Retail Innovation Report by Sourcing Journal

RETAIL INNOVATION

Letter From The Editors NAVIGATING THE CHALLENGES OF A NEW RETAIL LANDSCAPE.

RETAIL INNOVATION REPORT

ith online sales continuing to maintain momentum through the first quarter of the year, profitable brands and retailers would have typically been the ones with strong e-commerce capabilities. But due to the upheaval brought on by the global pandemic, the rules have changed. It takes more than having a solid e-commerce structure in place to succeed today. As 2020 transformed how and where consumers shop and buy, this year is being defined by the efficiency, effectiveness and responsiveness of a brand or merchant’s entire value chain. This means knowing that the customer journey can start anywhere—on a mobile device, on a website, in a physical store or on social media. A successful value chain requires bringing to market the right product, in the right style, and at the right price point. For fashion apparel, add “the right fit” to that equation, too. And for apparel and luxury goods in particular, today’s retail landscape is

one that is increasingly seasonless. This requires having product development strategies and processes in place that can reduce lead times from months to three or four weeks. Seasonless demands PLM processes that eliminate the need for physical prototypes. It requires product development processes that not only take into account the trends of the moment, but also the availability of fiber and fabric to meet those trends. At the front end, a seasonlessly-driven supply chain requires lean inventories that can meet market demands comfortably (and do so profitably). And for online, it requires fulfillment that is efficient and cost-effective. The new retail landscape also requires changes to the in-store experience. Due to behavioral shifts brought on by the pandemic, physical outposts need to be clean, sanitized and safe. Beauty product try-ons have been replaced by product samples. And with apparel try-ons, consumers remain wary of contamination. Other behavioral consumer changes include preferences for curbside pickup, contactless and cashless transac-

tions as well as options such as “buy now, pay later,” which Salesforce said in a recent report saw usage grow, yearover-year, by 109 percent in the 2020 holiday shopping season. Oh, and don’t forget that products offered have to be ethically and sustainably sourced, as well. All of which require investments in technology and innovation. In this special report, editors and reporters from across Fairchild Media Group, which includes WWD, Sourcing Journal, Footwear News, and Beauty Inc, have compiled insights into the current state of retail innovation and technology, and how various solutions, strategies and tactics are being deployed in the market right now. From assortment planning and the implementation of AI to data analytics and virtual showrooming, the retail innovations discussed in this report are not only informative, but can help retailers and brands better navigate a new, more challenging landscape. The Editors of WWD and Sourcing Journal

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RETAIL INNOVATION REPORT

Contents Small Bytes

Power Players

Cueing Up Clienteling

The Livestream Dream

Getting It Right

‘Tech’ Investing 101

Innovation Initiatives

Virtual Shopping

The E-comm Influx

Reading the Tea Leaves

Next-Gen Retail

Navigating the Transformation

Dialing It Up

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small bytes THE NEW FACE OF HIGH STREET

ASOS LAUNCHED ITS CIRCULAR DESIGN GUIDE, INFORMING ITS LATEST “CIRCULAR” FALL COLLECTION.

RETAIL INNOVATION REPORT

Online titans, including Asos, Boohoo and Next, are poised to change the face of the British high street as they jostle for control of ailing retailers struggling with expensive store estates and owner-managers who’ve failed to grasp the power, and potential, of e-commerce. Not long ago, the might of the British high-street retailer was measured in store numbers, property portfolios, hot locations and adjacencies. But those numbers don’t really count anymore. Today, the power lies with data, agility, speed — and meeting the customer wherever they happen to be. Earlier this year, Boohoo said it was buying the downand-out Debenhams department store chain for 55 million pounds — minus the store estate — while Asos took control of Topshop, Topman and Miss Selfridge, three formerly fizzy brands that fell on hard times as part of Sir Philip Green’s collapsed Arcadia Group. Next, meanwhile, has also adapted nimbly with the times, becoming the U.K. distribution partner of Victoria’s Secret and Laura Ashley home, and using its formidable online platform to market and distribute both brands. It looks like the online hares will continue to race ahead of the high-street tortoises, using a combination of bricks, and clicks, to appeal to customers. — Samantha Conti

‘BLOOMIE’S’ SMALL STORE CONCEPT Bigger is not always better. At least according to Bloomingdale’s, which is launching a small-store concept to help drive expansion. The new format will be called “Bloomie’s,” long a commonly used nickname for the retailer. The first Bloomie’s — a 22,000-square-foot setting at the Mosaic District two-million-square-foot lifestyle center in Fairfax, Va., near Washington, D.C. — is under construction and is expected to open in fall 2021. Bloomingdale’s sources said the new store concept will be a “smaller, highly edited and service-driven location.” If the prototype is successful, additional Bloomie’s could be built. The idea is to provide fill-in locations in cities and suburbs that support full-line Bloomingdale’s department stores, and to provide consumers with an alternative destination to shop, make returns or pick up packages ordered online. The Bloomie’s concept falls within Macy’s Inc.’s overall three-year “Polaris” strategy centered around closing at least 125 Macy’s stores, streamlining staff, as well as expanding off-price and offmall retail concepts, namely Market By Macy’s, a specialty concept with two locations in Texas, and Backstage, the multi-unit off-price division of Macy’s. About a year ago, Bloomingdale’s closed its Miami store in The Falls mall and cut some staff, per the Polaris strategy. — David Moin

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RETAIL INNOVATION REPORT

GIVAUDAN’S AI ACQUISITION In February, Swiss fragrance and flavors supplier Givaudan inked an agreement to buy French company Myrissi to help strengthen its Artificial Intelligence capabilities. Myrissi, which was founded in 2014, has created a patented technology that’s able to translate fragrances into color patterns and images and predicts the emotional response of the end consumer, Givaudan said. Fragrance and flavors suppliers increasingly are homing in on people’s emotions and well-being attributes in the creation process. “The acquisition of Myrissi is aligned with our long-term Fragrance & Beauty strategy; their expertise in AI will support us in proposing new visual and verbal storytelling approaches to consumers. This is particularly important in a time when e-commerce is booming,” said Maurizio Volpi, president of Givaudan Fragrance & Beauty. Myrissi created the link between colors, emotion and fragrances via a database of more than 25,000 consumer tests. “This unique consumer-centric approach allows Myrissi to support the development of fragrances that fully echoes customers’ marketing briefs,” said Givaudan. “The emotional impact of a product is enhanced by avoiding the cognitive dissonances that appear when sensory messages are not perfectly consistent. The uniqueness of the product and the brand identity are therefore amplified, and this helps consumers to select a fragranced product in store or via e-commerce channels that has a higher chance to be liked.” The deal is expected to close in the first quarter of 2021. — Jennifer Weil

Ulta Beauty and Target have joined forces in a bid to jolt the prestige beauty business. The retailers revealed they have created a strategic partnership to open 100 Ulta Beauty shopsin-shop in Target and on target.com in the second half of 2021. Called Ulta Beauty at Target, the concept will feature established and emerging prestige brands in the makeup, skin-care, hair-care and fragrance categories. The in-store shops will measure about 1,000 square feet and be located next to Target’s beauty departments. “Beauty is a category where we’ve invested heavily and grown fast,” said Brian Cornell, chief executive officer of Target, speaking on a conference call with Ulta Beauty ceo Mary Dillon. “As we thought about what’s next, one retail peer came to mind. By bringing these two brands together, we will redefine the retail experience.” “This is about two retailers embracing a time of change to lead and innovate,” said Dillon. “Both of our retail brands are coming from a position of strength, and we’re excited to come together to shape the future of beauty.” Noting that nine out of 10 beauty enthusiasts were excited about the concept during focus groups, Dillon said the point of the deal isn’t necessarily to gain access to new shoppers but to “gain a larger share of the overall beauty wallet.” — Jenny B. Fine

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The New Power Players HOW FARFETCH, POSHMARK, STITCH FIX AND THEIR DIGITAL COHORT ARE LEADING NOW, AND WHAT IT SAYS ABOUT WHERE THE INDUSTRY IS HEADED. BY EVAN CLARK

RETAIL INNOVATION REPORT

physical store, although that includes food, which is still dominated by in-person shopping. Fashion’s e-commerce penetration is higher — and it is there that the new, techier names are leading in almost every respect. “These new players have come up with an interesting way to appeal to the customer that’s different,” said Roxanne Meyer, an analyst at MKM Partners. “They appreciate that today’s customer wants convenience, they want value, they want personFARFETCH’S JOSÉ NEVES.

he changing of the guard has come — and the digital set, led by Farfetch, Stitch Fix Inc., Poshmark and others, is finally moving to the fore. Fashion has long been ruled by a tight-knit group of big-named retailers and apparel manufacturers. Between them, they had the brands, the real estate, the marketing mojo, the money and the mindshare with consumers and investors to lead the industry, setting the tone and shaping the future. They were moving through an uncertain landscape, but had their hands firmly on the wheel. Even as the rise of Amazon and the internet signaled a shift, the fashion establishment was able to keep its grip and attempt to change direction with the world. The new digital names generated buzz and grew quickly, but generally were still small, niche outsiders and many a next big thing — remember Boo.com? Or Nasty Gal’s first iteration?— came and went quickly as the online model was tested and retested. If power was gradually shifting from the physical to the digital before, the stresses of the coronavirus pandemic and a locked-down consumer base made the upheaval immediate. The result is a new group of power players in fashion. Brick-and-mortar still rules in absolute market share terms in the U.S. — on average 85.7 cents of every retail sales dollar spent goes into the till at a

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alization and you need technology to enable that. The buzzword of personalization is what these companies stand for and it’s going to manifest itself in different ways.” While each company has its own approach, they’ve all captured the imaginations of investor and customers, if not for the businesses they’ve grown already, then for where they’re headed. • Stitch Fix Inc. has established a profitable and growing business with a base of 3.8 million active customers and has a long data file on each one, catering to every shopper as an individual. • Poshmark and The RealReal are successfully using the billions of dollars of fashion sitting in consumers’ closets to build businesses that are also syncing up with the push toward sustainability. • Farfetch has pulled away from the pack and consolidated its online designer platform control through a mega deal with Alibaba and Compagnie Financière Richemont (parent of another digital disruptor, Yoox Net-a-porter), drawing a steady stream of brands (including the recent addition of Ralph Lauren, which is also moving away from department stores). There are many more with growing scale and digital savvy — from Zalando in Berlin to Revolve in California — that have become key outlets for brands and are blazing the path forward. There might be others that are bigger — Macy’s Inc.’s sales last year are expected to weigh in at more than $17 billion despite the pandemic — but it is the new tech set that is leading the conversation, grabbing the growth and inventing the future. Elizabeth Spaulding, president of Stitch Fix, said, “The future of shopping will be about personalized browse and discovery, not search, and requires a

deep understanding of customer needs together with a trusted relationship — the latter is how we are able to gather such a significant understanding of client feedback. By focusing on authentic engagement and relationships over transactions, and personal discovery over search, companies will truly be giving today’s consumers what they’re craving.”

“The future of shopping will be about personalized browse and discovery, not search, and requires a deep understanding of customer needs together with a trusted relationship...” — Elizabeth Spaulding, Stitch Fix It’s a future that requires a new set of skills. Consultant Chris Ventry, vice president in SSA & Co.’s consumer and retail practice, said, “The smart money right now is on these companies that are able to utilize the cash they have to acquire new customers through marketing, through creating a covetable and unique experience for a very broad assortment of customers. They’re grabbing onto an element of social sharing and a kind of community. “The power has moved from brick-and-mortar per se, although that’s still largely responsible for sales,” he said. “The first point of interaction is now mobile. Some companies are doing that better than others.” It’s a reorientation that reflects millions of decisions made by consumers, brands and stores that have led to one very important underlying shift. “It used to be about the physical asset because what you needed with the customer was the proximity,” said consultant Andrea Szasz, a principal in Ke-

RETAIL INNOVATION REPORT

tomers. Despite some advances in personalization, arney’s consumer practice. “Now the asset is the data. the online buyer experience is still largely one-way “What all retailers were looking for 10 years ago and transactional. was the footfall and for the brands it was being And the company, which has plenty of room to seen within the box,” she said, adding that there grow geographically, could become more of a platwere only so many prime street corners to put a form for brands. store or Times Squares to post a billboard. “Now “When you think of the future of shopping, peoit’s about the eyeballs and owning the eyeballs and ple think that secondhand and new are separate. those are in an infinite world [online].” We think they integrate,” cofounder, president and That sets up an equation balancing the costs of chief executive officer Manish Chandra told WWD. acquiring new customers with their lifetime value While Chandra is at least now mostly connectto a brand, with new concepts putting different eling consumers to other people’s closets, Farfetch ements of the digital world to work in the effort. CEO José Neves has another kind of platform, Szasz pointed to companies that use the powwhich is connecting consumers to a large — and er of the crowd and elements of social media to global — network of determine what designer boutiques and brands and styles brands. to focus on. With a market capi“Consumers talization of nearly $23 really want to billion and high-profile create emotional tie-ups, Farfetch is beconnections and coming a juggernaut. they’re just obIke Boruchow, a sessed, more than stock analyst at Wells looking at prodFargo, said, “They have uct and more than a real opportunity looking at what over the next five to sometimes the 10 years to really make brands have to say, something sizable, like but what the comthe Amazon of luxury, munity has to say,” and this is happening she said. “These as Amazon is trying to are elements of push luxury. playing into this A STITCH FIX MEN’S SHIPMENT. “High-end luxury idea of driving brands on a global level are not well invested digdown your customer acquisition costs and driving itally, they don’t have big functional e-commerce up your lifetime value.” sites and they don’t have mobile apps,” he said. That notion of using the crowd has surfaced be“A lot of these brands sell to small mom-and-pop fore in fashion, but now it’s hit and at scale. stores in mainland China and luxury destinations.” Poshmark Inc., which helps people sell secondThe adage that nothing attracts a crowd like a hand looks to other consumers with an “asset light” crowd works both online and off. model, is profitable, boasts annual gross merchanJames Miller, CEO and chief creative officer at dise volume of $1.3 billion and has a market capitalThe Collected Group, parent to Joie, Equipment ization of more than $5 billion after its initial public and Current/Elliott, said brands are being pulled offering last month. to the big online marketplaces. In the company’s IPO paperwork, it declared: “This is where the growth is,” he said, noting that “The future of online shopping is social. While the customer his brands reach through online plate-commerce offers substantial improvements to forms are 15 years younger than the people who buy buyers over in-person shopping, namely the easy through the brick-and-mortar wholesale channel. access to unparalleled scale and diversity of brands, “You’re growing a different consumer in a differstyles and price points, the personalization eleent way,” he said. “These are my customers that I ment remains a challenge. The sheer scale of onwant to be talking to for the next five, 10 years.” line inventory can often overwhelm potential cus-

SALESFLOOR IS SEEING MORE AND MORE CUSTOMERS ENGAGING WITH VIDEO CHAT.

RETAIL INNOVATION REPORT

Cueing Up the Next Generation Of Clienteling CLIENTELING PLATFORMS GOT A BOOST DURING THE PANDEMIC. WHAT’S NEXT? BY ADRIANA LEE

lienteling may be as old as retail itself, but it’s never mattered more. Or seen as much innovation. Relationships left the page, moving from scribbled text in salespeople’s notebooks to new digital tools that, during the coronavirus pandemic, have proven vital. Once reserved for luxury purveyors, Clienteling, has not only become accessible for any retailer, it’s also become even more valuable thanks to the windfall of available customer data. And that data will fuel the future. But opinions about what that future will look like vary. Some see the next-generation of clienteling hinging on emerging tech, such as augmented and virtual reality, livestream, video and social commerce. Others believe that its future will still rely on basic tools like emails and chat apps, but focus on bringing more retailers into the fold. But all agree that having a data strategy is key. “Clienteling is essentially digitizing the black book and being able to capture all of the consumer information preferences and shopping behavior in a digital format, to automate what has typically been in the head of the store associate,” explained Rob Garf, Salesforce’s vice president of strategy and

insights. Clienteling is a marquee facet of the company’s intelligence-driven customer relationship management platform. “Clienteling was primarily used for high-end luxury or department stores where the high touch service model was, and still is, a huge differentiator,” he said. Even legacy companies like Saks Fifth Avenue, Bloomingdale’s and Neiman Marcus, which turned traditional clienteling into an art form, dove into newfangled solutions. Capabilities range, from simply adding appointment-setting features in their apps to integrating virtual mood boards curated by stylists. Thanks to such features, Neiman Marcus raked in more than $60 million in sales in a single three-month period, all while the coronavirus raged in the middle of last year. There is no doubt that COVID-19 tested retail. But the savviest executives also see opportunity in the challenge. “What we’ve seen particularly accelerated by COVID is that several different categories of retail are adopting aspects of clienteling—general apparel, health and beauty, sporting goods, anywhere that consultation is part of the selling process

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Beauty and its parent company bringing beauty and fashion AR experiences to the social app, or fashion week brands opening WebVR boutiques that mirrored physical shops. For Compton, it’s not about hatching some new tech— in fact, the technologies that will inform clienteling already exist. It’s about using the tools to bring more relevant experiences to the customers. “Most retailers now are getting a handle on who a customer is, and a single view of that customer, even if they’re coming in through different devices,” he explained. “They’re starting to employ more artificial intelligence and machine learning into the clienteling activities that they were doing already, and basically making those those activities more relevant.” The relevancy matters, particularly once the pandemic finally abates. As shoppers return to stores en masse, savvy brands and retailers could greet them with unprecedented insights and recommendations. The data between how consumers shop, whether in store or online, regardless of device or channel, could finally make for a great deconstruction of the walls between offline and online. Not all retailers are there yet, however. Instead, with a singular focus on virtual selling alone, some

RETAIL INNOVATION REPORT

really accelerated,” Garf said. Meanwhile, with the plunges in foot traffic, retail execs had to reevaluate the role of in-store sales associates, he added. They realized that these workers have always been tremendous brand ambassadors, but had been tethered to the physical store, particularly the cash wrap, to focus on checkouts rather than “the check-in process,” he continued. “What really happened with COVID is retail executives looked at these brand ambassadors [and said,] ‘How can we unleash these essentially influencers into the market?’” According to Garf, companies began to see and rely on staffers in three critical ways: as fulfillment experts, since more online sales were fulfilled by stores; as potential social media micro-influencers, and as virtual concierges or digital stylists, offering “the same level of service as they would in the store.” Retailers sought ways to bring the store experience to the digital world, asking themselves, “How can I bring that experience to the customers if they’re not coming into the stores?” said Forrester analyst Scott Compton. “Over the past year, that was really the transition that a lot of retailers were trying to make.” Examples run the gamut, like recent Snapchat projects from NYX Professional Makeup, Gucci

simply resort to consumer chat apps or FaceTime, Google Meet or Zoom video calls in efforts to show VIP customers new products that may suit them. Such piecemeal, off-the-shelf solutions can only go so far, though. “What we’re seeing is that a lot of retailers are quickly realizing that, when they use that roughand-tumble or nimble approach to ‘let’s just grab whatever tools we can get, and put it into the hands of store associates,’ you lose the ability to control the customer experience by not knowing what happens [next],” said Ben Rodier, chief client officer and co-founder of Salesfloor, an eightyear-old clienteling, virtual selling and mobile point-of-sale platform. While a Zoom call can satisfy the immediate need, it does nothing for longer-term insights, according to Rodier. “Did a sale occur after that interaction? Did the customer have a good experience? Are there any metrics that we tracked against that, when you pulled Zoom off the shelf and you put it into the hands of the store?” he said. “It doesn’t work. Those metrics don’t exist.” Rodier cited an example from Chico’s. The apparel company, a Salesfloor client, uses a customer data platform combined with the customer relationship management platform to shed light on patterns in customer behaviors and purchase history. Clienteling data helps power those insights, which can then be used to drive more sales. “They’re pushing recommendations back to the stores to say, ‘This customer bought three items in the last three months, and she has a 550 percent propensity to buy this product. Reach out to her on this day for this item,’” the CCO said. “And now we’re able to measure not only, ‘Is the email open rate better?’ and ‘Is the click-through rate on the text message better?’, but ‘Is she buying more often than she was before?’” So artificial intelligence, and what I call ‘next-generation clienteling tasking’ is right now a key part of how an associate knows how to do clienteling at scale, every day they come into work. “The application tells them what they need to do next in a reasonable amount of weight, a reasonable volume,” he added. The attraction is obvious and remains a motivating force. Clienteling solutions providers have seen major upticks in interest, and not just the large platforms. Smaller newcomers like Endear saw an influx of interest from retailers and brands recently.

According to co-founder Leigh Sevin, company growth figures have sailed over 100 percent in just the past six months. The app—which launched in 2019 and plugs into the vast Shopify retail universe—focuses on email and text messages, an approach that may seem like a lighter-weight solution to more robust clienteling technologies. But, the Endear founders said the platform yields a trove of data, and that could grow, as the company works on newer channels like social media.

“Clienteling is essentially digitizing the black book and being able to capture all of the consumer information preferences and shopping behavior in a digital format, to automate what has typically been in the head of the store associate.” — Rob Garf, Salesforce “We know at the higher end, sales associates were already texting their customers with personal devices, emailing their customers with their personal emails,” said Endear co-founder Jinesh Shah. “But there’s no visibility into that, there’s no strategy behind that.” In Shah’s view, the future of clienteling is more about bringing retailers of all sizes into the fold. Also providing solutions that don’t overburden employees. “We think that, you know, most retail teams are not interested in giving their sales associates multiple different solutions to try and juggle, while also trying to deal with customers that might be in the store, also coordinating pickup, also doing virtual appointments, also checking people out,” Shah said. “It starts to pile up with the number of different things they have to do, potentially the number of different tools and services they have to use. And so our goal is just consolidating as many of those things as possible, so that they’re not jumping around in multiple different places.” And, he added, having metrics also allows employers to reward associates, not just for immediate sales, but for efforts that lead to future purchases. Having more visibility into that ensures staffers are compensated appropriately, and can even help employee retention. Salesfloor and Salesforce, however, both see clienteling taking a turn techier with tools like aug-

mented reality, video and other areas. And some of those trends might not be that far off. “Anecdotally, from what I see in the market, in the industry, the AR use cases are still in the very low-single-digit percentages, in terms of proportion of interactions that are happening in clientele,” said Salesfloor’s Rodier. “I think that by the end of this year, you’re going to see some enterprise retailers who are using video in a much more meaningful way, where that number won’t be in the single-digit percentages anymore. And then AR will come very quickly behind that.

RETAIL INNOVATION REPORT

Share of all digital transactions that will occur via social, messaging, livestreaming, gaming and video by 2023. Since Salesfloor serves interactions in multiple ways—through video, live chat, appointment, email and text messages—it has a front-row view of where the interest is. So far, the company sees email and text message having about equal traction, at 25 to 35 percent. Live chat, which the company launched at the beginning of the pandemic, now has 40 to 45 percent traction. And then video represents a subset of that—“because video, you actually connect through live chat, and you turn your video on or off,” Rodier explained. And although AR may not feel as natural, he said, he does find it very exciting. For instance, in a video chat appointment, “I can let my cosmetic expert tell me how to not only put on the makeup, but let me press a button and see the color of my hair, if I change it to that color. Or what the shoes will look like on my feet,” Rodier said. “I actually did this a few weeks ago on one of the retailers’ websites,” he added. “Now I [can] see these Nike Air Force Ones on my feet, through my phone? Yes, I absolutely think that when you look at clienteling in virtual selling through live connections, like live chat, video chat and voice, I think that AR has a very strong use case that is coming to light right now. For retailers that are brave enough to be the first movers in that.” Salesforce’s Garf agrees. “This is really a lot of what I’m talking to our cus-

tomers about, like, all the time,” he said, explaining that tech such as AR and VR are part of a “spectrum of engagement” that consumers will come out of the pandemic still expecting. “On one side, there is contactless, right? It’s all about health, safety, convenience. And on the whole other side is about immersive or immersion. And that’s all about experience service. Emerging technologies like AR and VR, and even live streaming, is putting a real microscope on tech,” Garf explained. Livestreaming, which has been surging in Asian markets, could serve as a lynchpin of sorts for clienteling more broadly. Imagine shoppers viewing a product demo in a video, then firing up a chat with a salesperson. Then in the course of that conversation, they can see what the item looks like in 3-D using WebVR technology in a browser or through AR in a smartphone screen. In effect, for Garf, the future of clienteling doesn’t lie in one specific technology. But perhaps all of them. “Our research shows that in the next couple of years, 16 percent of all digital transactions are going to happen at the edge,” Garf explained. “So in social, in messaging, in livestreaming, in voice, in gaming, in video.” In other words, where clienteling goes next will be informed by what’s driving it in the present — and that’s the notion of serving customers, wherever they are. Because in the future, where they are just may be everywhere.

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How Luxury Can Make Livestreaming Work in China THE FORMAT GARNERS BIG SALES AND VIEWERSHIP NUMBERS, BUT NOT ALWAYS BIG GAINS FOR BRANDS. BY TIANWEI ZHANG AND TIFFANY AP

RETAIL INNOVATION REPORT

here’s no denying that livestreaming is here to stay. Kuaishou, the second most popular short video and livestreaming platform in China, raised $5.32 billion earlier this year, the largest IPO globally since Uber went public in 2019. And while Kuaishou might not be that relevant to fashion and beauty brands as a partner for now— its user base is more likely to publish snippets of small-city life, rather than the more style-forward posts on market leader Douyin—the livestreaming format overall is one that no brand can afford to overlook strategically. According to research firm EqualOcean, China’s livestreaming market is tipped to be worth more than 80 billion renminbi, or $12.37 billion, in 2021, breaking the 100 billion renminbi barrier by 2023. Nearly every Chinese social media platform, whether it is Weibo, WeChat, Xiahongshu, Douyin or traditional retailers like JD.com, Taobao, Secoo and VIP.com, integrates livestreaming as a basic function in their mobile applications. Anyone with a smartphone can press live and start selling on one of these digital platforms, but it takes careful planning and promotions, a great lineup of discounted products and a charming host

to stand out from a sea of streams. “The fundamental thing about livestreaming is that it’s very interactive,” said Yu Feng, the general manager of Taobao e-commerce. “It’s very similar to an immersive offline experience face-to-face. It can be used for branding, advertising, promotions in all these different ways.” Certain categories in particular have more to gain than others—such as beauty, apparel, and jewelry in contrast to products with less variability like shoes and accessories which enjoyed a higher existing e-commerce penetration. “My own take is that we’re just getting started,” Yu added. “Livestreaming can get to the scale of 1 trillion yuan or more in GMV [gross merchandise value]. As a proportion in GMV, let’s say 30 percent within two or three years, certainly that’s the goal I’m working toward.” “Three years ago, we had people internally [at Taobao] that never watched livestreaming but today, if you look at user profiles, the peak is at night time and a lot of people don’t watch the whole livestream. They have it running on their phone and they listen, if the host starts talking about something of interest that’s when they pick up the phone and start watching the video.” High-end brands began taking a look at the

format in earnest around this time last year, when China was first struck by the pandemic. Louis Vuitton was the first mover, hosting a livestream on Xiaohongshu last March. However, immediately it was confronted by the challenge of discounting, as promotions have traditionally figured as a key component of livestreaming. Max Peiro, chief executive officer at Re-Hub, a data-driven Chinese business solution provider, said high-end brands need to emphasize the uniqueness of the experience or product, such as limited-editions. He points to China’s top streamer Austin Li’s collaboration with Bottega Veneta as a benchmark example of a brand that protected its brand values and price structure while succeeding with livestreaming. Li sold 230 Bottega Veneta bags at a price of 12,300 renminbi each in a single stream in August. “Austin Li’s consumer base is huge — 29.42 million followers on Taobao and approximately 17.95 million followers on Weibo — and contains a lot of wealthier women with spending power, and this really changed a lot of minds,” he said. What Li did differently was that he did not focus at all on price during the stream, but rather,

he emphasized the uniqueness and scarcity of the product sold. Peiro added that “Luxury brands really need to consider what the goals of the campaign are and then organize their campaign around them. If they are hosting the stream on their own channel, then they should really view it as a branding exercise and focus more on production values. If you are viewing it as an opportunity to drive sales, then you need to match with the right streamer who can push your product and host on their stream.” Chasing volume is viewed by many brands as a dangerous minefield. Jacques Roizen, the senior vice president and China general manager for Pandora, said, “[If you think,] I didn’t make the kind of money I was supposed to make [due to discounts], but I’m going to make it up by having better data and the algorithm will favor me because of the volume that I generated on the live stream, I think that’s a losing game.” Instead, Pandora has opted to host much smaller livestream events that target their VIP customer base. Hosted by their own brand staff, it skips the expensive celebrity or KOL hosting cost and true conversion rates are much higher.

CHINESE ACTOR LI XIAN AND FRIEND OF THE HOUSE HOSTS LIVE STREAMING FOR CARTIER IN CHINA.

“As opposed to buying because they like this livestreamer and they get a promotion and they open it at home and they change their mind or they change their mind even before we ship it, now, these are guys that really want the product. Instead of having double-digit — you know, when I say double-digit it is high double-digit--return on livestreams — we find ourselves in a very low single-digit.”

“The fundamental thing about livestreaming is that it’s very interactive. It’s very similar to an immersive offline experience face-toface. It can be used for branding, advertising, promotions in all these different ways.” — Yu Feng, Taobao

RETAIL INNOVATION REPORT

CHINA’S TOP LIVESTREAMERS AUSTIN LI AND VIYA.

In fact, the rising competition between brands to achieve the highest views with their livestreams has created what many describe as a toxic environment among brands. Companies have been known to artificially inflate viewership numbers from what used to be a few million one season to a few hundred million the next by either paying plat-

forms a hefty sum to boost their visibility or simply faking it. It’s not uncommon to see views on Weibo for a fashion runway show rising mysteriously long after the event has premiered when interest would have tapered off. Screenshots of Dior Men’s panel discussion featuring brand ambassadors, friends of the house, and fashion editors, after its pre-fall 2021 show in Beijing, which it livestreamed in China. Livestreaming does not always have to come down to sales, but can be geared toward raising brand buzz. Cartier, for instance, used it to great effect on Taobao Live last year giving their fanbase a peek inside an offline exhibition that featured hundreds of timepieces and jewelry, including a necklace valued at 190 million renminbi. “Livestreaming is not a solution, it is part of an integrated strategy,” said Chloe Reuter, founding partner of Shanghai-based agency Gusto Luxe & Gusto Collective. “Don’t be fooled by the mind-blowing sales figures from some of the top streamers, that is a result of a carefully executed digital and offline communications strategy. Neglect this, and you’ll be wasting the massive budget you’ve spent on doing a livestreaming in the first place.”

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Battling Uncertainty With Improved Assortment Planning AS THE LANDSCAPE CONTINUES TO CHANGE, OFFERING THE RIGHT PRODUCT AT THE RIGHT PRICE HAS BECOME MORE CHALLENGING THAN EVER. BY MADELEINE STREETS

RETAIL INNOVATION REPORT

ssortment planning has always been a critical piece of the retail journey, connecting products with the right vendor—and eventually the end consumer. The goal is clear: To choose the best products for your store or website, to maximize sales and profit. But achieving this requires a more thoughtful approach, one that takes advantage of technology to support business strategy. The stakes are high, so establishing a successful assortment planning system should be a top priority. When things run smoothly, retailers are able to take full advantage of their available inventory space and fulfil orders quickly and efficiently; this not only results in consistent sales but also encourages repeat business, due to customer satisfaction. When things go wrong, retailers will quickly see the damage to their bottom line. “For one of our retail customers, 5 percent of their assortment accounted for 45 percent of their markdowns,” said Jeff Warren, vice president of strategy and solution management at Oracle. “And in retail, a markdown equals a mistake. Just the slightest margin of error can have a dramatic impact on the margin of the business—and

that could be the difference between a successful season or not.”

WHAT SUCCESSFUL AP LOOKS LIKE

While planning an assortment might appear to be a series of granular decisions, industry experts recommend that retailers consider a holistic view. While individual decisions may be made about various stores in a network, or various displays within a single store, these choices should all fit together into a broader brand identity. “An effective assortment planning strategy is when a retailer starts high level with a vision of how they want to lay out their store, whether that’s by category, by brand, by gender, by trend, by color,” said Amber Vanes, vice president of Retail Performance at RICS Software. “They need to know how they want their store to come to life.” Once this zoomed-out vision has been consolidated, retailers can focus on specific components of their strategy. Choosing which products will work for a merchant’s commerce channels and audience is dependent on numerous factors, from product type to demographic to location, but a few factors are consistent across the retail industry. For Oliva Skuza, co-founder and co-chief exec-

RICS SOFTWARE’S POS PLATFORM WORKS ON MOBILE DEVICES AS WELL AS DESKTOPS.

utive officer of digital wholesale platform NuOrder, emphasis must be placed on creating a system that is agile and flexible. Even the best laid plans can go awry or be disrupted by unexpected events—as the industry learned firsthand in 2020—so being able to adapt to new information can give retailers the upper hand in a competitive landscape. Technology that provides transparency and a unified interface can help retailers identify problems and take action within a single workflow. Visibility into the current assortment, available in real-time, is also a key aspect of a successful strategy. Particularly for retailers operating across multiple channels, markets or locations, comprehensive insight into inventory and sales performance can underpin decision-making. Once an initial merchandise order has been made, it is this data that will inform retailers on where to improve for next time—and maybe where to pivot in the now. “This real-time visibility became especially valuable during the pandemic, when consumer preferences shifted and brands and retailers needed to adjust their product strategy accordingly,” said Kristin Savilia, CEO of digital wholesale platform Joor.

CHOOSING THE RIGHT PRODUCTS

This is where the “art” of assortment planning comes in: Future product selection. Not only has the consumer adjusted to new behaviors and preferences, but the traditional buying process

has also been upended. When buyers look to find the next big seller, they can no longer discover product in the same way; trade shows are mostly digital-only and in-person appointments are commonly suspended. “Market appointments are all conducted on video now,” said Skuza. “Therefore, without the right technology platform, buyers and vendors are forced into endless back and forth. Additionally, buyers aren’t in the showroom to touch and feel the product, so they have to rely on these videos and line sheets to make selections.”

“In retail, a markdown equals a mistake. Just the slightest margin of error can have a dramatic impact on the margin of the business.” — Jeff Warren, Oracle Virtual showroom technology has helped to close the gap between physical and digital trade shows, but it is critical that these events are supported by the right technological infrastructure. Through platforms like Joor and NuOrder, retailers can manage all their subsequent orders in one place and maintain visibility over every stage of order management. This end-to-end service is critical in order for the user to experience the full benefits. The right technology partner will automatically update product information for vendors, handle payments

within the ecosystem and enable post-purchase communications, so that there is a singular destination for all order-related information. This frees up employees to focus on the harder strategy decisions of what to buy and where to send it. “Three common mistakes when selecting a third-party solution include: Picking a solution for looks alone; forgetting to consider the breadth of brands using the platform; and forgetting to insist on global reach and support,” said Savilia. “Sometimes a solution might look good on the surface but only digitize pieces of the wholesale buying journey, requiring manual intervention for others.”

THE NEW DEMANDS OF E-COMMERCE

The events of the past year have not just influenced consumer preferences, but have also impacted the methods retailers use to sell the product, once they’ve selected it. Whereas changing trends in colors or silhouette might affect the number of SKUs ordered, the growth of online shopping now requires merchants to plan for new ways of stocking their assortments. One danger is the risk of split orders, whereby a consumer makes a purchase online that’s comprised of products stored across multiple locations. Warren warns that split orders can strain logistics systems, requiring multiple packages and shipments—and greater communication standards— in order to complete the order. Consumers may also be put off by needing to wait for two separate packages to arrive.

RETAIL INNOVATION REPORT

“Real-time visibility became especially valuable during the pandemic, when consumer preferences shifted and brands and retailers needed to adjust their product strategy accordingly.” — Kristin Savilia, Joor In these situations, it can be helpful to work with a wholesale management platform that can accommodate delayed delivery or held stock so retailers can divert inventory accordingly as their own orders come in. Additionally, by reviewing individual sales performance within various categories and markets, merchants can set themselves up for success from their largest distribution centers. Fortunately, the e-commerce boom is as much of an opportunity as a challenge. RICS Software’s

Vanes highlights that the ability to sell to consumers directly through a website eliminates the need for a retailer to hold all of its inventory itself. Instead, retailers can keep just the most popular styles in-store, for pickup or ship-from-store fulfillment; other orders can be shipped directly from the brand’s own warehouses. “E-commerce doesn’t limit your real estate so you can showcase all these styles online, you can have this amazing assortment, you can drive so many more sales,” said Vanes. “Working with the right technology partner, it really opens that door to test new assortments and styles that you might not have tested, to surprise your customers.”

THEORY IN ACTION

Retailers have been assortment planning for years, but the new circumstances require a more nimble touch. Even industry heavyweights can benefit from greater visibility into their existing inventory performance and real-time data analysis, to help inform future ordering and inventory planning. As the number of sales channels and fulfillment options increase, so too do the number of decisions needed to optimize them. Particularly for fashion and footwear, which count significant SKU variations for color and size, finding the right partner to support assortment planning can alleviate uncertainty. Backed by data, these tools can provide the science so that retailers can focus on the art of their business.

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Taking On Tech Investments, A How-To PUTTING THE CUSTOMER IN THE CENTER OF YOUR BUSINESS PLAN REQUIRES INVESTMENT IN TECHNOLOGY. BUT WHAT SHOULD MERCHANTS LOOK FOR IN A SOLUTION PARTNER? BY ALEXANDRA PASTORE AND ARTHUR ZACZKIEWICZ

RETAIL INNOVATION REPORT

ixty percent of outperforming companies reported that they need to “stand for something bigger than the products they sell and that they expect to always seek the best outcomes for their consumers,” according to a research report by Accenture. The company also said that businesses are “getting the best by being customer-obsessed.” But “being customer-obsessed” requires investment in technology—and not just with marketing. Improving the shopping experience and deploying a consumer-centric approach means making technology investments across the entire value chain. It also requires choosing the right solution providers and partnering with the right technology firms. Before considering what to look for in a partner, it’s important to know that investing in the customer journey is not new. But heightened technology investments (which have skyrocketed in the last year) have given a new meaning to the process with companies able to reference real-time data to inform quick, confident decision making as consumer behaviors evolved rapidly. Eric Shea, managing director of Accenture Strategy’s Retail Industry Sector, said his firm has

seen “all consumer behaviors and habits changing almost overnight and the experiences that they’re expecting from our retailers and brands resulted in a huge increase in digital revenue and digital channel use [that] pushed retailers and brands to enable new omnichannel experiences.” As a result, this has put a “huge requirement on retailers to have more data to understand what’s happening in their businesses and to learn from those changing behaviors,” Shea said, adding that while data building for the customer experience is essential, merchants also need to hav the right process, and people, in place to use it. It’s also become important for companies to see their customers as part of a more diverse group. Shea explained that data was, “of course, important before but because of the rapid changes it’s more important to be to see that at a micro level. Gone are the days where we can just say, ‘Let’s do what we did last year plus 20 percent,’ because these consumer behaviors are changing so quickly and I think even the way we think about that customer, thinking about it as one persona, for some retailers doesn’t work anymore, because we are serving a very diverse group of customers, and they all have different needs that they’re looking for us to fulfill.”

looking at technology firms to partner with, it is Shea said retailers and brands need to get away important to “make sure the technology can grow from thinking about the transaction in the basket with your business from scaling data to flexible inand put its purpose and the experience to improve tegrations to applications.” customer’s lives at the forefront. “Don’t underestimate the importance of the data Eliot Buchanan, co-founder and chief executive that powers the experience—not all providers are officer of Plastiq, the payments platform provider, equal and the more complex your operations the said for small- to mid- sized businesses it is importmore opportunity for failure,” she said, adding that ant to identify the “pain points” first. “Start with for her company’s part, the number one thing “conthe problem that you need to solve that’s affecting sumers look for in a delivery experience solution is your profitability, growth or enjoyment in running accurate and up-to-date information. All the bells your business,” Buchanan said. “One pain point we and whistles don’t mean anything if you don’t enhear from small business owners – even those who sure those critical elements are up to par.” have bookkeepers or accountants to help them — is Bebout suggests asking questions, such as: “Has the time and effort it takes to manage their financtheir technology proven itself within your induses. They have invoicing and receivables, payments try or more specifically, of all types, payroll and your category? Do you then have to reconcile need a partner that everything across multiTake Note! encompasses a more ple bank and credit card consultative approach relationships.” For retailers and brands looking to reimagine their business in this new era of the consumer, here are or will a transaction“One customer said it some key takeaways for getting started and what to al approach meet the took him five to seven consider when looking for a technology partner: business need? And hours, twice a month, • Reassess your business plan in the context importantly, does your just to update his of a customer journey that can begin anywhere: technology partner books,” Buchanan exonline, in a store, or on social media. have a team with difplained. “And this was • Develop a strategy that prioritizes the ferent backgrounds time that could be incustomer experience; to include developing longthat can understand vested in his customers term customer value. all the challenges of and new opportunities.” • Make investments in technology that align your business?” Buchanan said to adwith your reimagined business plan. It should A spokesperson dress that type of pain include leveraging data and analytics. • When teaming up with a technology for sell-through data point, his company enpartner, make sure they have experience in your solution provider Sky ables “our customers to business segment. I.T.Group said as remanage their payments tailers and brands and cash flow in one focus on driving the place, so they were in best experience for their shoppers, “strategies control, and could invest their time in doing what are changing fast and finding the right technolothey love, which for most—except for us fintech gy partners has become a major priority. When geeks—is not bookkeeping.” Indeed, merchants it comes to data-sharing and reporting procould then focus on product and the customer. grams, a partner’s ability to design and execute When connecting with a solution provider, Buon specific solutions that drive efficiency and chanan suggests asking several questions: “Is this productivity is essential.” technology easy to install and use—will we use it? Is Sky I.T.Group also said merchants should assess it able to be customized to meet our specific needs, a technology company’s customer success and user can we customize it ourselves? Will it work with our support. “Today, technologies solutions go beyond other technology solutions —is it interoperable? just the IT department, it encompasses business Does it optimize our processes, empower our team users across various divisions,” the spokesperson to develop new skills, our customers to be happier, said. “Ensuring your team has exceptional support and our community to be better? How much does it available when they need it can make the differcost, now, and in the future as we grow?” ence between successful adoption and just another Jenny Bebout, co-founder and vice president of unused tool.” last-mile delivery solutions firm Convey, said when

Industry Embraces Tech Innovation RETAILERS FROM PVH CORP. TO LULULEMON TO SAKS FIFTH AVENUE HAVE ALTERED THE WAY THEY DO BUSINESS. BY CHUCK DOBROSIELSKI

RETAIL INNOVATION REPORT

s vice president of information technology at Ariat International—a footwear and apparel brand focused on equestrian sports, work industries and other outdoor activities—Ryan Bezenek focuses on investing ahead of the curve. And right now, especially as critical businesses are relying on smooth, predictable supply chain and distribution operations, Bezenek said leveraging and growing efficiency through the use of technology “is more important than ever.” Speaking at the National Retail Federation’s virtual conference earlier this year, Bezenek said he believes a lot of the shifts in consumer behaviors and expectations from the past 10 months are here to stay. His advice for those companies that want to survive and thrive under this new paradigm: “take a hard look at how you’re leveraging technology to meet the customer where they are.” Rachel Grogan-Cook, senior director, global supply chain at Burton Snowboards, appeared alongside Bezenek on a panel led by Infor retail industry and solution strategy director Elaine Gaydosh. Grogan-Cook said the snowboarding equipment and apparel outfitter’s “motto on the supply-chain side is making sure that we have the right product in the right place at the right time.” Given the

crucial role prior software investment has played in delivering on that ideal, she said the company is continuing to invest in these tools and seeking out further efficiencies moving forward. “Even though at times it may be difficult, expensive and not really a glamorous proposition, I would say put the systems in place that will make you stand out in what I think is going to be a really competitive landscape when things return back to that quote-unquote normal,” Bezenek added.

THE PANDEMIC SHIFTS THE ROADMAP

Despite all the changes and disruption of the past year, Kate Nadolny, senior vice president of business strategy, operations and innovation at PVH Corp., believes the innovation roadmap hasn’t necessarily changed. Artificial intelligence and automation, personalization tools and omnichannel solutions, she said, still remain the silos her work centers around. Instead, the pandemic has simply shifted the priorities within those pillars, transforming what may have once been seen as three years out into an immediate need. “In terms of our general roadmap, we are on the right track,” Nadolny said. “It really just is about making sure that we’re not getting stuck in what we said we were going to do in the next six months versus the next five years, and really changing

those priorities and reacting to the business needs.” Cheryl Friedman, vice president, Lowe’s Innovation Labs, and Melanie Nuce, senior vice president of corporate development at the information standards organization GS1 US, joined Nadolny for a panel focused on driving technological change. Friedman agreed with Nadolny, saying the roadmap itself has not changed, but rather programs like curbside pickup, previously planned for 2021 at Lowe’s, have simply been pulled forward. “Our focus always revolves around a world where there’s less friction for customers, where we are distributing knowledge and keep getting it to customers when they need it to complete their tasks and when our stores can meet them one-on-one,” Friedman said. “I think that those priorities haven’t shifted but because the customer needs have accelerated, we’ve been able to accelerate deploying our solutions at-scale sooner than we normally would have.” Though this lined up with what PVH, home to brands such as Tommy Hilfiger and Calvin Klein, experienced, Nadolny said there’s still no proven playbook when it comes to retail innovation. “I don’t think so because I don’t know if we ever should get there,” she added. Nadolny continued, “I think innovation, especially in the retail space, it touches so many different functions and it touches so many different ways of working, it’d be hard to say that how you’re going to innovate making the best new woven shirt or the best new swimsuit is the same way of thinking about how you’re going to innovate to completely change some sort of technology infrastructure or manage your supply chain very differently.” Nuce, who echoed this sentiment, described intellectual curiosity as the most important characteristic of an innovation team leader. “You have to be willing to learn,” she said. “We talk a lot about nimble learning and giving yourself headspace to research things because these topics like emerging tech [are] not easy.”

RETAIL EVOLVES

Like Friedman, Marc Metrick, president and CEO at Saks Fifth Avenue, framed the pandemic as an accelerant to change. “It wasn’t like all of a sudden

Has the Pandemic Prompted a ‘Great Compression’ of Retail Innovation? THE UNFORESEEN ONSET OF THE PANDEMIC FORCED RETAIL TO EMBRACE AND ENACT CHANGE. BY KATE NISHIMURA

The global pandemic that took hold last winter has inarguably changed the retail landscape—perhaps for good. At National Retail Federation’s virtualized Retail Big Show, Mitch Joel, journalist and founder of Six Pixels Group Inc., dubbed this strange moment in time the “Great Compression”—a rapid adoption of new buying behaviors and an unprecedented reliance on digital, spurred by the Covid-19 crisis. While the world was quickly becoming more tech-savvy pre-pandemic, the events of the past 11 months have forced consumers young and old to rely on technological solutions for the most mundane of daily tasks, he said. Children have quickly learned how to use Zoom for distanced learning on computers and tablets, while many seniors who were e-commerce-averse are now ordering provisions online rather than braving the stores. “The stuff that we expected to take until 2030 happened all of a sudden in the span of a few months last year,” he said. The onset of the pandemic prompted retail to undergo three “stages of sudden evolution,” Joel says: to survive, sustain and finally, to strive for recovery. The early days the crisis represented a mad scramble simply to withstand its pressures, with many retailers attempting to understand which areas of their businesses were being impacted and which products and services might be considered essential to cash-strapped and anxious shoppers. Many organizations were unable to weather this period, Joel said, driving a spree of economic carnage, namely bankruptcies. CONTINUED ON PAGE 33

SAKS FIFTH AVENUE SAW ONLINE SALES SURGE DURING THE PANDEMIC.

no one wants this or everyone wants that or no one wants to come to a store or everyone wants to go online,” Metrick said. “This was just an accelerant to what was already happening, the consumer was already moving in this direction.”

RETAIL INNOVATION REPORT

“It really just is about making sure that we’re not getting stuck in what we said we were going to do in the next six months versus the next five years, and really changing those priorities and reacting to the business needs.” — Kate Nadolny, PVH Corp. However, Metrick stressed that some things have stayed the same. In-person shopping, for example, remains important, especially for luxury retailers. Since Saks reopened in early May, he said sales have only been slightly negative year-on-year. At the same time, he added, the retailer’s digital business not only did not see a corresponding hit, but rather “began to fire even more.” Celeste Burgoyne, president, Americas and global guest innovation at Lululemon, said the activewear firm recognizes there has been a shift to

digital that won’t go away, but believes “physical is as important as ever,” and will continue to lean into the segment. “We’re really excited to see how we will continue to evolve that physical experience, while we continue to really understand that digital will forever have some momentum behind it,” she added during the panel with Metrick. Personalization, a pillar of Saks’ strategy since before the pandemic, remains a key component of the retailer’s plan moving forward, Metrick said. “Forever, luxury owned that high-touch relationship,” Metrick continued. “Luxury owned knowing when your birthday was, your anniversary, knowing you when you walked into the store, and over time, data became the greatest equalizer and almost everyone was able to personalize things more. So, we are taking it a step further and we’re actually building technology to be able to connect our instore experience with our online experience using data to really give the customer the best possible experience when they come into our store.”

CEO’S TAKE

When Marvin Ellison joined Lowe’s Cos. as president and CEO two years ago, he said he was surprised by the number of “fundamental things” the company did not have in place at the time. The

store couldn’t offer customers an e-receipt. Store schedules were templated at the corporate office and sent out. The e-commerce platform was on a decades-old infrastructure. “So, think about your computer today versus your computer 10 years ago, and that’s the equivalent of what a multibillion-dollar e-commerce platform was sitting on,” he said. Consequently, Ellison said he spent his first couple years at the company building up what he described as its foundation. “Like building a home, once the foundation is in place, the structure goes up relatively quickly, but without the solid foundation, the structure is very unstable,” he continued. “So, when I think about operational excellence in retail, I think about it within that framework.” Now with that base in place, Ellison said Lowe’s is taking a step back and, like Metrick, focusing on the customer. “Everything we try to do is not about our competition, it’s not trying to replicate or predict what’s going to happen in the macro environment, it’s really more about being customer-centric,” he said. As Lowe’s works on its technology development, Ellison said the retailer focuses on simplicity and intuitiveness. “As my chief information officer, Seemantini Godbole, says to me often, ‘The most effective technology is technology that no one sees,’ it’s always behind the scenes, it’s always behind the curtain,’” he said. In another fireside chat, Wayfair’s co-founder, co-chairman and CEO Niraj Shah discussed his own company’s approach to technology. Though Wayfair is an e-commerce company, Shah said only roughly 20 percent to 25 percent of its more than 3,200 software engineers, product managers, product designers and data scientists work on the e-commerce experience. Instead, the large majority work on other things, such as the infrastructure to support the catalog, the recommendations algorithms or the supply chain. In one specific case, Shah said the home goods giant has developed a means to algorithmically look for unconscious bias during performance reviews and uses that to help coach managers. “That’s just an example where you would say that has nothing to do with being a home goods retailer,” Shah said.

By August, within what might be considered the normal back-to-school timeframe, “we headed into more of a sustain model,” Joel said. Surviving retailers came to grips with the pressures of the pandemic and developed forward-looking strategies, like expanded omnichannel services and enhanced e-commerce platforms, to deal with a consumer migration online and away from stores. “Every retailer had to figure out, ‘How do we engage our customers? How do we engage our employees, our associates, our team members?’” during this time, he said. Prior to the onset of the coronavirus, e-commerce represented just 15 percent of all business exchanges, a number that rapidly shot up to 50 percent during the long months of lockdown, he said. While the reopening of retail will certainly prompt another shift in that breakdown, Joel doesn’t believe the web will lose much ground going forward, and it certainly won’t return to pre-pandemic numbers. That’s significant, considering that many experts predicted online buying would represent just 30 percent of all commerce by 2030. The appeal of physical retail has also diminished over the past year. Shopping—once a relaxing, social activity that gave consumers “something to do”—became fraught with risk and discomfort, Joel said. While in-person browsing and buying may regain their appeal with the widespread dissemination of the coronavirus vaccines, online options have also gained ground during this period, becoming more experiential and less transactional—a fun way for restless shoppers to pass the time. “People don’t buy stuff, they buy experiences—this is a trope we’ve heard forever,” Joel said. Most of the industry is still working out the kinks that make online and omnichannel experiences convenient, seamless and engaging for consumers, and have yet to enter the final stage of striving for recovery. “We experienced something that forced us to do things faster, and innovate, and think differently to survive to get to that point to sustain,” Joel said. Businesses shouldn’t pull back on those efforts once the retail landscape begins to return to normal, he added. Those that attempt to go back to the status quo now that consumers have become used to a new way of transacting and interacting with their brands risk losing ground. “Don’t be that brand,” he warned. “If innovation was forced and pushed in this way, I think this is a tremendous opportunity for you to keep it going to grow and to keep that speed of innovation going.”

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RETAIL INNOVATION REPORT

uring the pandemic, small businesses had to stretch cash flow like never before. Despite retail’s digital revolution in the last year, 85 percent of B-to-B suppliers do not accept credit cards at all – a huge obstacle for small businesses which on average have only 30 days of operating cash on hand at any given time. And for many small businesses, access to credit when non-essential businesses were temporarily closed last spring meant the difference between reopening and a permanent shut down. Founded in response to a need in the industry to provide business owners with access to their earned credit to better manage cash flow and growth, Plastiq has helped millions of customers make billions of dollars in payments where credit cards are not accepted. Led by Eliot Buchanan, the company’s Co-founder and Chief Executive Officer at Plastiq, the digital payment platform, was designed to help companies pay and get paid in a method that works best for them. Businesses are able to make payments on a card

through the Plastiq app with payment sent to recipients by an ACH payment, check, or wire transfer. Here, Buchanan talks to WWD Studios about the retailer’s growing need for credit options, limitations on small business owners, and how businesses can take control of cash flow. Fairchild Media Group: From your perspective, how have you seen the needs of small business owners changing during the pandemic? Eliot Buchanan: While we’ve never ever seen anything like COVID, the challenges faced by small businesses in the past year are familiar – access and time. Access to customers, access to talent, access to suppliers, access to cash and credit, and time to make sales and realize profits. A third of small businesses in the country were made non-operational by the pandemic. Think of your favorite local stores and restaurants who’ve had to pivot to new ways of serving customers and needed time and cash to make transitions. On the other hand, online businesses are growing, and also

need access to credit to expand inventories to meet the increased demand of quarantined customers shopping from home. And those shipments must arrive in time to increase sales. In the past year, Plastiq, together with partners like Visa, have provided thousands of companies with immediate access to credit, and 30 to 60 days of interest-free time on their payables to help navigate some extraordinary circumstances. FMG: To that end, what limitations are you seeing businesses and retailers struggle with now? E.B.: One of the biggest challenges small business owners face is access to credit. Only a third of small business loan applications are approved, and approval rates are even lower if the business is owned by a woman or person of color. Thus, most small businesses are financed by personal savings and then cash-supported through sales – making cash flow the most important ingredient in success. We founded Plastiq to help by opening new financing options for businesses by enabling them to pay expenses with credit cards, which extends their payment cycles and helps preserve cash to address new opportunities. As one of our customers put it, “Despite having earned a great credit rating, I couldn’t get a small business loan, but I had credit cards, so I decided to lend myself my own money.” FMG: What does having flexibility over cash flow allow a new, or small, business? E.B.: The average small business in the U.S. only has 30 days of operating cash on hand at any given time, so controlling cash flow is a daily existential concern. And with the pandemic, days

turned into months, so businesses need to stretch their cash like never before. Our customers have many bills to pay every month. It’s everything from commercial leases, to professional services, to supplies and inventory for future sales. Plastiq enables our customers to schedule, pay, track and reconcile all of their bills in one place, with the flexibility to pay by credit card, ACH, or a wire transfer, so they have more control over their cash flow. And by choosing to pay expenses with a credit card, small businesses also can realize valuable rewards. With access to credit and the flexibility to pay business expenses with credit cards, small businesses can build the cash reserves to realize new growth opportunities. For example, a company may need to hire freelance talent to scale design capacity or engage a marketing firm to develop a campaign for a new product, or pre-pay for expanded distribution. We’re proud to serve many fashion retailers and ecommerce companies, and one particular use case we see in these sectors is the bundling of card and cash payments to increase purchasing power for inventory before key selling seasons. FMG: Why is it important for businesses to have this control?

FMG: In your own words, how does Plastiq’s technology enable a more organized financial platform, or “digital wallet”? E.B.: One of the biggest pain points for small business owners is paying, tracking and reconciling their payables across checking accounts, credit card, and bank statements. It’s maddeningly inefficient. Our goal is to provide small businesses with a one-stop-shop for all of their payments, to save time, money and provide peace-of-mind, with real-time notifications on their payment status. There are money management apps available for consumers. But we’ve purpose-built a payment platform specifically for the needs of small businesses with many bills, multiple payers within the company, and different recipients each month. Plastiq is interoperable with Quickbooks Online, so your payments in Plastiq can be seamlessly incorporated into your accounting software making monthly reporting and quarterly tax preparation easier. And we’re excited to be partnered with Visa SavingsEdge, wherein Plastiq customers can register their Visa Business Card and save on their purchases. For more information about Plastiq, visit Plastiq.com/visa-business-card.

E.B.: Most entrepreneurs start businesses to ‘be their own boss,’ but independence comes with a certain amount of risk and uncertainty, and this has been no truer than in the past year. By providing access to the credit they’ve already earned, and visibility to see their payments in one place, and the flexibility to efficiently manage their cash flow, we can empower business owners to focus more time on the second biggest reason for starting a business — to ‘do what you love.’

Virtual Shopping to The Rescue MANY RETAILERS ARE EMBRACING NEW TECHNOLOGY TO KEEP SALES REGISTERS RINGING AND STAFF ON THE PAYROLL. BY GLENN TAYLOR

RETAIL INNOVATION REPORT

he Covid-19 pandemic’s impact on retail stretched far and wide, but perhaps its biggest hit came to employment, particularly in brickand-mortar stores. While more than 15.6 million people in the U.S. worked in retail in February 2020, that figure has since been cut down by 383,000, or 2.45 percent, according to preliminary data from the Bureau of Labor Statistics. But throughout the year, which saw non-essential retailers furlough and lay off employees as they shuttered stores, burgeoning platforms that already sought to integrate the in-store and e-commerce experiences were able to take on an even more important role: keeping retail associates on the job. Platforms such as Hero and Go Instore, for example, have helped retailers adapt to the new conditions brought on by the pandemic by getting these associates in front of the online consumer. Platforms like these are connecting both parties at an opportune time when livestreaming is gaining popularity from more U.S. and European retailers. But unlike offerings which engage the audience to chat and buy but are often aimed at appealing to a wide audience, the value from specific platforms comes from the desire to give shoppers as close to a personal, in-store shopper-associate interaction as possible. This means more associates inevitably

get put to work. At least 85 percent of retailers using Hero for example, which enables shoppers to connect with store associates via video, text and chat to get a more in-depth, “in store” virtual shopping experience, were able to keep at least part of their sales teams working from home. Adam Levene, founder of Hero, noted that one European client that closed as much as 50 percent of its store network since the pandemic first hit has kept all of its store associates on staff, allowing them to work from home. “The one thing we’re seeing that’s really interesting is that as brands are shrinking their physical store network, many of them are keeping the associates from those stores on payroll, but working from home, because they were able to assist those online shoppers,” Levene said. Go Instore, which also leverages video to stream physical store experiences to online shoppers, saw one of its clients “un-furlough” 30 percent of its workforce—an estimated 3,000 employees—just to operate the online side of the business. Another client brought back an estimated 20 to 25 percent of employees upon scaling the platform, according to co-founder and chief technology officer Aman Khurana. In March, Go Instore started working on a pilot program with a U.S. retailer in which an individual staff member from five stores would use the com-

pany’s technology, but when its stores shut down, the retailer decided to scale up from five to 50 staff members leveraging the platform. The implementation was so successful that in 14 days the retailer expanded the platform to 650 staffers. While the Go Instore platform originally launched in 2014, it’s adoption among retailers didn’t gain traction for years as many prospective clients still treated the online and offline channels differently. At the same time, people weren’t used to the everyday normalcy of Zoom and Skype calls. But as the pandemic hit, it let retailers know just how disparate their sales channels really were. It also uncovered the reality that in-store staff no longer had to be positioned as an alternative to the online experience. “Previously, retail staff members saw online as a challenger to their job,” Khurana said. “They saw online as ‘That’s taking my commission away, that’s taking my job away. I hate online.’ Suddenly, now it’s, you can sell to the online consumer and you can earn commission by selling to the channel. Now, online is my savior and I can work with that.” Illustrating the power of the merging channels, as many as 40 percent of store associates using the Hero app go back to it every single day, according to Levene. Since an associate now can sell products not just in a store, but within the comfort of their own home, they now have even more incentive to make the jump online. “Most of our North American partners in particular offer commission to those associates and usually if they have a commission plan for in-store customers, they mirror that commission plan online,” Levene said. “So if an associate in a store assists an online shopper and that online shopper goes on to buy online, the associate gets credit for that.” In reconsidering the staff’s role, retailers can unlock new selling potential from their associates and even understand how to better reallocate funds. If more employees are selling from home or in a smaller location, then the economics around physical retail change as well, enabling more of the potential pay to go to employees and less on store overhead costs. “If I can click a button on a website from wherever I am in the world and visit a store and as a consumer, my metrics are the same as actually visiting, then we can put that store anywhere,” said André Hordagorda, co-CEO and co-founder of Go Instore. “You could put a huge center near a town that has low employment levels, and you could

stock these studios with one of each product. You could be open 24 hours a day.” This evolution of staff also opens opportunities to discover where the associate is best fit to succeed, making these employees even more valuable to the retailer. In leveraging data from online associate-shopper interactions to determine conversion rates and understand associates’ strengths, retailers can measure performance and ultimately learn more about training opportunities on how to sell to certain customers, Hordagorda said. “I think the skilled associate is still very much going to be in demand, because what we’ve done is increase the reach of them,” Hordagorda said. “I think the more mundane—perhaps the checkout teller—those sorts of roles are starting to disappear. And that’s great. We can remove some of the more repetitive tasks, but the brand ambassador element remains. Extending that kind of store associate— which is synonymous with customer service in the U.S.—digitally breathes life into their career.”

“If I can click a button on a website from wherever I am in the world and visit a store and as a consumer, my metrics are the same as actually visiting, then we can put that store anywhere.” — André Hordagorda, Go Instore The byproduct of these solutions has kept many employees working throughout periods of layoffs, and the decision to bring this element into the overall retail experience is playing out well regardless how a company pivots its brick-and-mortar experiences going forward. Whether a brand is more focused on building out stores after establishing an online presence, or a larger traditional retailer is looking to lean out its physical real estate as it scales its online operation, the growth of platforms like these shows that the associate can be relevant anywhere. “We are seeing this evolution of what you would consider the traditional sales associate, and they essentially become a brand ambassador or a product expert,” Levene said. “I think the lines are really blurring between where and how they operate. Traditionally, they were in store, waiting for in-store customers, and the long-term evolution of that is now they are brand experts. It could be anywhere. It could be online, it could be in store, it could be in a virtual showroom, almost like a dark store.”

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Addressing the Data Divide AS DEMANDS FOR FASTER LEAD TIMES INCREASE AND FULFILLMENT PROVES KEY TO ONLINE SHOPPERS, SKY I.T. GROUP’S SOLUTION HELPS RETAILERS STAY AHEAD.

RETAIL INNOVATION REPORT

ith continuous disruption creating monumental changes in consumer behavior over the past year and historical data proving obsolete, retail’s demand for data has never been higher. And for retailers now needing to make quick, confident decisions, understanding the consumer, as varied as they are, has become paramount – especially as consumers continue to flock to online shopping where fulfillment is key and stockouts can sour a brand’s relationship with the customer. For many retailers, Skypad, Sky I.T. Group’s interactive web-based reporting solution, is what makes staying close to the consumer possible. Here, Gil Hakami, Vice President, Business Development at Sky I.T. Group, talks to Fairchild Media Group about addressing demands for faster lead times, navigating data, and the cost of data divide. Fairchild Media Group: From your perspective, how has disruption affected the relationship between retailers and their brand suppliers?

Gil Hakami: As demand for data increases to keep up with the fast paced and ever-changing retail and digital environment, retailers are looking for more efficient ways to share data with their supplier community, that can in return drive more business insights, collaboration, and ultimately improve the consumer shopping experience. The retailer buying office has been one of the hardest-hit groups due to the pandemic. In some cases, retailers were forced to completely pause data-sharing efforts with their suppliers due to resource restraints and manual efforts required with legacy practices, and this unfortunately continues today. The lack of visibility into sellthrough reporting is debilitating to the merchant-supplier relationship during such a critical demand shift, as suppliers are unable to prepare assortment, allocation and pricing recommendations for their buyers. For suppliers to be effective retailer partners, they need to be equipped with data and tools to drive confidence and proactive action. With access to performance data, suppliers are able to be extensions of the buying team, coming with valuable suggestions on

targeted in-season opportunities such as reorders, transfers, and fill-ins. With fixed resources in the buying office, narrowing the data-gap between retailers and their suppliers is the key to the industry’s success. FMG: How does Skypad enable collaboration in these relationships? G.H.: Skypad brings multi-brand retailer buyers and their brand suppliers together on a standardized set of sales and inventory performance insights. Brands and buyers are then able to self-serve product and location performance reports across different time, geographic, and product attributes to quickly identify opportunities and collaborate on business trends. To start, we relieve retailers of any current data-sharing practices that are in place, such as manually emailed buyer reports and vendor portals. We then replace these practices with a high yielding data-program that standardizes a consistent set of information, and automatically distribute the data across the supplier community in a secure easy to use, web-application, called Skypad. The selection of what metrics to

share and which reporting views to distribute comes from a deep analysis of how the information shared can impact the supplier and ultimately benefit the retailer and their shoppers. Skypad was designed as a reliable platform to share and consume data maintaining a consistent pulse of your business – no matter the disruption. Retailers who leveraged Skypad before and during the pandemic did not skip a beat, as consistent data sharing and reporting practices enabled suppliers to evaluate the business shifts to e-commerce and expedite critical recommendations to support demand.

tar vs direct-to-consumer strategies are top of mind. We are also finding that access to information plays a major role here. DTC programs enable brands with access to a wealth of real-time, clean and standardized information, while wholesale insights are harder to acquire and consolidate, leaving suppliers with a relatively narrow window of visibility. Retailers who elect to share comprehensive data with their suppliers not only gain their loyalty and support, but also evolve into strategic partners who evaluate and align big picture market insights to their specific retailer-supplier relationship.

FMG: Why is it so important to have seamless access to the ‘right data’ – especially during disruption?

FMG: To that end, how has Skypad enabled companies to meet new, faster demands during the pandemic?

G.H.: I think the key is highlighting the “right data,” as it truly makes the differ- G.H.: The pandemic established a sense of urgency to dig into specific data that ence between taking action and taking supported visibility into location level the right action. What data should be performance. Even with stores closed, shared? When should it be shared? And many retailers expedited store inventoin what format? These are the three mary management solutions, such as with jor components that we evaluate with the “buy online, pick up in store” and our retailer partners to help identify the impacts—good or bad—they can have “buy online and ship from store” programs. Close monitoring of how these on their business. online order fulfillment methods were The format is also important – if both satisfying consumer demand and suppliers and buyers need to hop through hoops to access the informa- reducing inventory was critical in untion they need, and/or re-format the in- derstanding and reacting to the pandemic impacts. formation they are less inclined to put Timing is a crucial component in tothe effort required to do so. We hear day’s fast-paced retail environment, but it all the time – user-friendly, turn-key access to data needs to be prioritized. it’s also about frequency. UnderstandSelf-service best practice reporting sup- ing how often information should be shared – and committing to that freplemented with easy use ad-hoc tools quency – supports routine and sharphelps brands both uniformly report on er visibility into trends. The fashion the business with their merchants and wholesale industry standard has been quickly identify opportunities unique weekly frequency for over a decade, to their business model. and while it is still proven effective if Additionally, brands are tasked more executed consistently, daily frequency than ever with determining the right has become attractive to suppliers as distribution mix for their business, and we find that wholesale brick-and-mor- well as retailers who rely heavily on tar-

geted promotions. Retailers who elect to leverage Skypad are delivering data to suppliers Sunday night in an e ort to ensure data is readily available for Monday morning distribution. Suppliers prioritize where their attention goes based on when they can access performance data, so it’s the retailers providing access first thing Monday morning who get suppliers’ attention first. Retailers providing access to data later in the day on Mondays, and throughout the week, leave less time for their suppliers to identify opportunities and drive collaboration. FMG: How does Skypad help in terms of ROI and cost savings? G.H.: Due to the major data-divide between retailers and their suppliers, in-season opportunities are overlooked at an alarming rate, and assortment and allocation imbalances are leaving consumers frustrated at the retailer and brands’ expense. For example, a retailer that provides limited visibility to their supplier community at the account level is bound to miss allocation needs at the door level. Retailers that are not sharing sizing or color level information with their supplier community are more likely to experience broken size runs, stock-outs and overall inventory waste. By establishing a Skypad data-sharing program with suppliers, our retailer partners receive significantly more targeted opportunities from their supplier community, all while being relieved of the manual or systematic efforts to distribute reporting. Our retailer and supplier partnerships have unfailingly proven that when more detailed, frequent and accessible data is shared by the retailer with the supplier, the merchant-supplier relationship realizes higher ROI and lower costs throughout the supply chain.

E-Comm Influx Forces the Last Mile To Evolve AS ONLINE SALES SOAR, GETTING THE PRODUCT TO THE DOORSTEP IN A TIMELY MANNER BECOMES AN EVEN GREATER CHALLENGE. BY GLENN TAYLOR

f this past holiday season is any indication, the traditional delivery model of shipping from a distribution center directly to the home via a personal carrier like FedEx or UPS might no longer be enough to satisfy the consumer. Increases in demand caused delays throughout the fourth quarter, and even led some carriers to restrict shipments from particular retailers. Now, retailers are pivoting to innovative solutions such as leveraging their store bases and even integrating the shopping center into the delivery experience. Additionally, third-party couriers are becoming a bigger part of the ecosystem in the constant challenge of getting product to the shoppers’ front door as efficiently as possible.

RETAIL INNOVATION REPORT

TRANSPARENCY TOP OF MIND

When aiming to shore up the last mile, transparency must come first, especially for retailers that are still stuck in building out a successful, reliable system, according to Cyndi Lago, vice president of supply chain at Capgemini Invent. “If I can’t tell my customer where their order is at all times, they’re not satisfied, because they expect that now,” Lago said. “You have Doordash delivering my groceries, that tell me they’ll be at my house in 10 minutes. Now, Amazon is telling you when things are coming and when they arrived, because Alexa will say ‘You received your package.’” This is still a struggle for retailers, with 56 per-

cent saying they don’t communicate a successful delivery to shoppers through any notification, whether email or text, according to analysis from ParcelLab. Of the 25 out of 52 retailers analyzed in the study that do send a delivery notification, nine of them still opt to let the carrier communicate with the customer, which could generate a less personal response and undermine the personalization they may be trying to convey. “One of the things where technology has helped in these delivery experiences is being able to customize that text message that says ‘we’re on the way.’” said Gina Anderson, vice president of solutions and growth at transport, logistics and supply chain network Geodis. “When you do have that, it does allow that delivery experience to be more specialized.’” Carson Kreig, the co-founder of delivery experience management platform Convey, cosigned this sentiment, particularly since many retailers are still handcuffed to the data that their carriers are providing. Kreig says that Convey’s predictive capabilities typically identify issues in the delivery process 33 hours on average before a traditional carrier does. This includes tracking of inbound and outbound orders, as well as carrier performance metrics such as whether they are meeting service level agreements. “We’ve invested a lot in data science and machine learning and our historical shipment database to really start to predict shipments,” Kreig said.

“One recent apparel client that we just signed last year had an undeveloped e-commerce fulfillment network so they were fulfilling everything out of a single origin location in Grove City, Ohio, typically handing it off to FedEx and UPS and then crossing their fingers that it was going to make it to the client. But last year with all the network disruptions, they realized that wasn’t a long-term strategy, so they went from two carriers on their platform to now seven.” When it comes to who has been doing last-mile delivery the best, Walmart and Target have set the standard in recent years largely due to their already robust physical infrastructure and their significant investments in fulfillment. Target said approximately 95 percent of all sales during the holiday season were fulfilled by stores, thanks in large part to its Shipt delivery network, which saw sales serviced by drivers expand by 300 percent. Target acquired Shipt in December 2017 for $550 million to fortify its last-mile offering, then in 2020, it acquired the proprietary technology of the now-defunct Deliv to assist in the batching and routing of orders.

THIRD-PARTY COURIERS ARE SET FOR MORE GROWTH

Unfortunately, most retailers don’t have the capital to take the routes of the bigger names by launching their own networks or acquiring established companies, and usually have fixed assets and fixed employee bases, which can be hard to scale when demand spikes. In these instances, a third-party partnership route is encouraged. Gig worker-powered platforms such as Instacart and Postmates got their starts from delivering from grocery stores and restaurants, respectively, but even these platforms have begun to partner with major retailers. Walmart began a trial run with Instacart in August, and over the holiday, Dick’s Sporting Goods started a limited partnership with the company through 150 stores. And Gap Inc.’s Banana Republic and Old Navy, as well as apparel retailers such as Zadig & Voltaire and Uniqlo, have partnered with Postmates to deliver on demand in select cities such as San Francisco and New York. “I think the smaller transporters and companies that can come in and own an area will still continue to see growth, especially if the volume is there,” Lago said. “When you think about the gig economy workers and you think about Uber and Doordash, because they have the analytics and infrastructure in place, it makes it very easy to be able to use their platforms to make decisions.”

SHOPPING CENTERS TAKE ON NEW ROLE

Beyond the delivery itself, much of the debate about last mile stems from where the products are coming from. The aforementioned ship-fromstore concept has gained popularity for retailers with a wide physical network, but real estate could take on a whole new role in 2021.

“If I can’t tell my customer where their order is at all times, they’re not satisfied, because they expect that now.” — Cyndi Lago, Capgemini Invent In an NRF virtual Big Show session in January, Bill Thayer, co-founder and co-CEO of Fillogic, a logistics-as-a-service platform that converts underutilized space at retail centers into tech-enabled, micro distribution hubs, highlighted that malls could serve as aggregation points for logistic providers and retailers to expand the local delivery networks. Thayer said that shopping centers could handle fulfillment from both physical players and even digital natives that don’t have a reach into brickand-mortar in the area yet but are considering the option. These aggregators could theoretically serve as homes to logistics services such as cross-docking, cooling and even added freight that a retailer typically wouldn’t have immediate access to.

OLD NAVY HAS ENLISTED POSTMATES FOR SPEEDIER DELIVERY.

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Driving the Consumer Experience Through to the Last Mile AS EXPECTATIONS FOR A SEAMLESS DELIVERY CONTINUE TO RISE, CONVEY PROVIDES INSIGHTS INTO HOW RETAILERS CAN PROACTIVELY MANAGE A TRANSPARENT CONSUMER EXPERIENCE.

RETAIL INNOVATION REPORT

ith new consumer behaviors creating major increases in online shopping amid the pandemic, the retail industry faced an end of the year “shipageddon” in 2020, which came with new restrictions, costly deadlines and anxious holiday shoppers. From a consumer’s perspective, the delivery experience has always been tied to the overall shopping experience, with expectations for a transparent delivery experience expressed even before COVID-19 continuing to gain momentum. In fact, the delivery experience affects not only purchase habits but brand perception as well – ultimately creating wavering loyalty and causing consumers to think twice before ordering again. Though it may seem like an external task, the brands coming out on top are those who have taken ownership of the post-purchase experience. Convey, a delivery experience management solution, helps brands do this by guarantee-

ing better visibility and better customer experience with a holistic approach that helps brands make delivery promises they can keep. By being proactive, the company says, retailers are able to tackle the problems of cost, speed and customer experience to live up to expectations and solve challenges at all stages to stay competitive. Here, Jenny Bebout, Co-founder and Vice President, product at Convey, talks to Fairchild Studios about new consumer expectations, what can be learned from last year’s high shipping rates and proactively managing the shipping experience for the consumer. Fairchild Media Group: In terms of delivery, what are consumers’ expectations today? Jenny Bebout: The biggest evolution in delivery is the expectation of brand ownership of the last-mile delivery experience. Consumers expect the brand they are shopping with to own the experience from the time they press buy until the time the item is in their hands.

Whether it’s fair or not, that means that the delivery experience and all the solution providers that go into getting that item from A to B are an extension of the retailer’s brand. And with at-home purchases booming and mobile shopping experiences getting more sophisticated, customers expect flexibility and transparency from brands and retailers. They want choices like in-store pickup, mobile alerts, or scheduling options for whiteglove delivery. Full cycle transparency means the customer expects to know the details of their order from fulfillment to shipping and delivery. This information has become part of the product itself. Amazon has definitely raised consumer expectations around cost and speed. In fact, our most recent consumer survey revealed that 73 percent of consumers shop at Amazon exclusively because of fast, free shipping. And beyond that, Amazon has also created expectations of consistency and reliability of deliveries. No matter who is fulfilling or delivering the item, we’ve come to expect we will receive the same experience both in terms of look and feel and results. FMG: What are the most common problems in the delivery process? J.B.: When you peel back the layers, you’ll find the ability to quickly analyze disparate data is at the root of the majority of delivery issues. A lot of retailers struggle to piece together the last-mile journey to understand what the shopper is really experiencing. And being able to track every package across a diversified network of carriers, let alone your operations upstream, can get complex really quickly. There are different origins and services levels to consider, not to mention millions of customer destinations. Managing all of that infor-

mation and being able to simplify and communicate it to customers can’t be done without the right technology. FMG: How much do delivery exceptions cost retailers every year? J.B.: The cost spent to resolve delivery issues such as delays, incorrect addresses, or damages can add up very fast. The net impact to the retailer can depend on several factors, but the most common one is customer support. WISMO, or where is my order, calls represent up to 30 percent of all inbound care team calls for retailers and each one costs an average of $5 to manage. It’s also important to note that the delivery experience is a leading cause of negative NPS & CSAT scores, so a bad delivery experience has a direct impact on customer retention. If a retailer can increase customer retention by 5 percent, it can lead to an increase of profits by at least 25 percent. Our data shows that a new customer is 5-20 percent likely to make a purchase, while existing customers are 60-70 percent.

iday consumer survey revealed that 47 percent of shoppers are unlikely to shop with a retailer again after a poor shipping experience. The new expectation is for the retailer to communicate issues and take action to remedy problems. It’s also important to meet your audience where they are by providing live updates via email, text and in-app. Because at the end of the day, the customer isn’t going to fault the carrier for a delivery exception, they are going to blame the brand. The delivery journey is an opportunity to surprise and delight customers as they anticipate receiving their order. Customers may love your brand, but they will think twice before ordering again if they have doubts about when their packages will arrive.

FMG: What can retailers do to prepare for continued preference for online shopping and at-home deliveries? J.B.: COVID and “Shipageddeon” have put an enormous amount of pressure on retailers to communicate with customers at every stage of the deliveryfrom dollar to doorstep. In 2021, proactive communication is no longer a consideration, but an absolute necessity. It goes beyond a tracking page – you have to keep your customers informed and not rely on carriers to communicate a delivery issue. Today’s customer expects brands to provide full delivery transparency from the start. Providing accurate delivery date estimates is critical. Our post-hol-

Reading the Retail Tea Leaves IN A POST-COVID LANDSCAPE, RETAIL INNOVATION CENTERS ON E-COMMERCE, CONVENIENCE AND SAFETY. BY DAVID MOIN

RETAIL INNOVATION REPORT

ears ago, innovation in retail was the purview of a handful of companies, notably Walmart, Target, Amazon, Apple, Selfridge’s and Nordstrom excelling in such areas as logistics, everyday-low-pricing, direct-to-consumer, experiential merchandising and service, respectively. Now, innovation is table stakes for staying in the game— and the pandemic is forcing transformation at unprecedented rates. “The sector wasn’t very innovative until Amazon or some of the New Age retailers showed up,” said Ambo Bose, chief practice officer, consumer packaged goods, retail and hospitality, Fractal Analytics. “Preceding the pandemic, there was always talk of transformation and experimenting. When the pandemic came, it was either innovate or die, there was nothing else—no other option.” “There has already been a massive amount of innovation in retailing. The underpinnings go back years, with the beginnings of omnichannel retailing and understanding the consumer holistically,” from channel to channel, said Steve Sadove, Mastercard senior adviser and former chairman and chief executive officer of Saks Inc. “Investments by bigger retailers made years ago, they’re reaping benefits now.”

Sadove said that for the near future, “I see major investments ahead in analytics, technologies, fulfillment, robotics, A.I.—all of that.” “Retail as a sector has been forced into a tsunami of innovation in digital marketing,” said Stacy DeBroff, founder and chief executive officer of Influencer Central, which conducts consumer panels and trend-spotting for 350 retailers and national brands. “Retailers were too reliant on the in-store experience, flyers and catalogues. But COVID forced a tremendous amount of experimentation and innovation, and the innovation that we are seeing, it’s reaching maturity levels in 2021.” “Retailers need to become savvy in social media selling. It’s going to dominate a lot of retail sales,” DeBroff added. “Already, 69 percent of consumers have purchased something directly via Facebook posts, Instagram shoppable posts and swipe up links, and every social platform is creating ways you can shop right from the site instead of going to the brand site. You can complete the purchase without ever leaving the social media platform.” Increasingly, brands are turning to influencers, to lift sales via social marketing. “Charli D’Amelio on Instagram generated over 2 billion impressions with 100 percent surge in sales for Aerie and

is very innovative. “You used to have to make big investments in technology to play online. But companies like Shopify have given small companies the ability to play online. That’s been transformational for the smaller companies,” Sadove said. Sustainability, he added, differentiates the retailer’s product in a way that appeals to the environmental sensibilities of many consumers.

“Preceding the pandemic, there was always talk of transformation and experimenting. When the pandemic came, it was either innovate or die, there was nothing else—no other option.” — Ambo Bose, Fractal Analytics According to a Coresight Research report, “Sustainability suffered a brief dulling of interest as the Covid-19 virus captured mindshare in early 2020, and attention was diverted to health, employment, family safety and finance. However, as 2020 progressed, the effect of Covid-19 appeared to accelerate interest in sustainability as consumers increasingly sought out brands, products, services and retailers with values and purpose beyond mere commerce. “We predict that environmental awareness and a push for sustainability will impact a range of sectors and regions in 2021,” the report indicated. “Most inQR CODES CAN HELP BRANDS TELL A STORY TO CONSUMERS.

American Eagle,” she said. Live-streaming activity is limited in retailing, but on the rise, DeBroff suggested. “Every social media platform has just come out with live-streaming functionality, be it Facebook, TikTok, Amazon Live, YouTube, Etsy or Twitch. You see Burberry used TikTok to launch their new fashion collection. L’Oreal has also live-streamed to sell products.” The selling format, she said, “is just emerging but in 2021 it will really come alive.” “Video and social commerce is the future of retail, and at Xcel, our Longaberger brand is a trailblazer,” said Robert W. D’Loren, chairman and ceo of Xcel Brands Inc. Longaberger, a social commerce retailer, launched a monthly live-streaming series in early February, providing an alternative venue for shopping the brand’s artisanal handcrafted American home goods. It enables shoppers to learn more about the products by interacting with hosts who know about the merchandise. The live-streaming, D’Loren said, “enhances the customer experience by integrating live video shopping with a compelling host and new exclusive product.” “Think Amazon, Shopify, The Real Real, Rent the Runway, A.I., buy-online-pick-up in stores, ship from store, and sustainability,” Sadove said, underscoring his view that retailing as an industry

dustries have a handful of environmental concerns that are destructive to the ecosystem but also carry with them the potential for reputational risk and financial harm. We believe that this year, corporates will resume and increase their focus on improving sustainability efforts following 2020’s lull.” Innovative solutions for retailing are emerging from social media. “Whether it’s Facebook, Instagram, or TikTok, we are starting to see social shopping evolve,” observed Anjee Solanki, the national retail director for Colliers, a commercial real estate firm involved in brokerage, property management, landlord and retail representation. “During the pandemic, there’s been a 50 percent increase in adults using social networks. It’s no longer for the young. This will definitely start to gain additional traction,” said Solanki. She explained that social media is becoming as much a shopping platform as one for educating and deepening engagements with consumers. Moreover, to a degree it’s happening in a down-toearth manner, with brands shifting from using celebrities or actors, to partnering with everyday people, such as store associates, to deliver the brand message. There’s more authenticity and aura of inclusivity to the message that way, plus it’s a money saver, Solanki said.

RETAIL INNOVATION REPORT

“I see major investments ahead in analytics, technologies, fulfillment, robotics, A.I.—all of that.” — Steve Sadove, Mastercard She also sees technology further integrating convenience, data collection and providing information to shoppers on brands, such as with QR codes to access videos that tell the brand story. “It’s taking you on a longer shopping journey in the stores,” or on your mobile at home. “The integration of online and offline is a must-have for all retailers,” said Solanki. Fractal’s Bose highlighted several important innovations: First, resetting inventories. He estimated that post-COVID, retailers will display 65 to 70 percent of their pre-Covid assortments, with about 50 percent of the items in their assortments selling during the pandemic. Bose also sees the rise of “quick service cloud kitchens” where what was once a restaurant becomes just a kitchen for pickup and drive-thru; virtual imaging in beauty and fashion gaining significance for mobile shopping and for safety since you

don’t touch or apply anything; and livestreaming, which he said has caught on with large retailers in China yet still in early stages in the U.S.; groceries are moving to subscription models for timely delivery, discounts, contracted rates that don’t fluctuate and automatic replenishment to your home. Certain grocery chains, he added, are converting stores to fulfillment centers for shipping or curbside pickup. “COVID forced everyone to figure out new or better ways of doing things,” said Vic Drabicky, founder and ceo of January Digital a digital consultancy which lists Tumi. Sandro, Drybar, Peapod, The Honest Company and David’s Bridal as among its clients. Some of the innovation has become standard procedure, like BOPIS and curbside, whereas QR codes which were “never really key to the mix,” are gaining popularity because they provide all sorts of information on products, including videos, and “ways of interacting with the product without having to physically touch the product,” he said. Drabicky also cited an evolution with personal stylists, which companies like Saks Fifth Avenue and Neiman Marcus have adapted to communicate with customers at home, escort them through stores when they come in and show them around and have styles ready fo them before they come in, to save shoppers time, and exposure to other people and products. “Saks has done a great job with this. It’s always been a service, but people didn’t use it because they felt it was an over the top luxury and made them feel they had to buy. Now it seems very basic because it’s safe, you get to where go to quickly and you get advice.” Citing other retail innovations, Drabicky said Home Depot, which can be difficult for shoppers to find what they want, updated its app listing the exact aisle and exact placement for every product. He sees live-streaming taking on a different dimension. “There is always going to be a place for really big influencers and celebrities, but there is a big movement towards authenticity - using actual workers in your stores. That can be a really impactful sales mechanism and way to build a real relationship. Nordstrom has been doing it, Sephora as well. “If you think of retail as a pendulum, stores on one side, digital or innovation on the far right, COVID swung way to the other side,” said Drabicky. “I expect the pendulum to swing back. People are tired of being cooped up and want to have more of that socializing aspect.”

Men’s Wearhouse NextGen Retail Strategy Comes Online

en’s Wearhouse 2.0. That’s one way to describe the ambitious new store design program the retailer has created to update and modernize its fleet. This Next-Gen concept was created by Tailored Brands, Men’s Wearhouse’s parent, in partnership with the architecture firm Nelson Worldwide, and features the bells and whistles today’s customer demands…and that Tailored Brands itself needs. The retail group, which also owns Jos. A Bank and Moores in Canada, emerged from bankruptcy as a private company in early December with less debt and far fewer stores, but still a work in progress, both because of the pandemic and the upheaval it has caused in the way men dress. A fixture in malls and strip centers, Tailored Brands has had to cope with many of its physical stores being shuttered due to lockdowns, plus banners that had long been the go-to resource for men looking for suits, ties and formalwear — but less so for the casualwear that has become the norm for many men in the WFH era. Even in the tailored clothing realm, the group’s chains had lost ground to newer brands like Suitsupply, which appealed to a younger generation looking for more edgier fashion. Updating the look of its core Men’s Wearhouse stores is vital as the retailer prepares for business post-coronavirus — whenever that might happen. The new concept includes a significant reduction in hanging stock as well as an in-store design that features clean sight lines and perimeter walls that allow for more merchandising of head-to-toe looks and an enhanced focus on sportswear and polished casual looks, a clear adjustment to men’s new way of dress-

SPORTSWEAR IS A KEY COMPONENT OF THE NEXT-GEN STORES.

THE RETAILER, HIT HARD BY THE PANDEMIC AND SHIFTING DRESS REQUIREMENTS, IS EVOLVING WITH ITS CUSTOMER.

RETAIL INNOVATION REPORT

THE LOUNGE ARE INSIDE THE NEXT-GEN STORE.

ing. Glass panels and a color palette of oak, gray and blue accented by glass and steel finishes are intended to complement the revamped merchandise mix. “We know that men’s wear retail is changing rapidly, driven by customers who are digitally connected, in control and expecting zero friction as they engage in digital and physical environments — often simultaneously,” said Tailored Brands chief customer officer Carrie Ask. “Over the past nine months, Tailored Brands successfully launched more than 30 new digital capabilities to support the customer and employee experience including buy online, pick up in-store, contactless measurement and curbside pick-up. Our knowledgeable sales team is known for delivering exceptional service to customers, individualized to their needs and specific style preferences. This long-term strength, combined with the exciting new technological advancements we are unveiling, demonstrates our continued commitment to service and innovation.” Ask said the Next-Gen concept was created after thorough research from customers and staff in a variety of departments including marketing and planning. The goal, she said, is to “modernize Men’s Wearhouse” and create stores that would support that strategy. A lynchpin of this strategy, Ask said, is The Vault, which allows for a substantial reduction of inventory on the floor while retaining the stores’ historically wide range of sizes. “We’ve always kept a range of sizes in the store,” Ask said. “We are preserving that legacy but liberating space for more storytelling. We’ve opened up the entire sales floor.” It also eliminates the sea of sleeves that has been a hallmark of the stores for years. “Our on-floor suiting count has been reduced by 85 percent, while delivering increased sales and selling margin, proving that curating our assortments deliver stronger performance and a better consumer experience. There is also a Shirt Shop which includes an interactive touch-screen display that allows customers to select style, fit and color from in-store and online inventory. In the rental department, and throughout the store, the company is employing 3DLook which uses artificial intelligence to determine a customer’s size by analyzing two photos — a first for any men’s wear retailer in the U.S., Ask said. “We’re modernizing something we’ve always done,” she said. Other elements include more mannequins and floor-to-ceiling digital displays that can be changed seasonally.

The Next-Gen stores also rejigger the positioning of the assortment with casualwear and rental merchandise pulled to the front. Ask said rentals, which are a big business for Men’s Wearhouse, require customers to visit the store to return their merchandise and the hope is that they’ll be enticed to pick up some other items while they’re there. Zones were also created to better highlight the polished casual assortment, suits — now positioned next to The Vault — and the custom department. The first two Next-Gen stores opened quietly at the end of last year in Shenandoah, Texas, and Buford, Ga. Ask said that the Texas store was a remodel of an existing unit and the Georgia store was a relocation. A third Next-Gen store will be opening in the San Francisco Bay area shortly, she said. The locations were chosen in order for the company to gather results from different parts of the country — and they’re also located next to large offices for Tailored Brands in Houston, Atlanta and outside San Francisco. Once the Bay Area store opens, Tailored Brands will take a break to assess the results. “For now,

we’ll be gathering insight to maximize our learnings and make refinements,” she said. But so far, so good. Since opening, Ask revealed, both of the Next-Gen stores are “outperforming the fleet,” with strength in denim, chinos, knitwear and suits along with furnishings and accessories. The Alternative Apparel sportswear brand, which these stores are integrating with tailored clothing on mannequins, as well as the Collection by Michael Strahan denim have been especially strong performers in these units, she said. Eventually, this Next-Gen concept may roll out — at least in part — to all 638 Men’s Wearhouse stores. “But there are design elements that could roll out independent of a full remodel,” she said, pointing to the digital shirt wall as an example. The concept will also be employed at the company’s Moores stores in Canada, she said. Although most of these stores remain closed because of the pandemic, Ask said there is “a lot of applicability” between Men’s Wearhouse and Moores. But the concept will be tweaked to appeal directly to the nuances of the Canadian customer, she added.

Next-Gen will not be used at the Jos. A. Bank stores, however. Ask said that much of that fleet has already been refreshed, so another remodel is not immediately necessary. Parent company Tailored Brands is still facing an uphill battle, however. According to a notice of an emergency bankruptcy court hearing, the firm “experienced unanticipated declines in its business” in December and early 2021, which caused the company to “severely underperform against the financial projections upon which its Chapter 11 plan of reorganization was based.” As a result, the company has determined it needs to obtain $75 million in additional financing by the beginning of this month, the papers said. In consultation with its advisers, PJT Advisors and AlixPartners, it was determined that Silver Point Capital LP, one of its existing lenders and its largest equity holder, will provide $25 million to the exiting priority term loan and $50 million secured on a subordinated basis, the papers said. That loan would be converted to equity within three years at $1 a share.

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As Design and Production Cycles Shorten, Flexibility and Agility Take Priority

RETAIL INNOVATION REPORT

ost companies that successfully navigated the COVID-19 pandemic either were very fortunate or were able to be flexible and agile. Even for companies with core product categories that maintained (or even increased) demand, the characteristics of flexibility and agility stood out, according to Roberto Mangual, CEO of Exenta. Mangual tells Fairchild Media Group that the disruption caused by the pandemic—namely the shortening of design and production cycles as distribution channels change and multiply—remains the top issue shaping the apparel industry, making the application of flexible and agile technologies crucial going forward. Fairchild Media Group: What characteristics do companies that have successfully navigated the problems caused by the pandemic have in common?

Roberto Mangual: Companies that have the teams, tools and processes to make better, faster decisions based on real-time visibility into their entire business cycle will always react better to changes in demand, mitigate supply chain disruptions and leverage changes in viable distribution channels more effectively. At their core, the most successful companies exhibited intangibles of grit and determination to forge through the storm of the pandemic. FMG: What is the lack of visibility into analog supply chain costing apparel brands? R.M.: Across a broad customer base, our anecdotal surveys indicate lack of visibility can cost anywhere from 30 percent to as much as 80 percent of potential earnings. On the extreme side, we saw a few companies in 2020 that, unfortunately, lost their businesses due to an inability to pivot and adjust. On a positive note, the best compa-

nies are gaining 20 percent, 30 percent and some even much more in a down year—by doing more with less; making better, more informed decisions; and taking strategic actions supported by actionable data. FMG: What steps must apparel brands and manufacturers take to facilitate more collaboration among their employees, customers, and partners, as they look to innovate new products? R.M.: It’s essential to integrate and digitize disparate points of data, processes and every piece of collaboration. Relying on emails with spreadsheets to track your demand, inventory and work in process, and then having someone manually put that into an ERP system is a dying concept. The same is true for managing an entire design process through a combination of Illustrator, Excel and email. It’s simply not a sustainable way to operate and is completely unscalable. FMG: How can apparel retailers best leverage automation within the supply chain? R.M.: Our customers who manufacture on-demand custom products are great examples of this. The entire process is automated, from the order placement on the e-commerce site, straight into the system that manufactures the item, packages it and ships it back out to the consumer. The only hands to touch it are those taking the physical action to get it out the door. Their systems tie all the channels together, from e-com-

merce to drop ship. With the right systems in place, you could almost run an entire business without “leaving your chair.” FMG: Where are apparel retailers still seeing the most difficulty in achieving end-to-end visibility of their supply chain? R.M.: The design process, which is usually dynamic and abstract, remains difficult for many retailers and vendors. A company that has strong production visibility and efficiency, but a very “Wild, Wild West” approach to design, can focus on design as the biggest opportunity to improve time and accuracy. Visibility in the design process ensures that end products accurately reflect the specs and characteristics as the designer originally intended, and as was promised to the retailer or end customer. When the end product aligns with design specs, there are fewer returns and chargebacks, which is key to a healthy bottom line. The lack of visibility and integration with both production and in-transit systems remains an area that costs companies time, money and sales opportunities. The best companies have real-time visibility and management of production and shipments whether they own the manufacturing process or rely on a third party for manufacturing. Their ability to proactively measure manufacturing efficiency in “real time,” and to predict and react to delays, sets them apart from companies relying on someone sending Excel spreadsheets days late and many dollars short.

Navigating the Tech Transformation SOLUTION PROVIDERS REVEAL WHAT’S TRENDING IN RETAIL INNOVATION AND TECHNOLOGY, AND SHARE INSIGHTS AIMED AT HELPING RETAILERS AND BRANDS NAVIGATE ANOTHER TUMULTUOUS YEAR. BY FAIRCHILD MEDIA GROUP STAFF

RETAIL INNOVATION REPORT

or most retailers and brands, 2020 is a year they’d like to forget. From pandemic-induced bankruptcies and store closures to the acceleration of the industry’s digitalization and seismic shifts in consumer spending, the year tested the mettle of fashion apparel, luxury, beauty, home goods and accessories businesses. And so far, it appears the trends that emerged last year will remain, according to industry consultants, solution providers and other observers, as COVID-19 continues to force businesses to transform. Of course, that transformation requires innovation. And technology companies are clearly stepping up to the plate. From mobile platforms to facilitate curbside pickup and contactless payment options to improved e-commerce functions and AI-powered personalization, the technological innovations available are all aligned with increasing conversions and bolstering profits. But innovation alone cannot save an overstored-market where consumers are shunning traditional types of retailing. Some of the major retail brands that filed for bankruptcy last year included J.C. Penney Co. Inc., Neiman Marcus Group, J. Crew Group Inc., Brooks Brothers, and Tailored Brands Inc., among others. This year, additional Chapter 11 filings are expected — despite a recent

holiday shopping season that broke sales records. Why? Well, maybe it is simply time for certain types of retailing to sunset. Stephan Schambach, founder and chief executive officer at NewStore, said “we are definitely going to see more bankruptcies in department-style and mall-style brands. This kind of retailing is coming to an end. It’s been in decline for a long time actually, it is not something that started during the pandemic.” “In my mind, the model for future success is the vertically integrated brand,” said Schambach, who is an e-commerce pioneer and founder of Demandware, now owned by Salesforce. “They can create a world for themselves with their own websites and their own stores. If they can connect the two and deliver as fast as or provide more services than Amazon, they will really thrive.” Of course, Schambach has some caveats. “It’s possible so long as they make the right investments,” he said, adding that he does not think the “traditional resale models are going to survive. By and large, especially in specialty retail, it’s going to become a brand’s world.” The emergence of a “brand’s world” is already in motion. Aside from the acceleration of retail digitalization, last year witnessed the acceleration of direct-to-consumerism. Shoppers, pinned down

by the pandemic, migrated online and tried new brands. Amit Sharma, founder and chief executive officer at Narvar, expects this trend to gain more steam this year. But there are challenges ahead. “Although there’s light at the end of the tunnel with vaccines being rolled out now, we are still a long way from full recovery, so expect to see more market contraction,” Narvar explained. “Those who can adapt and stay nimble, who have good fundamentals and financials, will be able to weather the storm. We’ve already seen winners emerge over the past year who’ve been able to pivot quickly to add critical services like curbside pickup.” Narvar said on an optimistic note, his company’s research found that over 50 percent of consumers “experimented with new retailers during the pandemic — some due to issues finding inventory or getting it in a timely manner, but many others who wanted to support local and small business or try something new.” “We fully expect that spirit of exploration to continue into the new year and beyond, which unlocks some market share and will ultimately make for a healthier ecosystem with more choices,” he added.

AI, DATA ANALYTICS — AND ROBOTS

Among the investments aimed at helping brands and retailers penetrate a market saturated with marketing and brand messages, AI and predictive analytics is seen as a way to reach the right customer with the right product.

“Digitization is key in terms of being able to design, sample, manufacture, manage and trace product and get it to the right places, at the right time, in the right quantities. This simply cannot be done using legacy systems and processes.” — Werner Terblanche, ITL Group First Insights Inc.’s “Voice of the Customer” approach, for example, is helping brands deliver products that shoppers want — the right size, color and style as well as the right price point. The company recently expanded its Voice of the Customer solution to an enhanced “Next-Gen Experience Management platform” — to help brands and retail increase margins and sell-through. Customers have used First Insight’s Voice of the Customer (Voc) predictive analytics platform CONTINUED ON PAGE 56

DATA ANALYTICS CAN REDUCE MARKDOWNS.

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The Future of the Fashion Supply Chain Is Fully Connected

RETAIL INNOVATION REPORT

hile many fashion retailers had initially expected to digitize their supply chains over a five- to 10-year period, Paul Magel, president of business applications and technology outsourcing division at CGS, estimates that the COVID-19 pandemic accelerated these timelines to as short as five to 10 weeks. In an interview with Fairchild Media Group, Magel shares why the fashion supply chain must move away from analog processes and blend together offshore, onshore and nearshore manufacturing. Fairchild Media Group: Given your perspective, what’s the top issue that will shape the industry in the next year? Paul Magel: For the fashion industry, the pandemic has been more of an acceleration event than an innovation one. Forward-thinking companies had already launched the initiatives needed to sustain and grow their businesses before the pandemic hit. What is most needed today is agility

in all operations—especially in getting goods into the marketplace. Consumers want products that are more customized, personalized, sustainable, ethical and delivered rapidly. Greater agility and visibility are needed to operate faster and more efficiently in meeting these demands and get closer to the consumer. FMG: What is the lack of visibility into analog supply chains costing apparel brands? P.M.: The speed and accuracy required in fashion leaves little room for errors or delays. Everyone in the supply chain must always have access to up-to-date information to make faster and better-informed business decisions. This can only be accomplished when all supply chain processes and teams are fully and digitally connected. From our perspective, analog supply chains simply cannot effectively and sustainably compete in 2021. FMG: Assuming the elevated eCommerce levels continue, how can fashion firms meet the demand while delivering on quality and accuracy?

P.M.: While eCommerce is exploding right now, we expect to see something of a recalibration in consumer behavior in 2021 that will return some shoppers to brick-and-mortar stores to satisfy pent-up demand. Regardless of how this plays out, the most crucial requirement for all fashion companies is to be positioned to sell across multiple platforms efficiently and seamlessly. Newly popular customer service options like buy online, pick up in store (BOPIS), curbside delivery, rapid deliveries and shipping-from-store inventory will continue to be essential aspects of the fulfillment effort. FMG: What insights from the past year can retailers apply to their planning and inventory solutions? P.M.: In an environment where consumer behavior is changing rapidly, many companies require smarter and more advanced planning, inventory and distribution solutions. With retailers experiencing rapid changes in cash positioning, planning systems that are focused on evaluating historical demand trends may not mean as much to some companies as they did in the past. With less visibility into the future, companies need planning systems to achieve and maintain inventory balance quickly. Many companies are buying smaller stock levels to preserve cash, but they still need to be agile enough to meet demand. This means that they have to be smart about holding the right products and levels in their warehouses. Retailers also need to have real-time visibility of all inventory, including inventory held in their stores, that can be

used to fulfill online customer orders quickly and efficiently. FMG: How can apparel retailers best leverage automation within the supply chain? P.M.: Virtually every company can benefit by implementing more technology. Depending on their current technology maturity level, they may focus on readily available solutions such as ERP, PLM or warehouse management. For others, promising emerging technologies, such as machine learning and artificial intelligence, can enhance real-time decision-making. Regardless of technology, retailers must attack their highest-priority needs first and seek out solutions that are more agile in delivery and open in connectivity to achieve a much faster ROI. FMG: Where do fashion brands have the best opportunities right now to improve operational efficiency and cost-effectiveness in the supply chain? P.M.: The pandemic is driving rapid and significant changes in sourcing strategies and the sharing of risk across the supply chain. To meet today’s consumer demand, companies should form flexible supply chain partnerships to get the most visibility, agility, speed and collaboration out of their operations. A low-cost offshore manufacturing model is not enough. The better strategy often includes offshore, onshore and nearshore capabilities and partnerships. Integration of disparate systems is another opportunity; companies ultimately need to connect their supply chains from the shop floor to the showroom.

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for over a decade to gather data, insights, and help power profitable business decisions. The company’s Next-Gen Xm Experience Management Platform strengthens the company’s solution portfolio by delivering an enhanced experience for users all across the spectrum, ultimately streamlining operations to enable smoother operations.

RETAIL INNOVATION REPORT

“The winners will be those that take this moment and this opportunity one step further, to not only provide a seamless utility for shoppers, but to elevate up and create an emotional connection.” — Jessica Murphy, True Fit Corp. JoAnn Martin, vice president of industry strategy at Blue Yonder, also sees using data and tapping into AI-powered technology as key to helping brands and retailers thrive. “Customer data will be leveraged to integrate and predict demand as customer behaviors change,” Martin said. “With this in mind, AI will help retailers make smart decisions in the face of unpredictability. Localization will be key to differentiation and customer satisfaction. Pricing will become more automated and tied to assortment lifecycle strategies set through more robust assortment planning.” And while customer data and predictive analytics is focused on gleaning insights pre-conversion, top solution providers are offering prescriptive analytics and AI-powered automation solutions for supply chain and inventory functions—which includes deploying robots, too. Rob Armstrong, vice president of portfolio marketing at Zebra Technologies, said his company is increasingly working with retailers “to leverage the power of intelligent automation to unlock new levels of performance within their businesses.” Armstrong said intelligent automation is comprised of innovative solutions for automated data capture (such as using machine vision capabilities and IoT sensors), decision automation (using prescriptive analytics and AI-powered task/workforce management software), and physical automation (using robotics-based solutions) — “all working in concert with one another to augment the front-line worker and empower them to do their best work.” “I anticipate growth in intelligent automation, from computer vision-based artificial intelligence

and augmented reality to the implementation of co-bots and robots,” Armstrong said. “This could mean we see retailers implement cashier-less checkouts or automated shelf inventory control with the use of robot assistance, or leverage cobots/robots to shift from activities like stock-taking and picking orders to hyper focus on customer service and boosting the shopping experience.” Armstrong said as these technologies come to the forefront, “most workflow optimization solutions have not caught up—only focusing on either the human or automated workflows with little synergy between the two.” He said as retailers adopt more intelligent technologies, “they will need to develop a common point of orchestration to ensure that automation systems can augment human workers to achieve the highest levels of productivity improvement.”

A SUPPLY CHAIN FOCUS

Last year, workflow optimization was a touchy subject for many retailers and brands. Right before COVID-19 struck, companies were already facing

supply chains disrupted by a trade war with China. Then the shutdown-related lockdowns slowed the flow of goods from the manufacturer to the retailer. Even the last mile struggled as online shopping demand soared. It was a supply chain mess that many companies are still trying to untangle. Richard Widdowson, vice president of retail solutions at SAS, said that developing a more flexible supply chain “from vendor to retailer to a consumer’s doorstep is key for the retail industry [this year].” “Data and technology can help us get there, but open collaborations between business partners is also essential to make it work,” Widdowson explained. “We still don’t know how and where consumers will want to shop in the future with all the new choices and constraints. The growth of online shopping shows consumers are making more deliberate choices and fewer impulse buys. Instant fulfillment—all the rage in 2019—is becoming less important now.” Widdowson said today, consumer purchases “hinge more on brand, price, quality and loyalty. The good news for retailers is that those are areas

PERSONALIZATION TECHNOLOGY CAN INCREASE CONVERSIONS.

rich with data that can be analyzed, understood and acted upon quickly.”

ACCELERATED DIGITALIZATION, PART 2

As 2020 saw the acceleration of a fully digitalized retail business model, this year will see a repeat of this trend where technology investments will be critical for success. Werner Terblanche, commercial director at ITL Group, said right now there are several “competing impactful trends and real lasting changes, so the key to both surviving and thriving in the industry is adaptability.” “The entire industry throughout its supply chain has been heavily impacted and is having to reinvent itself within very compressed timeframes,” Terblanche explained. “The winners are going to be those who accept and embrace the change in a very proactive manner, looking not only at dealing with the COVID-19 global pandemic and its consequences but thinking beyond that, looking for the opportunities that arise and how to realize those toward building a platform for future growth.” Terblanche said the pandemic has accelerated and amplified “a transformation of consumers’ thinking and behavior becoming far more socially and environmentally conscious and connected. So, sustainability, transparency, digitization are all now key concepts.” He said from the perspective of business, “we have to reevaluate our value propositions and put the structures, resources and processes in place to deliver what the rapidly changing market demands, else we will quickly become irrelevant.” “Digitization is key in terms of being able to design, sample, manufacture, manage and trace product and get it to the right places, at the right time, in the right quantities,” Terblanche said. “This simply cannot be done using legacy systems and processes. To be successful in such an environment, businesses also simply cannot meet the multiple pressing demands alone, so collaboration and choosing the right partners wisely and working together through the supply chain is critical.” Dan Doles, president and chief executive officer of Mojix Inc., also sees the need for adaptability and flexibility by retailers and brands as the landscape continues to evolve. “Brands will namely have to reduce inventory levels and leverage omnichannel, while improving flexibility and reactivity, both for new products and CONTINUED ON PAGE 60

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Age of E-commerce AFFIRM DISCUSSES THE SWIFT SHIFT TO RETAIL E-COMMERCE AND EMERGING MARKET TRENDS.

RETAIL INNOVATION REPORT

Silvija Martincevic: Affirm offers consumers a flexible and transparent alternative to credit cards through our unique ability to service a wide-range of transactions among a wide range of merchant partners - from low Average Order Value (“AOV”) to high AOV, online or offline. Our network consists of more than 4.5M consumers and 7,900 merchant partners, across Home & Lifestyle, Fashion, Beauty, Travel, Fitness, Auto, and more. This includes major retailers like Walmart and Nordstrom, wellknown brands like Tom Ford, Oscar de la Renta, and Neiman Marcus, and small and medium-size businesses like Cosabella and Alice & Olivia. In order to sustain this network of incredible partners and consumers, we have always stayed true to our mission of putting people first. We are committed to delivering transparent information to consumers at checkout so that they understand their financing options and can make informed decisions. This includes showing the total cost upfront and never charging a consumer more than they agree to. In addition, Affirm never charges late or hidden fees — not even with our 0% APR offers, Fairchild Media Group: How is Af- which have no fees or deferred, hidden, firm differentiated in the market? or surprise interest, ever. What sets it apart from other Buy Our consumers also benefit from Now, Pay Later (BNPL) options? the fact that we underwrite each loan

massive shift to e-commerce has resulted in a competitive retail market. In this changing retail climate, Affirm, a buy now, pay later solution has emerged as a differentiated player that caters to both shoppers and merchants. Affirm stands out due to their commitment to transparency, customer loyalty, and a dedication to evolving along with shoppers and merchants to meet their needs. Affirm told WWD that while total worldwide retail sales declined by three percent in 2020, retail e-commerce growth boomed with an increase of 27.6 percent. The company also pointed out that buy now, pay later is the fastest-growing e-commerce payment method globally – so it comes as no surprise that the category’s market share in North America is expected to triple in the next three years. Here, Silvija Martincevic, Chief Commercial Officer at Affirm, talks to WWD about changes and trends in consumer behavior, the growing importance of omnichannel and the significant shift to e-commerce.

individually (as opposed to extending a single line of credit), and consider data beyond FICO scores, such as transaction history and credit usage, to predict a consumer’s future repayment ability. This approach allows us to ensure we’re lending to consumers responsibly, while giving payment flexibility to as many people as possible.

repeat purchases at the same merchant within twelve months.

FMG: E-commerce is surging due to swift changes in consumer behavior that stemmed in part from the COVID-19 pandemic. How does Affirm help retailers adapt to these profound changes?

S.M.: The cost to acquire a customer and the cost to convert a sale are two of the biggest challenges facing merchants, and these costs are rising across almost every channel. For most retailers, it isn’t enough to only sell online or in-store. Today consumers shop on their phones, pick up in store, and can return items from the comfort of their own home, so retailers need to meet consumers where they are by supporting the flexible, cross-channel shopping behavior that consumers prefer.

S.M.: The recent surge in online shopping has forced merchants to upgrade their e-commerce strategy, and part of that has meant offering modern payment methods like Affirm at checkout. Merchants recognize that consumers, especially Millennials and Gen Z, are looking for alternatives to credit cards, and increasingly prefer more flexible and innovative and transparent ways to pay. The value that Affirm delivers to consumers allows us to act as an efficient, powerful revenue accelerator and marketing platform for our network of approximately 7,900 retailers, regardless of size or vertical. Offering Affirm at checkout results in several merchant benefits. The top three are as follows: Reach - merchants are able to reach more customers and increase sales. Demand - by solving affordability for consumers, we’re able to help merchants increase demand for higher net average order value (AOV) items — in 2019, Affirm merchants reported a growth in AOV of 85 percent. Conversion - we help merchants increase purchase rates because we believe the frictionless consumer experience and enhanced buying power Affirm facilitates leads satisfied customers to repeat purchases. For example, approximately 20 percent of consumers from our January 2019 cohort made

FMG: Omnichannel has gone from “nice to have” to “need to have” for retailers. Would you elaborate on the importance of omnichannel in such a saturated and competitive market?

FMG: From your perspective, what are other notable trends you’re seeing in the retail industry right now? S.M.: As the retail industry looks to bounce back this year, merchants must evolve, and many are focused on creative and innovative ways to engage consumers digitally as commerce moves online. It’s estimated that one in four global retail sales will occur online by 2024, and I believe mobile commerce is going to accelerate even more rapidly. Window shopping has moved to mobile devices, and merchants must deliver exceptional mobile experiences to engage customers and succeed. Great examples are apps like Wayfair that use augmented reality technology to enable customers to envision what a piece of furniture will look like in their space, and Warby Parker’s home try-on which allows customers to get a virtual sneak peek of how their glasses will look before they purchase them. Retailers will continue finding new ways to bring in-store-like experiences to customers at home with innovative

technology solutions. I am also seeing more consumers lead with their values when choosing where to shop. A McKinsey study found that 15 percent of consumers are making purchase decisions based on a company’s purpose and values, and I expect this to continue. Merchants can develop lasting relationships with their customers by demonstrating their shared values. FMG: What are your thoughts on how retail will fare in 2021? What changes do you think we might see? S.M.: I expect the rapid growth of e-commerce to continue in 2021. The shift in online shopping is here to stay, supported by the NRF’s recent forecast that U.S. e-commerce sales will grow up to 23 percent this year alone. As a result, I believe retailers will increasingly invest in e-commerce and mobile, while upgrading their payment solutions to meet consumer demand for innovative digital payment options. I think we’ll see the adoption of contactless payment options increase as safety continues to be top of mind for consumers. The U.S. has seen the steepest rise in contactless payments – and this year I expect this to rise even more broadly across sectors like public transit. Lastly, once the pandemic is behind us, all retailers will be fighting to get consumers back, and for this reason we should expect to see retailers employ digital engagement strategies like subscriptions, product bundles, and loyalty and rewards programs to engage with customers online. As in-store shopping has declined, reaching new customers and converting sales are even more top of mind for retailers. In fact, a recent Affirm survey revealed that 67 percent of consumers agree that the ability to earn rewards impacts where they spend their money. In 2021, it will be even more necessary to offer subscription and loyalty programs to encourage consumers to complete a purchase and keep coming back.

CONTINUED FROM PAGE 57

replenishment,” Doles said. “But these companies also have opportunities lying ahead, in that they can provide more transparency to end customers by sharing sourcing information and/or information on raw materials and prepare for the rise of the secondhand market.” As Terblanche notes, the digital evolution occurring requires a new, environmentally friendly mindset. And while Eric Linxwiler, senior vice president at CBX Software, said “sustainability” means different things to different brands and retailers, “all can agree that supply chain transparency and sustainability are top-of-mind boardroom discussions for the near-term horizon.”

“Retailers will need to prioritize technologies that give them a clear, holistic picture across all aspects of their operations.” — Matt Laukaitis, SAP “For example, we are getting multiple requests for solutions or capabilities in delivering sustainability and quality management (SQMS) systems that will provide efficiency and effectiveness gains in areas of vendor management, audits and assessment management, corrective and preventive action (CAPA) management, document management, training, etc.,” Linxwiler added that many firms are seeking continuous assessments “to identify if a supplier or mill requires requalification, disqualification or continuous monitoring. And further, they want to close the loop on any related corrective and preventive actions to ensure issues uncovered in an assessment are properly addressed.”

RETAIL INNOVATION REPORT

THE NEW RETAIL EXPERIENCE

The acceleration of digitalization processes cuts across all aspects of retailing, indeed, across the entire value chain. But it all aligns with one thing: the customer. And it’s not just about taking a consumer-centric approach, but offering a truly omnichannel shopping experience that is online, in-store, fluid, efficient, mobile, personalized and customized. Gaylene Meyer, vice president of global marketing and communications at Impinj, said retail has been forever changed by 2020. “First, shoppers have so completely embraced these digitally-enabled shopping methods,” Meyer said. “Online shopping has extended to every single retail segment. While I do miss browsing in a few special

shops, I’m also very happy to have all my regular basics show up on my doorstep. I don’t think there is any going back from here. In addition to online shopping, I expect models like Buy Online, Pickup In-Store (BOPIS) and curbside pickup will continue to grow in popularity.” For in-store shopping, the point of sale is poised to be radicalized by RAIN RFID (a battery free version of RFID that is more ubiquitous). “First off, nobody is going to be sad to say goodbye to waiting in a checkout line,” Meyer said. “Luckily there are many innovations happening at the point-ofsale. Because RAIN RFID reads many tagged items simultaneously without line-of-sight, customers don’t need to search for a barcode to scan. This means that retailers can create a touchless, customer-first experience that is simple and intuitive, delivering a faster checkout, shorter lines and a safer shopping trip.” For her part, Melanie Casinelli, chief digital transformation officer at Impact Analytics, said next-gen retail will be defined by data. She thinks “we will continue to see the gap grow between retailers who invest in technology that enable them to use their data and those that do not.” Casinelli said COVID-19 has propelled “that customer who wants what she wants when she wants it. If you cannot service her by using traditional methods of forecasting and data analytics, then the retailer who is using anticipatory forecasting leveraged via AI will jump in.” “Secondly, receipts are continuing to be cut to free up cash,” Casinelli said. “Those retailers utilizing AI will be able to build consumer centric assortments whose inventory investment is optimized from a depth and breadth standpoint. Customers will enter a store and see assortments that speak to them. However, those retailers relying on last year will have a tough time rationalizing their purchases within the context of cut receipts. This will exacerbate buyers using the peanut butter spreading methodology. Everything is bought the same, which leads to significant overstocks and out of stocks.” Sarath Jarugula, president and chief executive officer at RichRelevance, sees innovation driving change this year that more fully aligns the entire value chain from the supply side through to the store shelf. “As the pandemic tailwinds are likely to continue, digital is here to stay and will thrive in 2021,” Jarugula said. “With disruption comes opportunity,

and retail pioneers will show us the way—online stores are being reimagined as destinations, while brick-and-mortar stores are adopting elements of online experience to bring the two formats closer.” This year, Jarugula said retailers and brands “will make further investments in AI and autonomous technologies, both for their customer facing areas, and to connect supply to customer demand. With intelligent decisioning, retailers will drive efficiencies in their planning, supply chain and merchandising decisions.” Jarugula expects the new retail to involve merchants moving from a “gut feel” approach to one based on evidence-driven decision-making. For example, “online behavioral data will be leveraged for offline consultations and by contact centers, and inventory decisions will be made algorithmically in an agile manner,” Jarugula said. “Whether you sell mountain bikes, loungewear or consumer goods, can your every decision be customer-centric? That’s what 2021 will be about.” Joaquín Villalba, founder and chief executive officer at Nextail, also agreed that the winning brands and retailers this year will be the ones who “take a data-forward approach to their retail merchandising, especially as consumers will continue to see value over volume for the foreseeable future.” “Essentially, we expect to see brands going back to their roots this year,” Villalba said. “What that means is that the most important thing to offer are the products that customers love. While stores have come a long way in terms of becoming centers for gathering and even entertainment, and likewise online channels offer incredible convenience, at the very core of the shopping experience is being able to go to the store (or channel) and find what you were looking for or even discover something new to love.” Villalba said to accomplish this, the industry will need to deploy a “demand-led model” that offers them the “advantage of agility to meet shifts in demand aptly and even proactively.” Which means they can avoid excess inventory, “not only to avoid markdowns, but also to adopt a more sustainable business model that informs production and reduces waste.” “While some brands found creative ways to clear unwanted stock over the last year, having agility and hyperlocal demand alignment will make the possibility of selling more with less built directly into their approach to inventory at all times,” Villalba said. CONTINUED ON PAGE 64

LEVERAGING AI CAN INCREASE SUPPLY CHAIN EFFICIENCY.

SPONSORED STORY

How Real-Time Visibility Can Set Up the Supply Chain for a Rebound

RETAIL INNOVATION REPORT

hen the apparel supply chain was upended by the COVID-19 pandemic, it showed that operations sorely needed digital transformation to bolster real-time inventory visibility and better support communication between buyers and vendors. Emilee Kemnitz, industry marketing lead at Oracle NetSuite, shares insights on why gaining this visibility and leveraging automation are crucial to meeting today’s demands.

consumer. Businesses will continue to realize they can’t maintain production at normal levels with offshore suppliers and manufacturers, leading them to evaluate localizing the supply chain. Issues associated with current supply chain disruptions will also push businesses to automate, consolidate and refine their processes through software since the need for visibility is clearer than ever.

Fairchild Media Group: Given your perspective, what’s the top issue that will shape the industry in the next year?

E.K.: Because analog supply chains are managed through paper records, manual entry and duplicate efforts, the absence of visibility results in siloed information. Hosting data in multiple places creates many redundancies in data. Efficiency and data integrity are in jeopardy when there’s no real-time visibility into key business metrics. Without visibility into the source of components that go into goods, and the path those components take to the facility, how can businesses have confidence in meeting customer demand and satisfaction?

Emilee Kemnitz: Supply chain shortages and inefficiencies due to the coronavirus have emerged exposing businesses with limited inventory visibility. These disruptions have already started to reshape the industry by pushing wholesalers and retailers into adopting an alternative selling channel, which in most cases is trending towards direct to

FMG: What is the lack of visibility into analog supply chains costing apparel brands?

FMG: Assuming the elevated e-commerce levels continue, how can fashion firms meet the demand while delivering on quality and accuracy? E.K.: Order fulfillment is seamless or turnkey when an e-commerce site, inventory levels and financial transactions are all housed under the same roof. This structure enables businesses to message accurate delivery timelines to the consumer. The pandemic’s e-commerce boom also made companies realize the importance of reaching consumers at home. Brands are ramping up social engagements to inform what they’re creating. Fashion brands used to rely on the in-store buyer landscape, but now they need to rely on close contact. Specifically, for businesses going DTC, quality and accuracy depends on how connected the brand is to their customer base. Measuring consumer feedback and then applying it to future creation is how businesses can capture repeat buyers. FMG: What insights from the last year can retailers apply to their planning and inventory solutions? E.K.: As most business’s workforces are operating remotely, employees need accessibility to their everyday functions so they can maintain consistent communication with vendors and customers. It also became apparent that there’s significant value in access to real-time business metrics and traceability into where a product stands in the production process. Companies must enable themselves to track a product as it evolves from raw material to manufac-

tured goods and subsequently its shipment to a store or consumer. FMG: What role should nearshoring play in sourcing as executives continue to rejigger supply chains? E.K.: Executives need to vet manufacturers and fabricators in the event they’re forced into nearshoring production. Apparel businesses must work through sampling and dictate whether the factory is adept at delivering product to their standard. Nearshoring requires time and money to determine which vendors can handle product creation—testing supplier options isn’t a quick process. If a business is moving away from offshoring, it’ll force them to identify other alternatives to their supply chain and restructure how they’re sourcing ingredients. FMG: How can apparel retailers best leverage automation within the supply chain? E.K..: Investing in technology and automating the supply chain within one holistic system like an ERP, allows retailers to improve quality and flexibility in their manufacturing processes. Additionally, automating data flow from 3PLs and distributors provides real-time status updates and increases visibility. Seamless flow of production metrics allows key stakeholders to trust that the decisions being made are accurate. If a retailer is looking to onshore suppliers and/or manufacturing, the cost will be higher than what they’ll find offshore. From a cost-benefit analysis, automation is a way to offset the cost of relocation and can be viewed as a driver of savings.

CURBSIDE PICK-UP REMAINS A TOP CONSUMER PREFERENCE.

CONTINUED FROM PAGE 61

Villalba also expects to see a shift in required skills and experience for the fashion industry, in particular. “The skills that a new, data-driven fashion industry requires mean that companies will be looking to professionals such as data scientists, data engineers, and even artificial intelligence and machine learning specialists to help them work with data,” Villalba said adding that in his company’s own research, “we found that a growing number of major fashion retailers are dedicating a significant portion of their annual budgets to investing in these data-related professionals.”

RETAIL INNOVATION REPORT

PERSONAL, EMOTIONAL CONNECTIONS

While it is clear is that “demand-led” models and consumer-centric approaches in building a new version of omnichannel retailing are essential, there’s another element required—personalization. Jessica Murphy, co-founder and chief customer officer of True Fit Corp., said anybody “who’s not reinventing themselves is missing a huge opportunity to meet the customer where they are right now—in a place that is all about convenience, simplicity and low friction.” “The winners will be those that take this moment and this opportunity one step further, to not only provide a seamless utility for shoppers, but to elevate up and create an emotional connection,” Murphy said. “Shopping has always been a personal experience, and establishing that emotional

connection requires innovation and a deep understanding of your shopper amidst the short and long tail of competing places they have to buy.” Murphy said the formula for success today is “getting in front of the right people with the right product.” Ali Asaria, chief executive officer and founder at Tulip, echoed other perspectives and said the brick-and-mortar shopping experience will look different this year. “Consumers will continue to show interest in e-commerce for convenience and safety and so brands will have to look for more innovative ways to bridge the gap between digital and physical shopping,” Asaria said. “As stores welcome back in-store shoppers, personal and experiential engagement across all platforms will be key in responding to the omnichannel customer,” Asaria explained. “For example, a customer may want to browse online, consult with an associate through video chat, and book an appointment to pick up an order in-store at their convenience. We’ll also see fulfillment and delivery continuing to become the norm as customers are desiring more choice and quicker methods of receiving their orders.”

CLOSING THOUGHTS

In the end, though, isn’t buying goods often based on price? Consumers want the best bang for their buck. Matthew Pavich, managing director, global strategic consulting at Revionics, an Aptos Company, said while 2020 was about reacting and “putting out fires to make the most out of a highly

disrupted year,” this year should “be focused on retailers investing in building a better foundation for the future—and much of that foundation lies on intelligent pricing and promotions.” Pavish said the best retailers are “reevaluating their competitive strategy, figuring out who their new threats are and building strategies to elevate their value proposition in a market that looks completely different than a year ago.” Subsequently, Pavish said retailers and brands “must ensure that all channels offer pricing that is dynamic and informed by science. Whether a shopper is browsing online or in store, retailers must understand shifts in demand and cost structures to align pricing objectives.” “Lastly, retailers must adapt to the new behaviors customers have adopted during pandemic,” Pavish said. “For example, as brand loyalty shifts and new items become price perception drivers, successful retailers are the ones who have already identified these changes and provide competitive prices in the space.” As summer approaches, there’s hope the distribution of vaccines for COVID-19 will be broader, and the impact of the pandemic lessened. There’s hope for a more normal second half. Still, Matt Laukaitis, SAP global general manager for consum-

er industries, said the retail market will continue to deal with the ramifications of COVID-19 for the short term. “Consumers have adapted their behavior in significant ways— and these trends will continue and will set the bar for all brands experiences, only at a faster rate of change than pre-COVID-19,” Laukaitis said. “For example, a phenomenal brand experience delivered through a virtual personal stylist and curbside pickup will remain a source of differentiation for winning brands. Retailers need to strengthen their e-commerce presence and digital capabilities as this will continue to be a driving force for the industry, even as in-person shopping resumes.” Laukaitis acknowledged that managing a digital and physical presence is complex and challenging and can be especially hard on supply chains and for retailers and brands “delivering the brand experience without the right technology.” “With the right tools, brands can optimize inventory management to turn potential logistics and inventory positions into a strength— incorporating brick-and-mortar locations into the supply chain,” he said. “Retailers will need to prioritize technologies that give them a clear, holistic picture across all aspects of their operations.”

U.S. E-COMMERCE PENETRATION Online and in-store sales as a percentage of total retail* spend, 2010-2020

6.4%

7.2%

8.0%

8.8%

9.7%

10.7%

11.8%

13.2%

14.4%

15.8%

21.3%

Ecommerce Sales In-store Sales *Total retail figures exclude sales of items not normally purchased online such as spending at restaurants, bars, automobile dealers, gas stations and fuel dealers

2010

2011

2012

2013

2014

2015

2016

Source: Digital Commerce 360 analysis of U.S. Department of Commerce data

2017

2018

2019

2020

Updated January 2021

SPONSORED STORY

Why Online Trade Shows and Virtual Showrooms Are Here to Stay

RETAIL INNOVATION REPORT

n operating a wholesale platform with 300,000 curated retailers and 430,000 buyers, JOOR knows a thing or two about the benefits of the network effect. Last year, nearly 500,000 new connections between brands and retailers were made on the JOOR platform, the company says. In an interview with Fairchild Media Group, Kristin Savilia, CEO at JOOR, talks about the role digital trade shows and virtual showrooms will play in B2B retail going forward.

and retailers to visually collaborate and place orders. At JOOR, offering innovations that drive efficiency extends to the last mile of the transaction: last year we launched JOOR Payments to foster seamless online bulk invoicing and on-platform credit card payment processing, which has helped our brands immensely during tough times. We recently announced the addition of SEPA and ACH to allow for seamless bank transfer payments, which account for over 50% of wholesale transactions.

Fairchild Media Group: The industry finally embraced virtual showrooms and trade events out of necessity. What’s next? What are other ways the industry can boost efficiency through technology?

FMG: What are some of the benefits of virtual showrooms that will extend through 2021 and well beyond the pandemic?

Kristin Savilia: Last year, we saw a shift as brands and retailers alike realized that they needed technology to do business with one another, not just with their consumers. Our industry standard virtual showrooms reimagined the wholesale process, with 360° imagery and The Edit, allowing brands

K.S.: Virtual showrooms have become the connective tissue between brands and retailers; they will continue to play this role well beyond 2021. The pandemic has upended the traditional market structure, which is not a bad thing. Designers can now benefit from showing collections on their own schedule. This includes extending the reach of fashion weeks and markets over multiple weeks

to buyers worldwide who may not have attended otherwise. For the first half of this year, we expect there will be few physical shows and that most buyers and brands will choose to participate virtually. When shows return in greater numbers, they will have a virtual component to appeal to globally distributed and environmentally conscious audiences. Virtual showrooms will play a critical role in the culture of trade shows for years to come. FMG: How can SMBs stand out in the apparel space, particularly as more focus goes online and department stores fall out of favor with shoppers? K.S.: Department stores are not going away, but reaching smaller boutique retailers is more important than ever for brands to diversify their outlets. The ability to showcase collections for remote buyers through 360° imagery and video gives a brand a competitive edge. Customization is expected by buyers who are used to a showroom experience. That’s why we enable brands to send personalized, shoppable showrooms to their retailers. The SMBs that adopt digital wholesale and capitalize on virtual trade events will be best positioned for now and the future. FMG: One advantage to online B2B transactions is the data brands can glean. What types of information can serve brands best as they try to get assortments right?

K.S.: One of the best ways to navigate today’s ever-changing landscape is to have robust data that offers clarity on the past, and better yet, on present trends. It was important for JOOR to offer a flexible reporting suite for brands that provides real-time insights on best-selling styles, order counts, production volumes and inventory. Having data readily available at the moment of intent—where brands decide what to sell and retailers determine what to buy—is our secret sauce. FMG: Retailers today are focused on chasing business rather than making big commitments heading into the season. How does the digitization your platform provides facilitate this trend? K.S.: JOOR Passport is a great example of how we are making it easier for retailers to do business. Launched last year, JOOR Passport centralizes the trade show and fashion week experience by creating a one-stop shop for users. In 2020, we powered 17 global events on the platform with over 1,600 participating brands. We had 140,000 visitors from 130 countries and sold more than 500,000 items. By digitizing the brand-retailer interaction, JOOR Passport enables a 365-day-per-year marketplace where retailers discover new styles and designers, and brands generate more connections. Additionally, brands can show current inventory available to fulfill immediate needs.

Dialing It Up THE ENGAGING, INTERACTIVE COMMUNITY-BUILDING APPROACH HAS ITS OWN SET OF GUIDELINES. BY GLENN TAYLOR

RETAIL INNOVATION REPORT

ivestreaming continues to be gaining steam in the U.S., with an estimate from Coresight Research expecting the market to reach $25 billion by 2023. But for retailers considering the technology, they must first understand why it is gaining traction. The trend appears to be satiating the consumer’s appetite in two different ways: one is capitalizing on the popularity of influencers, while the other is replicating the in-store experience online. “At the end of the day, people really like to see someone who they recognize or respect in their industry talk about the products that are being sold. There’s a component of who is selling,” said Fatima Yusuf, director of partnerships of Shopify in a recent webinar. But Yusuf also noted that online, there is a growing need of “feeling like you’re still engaged and able to have a conversation with a person when you’re looking at that product.” This effectively means that livestreaming is hitting both the top and the bottom of the sales funnel, given the diverse range in shopper’s intent when accessing a stream. Regardless, given the social nature of the platform, livestreaming’s value to brands isn’t transactional, and shouldn’t be treated as such. “The transaction just happens to come because you have an aspired state that you want to be and you want to be part of a group,” said Alan Boehme, chief technology officer, H&M Group in the session. The panel, the first in the Retail Innovation Summit series from The Jay H. Baker Retailing Center at the Wharton School of Business and re-

tail and CPG accelerator XRC Labs, touched on the growth of one of today’s emerging livestream players: ShopShops. Although ShopShops started in 2016 as an idea to “bring a Yelp version of shopping to Chinese consumers, says founder and CEO Liyia Wu, the business quickly shifted to the livestream model early on, launching operations on the Taobao mar-

ketplace soon after. All it took was five minutes into the company’s first event for Wu to say, “This is the future of shopping.” Two years later, ShopShops made its public launch and is now established in five countries, hosting approximately 800 live events per month. “Coming in live is where people get to build a new shopping behavior and a community, and that does happen in real time,” Wu said. “However, I would say that this is a portion of real-time video and a portion of replays. We see the video value of live content that could be watched over and over again.” Wu highlighted that replays of the livestream events can foster new conversations among shoppers and retailers, and help further expand the community being built. She also stressed that livestreaming in general differentiates itself from the traditional “live shopping experiences” provided by HSN and QVC since ShopShops and other platforms offer a less-controlled environment than a studio setup. Wu said that in one livestream, a host was showcasing and trying on pairs of shoes in different colors, and after trying on the same shoe model, one in black and one in white, people watching the stream started requesting that the black and white shoes be sold as a pair. Shoppers with various different shoe sizes made the request, so the brand immediately moved to sell the mixed pair online. ShopShops, a graduate of the XRC Labs Cohort program, made its debut in the U.S. via its holiday beta launch with Rebecca Minkoff and other unnamed brands. Wu expects global adoption of the platform, particularly in English-speaking markets, will start to really settle in by 2023. The next three events that makeup this spring’s Retail Innovation Summit include: A March session that will cover transformations in logistics, particularly the adoption of new technologies ranging from supply chain traceability, micro-distribution hubs and machine learning platforms, and will include a discussion on the state of BOPIS, ship from store and curbside pickup. The April session will touch on the future of wellness, and how tech advancements in the space are driving new product innovation. The final panel, taking place in May, will spotlight Alibaba and select brand partners as they discuss the future of global retail innovation.

TWO LIVE SHOPPING EXPERIENCES VIA THE SHOPSHOPS APP.