January/February 2022
Labor Shortage Hits DCs J.Jill in Retail Reset Focus on Open-Air Centers
RETHINKING FULFILLMENT
Consumer trends transforming traditional model
March 20-22, 2022 Gaylord Texan Resort & Conference Center Grapevine, Texas
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from the editor’s desk
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On the Level: A real estate column
Contents
tech viewpoint: a retail tech column
VOL. 98 JANUARY/FEBRUARY NO. 1
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Retail Profile: J.Jill’s retail reset includes a greater emphasis on full-price selling and new focus on gross margins.
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Trending Topics: Meijer in eco-friendly parking lot paving pilot; Kohl’s ups renewable commitment; Canadian grocer’s new “flexstore” ShopTalk: Toys “R” Us makes store comeback; Wayfair to open physical stores across banners. Store Spaces Q&A: SDI’s Jim Owens discusses how to mitigate risk and impact of supply chain disruptions on facilities maintenance strategies.
REAL ESTATE
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RETHINKING FULFILLMENT: Consumer trends are transforming the traditional model.
For Open-Air Centers, Everything Has Changed Well-capitalized retailers — including long-time mall tenants — are snapping up spaces in outdoor centers that troubled retailers have left.
TECH
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Tech Q &A: Purva Gupta, of Lily AI, talks about the importance of knowing customers — in real time.
CSA (USPS 054-410; ISSN 0193-1199), is published bimonthly by EnsembleIQ, 8550 W. Bryn Mawr Ave., Suite 200, Chicago, IL 60631, on a controlled basis to qualified retailer titles and architects. Real estate and shopping center owners and developers $75 per year. All other non-qualified in the United States: $80 one year; $155 two year; $14 single issue copy; Canada and Mexico: $105 one year; $185 two year; $16 single issue copy; Foreign: $115 one year; $215 two year; $16 single issue copy. Digital edition subscription: $55 one year digital; $105 two year digital. Periodicals postage paid at Chicago, IL and additional mailing offices. POSTMASTER: Please send address changes to CSA, Circulation Fulfillment Director, 8550 W. Bryn Mawr Ave, Suite 200, Chicago, IL 60631. Subscription changes may also be emailed to contact@chainstoreage.com, or call 1-877-687-7321. Vol. 97, No. 2, January/February 2022. Copyright ©2022 by EnsembleIQ. All rights reserved.
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FROM THE EDITOR’S DESK
Power Moves: New CEOs to Watch There was plenty of CEO turnover in 2021 as new leaders were tapped to navigate companies amid ongoing pandemicrelated fallout, from labor shortage to supply chain disruption. In some cases, executives felt the time was right to move on — to outer space, in Jeff Bezos’ case. Here’s a look at six new CEOs to keep an eye on in 2022. • Marc Rosen, J.C. Penney: The former executive of Levi Strauss & Co. and Walmart took the reins of Penney in November, succeeding Jill Soltau, who left the chain after steering it through bankruptcy and its sale to Simon Property Group and Brookfield Asset Management. Rosen is a well-respected, 25-year retail veteran. But he has his work cut out for him in trying to revive Penney, a brand that has been struggling for years to regain relevancy with consumers. • Jason Buechel, Whole Foods Market: The next evolution of the natural foods grocery powerhouse will begin on Sept. 1, 2022. That’s when current COO Jason Buechel succeeds chief executive John Mackey, who is retiring after four decades at the helm of he company he co-founded (and sold to Amazon in 2017.) The new leader will take over as Whole Foods is growing on multiple fronts, including delivery, pickup and in-store, with nearly 40 new locations in the pipeline. Buechel, reportedly hand-picked by Mackey, previously served as the company’s global vice president, chief information officer and executive vice president. • Denise Paulonis, Sally Beauty: The first female chief executive in Sally Beauty’s history, Paulonis joined the company from Sprouts Farmers Market, where she was CFO. Prior to that, she served in various executive roles at The Michaels Cos.
CHAIN STORE AGE
Paulonis succeeded Chris Brickman, who led Sally through an omnichannel transformation that put it on solid financial footing. But the 58-year-old brand still faces a challenge in attracting and retaining younger consumers. • Andy Jassy, Amazon: The former chief executive of Amazon Web Services succeeded founder Jeff Bezos, who stepped down as CEO in July after a 27-year run. Jassy, who joined Amazon in 1997, is credited with building the extremely profitable AWS from the ground up. Jassey has inherited a sprawling company that, despite its enormous success and influence, is facing a number of challenges, both internally and externally, from worker unrest to antitrust complaints. • Dave Kimbell, Ulta Beauty: Kimbell moved into the top spot at Ulta in June, following the unexpected move by Mary Dillon to step down. He joined the company in 2014, a year after Dillon, as chief marketing officer (having previously worked with her at U.S. Cellular), and added merchandising responsibilities a year later. He was named president in 2019. Industry experts say that Kimbell, who worked closely with Dillon to build Ulta into a beauty powerhouse, is well suited to lead Ulta as it navigates retail’s “new normal.” • Roz Brewer, Walgreens Boots Alliance: The pharmacy chain made history with the appointment of Starbucks’ chief operating offer, Roz Brewer, as CEO. She is the only Black female to head up a Fortune 500 company, and only the second Black woman chief executive ever in the history of the Fortune 500. Brewer has moved decisively since arriving at Walgreens, accelerating the company’s emphasis on health care. Under her watch, Walgreens has launched a new health division, doubled down on its partnership with VillageMd and is adding “health corners” to some of its stores.
Marianne Wilson mwilson@chainstoreage.com
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COVER STORY
RETHINKING FULFILLMENT Consumer trends transforming traditional model
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By Dan Berthiaume
ncreasing customer demand for fast delivery and in-store pickup options are among the trends reshaping the fulfillment center — sometimes literally. Similar to all areas of retail, the functionality of the fulfillment center ultimately must adapt to the changing needs and wants of consumers. And as every retailer can attest, the past two years have seen major upheaval in customer demand patterns caused by the continuing COVID-19 pandemic. This paradigm shift includes customer expectations for near-instant fulfillment of online orders, as well as for retailers to conduct sustainable operations. In addition, ongoing supply chain disruptions make it more important than ever for retailers to be able to conduct operations within fulfillment centers as efficiently and accurately as possible. Following are closer looks at how fulfillment centers are evolving in response to these trends in three key areas: store-based fulfillment, automation and sustainability.
STORE-BASED FULFILLMENT Increasingly, retailers are shifting activities traditionally performed in centralized fulfillment centers to localized stores. In some cases, they are taking shuttered 6
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or underperforming stores and turning them into “dark stores” which serve only to quickly fulfill online orders Dark stores gained popularity during the widespread store closures and subsequent rise in omnichannel shopping that occurred during the early stages of the COVID-19 pandemic. In an interview with Chain Store Age, Nitin D’Souza, supply chain and transformation lead at digital consulting firm Publicis Sapient, discussed the hot topic of dark stores. “We’re seeing quick commerce companies pick, pack, ship, and deliver in as little as eight minutes,” said D’Souza. “Manual dark stores are used because they are the easiest to set up, do not require a large space and can be ready in as little as two weeks. For online grocery specifically, many retailers use instore picking and back-of-store picking.” As D’Souza noted, not all store-based fulfillment programs require a dedicated dark store. Many retailers, also use the back room or other dedicated areas of an active store to serve as a mini-fulfillment center for local online orders, either on a ship-from-store or in-store pickup basis. The nation’s largest retailer-owned cooperative is among the retailers experimenting with micro-fulfillment technology. Wakefern Food Corp. is piloting a
ShopRite is piloting a a compact automated storage and retrieval system.
storage solution from Kardex at a store operating under the ShopRite banner in Kingston, N.Y. The Kardex Remstar Shuttle XP Vertical Lift Module storage solution uses automated bots to retrieve grocery items from a compact storage center for streamlined picking. The solution is designed to maximize space and offer high-capacity storage. Grocery orders are stored in totes on the trays located within the unit, and the Shuttle XP automatically delivers those totes based on an order barcode scan when the customer arrives for pickup. The machine can also deliver orders when a customer checks in for curbside pick-up. “Our ShopRite from Home online shopping service is one of the fastest
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growing parts of our business and we are always looking for ways to streamline the online shopping process for our customers,” said Steve Henig, chief customer officer of ShopRite parent Wakefern.
AUTOMATION By automating routine manual processes performed in fulfillment centers, retailers can save time, limit out-of-stocks and increase the speed of stocking and unloading. While automation in the fulfillment center is not a new phenomenon, the trend has been picking up traction in the past year as retailers seek to mitigate the effects of what they expect will be long-term supply chain disruption issues (see sidebar). “Automation will streamline all the key steps in the supply chain, from manufacturing the products with minimum human intervention, to managing the distribution process with storage and retrieval systems, automated guided vehicles and drones, among others,” Abe Eshkenazi, CEO, Association for Supply Chain Management (ASCM), told Chain Store Age. Retail giant Walmart has been actively automating key fulfillment activities for several years. For example, the retailer is applying artificial intelligence to the palletizing of products in its regional
Supply Chain Challenges A staggering 98% of surveyed senior retail executives agree that supply chain issues will continue impacting the retail sector through 2022 and beyond, according to a recent study by First Insight and the Baker Retailing Center at the Wharton School of the University of Pennsylvania. The study indicates the top three ways retailers are combatting supply chain issues is by improving their forecasting, finding new manufacturing or vendor partners, and streamlining assortments. More than onethird of retailers are absorbing the hit from increased costs of goods and shipping and keeping prices consistent. In other findings, 59% said they will be passing on the costs to consumers. Nearly two-thirds of retailers anticipate a margin hit of less than 10% resulting from supply chain issues.
distribution centers. Walmart is working with Symbotic to optimize an automated technology solution to sort, store, retrieve and pack freight onto pallets, with plans to ultimately roll out the Symbiotic system at 25 of its 42 regional distribution centers. A complex algorithm determines how to store cases like puzzle pieces, using high-speed mobile robots that operate with a precision that speeds the intake process and increases the accuracy of freight being stored for future orders. By using dense modular storage, the solution also expands building capacity. Using palletizing robotics to organize and optimize freight, the Symbotic solution creates custom store- and aisle-ready pallets. Meanwhile, apparel and home merchandise retailer Bealls is implementing BG Robotic automation systems from Berkshire Grey to handle expanding merchandise categories and fulfill orders more quickly. Bealls intends to utilize the AI-enabled systems in an effort increase the processing capacity and throughput needed to meet surging customer demand. By implementing Berkshire Grey’s robotic systems with the capability to pick, sort, and pack over 55 million units annually, Bealls is looking to meet and exceed heightened customer demand and expectations for apparel, footwear, accessories and home items. The company also hopes that the robotic systems will enable its existing workforce to speed up store replenishment processes, helping to continue corporate growth. The Kroger Co. also is looking to automation to expand its new “customer fulfillment center” (CFC) footprint. Developed in partnership with U.K.-based online grocer Ocado, the CFC model combines vertical integration, machine learning, and
SUSTAINABILITY Consumers are paying more attention than ever before to the sustainability practices of retailers, including in their supply chains. In addition, sustainable fulfillment practices can often prove to reduce costs over time. Retailers are paying attention. According to the “2022 Bringg Barometer: State of Retail Delivery & Fulfillment” survey of 500 enterprise retailers in the U.S., U.K., Canada, Germany, France and Italy, sustainability
Tapestry is building a 788,000-sq.-ft. fulfillment center in North Las Vegas that will distribute 22.2 million units annually.
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robotics with affordable and fast delivery service for fresh food. The facilities leverage proprietary technology solutions focused on artificial intelligence and advanced robotics and automation to create more seamless and efficient fulfillment, picking and delivery capabilities for enhanced digital commerce capabilities across the U.S. CFC also represents one of the models engineered for the grocer’s flexible, vertically integrated Krosger Delivery network, which will also include smaller automated facilities and spoke locations. In CFCs, more than 1,000 robots traverse giant 3D grids, orchestrated by proprietary airtraffic control systems in the unlicensed spectrum. The grid, known as The Hive, contains totes with products and readyto-deliver customer orders. As customers’ orders near their delivery times, the robots retrieve products from The Hive, which are presented at stations for items to be sorted for delivery via an algorithmic sorting process. For example, fragile items are placed on top, bags are evenly weighted and each order is optimized to fit into the fewest number of bags, reducing plastic use.
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Labor Squeeze
Rooftop solar panels at an Amazon fulfillment center (courtesy Amazon).
and carbon emissions are an important fulfillment consideration, with 56% of respondents using fleets with electric vehicles, and one in three using bike fleets. In addition, more and more retailers are building or retrofitting fulfillment centers to meet advanced sustainability targets. Tapestry, the parent company of Coach, Kate Spade and Stuart Weitzman, is building a 788,000-sq.-ft. fulfillment center in North Las Vegas, Nevada. The center is expected to be completed next year. The project is being designed for U.S. Green Building Council’s LEED Gold certification. It will be partially powered by a solar array on the roof and feature innovative landscaping to minimize water usage. Energy-efficient lighting will be used throughout the facility, which will include electric vehicle charging stations. The North Las Vegas facility will leverage some of the latest advancements in materials handling equipment technology, including a goods-to-person system. The system is designed to increase efficiency, speed and storage capacity through automation and interaction with management systems to optimize the allocation processes. Serving Coach and Kate Spade, the facility is designed to distribute an annual 22.2 million units and hold 4 million units in inventory for both retail and e-commerce. Meanwhile, specialty outdoor retailer REI Co-op recently announced it is building a new distribution center that will operate as a zero-waste facility. The 400,000-sq.-ft. distribution center, to be located in Lebanon, Tenn., will support REI’s continued growth on the East Coast and in the Midwest and South. Expected to open in fall 2023, the facility and its operations will proactively address the employee experience, community CHAINSTOREAGE.COM
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engagement and environmental impact, according to REI. Situated on 41 acres in Wilson County, the facility will be one mile from I-40 and three miles from downtown Lebanon. The location will considerably reduce shipping times to fulfill customers’ online purchases and be able to support more than 70 REI stores. The Lebanon facility will complement REI’s three existing distribution centers, which are located Bedford, Pa.; Goodyear, Ariz., and Sumner, Wash. The Goodyear facility, which opened in 2016, achieved LEED Platinum certification — the highest level in the USGBC) green building rating system. It is the first distribution center in the country to achieve both LEED Platinum certification and Net Zero Energy. No discussion of sustainable fulfillment centers would be complete without mentioning Amazon. The omnichannel giant is implementing a variety of sustainable technologies in fulfillment centers around the country. To minimize energy use, these facilities feature state-of-the-art technology and are designed with efficient building systems. Many of Amazon’s operations facilities throughout the U.S. (as well as Europe and India) are powered by on-site solar, where a rooftop installation can power up to 80% of a facility’s energy use. In another example of how Amazon is increasing the sustainability of its fulfillment centers, the company is using energy-efficient, zero-emission power industrialized truck equipment at two recently opened Huntsville, Alabama fulfillment centers, as well as in a fulfillment center it is opening later this year in Delta Charter Township, Michigan. (are you using the full-name style of states, or the abbreviated style, as in 3 grafs up?)
Attention on labor shortages in retail has mostly focused on in-store operations. But distribution and fulfillment centers are also feeling the impact. All 100% of survey respondents from the retail industry reported having trouble hiring distribution center employees in a survey conducted in late fall by global organizational consulting firm Korn Ferry. Forty percent cited “significant” challenges, while 57% said they had “moderate” trouble finding enough workers. When asked if they are doing anything new or different to attract distribution center employees, 40% of the surveyed retailers said they are offering sign-on bonuses. Sixty-three percent have referral programs, and 40% said they were holding job fairs. Seventy percent said they were doing additional marketing. The largest percentage (41%) of surveyed retailers said the average minimum starting wage in distribution centers stands at $15 an hour. Nearly three-quarters (74%) offer some form of benefits (e.g., retirement, PTO, health coverage) to parttime employees. High turnover is another challenge. In a separate Korn Ferry survey, 64% of retailers surveyed said turnover at distribution centers hadrecently increased, and 44% reported that current turnover rates are running at 40% or more. With workers often receiving multiple offers, employers are finding that many workers are not showing up to the job, with only 15% saying 90% or more of distribution center employees make it to work on their first day. More than a third (35%) say that only between one-half to three-quarters of employees show up on their first day. In light of many retailer’s growth plans, distribution center worker shortages could get worse, warned Korn Ferry. Nearly three-quarters (69%) of respondents said they plan on increasing the size of their distribution center workforce in 2022 and 46% plan on opening additional distribution centers.
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RETAIL PROFILE
Retail Reset J.Jill CEO talks about the changes under her watch Claire Spofford took the reins of J.Jill in February 2021.
By Marianne Wilson
A little over a year ago, J.Jill was fighting for survival, trying to keep afloat amid the flood of bankruptcies in specialty retailing. Many people speculated that the 62-year-old women’s apparel and accessories brand, which sells nearly all of its merchandise under its own exclusive label, would not survive The situation improved in September 2020 when interim CEO Jim Scully pulled J.Jill out of its financial mess by negotiating a debt restructuring plan with the company’s lenders. The plan allowed the chain to get its finances in order without having to file for bankruptcy. Shortly after the plan was announced, J.Jill appointed Claire Spofford as CEO. Spofford took the reins of the company in February 2021, bringing more than 20 years of experience to the job. Prior to joining, she served as president of Qurate’s Cornerstone Brands, overseeing Ballard Designs, Frontgate, Garnet Hill and Grandin Road. Before that, she held executive positions at Orchard Brands and Timberland. She also had a brief stint at J.Jill, as senior VP and chief marketing officer. Since taking the top position at J.Jill, Spofford has brought new disciplines to the company and led a reset of a brand known for its casual, comfortable clothes that are stylish without being overtly fashion-forward. It’s a look that appeals to a target customer who is educated, affluent and on the other side of 40. Under Spofford’s watch, J.Jill has remained true to its target customer while moving to a greater emphasis on fullprice selling. Inventory has been reduced and there is a new focus on gross margins. “J.Jill had been in a situation, historically,
where it chased the top line to the detriment of gross margins,” Spofford explained. “There was a less than an optimum mix of full-price to markdown selling. Now, we are really focused on the gross profit.” The strategy appears to be working. J.Jill’s income for its most recently completed quarter (ended Oct. 30, 2021) totaled $11.2 million, compared to a net loss of $23.2 million in the year-ago period. Total net sales rose 29.4% to $151.7 million. Gross profit was $104.5 million compared to $69.0 million a year ago and gross margin was 68.9% compared to 58.9% in the third quarter of fiscal 2020. The retailed attributed the year-over-year gross margin increase to strong full-price selling and reduced promotions.
What are the key actions you have taken since becoming CEO? We have changed the business model from a historic one that was focused on top-line growth rather than gross margin, which led to over-inventorying and the need to promote to move through it. Now we are focused on inventory management and tightening up some of the disciplines in the business and how we manage it. We’re not overbuying, which would put us in the position of having to
J.Jill has remained true to its target customer while moving to a greater emphasis on full-price selling. Inventory has been reduced and there is a new focus on gross margins. In the Q&A below, Spofford discusses the changes at J.Jill, the company’s strengths and what lies ahead. A little over a year ago, it didn’t appear all that certain that J.Jill would make it. How did the company overcome the challenges it faced? I think the debt restructuring that was put in place later in the year [September 2020] and the hard work that went into it, along with the belief all of the stakeholders had in the potential of the brand, combined to keep people focused and
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make sure that it was able to restructure and not file. We were able to come out in a place where we could reset and rebuild the business, which is what we’ve been focused on.
promote extensively. We don’t promote out of the gate with new assortments. These are the things that we’ve emphasized as we tightened the business model and charted our course forward. Also, when you’re trying to sell at full price, it’s very distracting to the customer to have a lot of markdown inventory to move through as well. We are competing for her wallet and her share of mind. We want her to be focused on our great product and brand stories as opposed to constantly having to work through lots and lots of markdown inventory.
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RETAIL PROFILE As a result, we are very focused as a team on disciplined inventory management, with a relentless focus on gross margin and on full-price selling. How do J.Jill’s sales break down between channels? Direct sales as a percentage of total sales were 46% in the second quarter. Our business tends to hover around the 40% to 50% range. I feel very lucky that we have a balanced business model of direct-to-consumer and brick-and-mortar sales. Not only does it allow us to manage the business, it allows our customer to shop with us when and where she wants to. We are fortunate in that we are not overstored. But we have stores in a lot of the key markets where customers want them. How have the changes you’ve implemented impacted the stores? From a merchandising strategy standpoint, we had always come out with floor sets — a big brand reveal — once a month, which we supported with lots of marketing and a catalog drop. By mid-month, we would support it again with more marketing and another catalog drop. But you still get diminished returns. Also, we were promoting significantly right out of the gate, so we didn’t give products a chance to sell-through at full price. But now we’ve stretched our floor sets out to nine major ones, which we augment with newness capsules on a regular basis, every one or two weeks. It could be a capsule of our core collection or of one of our sub-brands, such as Pure Jill. It could also be a digital-only capsule. But we are flowing in newness much more regularly and supporting it more digitally from a marketing standpoint. What is J.Jill’s fashion positioning? Our value proposition is grounded in a premium casual aesthetic, with a fabricfirst approach. We feel great about our materials and fabrications. Our assortment is grounded in wonderful basics such as pima knits, linens and some of our other core franchises — things that our customer comes back to
R J.Jill, which has its roots in the catalogue business, operates 260 stores nationwide.
us for season after season and year after year. But it’s balanced with a nice focus on novelties. These are items with prints and embroideries… items that are more fashion-oriented and flow in and out of our assortment on a regular basis. This newness is something we’ve also been very focused. How would you describe the typical J.Jill customer? This is another area where I feel we are very fortunate. We have a very loyal customer. Once she discovers us and experiences our product and our service, she tends to stay with us. In general, our customer is 45-plus and well educated. She over-indexes not just for a college degree but a graduate degree. She is relatively affluent and that keeps us on our toes because she can pretty much shop where she wants to. We have to do a good job of giving her great product season after season and making sure her experience is terrific.
Is the business experiencing the labor shortage that so many retailers have been dealing with? We’re very fortunate in that we have good retention of our store associates for specialty retail and I think that comes from a few places. Our store associates have a deep connection not just with our brand, but with our customers specifically. They know the customers and they understand their lives. There is a real connection there that helps us with employee retention. And the other very interesting thing, which I just love, is that a lot of our store associates are people who had other careers but were J.Jill customers. They love the brand and when they retired or chose to do something different, they came to work in our stores. It’s a terrific dynamic.
How have the ongoing supply chain problems impacted the company? We are managing through it. We have really good relationships with our suppliers and are talking to them every day. The team is very focused on the flow of products and real-time information about the same. We signaled in our second-quarter earnings release that we will see some impact to gross margins in the back half of the year due to rising logistics costs. From a design and merchandising standpoint, our teams have done a great job of making sure our color palettes transition well from one to the other. So
What is the strategy with regard to store closings and openings? We signaled in our second quarter earnings release that we anticipate closing about 20 stores in 2021. But we are not closing stores because we are overstored. We are closing them because of opportunities in the current environment to make sure we have the right economics going forward. We will always be optimizing our retail portfolio, whether that means negotiating and re-negotiating leases, closing stores or opening stores. We do feel there is potential for store unit growth going forward as well.
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that if certain pieces of the assortment come in later, we can still tell a very beautiful and compelling story online and on the floor of our stores.
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STORE SPACES
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By Marianne Wilson
MEIJER IN ECO-FRIENDLY PAVING PILOT Meijer is bringing customers’ recycled plastic bags full circle in the parking lot of one of its stores. In collaboration with Dow, the retailer has entered into a pilot project featuring a new paving technique that uses recycled plastic bags to create a more durable parking lot. The recycled polymer modified asphalt (RPMA) parking lot, located at the Meijer supercenter in Holland, Mich., used approximately 12,500 pounds of post-consumer recycled plastic (PCR). All the recycled plastic used for the parking lot pilot project was came from the company’s in-store plastic film recycling program for customers. Meijer has collection bins inside the front entrances of its stores for customers to deposit clean, dry plastic bags and films. This year, Meijer expects to recycle 6 million pounds of plastics through the program. The project incorporated numerous partners to take the recycled plastics and turn them into a resurfaced parking lot. Padnos, a materials recycler, aggregated the Meijer recycled plastics, and converted them into usable PCR content. K-Tech Specialty Coatings, an asphalt emulsion company, modified the base asphalt binder with Elvaloy RET and PCR content. Rieth-Riley, the construction contractor, produced the final hot-mix asphalt and paved the Meijer parking lot and gas station. Powered by Dow’s Elvaloy Reactive elastomeric terpolymer technology, RPMA projects have increased durability versus unmodified asphalt, according to Dow.
PANDEMIC INFLUENCES LIGHTING TRENDS Nearly all (96%) of the respondents in a survey by LED lighting company aspectLED said they believed that lighting design trends have been influenced by the pandemic. Specific findings from aspectLED’s Annual Survey on Trends in Commercial and Residential Lighting Design are below. •Ninety percent of the participants said that they have seen more interest in lighting designs for outdoor spaces. •Eighty-nine percent have seen an increase in hands-free/non-contact lighting designs, such as motion-activated under-cabinet lighting in restrooms and public spaces. •Eighty-three percent have seen lighting design being used to de-emphasize crowded spaces by spotlighting specific areas such as tables in restaurants, and keeping the lighting low in general spaces where crowds form SOBEYS OPENS FIRST ‘FLEXSTORE’ IN NORTH AMERICA Sobeys has opened a supermarket that gives new meaning to the word flexible. The Canadian grocer’s store in Orangeville, Ontario, is the first location in North America to feature the “flexstore” concept from Zurich-based design & shopfitting company Interstore/Schweitzer. All the furniture used is flexible and ready to plug in as a result of an elaborate system in which the building services are fed from the ceiling into the counters and furniture. According to Interstore/Schweitzer, the Flexstore concept allows the retailer to change counters (including going from from service to self-service) and entire departments quickly and easily — without major construction costs — to respond to changing consumer needs. For instance, the pizza counter can easily be
KOHL’S LAUNCHES NEW SOLAR INITIATIVES Kohl’s Corp. is expanding its renewable energy program to equip 15 of its rooftops across Arizona and Illinois with solar arrays in 2022, bringing its solar rooftop total to 178. The new projects will increase Kohl’s installed solar capacity by 10.4%, to 56.97 megawatts (MW). On average, the new systems will provide 75% of each store’s electricity needs. Eleven percent of Kohl’s Illinois operational electricity usage and 9% its usage in Arizona will come directly from solar after the installations are completed. Kohl’s is also supporting the development of 23.4 MW of community solar projects across New York in 2022. The chain will subscribe to a share of four community solar projects that will generate renewable energy and provide economic and environmental benefits to area residents while providing energy credits to 18 Kohl’s store locations in New York.
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replaced by a salad bar by moving and exchanging the counters. The store design brings the new corporate identity of Sobeys to life and highlights the product presentation. The various departments are illuminated by specific lighting to create a different feeling for each area. The technologically advanced light fixtures have resulted in energy savings of 30% to 40%, according to lighting partner Imoon and Interstore | Schweitzer. Sobeys Inc. is Canada’s second largest retail group with more than 1,500 supermarkets in all ten Canadian provinces.
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SHOP TALK
Toys “R” Us PHOTO CREDIT: AMERICAN DREAM
TRENDING STORES: Toys “R” Us has opened its first U.S. store under its new owners, a two-level, 20,000-sq.-ft. location at American Dream, the 3 million sq.-ft.-plus entertainment and retail center in East Rutherford, New Jersey. The store combines signature elements that have long been associated with the retailer, including its Geoffrey the Giraffe mascot, with such new elements as Geoffrey’s Café/ice cream parlor and a slide that starts on the second floor and descends to the first (the café and slide will open later this year). Featuring some 10,000 products, the store also features stations where kids can play, interactive experiences, and product demonstrations. Next up for Toys “R” Us, which was acquired in 2020 by WHP Global, is a rollout of some 400 in-store shops at Macy’s stores. … Gucci is going big at American Dream. The luxury retailer is signing a lease for a 10,000-sq.-ft space at Triple Five’s massive entertainment and retail center in New Jersey. … A Pea in the Pod has returned to brick-and-mortar retailing. The specialty retailer of luxe maternity apparel and accessories opened two “concept” stores: an 1,800-sq.-ft. location in Chicago’s Bucktown area, and 900-sq.-ft. shop on the Upper East Side of Manhattan. The company, which was acquired by Marquee Brands in 2019, said it will be opening a “handful” of stores in its top populated customer locations across the United States. … Glossier’s return to physical retail continues. The digital-first company beauty company has opened a flagship in West Hollywood, Calif., on the heels of opening a location in Seattle. Designed by the company’s in-house creative team and inspired by classic Hollywood studios, Glossier LA features oversized props and amphitheater-style seating. Additional stores are scheduled to open in London and New York City this year.
COMING ATTRACTIONS: Direct-to-consumer home furnishings retailer Wayfair will open three stores in Massachusetts this year, including two locations for its AllModern brand and one for its Joss & Main banner. The company plans to launch stores for its remaining brands — Wayfair, Birch Lane and Perigold — during the next two years. … Primark is expanding in the United States. During the next five years, the value-priced Irish fashion retailer expects its U.S. footprint to grow to some 60 stores, up from its current 13 locations. PEOPLE UPDATES: Bevan Bloemendaal, who served as the VP of global retail experience & creative services at the Timberland Co. from 2014 to 2021, has joined Nelson Worldwide as retail practice leader. While at Timberland, which he joined in 1999, Bloemendaal led the creative disciplines responsible for global store design, visual merchandising, art and copy, digital/e-commerce and corporate events. … WD Partners appointed Jay Highland as executive VP, creative. He previously spent 17 years at Chute Gerdeman, where he served as chief creative officer from 2014 to January 2021. His experience encompasses all phases of the retail strategy and design process, including concepting, prototyping and scaled implementation.
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STORE SPACES Q & A
Supply Chain Disruptions Impacting FM Strategies Jim Owens is chief growth officer at SDI.
With physical retail continuing to drive the bulk of retail sales — and expected to do so for quite some time, stores are not only still highly relevant but, in some ways, more important than ever. Jim Owens, chief growth officer at SDI, the digital supply chain company, spoke with Chain Store Age about how retailers can mitigate the risk and long-term impacts of supply chain disruptions on their facilities maintenance strategies.
How have pandemic-related supply chain disruptions impacted the multi-site retail FM world? Experts expect that the pandemic’s impact on the supply chain will continue well into 2023, and those disruptions are starting to impact the ability of retail facilities management professionals to meet their performance goals and maintain their stores. This problem, is really hitting the maintenance world hard in terms of part shortages, stock-outs and extended lead times. This impacts their ability to complete work and meet performance metrics like mean time to repair, first call completion and overall wrench time. Additionally, because of these supply chain disruptions, commodity prices are rising and the price of FM spare parts is skyrocketing. The impact is felt in parts and asset assembly as well as capital assets. Why are we still feeling the impact on the supply chain? The global nature of our economy has made supply chain disruption more frequent and more impactful. On the supply side there were shortages because of lockdowns and then the continued uncertainty related to the pandemic. Demand, from a consumer perspective, initially halted for products but service demands increased – the rise of food delivery apps and the virtual restaurant are prime examples. After the economy started to bounce back, demand for products went through the roof, and the supply chain just wasn’t ready to meet that demand. How does the increase in demand impact retailers’ ability to maintain their stores and assets?
Increased foot traffic in stores means increased levels of repair and maintenance. Retailers historically haven’t had robust spare parts supply chains. There was no immediate need since maintenance strategies were very reactive. Technicians typically spend 25% to 30% of their time shopping (and driving) to find the parts they need to complete work orders. Couple that with item availability and logistical challenges, and the lost wrench time is significant. The FM parts supply chain impacts the downtime on those critical assets, which contributes to lost product sales, can cause health or safety issues, and creates a negative customer experience. It’s hard repairing your brand’s reputation. That’s why it’s imperative for retailers to get this supply chain under control.
apps, omnichannel fulfillment options and robotic process automation and artificial intelligence/machine learning — to better enable their spare parts supply chain, support their FM technicians and improve their maintenance strategies. Organizations invest tremendous amounts of money in technology and offerings to meet customer demand and expectations. Why not expect the same out of your supply chain? Many companies are adopting this consumer-driven approach to managing the FM spare parts supply chain, bringing the B2C experience to the B2B world. In doing so, they’re tying the work order management and CMMS (computerized maintenance management system) data into their supply chain data for end-to-end visibility, which allows better control.
What can FMs do today to mitigate their risk and minimize losses? They can: • Review internal purchase of supplier invoice data to identify frequently used parts and materials; • Identify all critical spares (missioncritical assets), HS&E related items; • Source additional, back-up sources of supply; and • Consider creation of internal inventory of safety stock.
How can SDI help retailers get started on this digital supply chain journey? We work collaboratively with our clients and their suppliers to develop solutions that include people and processes enabled by purpose-built technology. We start with a comprehensive assessment that includes data analysis, supply chain benchmarking, and baselining. We identify gaps and areas of risk, as well as areas of strength and opportunity, to suggest improvements and changes they can implement internally. SDI will exhibit at SPECS Show 2022 at the Gaylord Texan March 20-22. The company has also released a free report, “Integrated Parts Management for MultiSite FM Organizations,” to help FM professionals leard more about the digital supply chain process, lessons learned, and best practices moving forward. For more information visit: sdi.com.
What are some longer-term strategies they can employ? Retailers should look at their own internal supply chain practices for their merchandise and see how they could adopt the philosophies, approaches and technologies that they’re already using to satisfy their customers — eCommerce/mobile
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I cover retail real estate, meaning malls and shopping centers. But in these unusual times, the real estate that’s most needed and the hardest and most expensive for retailers obtain is industrial. Warehouses, that is. More products than ever are being delivered and not picked up in stores. C.H. Robinson, rated the nation’s top third-party logistics company by Logistics Management magazine, reported that some of its retail brand customers met their five-year e-commerce goals last year due to increased online purchasing. CBRE’s Industrial division reported that net absorption in the fourth quarter of 2021 totaled 122 million sq. ft. That took the full-year total to 433 million sq. ft.— an 81% increase over 2020 and the highest annual volume since CBRE began tracking the market in 1989. Warehouse vacancy rates, as a result, dropped to 3.2% and rents rose 11%. More than 500 million sq. ft. of new warehouse space is currently under construction, but rents will stay elevated due to supply-chain deficiencies. The biggest buyers and leasers of industrial space are 3PLs like C.H. Robinson, and the company’s VP of North American surface transportation, Noah Hoffman, doesn’t see availability increasing or rents lowering anytime soon. “Because we serve more than 7,500 retailers, we keep a close eye on inventory levels, and when someone doesn’t know how much of their merchandise they’re going to get from their supplier in Asia or when it’s going to arrive, they’ve been ordering 1,000 of a particular toy or game instead of what might have been 100.
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That fills up warehouses,” Hoffman said. The Eden Prairie, Minn.-based company has implemented emergency measures to make the most efficient use of the space that is available. It’s bypassing busy ocean ports when possible and running air charters to port cities where vacancy rates are higher. C.H. Robinson claims to have increased container capacity in Southern California some 25% by loading containers onto trucks and trains and immediately moving them inland to open warehouse space. Hoffman pointed out, too, that the Omicron surge has continued to keep longshoremen, truck drivers, and warehouse workers at home—a phenomenon that not only slows the movement of product but creates inefficient use of warehouse space. “When you don’t have enough people to keep merchandise moving efficiently through warehouses, it literally takes up more space. That’s one reason we’re exploring how autonomous vehicles like forklifts could alleviate some of the labor shortages,” Hoffman said, adding that his company has been working diligently to free up every possible square foot of space in their warehouses. The idea of turning empty space in malls and shopping centers into last-mile delivery depots was talked about in the early months of the pandemic, but the idea appears to have been left on the table. “We have had multiple conversations with owners in the mall space about the concept. What it seems to me at this point is that it’s an interesting dialog, but nobody has jumped in yet,” said John Morris, CBRE’s Americas industrial and logistics leader. “My guess is that many retail investors are taking a hard look at the feasibility and payback of that function in a mall.” Micro-fulfillment companies have started up during the pandemic—some which offer to set up in empty mall space. It’s a good bet more will come on board.
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See why your peers are joining us LIVE at the 58th annual SPECS Show: “The current rapid pace of change is challenging retail in ways we are still striving to fully understand. The opportunity to gather in a live setting to discuss, share and learn amongst our peers and the industry’s leading supplier partners is more important than ever. SPECS provides the perfect environment to do exactly that.”
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For Open-Air Centers, Everything Has Changed
The hero providers of essential necessities during the pandemic, outdoor centers are now in vogue with retail brands once found only in malls. By Al Urbanski For enclosed malls, COVID-19 was a game-stopper. For open-air centers, COVID-19 was a game-maker. Their key players—grocery stores, D-I-Y big boxes, home goods providers—were graced with a title that none ever dared claim for themselves: “Essential.” Is it possible that, in two short years, the tenants that lease space and the people that visit open-air centers and the things they do there are now different? “Everything is different,” said Adam Ifshin, CEO of DLC Management Corporation, which owns and operates 85 outdoor centers comprising more than 15 million sq. ft. “Tenant demand has changed for open-air. Where they’re coming from has changed. They’re adding stores and moving out of regional malls,” Ifshin said. “Their credit profiles have changed. Average credit quality is much higher than pre-pandemic because a bunch of terrible tenants went away. They’re coming out of it with much less debt. Bankruptcy is off the table. And then you’re seeing demand. You’re seeing that tenants like Burlington can do 700 more stores, Ross 500 more.” During the 2020 holiday season, when millions of shoppers stayed home instead of flocking to malls, online purchases in the United States grew by 32% to a record $188 billion, according to Adobe Analytics. Online spending was $1 billion every day and on 50 of those days it topped $2 billion. Comparing 2021’s holiday shopping totals to 2019’s, online sales increased by 64% while in-store sales rose just 2.4%. Most shopping center developers believe that COVID set forth social circumstances that dialed up the omnichannel split between e-commerce and physical retail to a level at which it will remain for the next five to 10 years. Ifshin is one of them, and one of the things he sees this new standard forcing is mall stores moving into his open-air centers.
“Where tenants are coming from has changed. Their credit profiles have changed. They’re coming back with much less debt. Bankruptcy is off the table. And then you’re seeing demand.” — Adam Ifshin, DLC Management Corp.
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DLC’s Randhurst Village in Mount Prospect, Ill.
“Retailers are seeking to reserve space in open-air that is not available yet,” Ifshin said. “Even at the best malls, those midrange tenants can’t stay because the freight is just too high. And they are seeing they can do similar numbers in open-air centers at a lower cost.” Fred Meno, president and CEO of asset services at The Woodmont Company, is of the same mindset and his portfolio includes malls like the Park Plaza in Little Rock, Ark. along with several power centers. “Open-air centers have always had a big advantage over malls because of the cost delta. Due to taxes and CAM costs, mall expenses can be three or four times higher than open-air centers,” Meno said. He currently is seeing big box retailers like Big Lots actively expanding into his centers, and he’s also seeing some of his traditional in-line mall tenants moving into open-air. “Charlotte Russe, rue21, and Aerie are expanding quite heavily. Lululemon is doing very well with a wide expansion that now puts more of its stores into open-air than malls,” he said. “I think we’ll see more of this, but what’s causing a wait-andsee attitude is the lag in the recovery of entertainment tenants. Theaters and rock-climbing centers are still in a bit of limbo because of social distancing, and that’s a really critical category. You’ve got to have that entertainment factor.” Longtime mall tenants like Banana Republic and Bath & Body Works have been actively seeking spaces in higher-end mixeduse centers for the past five years, and their presence in those locations leads more of their competitors to join them. Banana Republic moved out of Scottsdale Fashion Square in Scottsdale, Ariz., in 2017 and moved into the town’s Kierland Commons, JANUARY/FEBRUARY 2022
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a mixed-use center with a spa resort and luxury condominiums above its shops and restaurants. Since then, they’ve been joined by Bluemercury and Athleta. Jeff Green, a real estate consultant at the Hoffman Strategy Group who advises property owners, retailers, and municipalities, says that high mall costs play a role in whether a tenant stays or not, but who their neighbors are weighs heavier in the decision. “I don’t think all malls will close. The C and D malls will close, but the A’s and B’s are on unbelievably great pieces of real estate and brands that benefit from that are going to balance that with the cost of their rent.” Green said. “More important is co-tenancy. Bonobos wants to be next to other digitally native brands.” Paul Weinschenk, president of retail at The Peterson Companies, also firmly believes that co-tenancy is the prime consideration weighed by retail tenants considering bases of expansion. “Co-tenancy has always been an aspect of retail leasing and it doesn’t matter what the category is. Tenants always like to travel in packs and they like to rely on each other to do the underwriting
Regency’s Fresh Look
Eight years ago, senior executives at Regency Centers decided to evaluate their open-air portfolio, see what kinds of tenant curations and community outreach were working the best, and create standards to be applied across their 400-plus centers nationwide. Thus was born Fresh Look, a business model fashioned by three segments: merchandising, placemaking, and connecting. Summed up, the formula comes out something like this: Hand-pick local merchants and national chains that can flourish in the centers they’re in; make grounds walkable and pleasing with art placements and gathering spaces, and engage communities with events, charitable initiatives, and social media programs. “The basic idea is to tailor centers to each community, to gain an understanding of each community and what it needs,” said Regency VP of marketing Jan Hanak. Before opening Mellody Farm in Vernon Hills, Ill., (see photo above) Regency’s market research team studied migration patterns, designated which neighborhoods they’d most likely draw customers from, and surveyed them to see what they’d most like to find there. What resulted was a power center anchored by Whole Foods, Nordstrom Rack, and REI that is lined with walkways and Instagrammable art pieces, plus gathering spaces that welcomed events. Restaurants—several in self-designed buildings—include Lazy Dog, Café Zupas, City Barbeque, and Shake Shack. “Mellody Farm presents a very complementary mix of grocery, soft goods, services, restaurants, and fitness that creates a center of gravity for the community,” Hanak said. “It is an excellent example of our three pillars of Fresh Look in action and one of many such properties we have developed from coast to coast since embarking on this program.” 22
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Souls by LT, a local high-end shoe boutique at Poag’s Peachtree City center in Georgia
and think it through,” said Weinschenk, who oversees massive outdoor properties such as National Harbor outside of Washington, D.C. and Downtown Silver Spring in Maryland. Experiential potential Josh Poag, whose Poag Shopping Centers helped create lifestyle developments fashioned after upscale downtowns with apparel shops, restaurants, and greenspaces, told Chain Store Age that he’s had more conversations with retailers intrigued with the lifestyle environment in the last few months than he’s had in the last few years. “The head of a large retail chain who I’ve known for years but never had much luck leasing space to came up to me at the ICSC show in December and said, ’You’re one of the luckiest guys in real estate. We’re going to be pulling out of lots of malls in the next two years and you are in the right place,’” Poag said. Poag’s centers have always shined a light on restaurant rows packed with quality tenants such as Torchy’s Tacos, Grimaldi’s Pizzeria, Bonefish Grill, Gibney’s Tavern, and Pot 28 North Gastropub. Now he says he’s now seeing more power centers and grocery-anchored centers accelerating the number and profile of their food and beverage tenants. A Poag marketing associate conducted a survey in the company’s markets and asked, “What do you want to see from us in 2022?” The top two responses, making up 90% of the No.1 answer choices, were events and restaurants. “The branding of centers is all about restaurants and events these days,” Poag said. Sandy Sigal, the president and CEO of NewMark Merrill, is one power center operator who’s long believed that good eats make for better shopping experiences. His Marketplace 99 in Elk Grove, Calif.--anchored by Burlington, Ross Dress For Less, and Hobby Lobby—contains more than a dozen dining spots. On the menu are CreAsian Vietnamese cuisine, Mike’s Diner, Chuck E. Cheese, Kobe Steak & Sushi, and In-N-Out Burger. Dining is the centerpiece at the company’s Village at the Peaks JANUARY/FEBRUARY 2022
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center in Longmont, Colo., a new age power center whose main entrance is encased by a restaurant pavilion filled by Bad Daddy’s Burger Bar, Fuzzy’s Taco Shop, Ozo Coffee Company, Parry’s Pizzeria & Bar, Pho Huong Viet, and more. Anchors at the center are Regal Cinema, Sam’s Club, Whole Foods, and Burlington. “The idea for us is that open-air wins when we provide a gathering place, a strolling place, an entertainment place. If you can check as many boxes as possible, you’re going to win,” Sigal said. To Sigal, open-air’s great advantage is that it has a less controlled environment than a mall’s. “The argument against brick-and-mortar is ‘Why should I drive someplace when I can just go to my computer and have stuff delivered?’” Sigal said. “But we help you leave your home and explore nature, have a nice meal, and walk your dog, as well as shop. That’s a different dynamic. It’s engaging-with instead of selling-to.” The mixed-use outdoor center Some 30 years ago, Don M. Casto III bought a piece of land in New Albany, Ohio, about 10 miles from downtown Columbus. It was fairly rural then. Easton Town Center, Chain Store Age’s No. 1 Retail Center Experience last year, is just five miles away from the spot, and it too was empty land owned by Limited Brands founder Les Wexner at that time. Then Wexner moved to New Albany, built the Buckeye State’s second largest mansion there, and turned the quiet town into a trendy suburb. Casto figured that Highway 161 would eventually reach New Albany when he bought it. It did and, last year, the Columbus-based Casto real estate company opened a the Hamilton Quarter shopping center on the property. The wait positioned Casto’s developers to build a new type of open-air center conforming to the mixed-use standards of today. The first anchor they landed was a home run — a 125,000-sq.-ft. Target. The prime anchor they secured for the site, however, was Ohio State University’s 500,000-sq.-ft. Wexner Medical Center. Opened last year west of the open-air shopping center alongside Highway 161, it gets 2,500 visits a day and the average income of
Back to school event at NewMark Merrill’s Village at the Peaks in Colorado CHAINSTOREAGE.COM
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“We help you leave your home and explore nature, have a nice meal, and walk your dog. It’s engaging-with instead of selling-to.” Sandy Sigal, Newmark Merrill
its sizeable staff tops $100,000. Subsequent phases will include 700,000 sq. ft. of office space and 600,000 sq. ft. of apartments. Retail and restaurant tenants at Hamilton Quarter include Hobby Lobby, Five Below, Beerhead Bar & Eatery, City Barbecue, and Wendy’s. “The design is about convenience between office, residential, and retail. For office and medical center workers and apartment dwellers, it provides everything they need within a quarter mile,” said Eric Leibowitz, Casto’s VP of development and leasing. “I think the end result for us is really a market-driven mix of uses. When designing developments today, everything is about providing convenience to people who are rushed for time.” Consultant Jeff Green believes that this formula is one that should be adopted by municipalities attempting to cling to retailers — and their tax dollars — in their malls and shopping centers. “The over-stored nature of brick-and-mortar retail in the U.S. requires that municipalities substitute the loss in retail sales tax revenues with other forms of taxable revenues such as medical centers,” Green said. “However, towns and cities hold on to the notion that new retail can be supported, and in almost all instances that is just not true.” The evolution revolution The classes and types of retailers, service providers, health care facilities, entertainment, and food and beverage concepts that will be populating open-air centers look to be plentiful and varied in the coming decade, most developers believe. “I talk to venture capitalists often and they all tell me that pureplay e-commerce is dying. They won’t finance any start-ups now. From a profitability perspective, they are racing to survive. The cost to them for returned products are greater than the cost of rent,” said Ifshin of DLC. “The successful ones are expanding their retail presences, but if you’re Warby Parker and you have a couple of hundred stores but you need 900 more, you’re not going to be able to find all that space in mixed-use and lifestyle centers. Now you’ve got to go into that center with the Target over there.” New names — names more often found in malls and town centers — will continue to be moving into open-air shopping centers, which themselves are evolving into new, hybrid forms. Names like Brooks Brothers, Modell’s, and Pier 1 have disappeared and new restaurant and entertainment concepts and DTC brands are taking their places in places they’ve never been before. “New brands triumph and formerly hot ones no longer exist. Markets are changing,” said Peterson Companies’ Weinschenk. “The reality of retail is that it’s constantly evolving.”
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TECH VIEWPOINT
2022: The year Of Web 3.0? While it’s hard to predict what the new year holds, it’s looking increasingly likely that retailers will be active in “Web 3.0” technologies such as metaverse, NFTs and cryptocurrency during 2022. Here is a brief overview of NFTs and cryptocurrency — and how they may develop throughout 2022. Metaverse By now, everyone has heard that Facebook changed its corporate identity to Meta. The company plans to create a sophisticated digital world called the “Metaverse.” Here, consumers will use augmented and virtual reality technology to digitally engage with each other and their surroundings, with crossovers into the physical world. Currently, the metaverse exists on a smaller scale, most prominently through immersive digital gaming platforms. Numerous retailers are introducing metaverse experiences in the popular Roblox virtual environment, exemplified by the recently launched Nikeland space from Nike. Virtual buildings and fields inside Nikeland are based on the company’s real-life headquarters. Among other features, a digital showroom enables customers to outfit their Nikeland avatar with special Nike virtual products. Customers can also earn in-game rewards for participating in virtual games and activities. Digital shopping also features prominently in Ralph Lauren’s partnership with the Zepeto global social networking and avatar simulation app, which provides customers with a personalized virtual world. The metaverse can also integrate with the “real” physical world, as evidenced by a promotion during the 2021 New York Fashion Week event. Crocs partnered with flex payment platform Afterpay to reveal an exclusive collection of Jibbitz charms at a Times Square digital “Dropshop” augmented reality-based shopping CHAINSTOREAGE.COM
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experience. Customers could also use Snapchat to virtually try the charms on a pair of Crocs, via a new Afterpay Snapchat Lens. With technologies that enable consumer interaction with the metaverse, such as AR and VR headsets, becoming more sophisticated and popular, 2022 should see a steady increase in retailer metaverse participation.
Every Tuesday
NFTs Retailers began discovering tangible value in the digital realm with non-fungible tokens (NFTs) in 2021. NFTs are unique digital assets stored on a blockchain ledger which certifies the owner. There is no way for an NFT to have more than one owner, and only the certified owner can sell it. Highlights of retail NFT activity during 2021 included Domino’s resurrecting its former “Noid” advertising campaign in a series of NFTs, and eBay and Shopify both started allowing their purchase and sale. As with metaverse commerce, NFTs offer retailers the chance to sell products without physical overhead. Once the potential cost of designing and developing digital products has been expended, these companies avoid costs such as warehousing and distribution, as well as any potential reverse logistics expenditures. While there is always the possibility of NFTs turning into a speculative “bubble” (as has happened with many other collectible commodities), this year should feature many more digital retailers and marketplaces joining the trend. Bitcoin/cryptocurrency Bitcoin is a nearly anonymous, decentralized, peer-to-peer online currency (popularly known as “cryptocurrency”) which is based on blockchain technology. Blockchain serves as a real-time, single ledger verifying all transactions conducted on the blockchain network. Bitcoin and other forms of cryptocurrency have slowly grown as an accepted form of retail payment by retailers including Newegg, Camping World and Sheetz. Walmart and Amazon both signaled interest in cryptocurrency with 2021 job postings. Where Walmart and Amazon go, the industry follows. Retail may not yet need cryptocurrency, but in 2022 a lot more retailers will surely begin accepting it while it is still optional.
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TECH Q & A
Know Your Customer – In Real Time Understanding the intent of customers as they are shopping an e-commerce site can provide retailers with multiple benefits, according to Purva Gupta, CEO and co-founder of Lily AI, an e-commerce customer intent platform designed to improve on-site search, personalized product discovery, recommendations and demand prediction.
What front-end advantages can retailers obtain from real-time digital customer intent? There’s certainly a new recognition in ecommerce, and from our retailer customers, that ‘customer intent’ is now so much more than the user’s clickstream in search of the products they want to buy. Retailers are clearly still making bad guesses about shoppers and inventory. Many of them have outdated e-commerce stacks and rely on simple tools like text-based keyword search. This is what we see when we see ghastly numbers like a 2% industry-average conversion rate, up to 50% return rates and average unsold inventory of 30%. I think that the success of an e-commerce customer actually discovering what they’re looking for comes from a retailer’s deep understanding of both their own product attributes and an ability to predict a unique customer’s intent. When they consistently invest in understanding customer context and intent — particularly relationships between product attributes like fit, size, color and style (and many others), and how those intersect with each unique consumer’s behavior, motivations and emotional context — they set themselves up for increased conversion, larger order sizes and consumers who return to their ecommerce sites to keep buying. What back-end advantages can retailers obtain from real-time digital customer intent? It definitely doesn’t just have to live in site search and personalization algorithms. Retailers can enrich their entire e-commerce stack with this real-time
that you like to look at red ones,’ you are now putting the exact product that the customer is looking for right in front of them instantaneously.
product and consumer intelligence if it is done correctly. When they send these consumer signals to the various destination systems in the retail stack, it doesn’t only help with the front-end shopping the consumer is doing, it also helps to fine-tune demand prediction models, allocation planning, inventory management and item set-up processes. How can AI technology help retailers determine digital customer intent? Understanding customer intent and how to apply it definitely requires a solution deeply rooted in data and automation. An AI-powered product attribute management system should be trained to recognize granular product details, and then be able to apply sophisticated relational intelligence to enrich that product data with consumer-centric attributes. These product attributes can then be delivered in real time at scale, enabling brands and retailers to effectively support the wide variety of descriptive searches from their highestintent shoppers. Here’s an example. If a customer is looking for a ‘floral print day party dress’ and they type that into the retailer’s search bar, it might be that the only attributes the retailer has in its entire catalog of dresses is just that it’s floral print, or maybe just that it is a dress. What that does is surface up a lot of frustrating results that make the customer have to sift through to find what they want. Instead, if the retailer AI-powered product attribution says, ‘we have 55 day party dresses that are floral print, and we happen to know from your behavior
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What type of quantitative benefits can an AI-based customer intent system deliver? The biggest — and most important one — is revenue. Retailers using our customer intent platform are already seeing eight-to-nine-digit lifts in top- and bottom-line impact. This shows up in key retailer metrics such as product sellthrough rate, improved conversions and, again, overall increases in revenues. Other important metrics are forecast accuracy, as well as the ability to sell through merchandise at full margins, rather than having to deeply discount because of uninformed demand forecasting. How does Lily AI help retailers collect, analyze and act upon real-time customer intent data? We really seek to solve the perennial problem that retailers have in understanding the why behind what their shoppers are looking for. We do that by investing in our platform and in AI algorithms that more than 15,000 qualitative product attributes into a universal mathematical language that can then be easily tied into unique customer preferences. By using robust, AI-powered image recognition to extract these product attributes, Lily AI allows retailers to configure over 10 times more attributes than they typically would for each product — from fit to style, from embellishments to occasion and much more.
JANUARY/FEBRUARY 2022
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