13 May 2022
5 trends shaping the near future of commerce
Here's a look at key themes from the Retail Innovation Conference and Expo.
Here's a look at key themes from the Retail Innovation Conference and Expo.
Welcome to Near Future. In this weekly feature, The Current spotlights innovations powering the next wave of commerce.
“By the way, it’s great to be back in-person.”
Whether it was speakers taking the stage or folks meeting up on the tradeshow floor, many conversations at the Retail Innovation Conference & Expo this week started out with that little aside.
It was a reminder that live events are still freshly back. It also underscored the moment before the retail community that gathered in Chicago this week.
In-person experiences are coming back. At the same time, digital habits are ingrained. There is some sense of a “return” to how things were in many facets, and that includes shopping. But, in truth, we won’t be going back to 2019. Too much has changed since then. Much of what started in the last two years will normalize, and be with us going forward.
Still, it's worth remembering that the next era won’t arrive all at once. The pandemic lockdown moment of March 2020 put us on watch for the next event that will change everything virtually overnight. But, in most cases, life tends to change gradually, and it doesn't follow a straight line up or down. Sometimes the shifts taking place under our feet now are only obvious after the fact.
The best way we know how to chart a course to come together, compare notes and share ideas with an eye toward what's working now, and where things might be heading.
That’s a big reason why conferences are valuable, and why they’re likely to remain with us going forward. With the chance to make lots of connections and pick up a voluminous amount of new information over a short period of time, a picture of current trends can start to fill in. Professionals come with an idea of what they want to share with others about their own experiences, and leave with a couple new ideas to apply to their own work.
It’s one way a community comes to an understanding of itself, and tells its story.
With that in mind, the following are a few takeaways on big themes from #RICE22. As a caveat, we didn’t attend every session or talk to all of the attendees. Consider this a snapshot of a few ideas that kept emerging, crosschecked against what we’ve been seeing from companies throughout the consumer goods and retail space.
This plays out in a couple of ways.
First, there’s the blend of ecommerce and in-store shopping. Shoppers are now largely comfortable in both realms, and they increasingly aren't considering them as separate experiences. They might start browsing for an item online, then go to a store to see it and complete a purchase. On the other hand, they might see an item in the store, then go home and seek out the right color or a better price.
“These journeys for shoppers are so much more fluid than they’ve ever been,” said Martha Welsh, head of strategy, operations and go-to-market initiatives for Google Commerce.
At the same time, brands are operating across both spaces. Digitally-native brands want shelf space at Target and Ulta to complement their Shopify stores and Amazon operations. Retailers such as Brooklinen and Brilliant Earth are expanding in-person operations. Well-known retailers that started in brick-and-mortar stores are opting for a digitally-based direct-to-consumer approach.
It’s more likely that brands will need to be in each. The goal is to create a seamless experience across them. It’s clear there is opportunity for innovation at the intersection of channels including stores, DTC and marketplaces.
“They all need to work together,” said Fareeha Ali, director of market intelligence at ecommerce software company Mirakl.
The merging of physical and digital is also at the center of the growth of the metaverse. A host of brands launched pilots to explore immersive experiences in virtual words like Roblox and Decentraland. As it evolves, the idea is that the metaverse intertwines both online and offline.
NFT and Web3 consultant Deidre Manna Yoshioka offered an example of a phygital product introduced by Tommy Hilfiger at the recently-held Metaverse Fashion Week. A consumer could buy a piece of clothing for their avatar, and also one that is wearable. It's all one product.
“It helped to bridge the gap between that digital and IRL world,” Yoshioka said.
Worldwide supply chain bottlenecks put a snag on commerce in 2021, as brands faced long wait times and out-of-stocks. The recent lockdown in China is a sign that the macro picture still isn’t entirely clear.
It means brands and retailers are continuing to put supply chain considerations at the front of their operations. With stores, websites and marketplaces important, moving items to the right places across those channels at the right time will be even more important.
At Amazon aggregator Perch, Marketing Manager Nathan Sieminksi said the leadership team’s experience building supply chain capabilities and the delivery network at Wayfair are key to its value proposition as it seeks to scale brands it acquires.
At the same time, more fluid modes of shopping across online and offline, such as curbside pickup, will mean the supply chain must be closer to the customer to allow for quick access. As the conference was taking place this week, IKEA announced that it will be outfitting sections of its stores to function as fulfillment centers for ecommerce. The front-end and back-end of shopping will increasingly be in the same place.
Ecommerce grew because of its inherent advantages in convenience, price and selection. As adoption continues and shoppers get a reminder of the in-store buying experience, expectations are rising. Shoppers want fast delivery, and they want items to be accurate to what they ordered. At the same time, they want an experience that feels more interactive, and offers moments of discovery.
This can be achieved by making an ecommerce experience feel more personalized to the shopper. This area is going beyond product recommendations. The growth of livestreaming is demonstrating how bringing a person associated with a brand into the digital shopping experience can help consumers to connect with a brand, better understand a product and get questions answered. The interactive experience of livestreaming also adds a social element that has long helped to inspire purchases. It’s an area that Coresight Research sees as a key trend.
There could be opportunities for in-store associates to lead livestreaming sessions, whether they are conversion-producing events, or one-to-one assistance for digital shoppers.
The privacy shifts of Apple’s iOS 14.5. The demise of third-party cookies. They’re often discussed as bringing change to how marketing on the internet is done. By setting up a more transparent relationship that is built around a better understanding of a customer, it could make end up making ecommerce stronger.
It makes first party customer data that is owned by a brand, instead of a social media platform, more important. After all, better experiences run on good data.
“Data is the gasoline that drives personalization,” said Brendan Witcher, VP and Principal Analyst at Forrester Research. “...When you have an engine you put gas in it...if you put high quality customer data in, that engine will run very well."
It brings a brand’s relationship to its customer closer. They can segment audiences with marketing. In turn, a better understanding of customers can inform product innovation.
One area where this plays out is through loyalty programs. These can help inspire repeat purchases, while also allowing brands to obtain the data that informs everything else.
Here, too, it will be important to think across across brick-and-mortar and online experiences. Custom apparel retailer Indochino is taking such an approach as part of its omnichannel strategy.
These are suggestions for where things are heading. What they will look like has yet to be determined. No matter what the topic, a message resonated throughout the convention center at McCormick Place: It takes testing, learning and iterating to arrive at what works.
That could mean testing a new approach to marketing on an emerging channel. It can feel like brands are required to be everywhere.
Erika Silberstein, president of commerce at Wine Enthusiast Companies, said the important thing is, "Thinking about a customer, and not a channel...Who are you reaching in the end?...People are whole people."
Along the way, the important thing is to center listening to those customers, and allowing their voices and preferences to guide you.
It could lead you in a different direction than you assumed you would go. That's what adapting for the future is all about.
The opening of a new Market Fulfillment Center highlights Walmart's plan to build a local, automated logistics network.
Walmart may never build a fulfillment operation with a footprint that rivals the sprawling network of Amazon, but it is still in position to build a similar engine of business growth from the bowels of the supply chain. That’s because the world’s largest retailer has a head start in one key area that the ecommerce leader currently lacks.
As executives at Walmart are known to repeat often, 90% of the U.S. population lives within 10 miles of a Walmart store. These brick-and-mortar behemoths provide built-in proximity that can not only provide convenience for consumers who are looking to easily shop in person, but also to the retailer as it seeks to ship digital orders out.
As Walmart emerges from two years of building ecommerce capabilities during the pandemic, it is now taking steps to make its digital business a cornerstone of future growth, and profitability.
Those plans include building new facilities throughout the supply chain, but the retailer is continuing to keep the store at the center of ecommerce.
The latest example arrived this week. Walmart said it is opening a new store-based fulfillment center in its hometown of Bentonville, Arkansas.
From Walmart’s news release:
The Market Fulfillment Center (MFC) is built within the store and is powered by a proprietary storage and retrieval system – named Alphabot. Walmart believes fulfillment through digitization and connecting its store and supply chain assets end to end will transform fulfillment. And along with it, customer satisfaction and associate opportunity.
While this is only Walmart’s second MFC, it points at the logistics model that the retailer is building. Rather than massive standalone fulfillment centers in each locality, Walmart is creating a network that includes stores, distribution centers and a fewer number of strategically located (and increasingly automated) fulfillment centers.
Walmart already has big box stores that resemble large warehouse facilities. Now, it is putting them to work as supply chain nodes. This makes sense, since Walmart’s sizable ecommerce growth is being driven by pickup and delivery. Those two fulfillment options are largely local, and originate at stores. So it's a massive strategic advantage to be located with 10 miles of the bulk of the U.S. population. Additionally, Walmart has a sizable grocery business, so it benefits from being able to colocate items within a store, rather than splitting inventory between in-store and ecommerce.
While combining a store and fulfillment center is a matter of space and real estate, Walmart said that technology is critical to making it all work. The Alphabot system detailed above is a key part of the retailer’s recently-revealed plans to have 65% of stores serviced by automation by 2026.
Alphabot is key to automating fulfillment. (Courtesy photo)
The shift to in-store fulfillment is designed to increase efficiency and help Walmart better serve customers. The company said that MFCs will help Walmart deliver more orders in a day, and increase accuracy. In the end, it will also increase delivery speed. As it continues to add fulfillment centers, the retailer has said that it can reach 95% of the U.S. population with next- or two-day shipping. By adding stores into the mix, it can offer same-day delivery to 80% of the U.S. population.
But for Walmart, the investment in automation is also an opportunity to draw on a new engine of growth. The retailer has said that unit cost averages could improve by 20% as a result of the automation initiatives it is implementing, and store-based fulfillment model.
While the upfront investment is likely significant, it is making use of existing assets. In the end, building now can help improve margins going forward. On the company’s recent earnings call, CFO John David Rainey outlined the company’s thinking on the ability of supply chain to increase returns for investors:
The third building block of the model includes improving returns by scaling proven high-return investments in our supply chain that drive operating leverage and improve incremental margins. We're investing capital to optimize our distribution and fulfillment nodes with automation that we expect will drive a significant improvement in unit economics in the coming years. Our capital structure and cash flow generation are an advantage, and we're allocating capital responsibly with a bias towards increasing returns.
While Walmart’s fulfillment operation may look different than Amazon’s, the retailer appears to have learned the lesson that an investment in infrastructure can transform the supply chain from a cost center into a profit driver.