others will focus on high-touch service; and some on quick pick-up, local delivery, and/or returns.  There probably even be some that stock products on-hand for people to buy and take home with them.  And as stores change, so will shopping malls.   Westfield CEO Steven Lowy described their transformation from a real estate firm to a "proptech" company, noting that they now spend as much on technology as they do on real estate.  But even as their pace of change has sped up, they are still "in the business of connecting consumers with business and retailers."   

Turning to people, it was a welcome change to hear discussions about how important they (i.e. frontline / store associates) are as part of the shopping process.  After years of technology being used to displace people, many of the Shoptalk speakers talked about using technology to enable them -- automating rote, mindless activities so people can spend more time doing the things they can still do better than machines, and empowering them with better tools so they can serve customers in a more personalized manner.  And to that I say "it's about time!"  Personalization has too long been focused on the "ization" part and forgetting about the "person."  

But It's Nice To Not Pay Rent
From Enjoy to Dollar Shave Club to Revolve, there were numerous examples of companies demonstrating there are other ways to deploy capital than building out (and running) a chain of retail stores.  Each showed that it's possible to find a market niche (often one abandoned by traditional stores / brands), provide a differentiated offer / experience, and develop it into a real business.  I doubt any of these non-store pure plays will displace the market leader in their space, but that really misses the point. They don't need to unseat the leader.  They only need to gain enough scale to be able to afford their infrastructure (people, DCs, delivery networks, etc).   And without the cost of stores, there's more money available to scale up.  

Let’s Get Physical/Digital/Analytical
It was refreshing to be at a conference and not have people shout "Big Data" at you every 5 minutes.  Don't get me wrong, there was plenty of data-centric discussion (an entire track on Measurement, Analytics, and Insights), but it went well beyond the need for data.  Most of the discussions focused on collecting data in new ways, and in different venues, as well as how to bring it all together and make sense of it, and take action on it. 

For the past decade, Ecom has been the focal point for analytics, leveraging the streams of data that flow from online interactions.  At Shoptalk, however, there was a panel focused on making the store as data rich an environment as websites are today.  This requires some investment in infrastructure  (see "Unsexy But Important" below), but for brands that still do the majority of their business in-store, it can be worth it.  Another session talked about the need to go beyond data involved in the path-to-purchase, and think instead about data as it pertains to the customer journey (pre- and post-purchase), and better yet, the entirety of the customer relationship.   This requires bringing together customer data that often sits in different parts of the company, and a more focused effort around making sense of it all and then figuring out how to act on it.  And it's here where startups appear to be investing significant time and resources.  Data Scientist is a more common role in Etail than in Retail.  Katia Beauchamp, Birchbox's CEO said they had 80 of them.  I've seen retailers far larger with only a handful.

There's a New Sheriff in Town ... And his Name is Bezos.
Wal-Mart had a 20-year run of being retail's 800lb gorilla.  But listening to the speakers at Shoptalk, their reign is over and Amazon has moved into the top spot.  I can't recall a single session that didn't mention Amazon ... most of it discussing them as a threat.  As I mentioned in my previous post, I'm a fan of Amazon, but there are still things they don't do particularly well (e.g. fashion), and even as they continue to grow, and perhaps reach Wal-Mart like dominance  (another 5x growth), there will always be opportunities for others. 

New Business Models Abound
From subscriptions to services, rentals to resale, and peer-to-peer trading / bartering (and hybrids of each), there were a number of companies taking a different approach than "buy it for X, sell it for Y."  And it wasn't just Birchbox and Dollar Shave Club. We heard from lesser known brands like Gwynnie Bee (plus-size subscription box), The Black Tux (Tux Rental), Le Tote (the Netflix DVD model for clothes), and DogVacay (Airbnb for dog sitters).  

And for those of us looking to turn the clothes in our closets into cash (which more often than not, gets turned back into clothes), there was a "Re-Commerce" panel comprised of Poshmark (community of individual resellers), Tradesy (individual resellers, but with centralized returns), thredUP (online resale shop w/ major retail partnerships), and Vestiaire Collective (EU-based online luxury consignment shop).  They each take a slightly different approach to the resale market, all claim to be profitable within 6-12 months, and have been raising money at a steady pace (over $300M across these four alone).  And if these weren't enough, there's reKindness (currently in beta, and perhaps mid-pivot), which enables people to swap or barter the stuff they don't want in their monthly subscription boxes.  

Unsexy But Important
An undercurrent running through many sessions was that there's a lot of boring stuff shoring up the cool, sexy, shiny objects that garner all the headlines.   The Oak Labs interactive fitting rooms in Rebecca Minkoff and Polo?  Not as magical without item-level RFID, which is also a key enabler of having inventory accurate enough to make BOPIS and BISBO hum.  Tracking shopper journeys and pathways in-store? And dong so at the individual customer / segment level?  Pretty close to impossible without some store-level infrastructure spend.  Ditto for in-store mobile apps (for POS, staffing / training, product knowledge) and the secure wifi they need in order to run.   And the explosion of image and video content and UGC of all types has driven ever-increasing needs to manage it (yup, I’m talking about CMSs and DAMs).  And someone in IT right now is likely thinking about the need for a DMP to handle all the data company-wide.  Sexy?  No.  But necessary?  Yes.  Casey Carl, Target’s Chief Strategy and Innovation Officer said their two biggest investments are in technology and infrastructure, noting that without them, it’s hard to scale the successful innovative experiences they come up with. 

It's Nice Not to Pay Rent (the sequel)
Jerry Storch of Hudson's Bay, who appeared to be speaking on behalf of all store-based retailers (one of his slides was titled "Episode 3 -- The Stores Strike Back") and bridge the offline and online worlds, noted the myriad of omni-channel options (80% of which include a store) and the increasing irrelevance of measuring sales by channel (hear, hear!).  But he caused many to scratch their heads when, in making a point about the higher costs associated with the direct-to-consumer model (vs. having customers buy in-store and take goods home), he omitted any store four-wall costs from his comparison. I guess the staff are free as well. 

Economics Are Essential
I've never heard so many venture-backed companies talk about profits.  Not that they were all profitable -- some still have the luxury of "choosing growth" -- but almost all talked about the importance of understanding their unit economics, and being profitable at that level, even if the company overall was still losing money in aggregate.  I've known many retailers that struggle to understand their business at the unit level (and a unit = a customer, not an item), and as we have all found out (sometimes the hard way), growth and profitability is just as important at the customer level as it is at the product level.  As one panelist put it, comps should measure "same-customer sales, not just same-store sales;" a lesson every retailer would be wise to adopt.

Be Ready for the Next Wave
By Wednesday AM, after 2 full days of sessions, I was beginning to think that all the good ideas were taken.  And then I went into Shoptalk's pitch contest, which quickly put that thought to rest.  Covering both B2B and B2C solutions, these 15 companies ranged from Augmented Reality to bodyscanning (full disclosure: I'm working with a 3D visualization startup with a similar bodyscanning front-end) to self-checkout (which won the audience prize) to a mobile-first Ecom platform (which won the judges prize).  In addition to the winners, two of my personal favorites were in localized cross-channel activation and psychology-based product recommendations.  And it's clear the startup space is still quite fertile.

We're Still in the Early Innings
Even as the industry has advanced so far in so little time, it's important to remember that >80% of all non-auto retail sales still take place the same way they did 50 years ago -- a customer goes to a store, gather items, pays for them, and takes them home with her.  "B2C E-Commerce" (as we used to call it) is only 20 years old.  Mobile (fka M-Commerce) turns 10 next year.  And waiting in the wings are VR and AR, robots and drones, beacons and bitcoin (and other payment innovations), IoT and wearables, and 3D printing.  Historically, technology has evolved faster than consumer behavior, which has in turn evolved faster than retailers or brands can adapt.  It will be interesting to see how brands go forward from here -- which ones seek to innovate (and at what speeds), and the extent to which there are customer or financial rewards (and/or penalties) for going too slow (or too fast). 

Ok. I’m Finally Wrapping Up
So, after 3 days of sessions, 50+ pages of notes, numerous conversations, and countless cups of English Breakfast tea, my brain was full.  And despite the challenges facing the industry, I left Shoptalk renewed and refreshed about the broader retail ecosystem and excited about the possibilities ahead.  There's no shortage of ideas to discuss and opportunities to pursue.  For a retail / brand CEO (or CMO, CIO, CDO, etc,), the biggest challenges are (1) thinking through which ones make the most sense for your customers and your brand, (2) prioritizing which ones to pursue when, and which budget(s) to pull from to pay for them (as well as the enabling technologies that make them work), and (3) getting the entire team (including frontline / store associates) to "own" both the idea and the execution.  The industry is in a time of transformation, requiring many brands to change or die.  And to make change happen, we have to get beyond buy-in. 

Through it all, I kept coming back to a central question -- what does it really mean to be a retailer?  It's not about having stores or a website.  It's not about the people you hire, the services you offer, or even the products you carry.  At its core, being a retailer is really about having a commercial relationship with consumers.  And to win in the go-forward environment, a brand has to win where it matters most -- the intersection of your customers with your brand. 

ps.  Shoptalk was widely covered by the media.  For more details on individual sessions, check out WWD, FBIC, The Robin Report, and Shoptalk's own LinkedIn page.