Suzy Davidkhanian (00:04):

Hi everyone. Welcome to EMARKETER's weekly retail show, Reimagining Retail, an EMARKETER podcast. Today we're live from the NRF Big Show to give you our observations. Joining me, we have senior analyst, Blake Droesch. Hey Blake.

Blake Droesch (00:18):

Hey Suzy. Good to be with you here at the Javits Center.

Suzy Davidkhanian (00:22):

Thanks for joining me and making the time. I know there's a lot going on here. And we also have Sarah Marzano, principal analyst.

Sarah Marzano (00:28):

Hi Susie, thanks for having me, and I'm so happy to have literally found the podcast booth, which was an adventure.

Suzy Davidkhanian (00:34):

You sound very excited. Well, I know you guys are both really busy, so thank you so, so much. And as everybody knows, this is the show where we talk about how retail collides with every part of our lives. And I'm your host Suzy David Canyon. And this week I'm so excited that we're at the Javits and we are going to talk about the NRF. If you couldn't make it, don't worry. We have you covered. We're going to talk to you about the moments on stage that made us pause the conversations that we were having on the sidelines, the things you might not have heard if you were trying to be in too many places at once, and maybe a little bit about the floor and the boost that surprised us for better or worse. So with that, I'm going to get started. My first question to you both is, what was one aha moment on stage that stuck with you? Blake, starting with you.

Blake Droesch (01:23):

Well, I'll start with a moment and something that occurred to me yesterday morning, which was the first day of the show, and I was sitting in the main stage area up on the fifth floor and listened to a couple of panels. It really occurred to me that really the future of retail has very little to do with actual retail itself. If you think about what was being talked about, I heard about everything from events to foundations to sports betting, data centers in space, but very little about the core fundamentals of retail itself. There were some exemptions, for example, the sporting good president spoke about store sizes and experiential retail.

(02:10):

But I think when you come to a conference like this, what really comes to the surface is this idea that retail and growing a business, it really today relies a lot more on developing these alternative revenue streams and all of this brand building that goes far beyond the typical selling products at a good price that are of high quality, and building a brand around lifestyle and all of these sort of things that keep customers coming back beyond just the core basics.

Suzy Davidkhanian (02:48):

So beyond product.

Blake Droesch (02:49):

Yeah.

Suzy Davidkhanian (02:50):

Now it's like retail as entertainment, retail as advertising platform, retail as service providers.

Blake Droesch (02:55):

Yeah. And I just think these companies that are successful and are doing cool things and have interesting things to say, which is why they're invited to come speak at a show like this, they have to be doing something beyond just performing successfully as a core retailer. And in doing so, I think we hear a lot more about how not just retail operates, but businesses grow in general. And I think today that really means entering new areas that are not endemic to your original business model.

Suzy Davidkhanian (03:26):

It's really interesting, because for me, when I think about retail, I think product is king, and if you don't have a really good product, you might have amazing in-store experience, but it doesn't matter. Or you might have the best Netflix house to bring entertainment to the forefront, but it won't matter if you don't have the right product. Sarah, what do you think about that aha moment?

Sarah Marzano (03:47):

I'm having trouble following Blake's existential answer, but I think it makes sense, right? As we think about how to inject a newness at a conference like this is just really what we all want to hear about it. We have to get beyond the core foundations of retail. But Suzy, I think I'm just going to be very diplomatic. I think you had a great point too, which is that the product assortment and foundations of price promotion and place still matter.

Blake Droesch (04:09):

I think that that is obviously true, very true, what Suzy's saying, but I think there's a difference between maybe just being able to do that well and then doing it in an innovative way.

Sarah Marzano (04:21):

Yeah, and differentiating ourselves.

Blake Droesch (04:22):

So I think the core of operation still matters, but then once you get beyond that... Because presumably successful retailers that exist have to already... That's table stakes, right? But then I think the ones that are really driving innovation, it's typically not in that realm of the core retail model.

Suzy Davidkhanian (04:43):

Fair. Sarah, what was one of your aha moments?

Sarah Marzano (04:46):

Yeah, so following onto Blake's point about ancillary revenue streams and how important they are to retail, perhaps unsurprisingly, one of the biggest aha moments for me was going to the session between Amazon retail ad service and Macy's. They had someone from Flywheel there as well talking about just how that partnership is progressing. So just to TL;DR, catch everyone up, but a year ago at CES, Amazon made an announcement they'll be productizing their retail media technology and Macy's has been one of the biggest major retailers to get into bed with Amazon and sign on for the core premise, which is that Amazon will be able to pipe in additional demand and streamline the friction that advertisers feel when it comes to buying media across disparate networks. And I think what was interesting to me, again with my retail media analyst hat on, sitting in the audience, is I've been eager to hear real results of how that partnership has come to fruition.

(05:42):

And this is the first quarter where it's been fully live, and we heard a couple nuggets including 175 net new advertisers that are investing in Macy's retail media thanks to this partnership. And something that the head of Macy's media network, Michael Krans, said on stage that what the partnership with Amazon is doing for them is helping them build credibility with enterprise level advertisers, right, while easing friction for the torso and long tail of advertisers. So some different challenges that they're working through that are opening the gates to additional revenue. And I will be very excited to see whether we can see any of that success play out when Macy's posts its Q4 results.

Suzy Davidkhanian (06:23):

It's really interesting, because Macy's also has had their retail media for quite some time now. So even the folks that started a long time ago need help from others to try and make sure that they take advantage of all kinds of different advertisers.

Sarah Marzano (06:35):

That's right. We haven't seen the number of networks advertisers spend with increase meaningfully over time. It hovered between three and five networks for years now, because it's been really difficult for retailers and their media networks to ease again that friction that comes from buying across disparate platforms. So this is a challenge that has continued to, I don't know, haunt many retail media networks who aren't the biggest in the room.

Suzy Davidkhanian (07:02):

It's so interesting, because my aha moment came from a combination of on stage and conversations over the last three days. I started on Saturday, as did you Sarah, on Saturday.

Sarah Marzano (07:11):

Sure did.

Suzy Davidkhanian (07:12):

And I think this is the most basic aha moment, but is worth remembering that organizational silos exist across every organization, and it's not the typical ones we used to think of like marketing, digital, merchants, but it's across everything, even within delivery for example, or even the people that are trying to get the things, the items, the original retail premise of SKUs from one place to the other. And this idea of balancing operational efficiency with strategic need isn't a rinse and repeat and you really need to understand how to break down the silos for that particular problem that you're solving. Well onto number two, what was the most interesting side conversation you've had so far? Sarah, starting with you?

Sarah Marzano (07:58):

Yeah, so I did start on Saturday. I went to an event hosted by StrataCash called what's in store for retail media. And as the title suggests, it's focused on in-store retail media and it's a really great well attended event with excellent content. I don't just say that because they let me on stage a few times, but Suzy, this ladders on to the point that you just made. The side conversations I was having that surprised me and also pleased me, is I think there is an increased recognition that retail media exists because of retail, and media has to understand how retail works in order to succeed in those environments, particularly as we think through building retail media that goes beyond sponsored product ads on retailers websites. When it comes to moving into physical stores, which is a crucial opportunity for brick and mortar retailers, they need to break down those organizational silos and make sure that everyone is moving in sync and working towards the same goal is getting more and more important.

(08:54):

And I think we're seeing the tone of the conversation really change, and that's really exciting for me. I think it's going to get harder before it's going to get easier, because dismantling the way these organizations have been built historically, when we identify that maybe it's not working anymore, it's certainly going to come with some friction, but it may be optimistic for retail media's future in general.

Suzy Davidkhanian (09:13):

Well, and I think it's interesting, because it's not just the vendors that are saying it, who are trying to implement their solutions and are saying, "You guy aren't talking to each other. We're not going to be able to help you." But it's also the retailers and the organizations that are like, "Oh, if we want to keep growing..." And it's like your last report said, "If we want to keep growing, then you have to break down the silos."

Sarah Marzano (09:32):

I had a great conversation with Mark Williamson who leads the Costco retail media network on stage at the event on Saturday. And something that he and Costco talk about a lot is having a merchant first and member first retail media organization. And I pressed Mark on what's something you had to say no to that was part of you adhering to these core values, but that was hard to say no to, right? Because it was indicative of turning away easy revenue. And one of the things he pointed to was he steered clear of monetizing Costco's data at scale, outside of the retail media environment, because it wasn't something that was going to bring value to Costco customers. And so I loved that value led approach and making those difficult decisions that again, recognize that we are here to run within retail media. We're here to enable the success of the retailers that we operate within.

Suzy Davidkhanian (10:24):

Yeah, that's great. Think about it's okay to walk away from money if you're going to gain money on the other end, faster, better.

Sarah Marzano (10:30):

But you need organizational buy-in and a lot of stakeholders coming together to have the strength to do that.

Suzy Davidkhanian (10:37):

It's the big picture. The long game. Blake, what about you?

Blake Droesch (10:40):

I sat in a lot of panels yesterday and this morning that to nobody's surprise were revolved around the topic of agentic commerce and AI. And I think that if I could offer some light criticism of the agenda this year, there was a lot of similar topic, a lot of similar panels arranged, all arranged around the topic of agentic commerce. And I think one of the things that I had gotten to a conversation about yesterday, was that there were a lot of panels with the same headline, the same theme, but they were all talking about agentic commerce differently. There was no standardized definition of what exactly that meant. And in fact, there was very little talk about the actual automation of purchasing through AI platforms, which is I think, at least in my opinion, what the true meaning of the definition of agentic commerce is.

(11:42):

I think one of the reasons why it wasn't really addressed, is because it is such a big topic. It is dominating this entire event, but so little of it has actually been put into practice. So we are really exhausting a conversation around what is primarily a theoretical topic at this point, or falling back on things like basically sophisticated chatbots that are enhancing personalization. And I think all of these topics are really important to be discussing, but it would be very helpful, I think, if we didn't just slap the buzzword on everything, and we actually said, "Okay, in this panel we are going to talk about personalization through better chatbots that AI are empowering." In this panel we are going to talk about what might the future hold with actual true age agentic commerce." So I think that some of the... I did strike up a discussion yesterday in a panel that I won't name, because I think it was...

Suzy Davidkhanian (12:45):

They tried.

Blake Droesch (12:45):

It was quite, yeah, fluffy conversation around the potential for something that doesn't... Sounds really great, but has not really been put into practice. And I think that the panelists had a very difficult time articulating how it's actually going to look and what the prospects for success are. So I think, look, this is not the last NRF where agentic commerce is going to dominate the conversation. So I think going forward as an industry, it would be very helpful to be a little bit more clear and use some more plain language about what we're discussing within that realm.

Suzy Davidkhanian (13:23):

It's interesting, because I had a lot of side conversations and did not go to as many panels as I would've liked to yet. Every vendor pretty much that I talked to was like, "It's AI hype. We're at the end of the cycle hopefully." A lot of people used explicit words when they were talking about AI and some of their competitors potentially only because I think if you've been in retail for a long time you know that AI is not new and maybe there are slightly new components, but every retailer and vendor who's supporting them has been using AI in some way, shape or form. And there are new parts, and that's the part to your point that we need to figure out. But it was interesting to hear that the cycle hopefully will be over and I was like, "Is that like RFID?" And they were like, "Yep, like RFID, internet of things, Roblox," which as you all know I love, "Web3. They all go through these cycles and then everybody figures out how to use them."

Sarah Marzano (14:13):

Yeah, I think what's nice is hopefully, to Blake's point, when the dust settles, we can start using the phrases more meaningfully and intentionally, and see where it actually matters, where it actually will make a difference to the retail and e-commerce landscape. Because I believe that it will, but when you slap the same title on every session and throw in the word transformation or disruption, it starts to lose all meaning and certainly loses all of its impact if you're an attendee.

Suzy Davidkhanian (14:38):

Yeah. Absolutely. And not having a similar definition, kind of like what you were experiencing with retail media a couple of years ago, right? If everybody doesn't think about the exact definition in e-commerce media, then it's hard to talk about it. My next question to you guys is, is there a trend that you thought would be more represented, either on the floor or in panels, that isn't? Sarah?

Sarah Marzano (15:00):

It's not a trend by any means, but I continue to be surprised every year at how retail media is largely a neglected topic. And again, there is the great event that StrataCash throws dedicated to in-store, but I think that the event has a place specifically because retail media was a neglected piece of... A neglected topic at NRF. It's a hugely important revenue generator for retailers, and we are not past the hype cycle here. We're actually just getting started. So I was shocked to see that when I looked at the agenda, there was maybe one retail media session here, one there, but it largely felt like an afterthought.

Suzy Davidkhanian (15:40):

Yeah. What about you Blake?

Blake Droesch (15:42):

I will say as a more objective of viewer...

Sarah Marzano (15:47):

Your paycheck doesn't depend on it.

Blake Droesch (15:50):

That retail media was certainly more underrepresented here than it has been in the past. So I think that's for sure. But I honestly think that a lot of emerging trends and technology have been underrepresented this year, because it's either been dominated by AI, or has been talked about beneath the guise of AI, which I think goes back to my... Not to harp on my last comment, but I think it's true. And I think that for example, look at social commerce, it's something that was really hot here three years ago, but it was a lot further off from being a tangible, actual important revenue stream for a lot of these retailers.

(16:33):

But I was in a panel yesterday with PacSun and they were saying that 10% of their e-commerce sales are coming from social commerce at this point. So we're now at a place where a lot of these trends are ramping up and becoming mature and sophisticated that maybe actually now is the time that retailers should be considering these channels and getting actually more tactical about them. I think we so often talk about as an industry, what is the fresh and new thing, and then as soon as it becomes legitimate, we abandon it to go on to the next thing that's coming without actually investing in it and giving it the time of day. So I think, yeah, social commerce.

Sarah Marzano (17:18):

I love that. I think that's such a good point. And like you said it earlier, we spend so much time at these conferences fixated on topics that are largely theoretical because of how early on they are in development, and then when there's real revenue opportunity, we're not spending as much time, which is meaningful because these are strategies and decisions that could make a real difference for the retailers and brands that are attending.

Suzy Davidkhanian (17:38):

Yeah. And there are a lot of technologies that are the underpinning of, let's call it AI, for now at least, that you can't just talk about one year and then move on. If you don't keep talking about it, then you can't implement newer, bigger, better in any of those things that help with margin, that help save margin. What is one booth that surprised you on the floor? What's something that surprised you, Blake?

Blake Droesch (18:00):

I was surprised how... Because I was over at the Amazon booth earlier today, and I was surprised to see that front and center was this booth that they have, or this installation that they have, which is basically as a way of showing off their AI platforms is a prototype for product development and go-to-market for consumer products. So basically it's this concept around a D2C brand needs to design a new piece of luggage. They sell luggage, and they showcase all of the ways in which AWS AI can perform market research, product design and product build, and basically help you determine the margins of a particular product that would be sold either on Amazon, or through another marketplace or direct to consumer.

(18:57):

And I thought it was really interesting in a couple of ways. One, I just thought it was a unique way for them to have a practical application for the different nuances of their technology, but also the fact that it's not actually a product that they're allowing their vendors on their marketplace to use to develop products to sell on Amazon. When I would think that it would be, right? You think that a company that has a huge marketplace and is investing in this technology would love to be able to give people a tool to develop products to be sold specifically on the Amazon Marketplace. Maybe that's coming, but...

Suzy Davidkhanian (19:39):

I mean they were part of the press tour, so I was so excited about it, and having done product testing at the company I worked for before, it's so critical to get it right at the beginning stages. The way they articulate that product, what I thought was a product, but like you're saying, it's not. It's just a showcase of everything that they do. So I think it's just a matter of time. It was really cool though.

Blake Droesch (19:59):

Yeah, it was cool. I thought it was cool. And then I think the Google booth, again, all of these companies have AI front and center. It kind of looks like they're all showcasing the same services, whether it's Amazon, Google, Adobe, IBM, all of the big ones that are front and center. I thought Google's just from a marketing standpoint, had really good messaging. If you go into their booth, they have all of the different services, all of the different ways that AI is enabling retailers on the front end and the back end. And I think Amazon was making an attempt to do the same thing, just because launched all of these different platforms, all of this different technology and everyone's trying to make sense of which aspects can do what. And I thought Google arranged that very neatly.

Suzy Davidkhanian (20:48):

Yeah. Plus they had a reason to be really cool since they just announced some new things too.

Blake Droesch (20:53):

Yeah, they did. So the partnership with Walmart, and the development of their ejected commerce in partnership with many top retailers as well. And I think one of the things from this... One of the big takeaways from this conference so far, is really how aggressive Google is being in really wanting to partner with retailers and win them over to be on their shopping platforms, which is... Just by comparison, I know Walmart has partnered with OpenAI a couple of months ago. OpenAI did not much of a presence here. I don't think they're on any panels as far as I know, where Google on the other hand is being very aggressive.

Suzy Davidkhanian (21:33):

Is everywhere. Yeah. Sarah, what about you? Did you have a chance to walk the floor a little?

Sarah Marzano (21:38):

There is a great vendor that has a really cool piece of innovative technology that really struck me, again from that in-store retail media perspective. It's called ClearLED. They can broadcast these LED displays and they can leverage existing physical retail surfaces to do that. So think about the windows on a retailer's storefront. They can leverage those to basically turn them into what seems like a digital screen, and use that for dynamic storytelling. Whether that's something from a merchandising point of view, or even something from a brand paid advertising POV. And what I love about that, is that one of the biggest impediments that we hear from retailers when it comes to scaling their in-store retail media, is that the infrastructure and the cost of setting up the technology and figuring out where on the floor that they're already utilizing it makes sense to make room for digital screens, is this inhibitor, right? So I love the idea of being able to use this less intrusive technology on surfaces that already exist within physical retail to do that.

Suzy Davidkhanian (22:34):

So what does that look like?

Sarah Marzano (22:36):

It looks like what a digital screen would look like except it's on a...

Suzy Davidkhanian (22:38):

Like on a white wall?

Blake Droesch (22:39):

No glass.

Sarah Marzano (22:40):

It's on the window. So it's on glass, on the window at the front of the store.

Suzy Davidkhanian (22:44):

Oh, that's... Oh, just at the front of the store. For now at least.

Sarah Marzano (22:46):

Yeah. Well, I think there's other surfaces that they can use in physical stores and even they can do things like overlay it on top of product. So it's taking the store and turning it into a canvas for projecting these dynamic messages.

Suzy Davidkhanian (22:58):

One of the things I thought was cool is that there are a lot, to your point about Google being everywhere, there are a lot of vendors that are partnering and bringing, big vendors, bringing in their smaller partner vendors to be at the booth with them. There was one with, you should go check it out, with the fuel pumps. I think they're called... The smaller vendor was Dover Fueling Solutions. And they're doing some really cool things at the pump with even click and collect, where the screen... You're going to be able to say what's in the, let's call it 7-Eleven, in the convenience store, to then go and pick it up.

Sarah Marzano (23:27):

I love that.

Suzy Davidkhanian (23:28):

Which is fascinating.

Sarah Marzano (23:28):

Yeah, drive that impulse purchase.

Suzy Davidkhanian (23:30):

That's right. That's all the time we have. I feel like we could keep talking and talking. Thank you Sarah.

Sarah Marzano (23:36):

Thank you for having me.

Suzy Davidkhanian (23:37):

And thanks Blake.

Blake Droesch (23:38):

Yeah, great to be here.

Suzy Davidkhanian (23:39):

And thank you listeners and to our team, especially Lance that edits the podcast so quickly. Please leave a rating or review, and remember to subscribe. I'll see you for more Reimagining Retail next Wednesday, and on Friday, join Marcus for another episode of Behind the Numbers, an EMARKETER podcast.