2019 mid-year retail report
A Nextail summer reading list
Whether you’re on a beach somewhere or still enjoying that office AC, we’ve put together a summer briefing of our best insights from the first half of 2019. We’ve also added some suggested reading if you’d like to take a deeper dive. Take a trip down memory lane or see them for the first time.
So, what have we seen so far this year?
1. Retailers are taking AI and machine learning seriously
Earlier this year, we took to NRF and ShopTalk to tap into the hot topics and trends exciting retailers the most and shaping the year.
One thing that came through clear as a bell was that retailers who are embracing innovative technologies are the ones coming out on top.
More and more retailers are adopting technologies like AI and machine learning. Case in point, just this week, Nike acquired Celect, the Boston-based AI retail predictive analytics firm, in order to better predict inventory needs.
Aside from the flashy uses like smart mirrors, and friendly robots, tech of this type also lets retailers do things like collect and process large amounts of extremely granular data and speed up core processes.
An example of a retailer applying AI and machine learning is major UK retailer, River Island. River Island is a true leader when it comes to innovation, having taken digital transformation seriously from the get-go.
AI and machine learning are helping River Island support operations with dynamic replenishment, allocation, and assortment planning “…to hyper-localize what goes into stores and to hyper-tune the assortment to the customer in store,” said Doug Gardener, CIO of River Island, at ShopTalk.
Reading list:
- Blog: River Island hasn’t seen the future of retail — it’s built it.
- Forbes: Amazon — Redefining The 80:20 Rule
- Forbes: Using AI to increase retail sales
- Gartner: AI Will Transform Retail Merchandising For Those Who Are Ready For Change
- McKinsey: Automation in retail: An executive overview for getting ready
- McKinsey: SXSW Interactive 2019: From the boots on the ground of “Silicon Hills”
- PSFK: River Island Deploys Machine Learning To Align Stock With Customer Demand
- ZDNet: Executive’s guide to prescriptive analytics
2. Activewear sales should be picking up again right about now
Nextail collects retailer data at granular and global level for the very best bottom-up, unified vision of stock possible. But we can also use this data to gain other insights.
Take activewear sales. We were curious to see what sales for this category look like throughout the year so we charted out how sales lift and fall over the months.
What did the data tell us? Well, unsurprisingly (but kind of humorously), there’s a huge uplift in activewear in January just as everyone is making their fitness-related new year’s resolutions . Then BAM! On May 3rd, activewear sales suddenly plummet. Did anyone else just hear the sound of dumbbells dropping around the world?
We also found that activewear sales should be picking up again right around now (mid-August), perhaps thanks to the back-to-school season, or even due to regrets from all that summer ice cream. Thanks, data!
Reading list:
3. Retail category to watch for innovation: Luxury
It’s been a busy year for luxury so far! We’ve been seeing more major luxury brands learning that embracing retail tech doesn’t mean they have to lose their luxury status or price points. Just look at examples like LVMH and the Chalhoub Group who are “all in” when it comes to innovation.
Younger generations have an entirely different idea of what luxury means, and brands have to adapt to them, not the other way around. LVMH is doing a great job reaching younger, more tech-savvy customers. Some luxury brands are also trying their hands at diversifying product lines, especially through streetwear and collaborations.
Maintaining newfound attention then requires a whole different skill set. New, digital, and distracted audiences respond well to brands that appeal to their sense of identity, personalization, and that know how to put on a good show (e.g. Gucci)! Brands are also using tech to create natural textiles that are more sustainable and an alternative to animal byproducts and diamond mining.
Combining technology with creativity also lets luxury brands ensure the behind-the-scenes “magic” of perfect execution at every touchpoint. Blockchain, for example, strengthens and speeds up traceability back to the source to guarantee authenticity. Brands are also coming up with pretty clever ways to deliver packages faster than ever (think drones, self-driving cars, and underground networks of tunnels).
But what we like the best is how luxury brands like Versace are becoming more agile in their core merchandising processes and decisions. Versace is using predictive analytics to make sure that items are located in stores where they’re most likely to sell across its 120-store network and online.
Reading list:
- Nextail blog: Part 1: Luxury Broadens its Reach, Part 2: Creating and Sustaining Loyalty, Part 3: Delivering Exquisite Execution
- BCG Altagamma: 2019 True-luxury global consumer insight
- Deloitte: Bling it on: What makes a millennial spend more?
- McKinsey: The age of digital Darwinism
- Leanluxe: Sara Bernát on today’s luxury fragmentation
- LVMH: LVMH Innovation Award: discover the 30 finalist startups that will showcase their solutions in the LVMH Luxury Lab at Viva Technology 2019
4. External solutions generally take the win for retail innovation projects
How should retailers carry out innovation projects to future proof their businesses? Should they be done internally or outsourced?
At our Nextail Live event in Madrid, we hosted a panel discussion to hear the pros and cons of going it alone or hiring someone else to do it. While there were great opinions on both sides, the main reasons for looking for external solutions are:
- Retailers aren’t tech specialists, so they would have to build a team from scratch to carry out homegrown innovation projects which is hard and time consuming.
- It takes a long time to build tech, and if it’s built internally (and not already obsolete) you still have to be able to care for it. Who will upgrade it or fix it if something breaks?
- Legacy tech and mentality may hold progress back.
- External products are broad enough to be malleable and flexible to meet changing needs, whereas internal solutions are often built for narrow, specific processes.
Reading list:
- Nextail blog: #1 retail innovation question: Build in-house tech or bring in external solutions?
- Business of Fashion: Inside H&M’s $4 Billion Inventory Challenge
- McKinsey: The journey to an agile organization
5. Merchandisers of the very near future will be able to add more value than ever thanks to tech
We had a chat with Sébastien Verdier, Regional Supply Chain Manager for the Chalhoub Group in Dubai. This major luxury group has doubled its efforts in terms of digital transformation. So we were interested in talking with someone on the front lines.
AI and automation will also play a large role in the day-to-day of merchandisers who continue to carry out many tasks manually. Verdier said, “The clearest advantages of AI automation are efficiency and all the time it will open up for the team. They’ll spend less time on Excel and more time adding value elsewhere in the company or supply chain. We’ll also see immediate impact since there will likely be fewer human errors.”
Reading list:
- Nextail blog: Notes from the retail field: Merchandisers of the future
There’s still a lot of 2019 left, but we hope you’ve enjoyed this roundup of what’s happened so far. We’re excited to see what else the year has to bring, so keep your eyes on this space for news from the retail-tech world!
