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1 Fung Business Intelligence Centre Global Retail & Technology Flash Report: Retail Innovation Conference Copyright © 2015 The Fung Group. All rights reserved.

June 23, 2015

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We attended the first annual Retail Innovation Conference, hosted by Retail TouchPoints, which took place at the Apella in New York June 16–17. More than 120 retail executives gathered together to share their knowledge and network with each other. Retail TouchPoints is an online publishing network that produces digital newsletters, video and audio podcasts designed to inform retail executives about the latest trends, research and strategies. On the day we attended, the conference featured three keynote speakers and four panels along with breakout innovation labs, which took the form of more intimate talks with different executives. Conference attendees were also given time to network in one-‐on-‐one sessions and at lunch table discussions.

At the conference, we heard from executives from Neiman Marcus, Zappos, ALEX AND ANI, BaubleBar, Origami Owl, Harry’s, DICK’s Sporting Goods and Ralph Lauren, among others. Leaders from research firms and organizations such as L2, Texas A&M Center for Retailing Studies and Forrester Research spoke as well, providing a dynamic learning experience for attendees.

The topic of retail innovation was broken down into four main categories: brick-‐and-‐mortar going digital, disruptors in the retail sector, the future of retail and best practices in retail today. The overriding message was that there is great potential in omnichannel retailing, but that it creates a widespread and overwhelming network. Some retailers are succeeding in the current environment, which is driven by social media and mobile-‐savvy consumers, but most feel they are lagging behind.

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Key takeaways: • Innovation labs at leading department stores and e-‐tailers are creating waves with new business

transformations.

• Retail Innovator Award winners were recognized for their innovation in customer experience.

• Sales are up and technology is available, but most retailers feel they are lagging in terms of omnichannel retailing.

• Customers expect seamless transactions, and retailers should provide better connectivity.

Innovation Labs Are Creating Waves with New Business Transformations We heard from Scott Emmons of Neiman Marcus and Kandis Yoakum of Zappos about retail transformations created through innovation labs. Though extremely different retailers, both Neiman Marcus and Zappos have prioritized innovation. The giant department store and online shoe and clothing retailer have taken their businesses to new levels by developing novel retail concepts.

Emmons took us through his “fail fast” strategy. He said, “Most of the things you do won’t work,” so he and his team at Neiman Marcus try an idea or project, then fail quickly, if they do fail, in order to not get stuck. The Neiman Marcus lab has generated many successful ideas, including the Memory Mirror, which revamps the dressing-‐room experience. The Memory Mirror allows shoppers to record videos and compare outfits in a digital mirror in order to see the whole outfit and its angles. The Zappos lab team holds “What If” sessions to brainstorm ideas such as pop-‐up stores, new lines of business and tools for firm self-‐organization—all with the goal of solving customer problems first and foremost. Both retailers are looking at the future of technology to transform their businesses.

Retail Innovator Award Winners Rewarded for Their Innovation in Customer Experience

Gary Schwartz, President of Impact Mobile, led a panel of Retail Innovator Award winners in a discussion of their businesses and career success. The winners were nominated for helping to advance an emerging retail area and having a specific innovative retail strategy or idea. We heard from Susan Soares, VP of Retail Operations at ALEX AND ANI, who spoke about her company’s old-‐school philosophy of connecting and talking with customers as part of the in-‐store experience. She noted that innovation doesn’t need to be something completely new, but that it is about problem solving. From BaubleBar, VP of Customer Experience and SWAT (Service with Accessorizing Talent) Nina Alexander-‐Hurst noted that her company’s SWAT team has created a video chat service for customers, which is one way for e-‐tailers to make their offering more personal. She says, “Acquiring a customer is expensive—keeping them is crucial,” an idea that many retailers today are taking to heart.


Award winner Kelly Loubet spoke about her journey from being a mom with a blog to her position as the Senior Social Media Strategist at Origami Owl. Loubet says that her brand stays authentic by being “a retail innovator…who isn’t afraid to try something new in order to get the desired result.” Judah Keim joined the panel from Harry’s, a premium shaving brand, and spoke about the brand’s online presence being taken brick-‐and-‐mortar through a single flagship store in the Soho neighborhood in New York. Keim is the Harry’s store Corner Shop Store Leader, and he described the neighborhood feel of the store and the “novelty of human interaction” that involves storytelling between his team and their customers.

All of the conference award winners are focused on developing trust with their customers and creating a unique and meaningful relationship.

Sales Are Up and Technology Is There, but Most Retailers Feel They Are Behind

Keynote speaker Maureen Mullen, the Cofounder and Head of Research at the member-‐based research engine L2, gave a compelling speech on the important disruptors and retailers in the market right now. Mullen shared her knowledge of the retail sector, touching on everything from consumer preferences to the newest trends. She noted that digital’s share of retail sales increased from 14% in 2012 to 50% in 2014, and described what that means for retailers today and in the future.

Companies such as Warby Parker and Nike are trying to help customers make more intelligent and more frequent purchases with the ease of new virtual try-‐on and customization technologies. Some retailers have already implemented such technologies; for example, IKEA offers augmented reality capabilities and Rebecca Minkoff offers “connected” fitting rooms. Mullen tweeted the following during the conference: “While 88% of companies report undergoing a digital transformation, only 13% of retailers think they are moving fast enough.” So, in essence, although omnichannel is said to be the future of retail, many companies feel they are further behind now that there are so many channels.

In order to remain relevant, companies are making digital content investments to drive conversion and build brand equity. For instance, Burberry has invested in video that allows customers to shop the runway and Anthropologie has implemented a pause-‐and-‐play video feature that allows customers to shop and watch simultaneously. Other new strategies involve personalization strategies in which dynamic content is created


for the consumer. Retailers are also being affected by user-‐generated content (UGC), which is gaining popularity all over the world, especially in the Asia-‐Pacific region. Consumers creating UGC often tag the product they’re talking about, which drives the conversion rate through the likelihood of purchase. In attempting to understand the available data and utilize the right resources, retailers are struggling to cut through massive amounts of information and create unique content.

Even Amazon, Mullen said, might need to venture into the brick-‐and-‐mortar channel to remain at the top. Amazon and other retailers, such as Nordstrom and Walmart, are finding new delivery methods, too. Some retailers provide delivery service directly to a shopper’s parked vehicle; Nordstrom offers curbside pickup in Seattle. Despite these advances in delivery services and online interaction with omnichannel, Mullen said, “The most important omnichannel retail capability for consumers is the ability to check in-‐store availability.” She said omnichannel is testing the retail sector to see who can synthesize the right investments, research and content to create the best shopping experience.

Customers Expect Seamless Transactions; Retailers Should Provide Better Connectivity

Adam Silverman, a Principal Analyst at Forrester Research, spoke about the gaps in retailing practices and where retailers can improve their business. Today, customers expect seamless transactions. The pace of change is accelerating, with mobile devices being used at home and on the go and tablets replacing desktops. Consumers have high expectations of channel integration: 98% of them shop digitally and 20% of online purchases are being made from mobile devices and tablets. Customers are taking their tablets into stores, too.

Silverman discussed how the large number of touch points affects the purchase lifecycle for a customer. But he said that even with consumers’ huge online presence today, only 12% of enterprise data is being used for analytics. Digital is creating new opportunities for retailers if they take advantage of research and technology. Silverman cited how poor store connectivity can disrupt the effectiveness of modern retail apps, and how cloud-‐based point-‐of-‐sale systems and beacons are the solutions to this issue. Based on his research, he’s looking toward a future where systems can provide real-‐time data insights and retail teams are not siloed by their enterprise systems.


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 [email protected] Cam Bolden [email protected] Sunny Chan [email protected] Marie Driscoll, CFA [email protected] John Harmon, CFA [email protected] Aragorn Ho [email protected] John Mercer [email protected] Charlie Poon [email protected] Kiril Popov [email protected] Stephanie Reilly [email protected] Lan Rosengard [email protected] Jing Wang [email protected]

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