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NRF 2018 Takeaways: 3 Types of Retailers That Will Survive & Thrive

Optimism. Innovation. Determination. That’s how I’d describe the atmosphere at NRF 2018.

Sure, 2017 was a difficult year for the retail industry in general. Big box retailers struggled. Toys ‘R’ Us filed for bankruptcy. JC Penney and Macy’s were among a number of large department stores to close down several outlets.

But the hyperbole used to describe the health of the sector as the ‘Retail Apocalypse’ was largely unfounded.

That’s not to say that the retail sector doesn’t have its challenges; they are significant and ongoing. Customer expectations continue to surge in line with advancements in technology. Retailers have to constantly evolve to meet these challenges and remain relevant to their audience.

What I found is that there are three types of retailers that are most likely to survive (and thrive) during even the most difficult of circumstances:


1. #1- #3 Category Kings & Marketplaces

The ‘Category Kings’ are retailers that define their category. In the same way that Google is intrinsically linked to the search engine category, Amazon is almost the synonym of online retail and e-commerce.

The Category King generally takes the majority of the profits in any given market, and by a long way, Amazon is a prime example in retail. It has achieved this status by being the first and currently the best at understanding a consumer’s wants and needs to consistently take friction out of the customer experience. And they’re constantly innovating.

Retailers, who are not Category Kings, have a steep hill to climb. The ‘Double Jeopardy’ law can weigh heavy. It’s an empirical law in marketing, that describes how brands with a lower market share have to deal not only with far fewer buyers they can attract but also with lower brand loyalty.

Most of them will always find it difficult to compete with the Category Kings (like Amazon, Lidl, and MSC Industrial) as they are generally at front of mind for customers due to their size and reputation.

They have to look for other ways to compete and differentiate.

This brings me to the second types of retailers.


2. Retailers with strong or exclusive own brands

What do customers associate with your company? Is it a particular color, shape, celebrity, language, technology or sound?

If they don’t associate anything, then your company is not distinctive enough and will likely be drowned out in a competitive retail market. There are so many retailers to choose from, you have no choice but to stand out.

To improve operating margins and stand out in the mass market, retailers are finding success by steadily increasing their private label activities. Just take the “passion brands” Sephora and Decathlon.

These retailers share the same passion for the products they sell as their shoppers and captured this emotion by launching their own private label brands.

Sephora’s private label, “Made in Sephora” is the beauty retailer’s top-selling brand with 1 product sold every 2 minutes and 1,400 products listed. And Decathlon, the world’s biggest retailer of sporting goods, increased its private label share from 33% to 50% in a few years. They have essentially become a brand in their own right.

Consumers look to brands for quality assurance and an emotional satisfaction. It’s becoming more apparent that these brands do not have to be manufacturer brands.


3. Mid-sized to large niche retailers with expertise

When consumers are choosing which retailers they want to deal with, trust and expertise are becoming more important. Retailers that truly understand their audience and actively support shoppers as they are trying to make purchase decisions have an important advantage that manifests in higher sales and loyalty.

Becoming the customer’s trusted source of advice has become a vital USP for retailers. And some are fulfilling that role with great effect.

Examples of retailers using Digital Advice to ease a shopper’s path to the right product

19 of the Most Compelling Digital Advisors of 2017

Best Buy’s incredible comeback is an excellent example of a struggling retailer going back to basics and winning customers around by giving them what they really want – help and advice. The company looked like it was going down the same path as many of its big-box counterparts, but started to place an emphasis on store assistant knowledge and online customer support through its Geek Squad. A 21% surge in stock price and increased revenues was the reward for this new strategy.

Specialist boating retailer West Marine can also be found in the bracket ‘trusted advisor’ because of the extensive support it offers customers shopping online. The company uses intelligent digital advisors such as an interactive Kayak Finder, to help customers sort through a number of products, getting to the perfect item without having to undertake extensive research.

Examples of retailers doing well may be all well and good, but it’s important to understand the practical steps needed for your business to succeed in the industry.

Here are some important takeaways from NRF 2018:

1. Keep it simple

“In today’s world there are more choices, more angst points, more obstacle courses than ever before,” Levis’ Brand President James ‘JC’ Curleigh told delegates. “In a world of difficult decisions, picking our your favorite jeans should not be one of them.”

Consumers don’t want shopping to be about difficult decisions. They want it to be as simple as possible.

A ‘decision simplicity index’ created by Patrick Spenner and Karen Freeman showed that businesses that make shopping frictionless for customers are 86% more likely to make a sale than those making the transaction more difficult. Their customers are also 9% more likely to make a repurchase and 115% more likely to recommend the company to a friend.

Curleigh revealed that Levis’ strategy was to put customers on a “simplified course” to make sure they continue to buy Levis or that they’re “introduced to Levis in a simple way”.

Consumers need to be supported. With the wealth of products, brands, retailers, and services on the market, any company that can demystify the options and makes the buying process more simple has a better chance of winning customer loyalty. It’s how Amazon positioned itself as a Category King.

Michael Evans, Head of Retail Solutions at Soti, summed it up nicely:

“Whenever they’re (the customer) walking into a retail store they not only just want to be able to find a product, they want to be able to find a product quickly, they want to have information on that product, they want to have information brought to the forefront, so they don’t have to dig for it. They want to be able to move quickly through it. but ultimately they want to have an interactive experience that brings them back.”


2. Invest in experience

The advancements in technology and shrinking profit margins have brought some retailers to the conclusion that getting rid of personnel, in the form of sales associates, is a sound strategy for saving money.

But Joe Jensen, Vice-president and General Manager of Intel’s Retail Solutions Division, thinks companies with that point of view are missing a trick.

“We really do believe the physical store is how consumers prefer to shop,” he said during the Robotics panel at NRF 2018. “The challenge is that, as retailers have laid off sales associates to cut costs, the experience has become more negative for customers. The old profit-and-loss equation needs to be rebalanced to bring more technology into stores so that retailers can better position their products and augment the capabilities of staff.”

He stressed that technologies such as AI were not “coming to terminate traditional retailers”, but should be used in retail stores to perform general tasks while experienced salespeople interact with customers, giving them the support, expertise, and advice they need.

Michelle Bacherach, CEO and Co-founder of FINDME, said that retailers who had a poor experience with AI were making a mistake if they dismissed the technology entirely.

“By throwing the baby out with the bathwater, you could be missing this massive opportunity.”


3. Go with the flow (omnichannel and voice)

Staying on the subject,

AI is becoming an unavoidable topic that retailers need to have internally. All the evidence suggests that today’s consumers prefer the omnichannel approach to making a purchase, and AI is a huge part of that.

According to a webcast shown at NRF 2018, of the 174 million shoppers that purchased items during the five-day period following Thanksgiving, omnichannel customers spent $82 more on average than online-only shoppers and $49 more than in-store-only customers.

Enabling AI allows retailers to track customer preferences and shopping habits across their omnichannel experience. This is important because it allows the retailer to create personalized offers and help customers in their decision-making process.

As Kate Ancketill, CEO of GDR Creative Intelligence, said:

“The retailers best positioned in the future will be those who adopt a more expansive definition of retail itself… and build something that is more dynamic, adaptable and responds to a fragmented market.”

And, increasingly, voice will be part of this architecture.

The number of transactions being made from people’s homes via devices like Amazon Alexa and Google Home are steadily growing, but virtual assistants are expected to have an impact on the way brick-and-mortar stores interact with customers.

In fact, 37% of survey respondents believe that virtual assistants will be the technology to have the biggest impact on the evolution of retail stores, second to apps that track inventory (40%).

“I think we will continue to see voice grow and grow in its application, so even though it’s here, I think we’ve only scratched the surface.” – Cristina Ceresoli, the NRF’s Vice-president of Retail Strategy.


So as we move away from the ‘doom and gloom’ on 2017, retail has every reason to look forward to a bright and innovative 2018 judging by the mood at NRF 2018. But to turn that optimism into tangible results, retailers have lots of work to do to stay relevant and keep customers coming back.

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Markus Linder is entrepreneur and co-founder of SMARTASSISTANT, now zoovu.