How are top retailers preparing for the disruptions of 2023?

Holiday shopping is in full swing, but by any measure, this has been a tough year for retail. As we get ready for 2023, retailers that constantly seek to improve and solve both internal problems and external disruptions will stay resilient and be poised to survive the worst. In addition to the inventory pileups, supply chain issues, inflation, and labor shortages, another big challenge for the industry has been the growing power of the consumer and falling brand loyalty.

To meet consumers where they are, we’ve been asking retailers to indulge in an interesting thought exercise: “What if you were an online business that happened to have stores and not a stores business that added on an online channel?” This small but powerful shift in mindset – what we call Digital-First Retail – can completely change your way of working and unlock incremental value across every aspect of the business. We talked about this on stage at WWD’s Apparel & Retail CEO Summit this fall, where a host of retail executives discussed their success strategies. Here are some that stood out to us:

Use technology to power the business: Neiman Marcus is prioritizing technology to “reach more customers and personalize the experience” for them, according to chief executive officer Geoffroy van Raemdonck. A new clienteling tool allows sales associates to improve communication with customers, while a new machine learning program will enable personalization in styling. The company is also using technology to enhance its supply chain and improve inventory allocations.

Remove channel separation: Shopify president Harley Finkelstein thinks separating channels into different businesses is “ridiculous” because that is not how customers shop. “Think about what your customer wants,” Finkelstein said. “If your customer wants to buy on TikTok or Instagram, you need to sell there. If they want to buy online or at a farmers’ market, that’s where you should sell. If they want to buy on a marketplace like Walmart or Amazon…that’s where you should sell.” And at the end, everything should feed into one centralized operating system that has a view into the full business.

Talk to your customers, not at them: “Our dialogue with the consumer was all about discounting instead of the greatness of our product,” said Todd Kahn, chief executive officer and brand president of Coach. This was before Coach decided it needed to reset the conversation and focus on understanding the needs of its customers. This helped the brand raise its average retail prices and update its product offering, resulting in a 300-basis point increase in operating income since fiscal year 2019.

Find the hidden insights in data: Bloomingdale’s chairman and chief executive officer Tony Spring says the secret to doing good business is in combining the art of retail with its science. “You need to use rigor and the analytics that are available to you,” Spring said. “Without that information, you will make the same mistake twice. You will miss opportunities. However, you need taste. You need gut. You need passion. You need risk-taking to make sure that the business and the assortment is well rounded.”

Believe in the strength of stores: Louis Vuitton chairman and CEO Michael Burke believes stores should be “cashless areas of pure delight” and an important tool in retailers’ arsenal as they build stronger relationships with their customers. “One hundred percent of our business is physical, and 100 percent is digital; every client is connected with us both ways, we do both all the time,” he said. In the future, retail stores will be “venues, experiences, restaurants on the top, bar, event spaces for fashion shows and cultural events…They are marketplaces that fulfill many desires, we don’t care if physical or digital.”