CXI Field Report — World Retail Congress 2018

The Customer Experience and Insight (CXI) Research Group presents

World Retail Congress 2018A CXI Field Report authored by Bernie Brookes, Adjunct Industry Fellow

CXI Field Report — World Retail Congress 2018

Highlights from this year’s congressThe 2018 World Retail Congress in Madrid was the best in many years: the quality of speakers and the relevance of topics—combined with A-list attendees—ensured the insights discussed and issues raised were more thought-provoking than ever.

By Bernie Brookes, Adjunct Industry Fellow

I have attended every congress since its in-ception in 2007 and been fortunate to sit on the Grand Jury awarding retail’s ‘Best of the Best’ during that time. I have also run the University challenge, which acknowledg-es the up-and-coming retail leaders of the fu-ture. This congress was one that demonstrat-ed a paradigm shift in retail thinking across a number of areas.

Prior discussions on the role of bricks and mortar, the complexity of big data, and the rise of China as a retail powerhouse were all crystallised at the congress in a way that may prove to be a template for global retail futures. Many of the prior directions and predictions were put to rest and many beliefs quickly dis-sipated in a new clarity as data, technology, physical retail, and the Amazon effect have all now come together in a much more logical and demonstrative way forward.

This paper will provide a glimpse of this way forward by outlining some of the major trends in presentations, award winners, and panel debates from this year’s World Retail Congress.

CHINA HAS A MUCH BIGGER ROLE TO PLAYPrior views on China—as a luxury goods do-main with a bourgeoning middle class and massive bricks-and-mortar opportunities to conquer—are still relevant in retail, but the real issue is the arrival of China as a world-class online retailer and marketplace. Where-as JD.com and Alibaba have previously been seen as online players catering for domestic clientele, they are now manufacturers, suppli-ers, exporters, importers, investors, technolo-gy providers, and bankers. They are the viable Amazon alternatives going forward and are quickly moving from strong local players to

international powerhouses with the ability to customise by country and serve local markets better than Amazon.

With JD alone having over 292 million customers and a 95% same-day delivery per-formance rate, they have conquered the Chi-na market and now are venturing off-shore with world-best logistics and technology. Alibaba, meanwhile, had a 56% growth last quarter, with 515 million active consumers. Alibaba’s Tmall—which has 140,000 brand merchants and sells in 225 countries— re-cently achieved sales of US$25 billion in one day. This indicates that the powerhouse is not just about China; it is about the world.

With artificial intelligence, B2C market-ing, international partnerships, cloud servic-es, digital media and entertainment, financial services expansion, innovation investments, and social media platforms, Alibaba will in-evitably outgrow China and other southern hemisphere ventures, reaching into Africa and the rest of Asia. However, the congress showcased not only China’s enormity of re-sources and expertise but also its entrepre-neurial strength, with technology submis-sions to the Grand Jury and new Chinese businesses such as Kaola firmly cementing the rise and rise of China as a global retail powerhouse.

THE REAL RFID, PLEASE STAND UP!While retailers are increasingly data hungry, they are not yet data driven; instead, they work on lower costs, lower inventory, better use of capital, greater quality of customer experience, and agnostic channels to the cus-tomer. Finally, however, it looks like RFID will provide the technology breakthrough prom-ised over the last decade, largely because it is now cheaper, it requires less infrastructure, tags can be integrated into labels, and the use of artificial intelligence can enable easier use of data collected. The store of the future will have RFID technology integrated throughout mobile marketing and ecommerce, supply chain and merchandising, and back-office operations; sensors combined with wearable RFID tags in product labels will replace the security devices, bar codes, and security gates used in retail since the 1980s.

So far, RFID has been seen as an expen-sive logistical technology, largely applicable to pallets, high-value inventory, and asset ©

2018

Wor

ld R

etai

l Con

gres

s; ©

iSto

ck Im

ages

/dan

ielv

fung

; © iS

tock

Imag

es/a

lbln

CXI Field Report — World Retail Congress 2018

© 2

018

Wor

ld R

etai

l Con

gres

s; ©

201

8 W

orld

Ret

ail C

ongr

ess

management. Never-ending trials by retailers and manufacturers alike recognised the tech-nology’s potential but never really raised its profile. Now it is a viable option to supersede the bar code, collect rich data, revolutionise inventory control and supply chain manage-ment, and enhance product traceability while potentially eliminating counterfeiting. RFID has finally arrived loud and clear at the 2018 World Retail Congress.

As just one example, Wearable X’s Nadi X (demonstrated by the Billie Whitehouse brand) gives you the support of a yoga teach-er by enabling yoga wear to be paired with your iPhone using RFID. As another, Avery Dennison highlighted the many benefits of RFID in driving digital transformation. The opportunities in stock visibility, brand trans-parency, shopper experience, and customer intelligence are all being realised with pos-itive ROI, reduced inventory, cheaper and faster omnichannel delivery, fewer mark-downs, and enhanced sales, not to mention stocktake at the touch of a button.

THE NOT-SO-MIGHTY AMAZON?Amazon provides the online-to-offline ser-vices needed to revolutionise retail and conquers the barriers of region and country while disrupting traditional business models. However, in a world where speciality retail disrupts traditional retail, off-price retail dis-rupts brands, and category killers kill or die, it seems inevitable that Amazon itself will be mimicked and disrupted—it may take time, but these forces were on full display in Ma-drid this year.

Shopify, for example, now has 600,000 retailers in 175 countries. It allows retailers or marketplace providers to go online quick-ly with simple, user-friendly technology, enabling them to control and manage their stock and/or customers. It is more a ‘brand’ marketplace than a commodity marketplace, raising important questions about the com-moditisation of brands under Amazon and the segregation of ‘brand’ and ‘commodity’ marketplace environments. Customers want ease of transaction, comprehensive ranges, and fully integrated channels; therefore, if Tmall, Shopify, or even local companies such as Catch and Kogan can provide such services locally with customised content, why would they not be able to succeed?

Jeff Bezos has said to bricks-and-mortar retailers: ‘your margin is my opportunity’. In the same vein, Amazon’s size, complexity, and global approach is the opportunity for customised, personalised, and local market-places. Comparing local sites against Amazon Australia, it’s easy to see the product associa-tions, price competitiveness, and user expe-rience improvements that can be established by local players. Where businesses such as Shopify and Zalando customise to brand, we will see locals such as Catch (Australia) and TodoRetail (Mexico) customise to local wanted product while search engines such as Spoon Guru add service and choice beyond what Amazon offers.

Presentations at the congress and sub-missions to the Grand Jury suggest that tech-nology, the pace of change, and accelerating customer demands will fracture many more business models—even, perhaps, that of the mighty Amazon.

REDESIGNING THE CORE FOR CUSTOMERSFor years the congress has been a place for showing new technologies and designs; this year, many were variations on the core—nic-er fixtures, bigger screens, robotics-based service options, fancy mirrors, fit devices, and automated checkouts. We have seen the syn-ergy between retail and technology realigned by the common purpose of customer ease and customisation. Specifically, technology now enables easier direct-to-customer while making technology useful and representing the brand far more logically.

This year we learned about many inter-esting and novel retail developments: Guer-lain has launched a lipstick vending machine where you can select a colour while the vending machine puts your name on it; Ted Baker has launched a store that resembles a web page with the in-store benefits of testing the look and feel of a garment; United Colors of Benetton has developed a store with no pay points, tables or scanners, adding a dy-namic ease-of-shopping feel; Converse have built a hotel to represent the brand; Bata has launched a technology-based footwear store; Ford has launched the first vending machine where you can buy full-size cars; Dolce & Gabbana has kicked off customised fridges and freezers; and Apple is building a Chicago

store with a roof resembling an Apple iMac.Meanwhile, the winners of this year’s de-

sign awards were fashion retailer, Missguided (Bluewater Shopping Centre, London) and Arçelik (Istanbul), a white goods, home-wares, and electronics store. These winners show that we are no longer looking at lots of screens, mirrors, and other tools for om-nichannel customer interaction but, rather logical store design technology in line with customer needs and wants.

KEY TAKEAWAYSFor Australian retailers who look very much left behind, a number of common messag-es were echoed at the congress which could well be accepted and adopted to keep pace, including:1. Test early and often. Do not wait for

endless results and evaluations; the in-itial indications are enough to roll out quickly or scrap the concept.

2. Have an alternative route to market. I wonder if Mattel had a marketplace lined up when ToysRUs went broke or did they get dragged down with the receivership?

3. Innovation is old news; continuous innovation is a must. Use start-ups, in-novation hubs, and external support to re-invent and innovate; many traditional retailers are using such methods of rein-vention and recreation.

4. Good retail disruption invests more in supply chain, collaboration, and locali-sation. So do it!

5. Exit the short-term investors. Focus instead on owners or stakeholders who have a vision, sign on for the journey, and commit to long-term continuous invest-ment.

6. Employ ‘big picture’ people. They have a vision of the entire business, not just their disciplines.

7. Check your measures. Profit is still measured in EBIT and gross profit, but profit by customer would be a more log-ical measure.

8. Customers want things that help and make life easier. They do not need over-engineered products—look at all those un-used buttons on the TV remote! ‘Direct to customer’ from producer is simpler; how do you position your busi-ness to protect it from disintermediation?

9. Retail partnering has been reborn. Not with technology suppliers or product suppliers, but brand-to-brand and ser-vice-to-brand. How do you get in front of the trend?

10. Don’t get comfortable. The allure of comfort stifles the potential to innovate, and the best time to renew or reinvigorate is while you are on a run, not when you are in trouble.

CXI Field Report — World Retail Congress 2018

About Bernie Brookes

Australian retail legend Bernie Brookes has joined Swinburne as an Adjunct Industry Fellow to help reshape the future of retail research and promote retail as a career path.

He was previously CEO of Edcon, South Africa’s largest non-food retailer, and Australian department store, Myer. He was also Director of Woolworths Australia and was inducted into the Australian Retail Hall of Fame in 2013. After a long and prestigious career in international retail, Mr Brookes is ‘giving back’ by bringing his extensive experience in industry and continuing passion for retail to CXI.

bbrookes@swinburne.edu.au

About CXI Research Group

The Customer Experience and Insight (CXI) Research Group is part of Swinburne Business School.

CXI is a full-service research group that conducts leading-edge research which centres on experience to build customer-led strategy and innovation.

The CXI team is specialised in a range of qualitative and quantitative research methods and frameworks. Our four pillars of expertise span the fields of retail and consumer behaviour, sport and wellbeing, service innovation, and employee experience.

cxi@swin.edu.auswinburne.edu.au/cxigroup

Engage with us for...

Custom researchTap into a range of tailored research services to understand, optimise, and leverage experience in your organisation.

Insights and inspirationAccess the latest insight and thinking on issues shaping experience today through research seminars, networking events, in-company presentations and research reports.,

Executive educationTackle real-world business challenges with the guidance of highly regarded researchers and educators who are thought leaders and pragmatic practitioners.

CRICOS Provider Code: 00111DTraining Organisation Identifier: 3059

Copyright © Swinburne University of Technology. All rights reserved. Reproduction in whole or part without written permission is strictly prohibited. The information in this publication was correct at the time of publication, May 2018. The views expressed by contributors in this publication are not necessarily those of Swinburne University of Technology or CXI Research Group.

Front cover image © 2018 World Retail Congress.