Business In News
It was amazing to be back in NYC for NRF 2023, and this year’s event did not disappoint. The annual retail gathering brought a huge set of new companies and interesting perspectives that will shape the future of retail over the next three years. Here are five key trends for retailers to pay attention to as they strategize for the months and years ahead:
Retail Media Networks (RMNs): One of the most important topics of the past 18 months, RMNs offer the opportunity for many grocers to expand their revenue by monetizing their data and scaling their on-site and off-site audience activation. This year at NRF, it remained a major area of conversation in booths, and we also have seen the industry embrace it. We expect RMNs to expand beyond grocery into apparel and specialty and convenience stores. While these segments lack some of the strong supplier relationships that exist in grocery, based on our observations and experience, we expect them to benefit substantially from on-site, off-site, and endemic/non-endemic advertising. This remains a $50 million to $100 million opportunity for most $5B+ retailers in 2023, and too few non-grocers are pursuing it as a solution.
Expansion of AI Data Use Cases: One of the most productive areas of conversation at NRF was around the expansion of AI/ML use cases in retail. For example, churn prediction, recommendation engines and customer lifetime value models were discussed at multiple booths. It seems retailers are finally upgrading their marketing technology stacks with this technology. There was also a significant increase in conversations about AI-driven use cases, from partners ranging from the large cloud providers to data specialist firms.
Retailers are finally starting to embrace AI in their core business operations — to boost efficiency by optimizing stock levels, for example, or combining supply chain availability with customer lifetime value to prioritize marketing offers. Plus, with the continued noise around ChatGPT, we expect the exploration and expansion of AI into practical retail use cases will only grow more important this year. If you haven’t explored ChatGPT to get a sense of its capabilities, you are missing out. Major opportunities include content production — especially for marketplaces — and product descriptions, product recommendations and of course customer service.
Health and Wellness: An emerging space for many retailers, health and wellness is becoming an important new business line for big box retailers as well as C-stores. First announced at NRF 2020, COVID has supercharged the adoption of alternative channels for medical care and wellness. We expect 2023 will be a big year for this area, and we’ve already had announcements from Amazon, among others. For example, Amazon announced a new drug subscription service for Prime members, RxPass. Other retailers also have expanded their contact lens and optical lines of business. Retailers that do this benefit from the higher margins in this sector, revenue growth consistent or faster than inflation and the ability to capture a greater wallet share.
POS Modernization and the Sales Associate Experience: One of the interesting themes at NRF was how retailers are shifting their spend to enable digital mobile apps for sales associates. Leading retailers are seeing a double-digit ROI on every dollar spent on sales associates, outperforming consumer-facing mobile apps. For example, pick and pack tools, in-store routing options and communication/chat platforms to shorten the onboarding and training process were widespread.
This is the first step toward a reimagining of the physical store. And as consumers have returned in force to those stores, we expect these investments to be just the start of a broader digital transformation of stores. Look for more digitally connected displays in physical stores, investments in new store footprints and updated layouts. We also see significant new investments in the point-of-sale solution to complement past investments in digital.
Sustainability and Social Responsibility: Retailers at NRF were increasingly focused on sustainability and social responsibility. One highlight was GAMUT’s CEO Mindy Scheier, who announced the creation of the GAMUT Seal of Approval, which identifies the inclusion of PWDs (people with disabilities) in the creation and marketing of products. During her session, Scheier explained that this provides authenticity to three audiences: brands, retailers and, most importantly, consumers. Retailers need to think outside the traditional product design box to achieve their social responsibility goals.
Sustainability was another critical area as retailers looked to optimize near-shore sourcing and balance costs and benefits. Digital experience solutions for sustainability — mostly around visibility — are being developed as well. We see trends where they show a ‘sustainability score’ for a given SKU when browsing online, allowing consumers to choose whether to spend their dollars on the products that are most sustainable in the category or overall.
In addition to the above, there are other key areas where we see the future of the industry really expanding as well. We expect Web3 (and even crypto) to continue to garner investment, even though it was only lightly discussed at NRF this year. It will be an important channel to reach younger audiences and future customers. Secondly, VR/AR continues to gain traction in the market, with augmented reality apps continuing to be popular and new AR glasses likely launching in the market this year.
NRF is always a powerful meeting place for experts in the industry. Retailers are continuing to look for a competitive edge, and these trends — whether it is retail media networks, sustainability or POS modernization — offer an opportunity for them to do just that.
Hilding Anderson is VP, Head of Retail Strategy, North America at Publicis Sapient. He works with Fortune 500 companies and top global retailers to advise them on digital business transformation and how to drive higher performance in the changing digital landscape. Some of Anderson’s recent work includes shaping a business transformation roadmap for a large department store, shaping the data strategy for a large grocer, engaging with the chief digital officer of a top luxury apparel retailer in New York on GTM digital strategy and business justification, as well as partnering with a large home improvement retailer on the East Coast in experience strategy and innovation.