NEW YORK — It's an understatement to say the country is undergoing difficult economic challenges -- but the retail industry may be feeling the pain more than most. The 98th annual National Retail Federation (NRF) Conference and Exposition, being held here this week, includes sessions covering all aspects of retail, from surviving the current economic conditions to optimizing a mobile strategy. Monday morning's keynote sessions repeatedly touched on the economic situation, emphasizing the importance of a business strategy based on customer centricity, technological investments, and brand relevance.
"We need to change how we bring about change in America," declared Lee Scott, Jr., president and chief executive officer of retail giant Wal-Mart, in his keynote entitled "The Company of the Future." Over the last few years, he said, problem-solving has existed in a vacuum in Washington, when in reality no institution can solve this global crisis alone.
"The American people are tired of 'Republican versus Democrat,' 'Liberal versus Conservative,' " he told the crowd. "They're tired of 'business versus labor,' and 'NGOs versus business.' They're tired of one side insisting on everything they want versus reasonable compromise to move this country forward. The American people want their leaders to set aside their differences, find common ground, and work together."
Though Scott said that he believes this country can become "a stronger America," he stressed that retailers would have to play a significant role if that change is going to come. "[The retail sector is] closer to working men and women -- and how they live their daily lives -- than any other industry [is]," he said. Fortunately, he added, retailers are held accountable for their actions: They have metrics that delineate what works and what does not, precisely because they have customers telling them at the cash register every day.
While the recession has undoubtedly hurt the retail industry, Scott told the audience that the downturn may be just the lesson the country needs, from a social perspective. "I've been worried for a long time now," he said. "You turn on the TV and somebody in 2007 is selling furniture and your first payment is 2011. Is that healthy?"
Corporate responsibility became a recurring theme in the early hours of the conference. In the second keynote presentation, "Weathering Retail's Storms," Stacy Janiak, vice chairman and national sector leader of retail at consultancy Deloitte, and Carl Steidtmann, Deloitte Research's chief economist of consumer business research, addressed the importance of corporate responsibility. Any true sense of that notion, Janiak said, includes at least five factors:
- ethical consumerism;
- risk management;
- accountability; and
"There's a rising interest from consumers and retailers around ethical sourcing, minor-free labor conditions, and providing safe and healthy products, all while reducing the company's carbon footprints," Janiak told the audience. "The bottom line here is that corporate responsibility and its intersection with sustainability will require even greater attention from retail management teams over the next decade, particularly on how to be additive to the customer experience [while also enhancing] the brand. This job isn't getting any easier, folks."
During his earlier keynote, Wal-Mart's Scott had detailed his company's approach to the social component of retail. Executives, he said, meet regularly with a panel of 50 young consumers, many of whom have cut their personal spending -- at restaurants, movies, or shopping in general -- and say they feel good about the money they're saving. That sentiment, Scott noted, will likely remain with this generation of consumers even after the economy bounces back, a factor that retailers have to be cognizant of.
Regardless of what the future holds, Janiak said during her presentation, change is a certainty. "Standing still," she declared, "is not an option." Moving forward, she told the crowd, companies must align themselves to center on three priorities:
- customer centricity;
- strategic technology investments; and
- brand relevance.
"Success for retailers tomorrow is highly dependent on making the right [technology] investments today," she said. Companies that, despite the economy, continue to invest in advanced technology will be the ones capable of achieving customer centricity and, in turn, the ones able to enhance customer loyalty. Improvements here include advanced business intelligence and analytics as well as maximizing a networked organization that connects not just employees and vendors, but consumers as well. "Only then will you reach a truly customer-centric organization," Janiak said.
The keynotes also pointed to the rapid advance of consumer technology, particularly the rising popularity of smartphones. Consumers now expect their shopping experiences to match the level of convenience they enjoy with their personal technology. The total value of mobile commerce, Janiak said, is projected to hit $9 billion by 2014 -- by which time we'll have reached what Janiak referred to as "Web 5.0" and an increasing shift toward online social shopping, deep customer insight, and increased personalization.
Despite the consumer preference for multiple touch points, each shopper still expects recognition as a single individual, which means retailers must create a seamless multichannel experience. A rising number of consumers are using two or more channels to research, evaluate, purchase, and return products, Janiak said, a phenomenon that has been made possible by the Internet. According to Forrester Research, by 2012, 49 percent of United States retail sales will be online or cross-channel sales. Even today, the importance of the online channel is significant, Janiak said, citing a recent Deloitte survey of retail executives that indicated every dollar of merchandise sold online influences as much as $3 in the store.
Consumers today, she added, are "smarter, less brand-loyal, and more aware of the host of choices available to them. It's getting much harder to know what and where your customer's next purchase will be." Consequently, she said, "consumers today want solutions and services, not just products." Achieving a customer-centric strategy, she said, will require:
- individual customer recognition;
- increase in relevant interactions; and
- intense data collection.
In his keynote, Scott made a point of emphasizing that not everything in the retail industry is dark and gloomy -- Wal-Mart, for example, recently reported a 25 percent increase in the sales of flat-panel TVs. "People still have money," he said. "It's not that people are out of money, but [that spending's] very targeted to very specific kinds of things they want." In this economy, you either hit the bull's-eye with your customer, or you might as well be a mile off the mark.
Neither Scott nor Janiak said they expected a quick turnaround, but there are certain economic changes working in retail's favor: Gas prices are declining, a second stimulus package is in the works, the housing market is recovering, and there's hope that President-elect Barack Obama will help restore confidence in consumer spending. Janiak, for one, says she's confident that a rebound is inevitable. "There's a growing amount of pent-up demand. Consumers have sharply cut back their spending -- sooner or later that dam will break."
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