NRF 2020: How Data and Tech Will Drive the Future of Retail
Earlier this week, I joined thousands of others at NRF 2020: the world’s largest retail conference and expo. Anyone that has attended a massive conference knows how easy it is to get overwhelmed by a tsunami of information and flashy tech — and NRF is no exception. However, as an analyst looking at things through the lens of where the most promising opportunities lie, several things stood out to me.
Big picture: The increasing market share of digitally native D2C brands and e-commerce giants means legacy retailers must do more and more to increase the profitability of their brick-and-mortar locations. In this hyper-competitive ecosystem, one question is on everyone’s mind: How can we leverage technology and data to increase revenue and cut costs? Companies offering solutions that best address this question will themselves have a competitive edge within the panoply of retail tech.
For innovative retail technology companies, there have been recent ample opportunities to attract investment. While there was a funding lull in the space between 2014 and 2016, there was an uptick in the following years, with Forrester Research projecting retail tech investments would exceed $25 billion in 2019. (1) With this context, here are my main takeaways from NRF looking specifically at how data and tech innovation are helping shape the future of retail.
Leveraging Tech and Data to Increase Sales
Online retailers have historically had a strong advantage over pure brick-and-mortar rivals when it comes to sales and marketing optimization. Everything online is digital, and customer data from online purchases is easier to track. There has also been an abundance of Software-as-a-Service solutions that help online retailers optimize customer searches, make product recommendations and otherwise personalize the customer journey.
Facing those advantages, brick-and-mortar stores have struggled to keep up. However, increased adoption of advanced in-store analytics tech is starting to level the playing field and physical stores are leveraging more real-time data to drive sales.
For example, retailers are gathering more data from in-store beacons and near-field communications (NFC) devices to gain visibility into foot traffic. Cloud-native solutions are also enabling retailers to not only store point-of-sale (POS) data but interface that data with other data from loyalty apps, demographics, inventory, etc.
At NRF 2020, I saw a lot of examples of innovative tech that is enabling retailers to combine and leverage data from multiple sources. One interesting solution enables retailers to track customers as they move around the store. The tech also interfaces with digital in-store signage to serve up a contextually relevant promotion or outfit suggestion to a customer once they enter a certain aisle.
Retailers that can leverage all of their data (both on and offline), and the tech companies that enable this will have a marked competitive advantage. This is because the brick-and-mortar vs. online distinction is actually becoming more irrelevant. The most important point is that the real winners are those that embrace an omnichannel strategy. Retailers of all stripes must be able to track the customer journey across all channels and touchpoints.
Leveraging Data and Tech to Cut Costs and Improve Margins
The potential applications for retailers to use data to reduce costs are virtually unlimited. An emerging field of tech companies have started to seize opportunities around multiple use cases:
- Promotional Optimization: Retailers are using data insights to power decisions about the price of the discounts they offer, how long the discounts should be in effect, what products they should have the promotions for, and what products should or should not have them at the same time.
- Inventory Optimization: Businesses are looking at POS data, enterprise resource planning system data, marketing data and other sources to build models that determine how much and what kind of goods should be at a particular store during a particular time. The goal is to maximize throughput and reduce holding costs without leaving revenue on the table by being out-of-stock.
- Reducing Headcount: Amazon Go stores — which have cashier-less checkout systems— are widely seen as a harbinger of retail’s future. An emerging field of startups is producing technology that is allowing other brick-and-mortars to operate without cashiers.
- Optimizing Headcount:
- Mobile Learning Solutions: Retailers have tremendous opportunities to save on employee training. A long list of major companies have embraced software that cuts costs on worker training and development with mobile learning, training and collaboration software for deskless employees and frontline teams.
- Communications Platforms: Easy-to-use platforms for worker teams have emerged that allow employees to communicate with each other in real-time and stay in close touch with management. Normally separate functions like chat apps and task management can be consolidated into one place with these products, which saves time for employees who no longer have to switch between platforms.
- Platforms for Aligning Store Personnel Behind a Data-Driven Strategy: Data can play a key role in maximizing employee efficiency. Retailers can get ROI from their employees using sales optimization systems that utilize data about shopper behavior, traffic and satisfaction to urge the adoption of techniques that drive up sales, sales conversion rates, and performance of store-operating resources. These systems can tell workers exactly what they need to do to hit performance goals.
Final Thoughts on NRF 2020
There is much to be excited about in this vertical. Volition Capital is interested in a specific type of retail tech company: ones that have identified a market opportunity to leverage data, bring additional efficiencies to the retail sector and ultimately aid in a larger ROI for their customers. Companies that have proven that they can deliver tangible ROI for customers will play a major role in the ongoing transformation of the retail industry. As we move ahead into 2020, I see tremendous innovation ahead over the next decade.