We recently held a webinar with industry veteran Ken Pilot about the current state of retail, what the landscape will look like in 2023 and how retailers can prepare to succeed. Here’s an overview of what he taught us.
Retail Trends in 2023
Our webinar attendees were eager to ask Ken about what he expects to see in the industry in the coming year. Here are a few of the trends he mentioned:
- More stores opening, with an emphasis on smaller stores and more retail growth.
- A lot of mergers and acquisitions.
- A focus on increasing profitability, through improving accuracy about what’s in stores versus what’s online (especially through RFID technology).
- Changing metrics to evaluate associates’ productivity.
Inflation & Pricing, Oh My
Factoring Today’s Landscape into Business Decisions
On the inflation front, viewers wanted to know how to manage their brands through the current economic conditions. Ken surmised that we’re probably at or around the peak of inflation and that we’ll likely see some deflation in 2023. He discussed the impact of freight costs, and how the built-in pressure to raise pricing to protect initial markup (IMU) is starting to go away. There is still some pressure on fabric and product, but he expects that to subside as well.
Of course, this brought up the question of how to set pricing. Again, Ken said he thinks we’ve seen the worst of it, leading to a lot of liquidation of products in the fourth quarter which will make prices go down and items more available for consumers. He also commented on how pricing really does require the perfect mix of art and science, saying that it should always be handled on an item by item basis. During the pandemic, many customers were just happy to get something they wanted despite the cost, whereas today cost is more of a deciding factor. Ken said that if there is more markup left to be done, brands should be careful not to take it too far.
Inventory & Planning
We asked Ken for his perspective on the state of inventory problems, and he said it’s a challenging time. One year ago, retailers were running out of products, but today many are stuck with excess. This highlights the crucial act of planning, and the importance of getting your numbers right. As an investor in Toolio, Ken reiterated that having the right technology in place is critical to help you plan, forecast and properly allocate products to stores. He anticipates a rough first quarter of 2023 for most brands, and hopefully some settling back into normal after that.
From there, our webinar attendees wondered whether C-Suite executives understand the importance of the planning function within retail organizations. Listen to Ken's take on that.
Another question had to do with the inventory pendulum, swinging from scarcity to excess, and how brands can better manage it. Ken said to remember that scarcity isn’t always a bad thing, and that having the right balance of product and running out of product keeps the customer hungry and keeps product from getting marked down.
Renovations, Business Lessons & Beyond
As our time with Ken became short, we tried to hit on a lot of topics that attendees wanted to cover. They’re a bit all over the map, and we’ll try to summarize them briefly here:
- Ken advised one viewer who needs to renovate a store and wants to prove they deserve the funding for it to proactively show what the lift to the store will be after the renovation takes place (ideally showing that the growth will pay back the investment within an 18 month period).
- When asked about what he learned through his Robot Galaxy venture not succeeding, Ken said he learned not to invest in something unless you’re investing at least some of your own money and to be willing to do every single type of job in order to help your startup start.
- Ken was also asked about how different roles should be working together, and he recommended that the head merchant and head of marketing should look at what the big buys are and decide what concepts or themes to get behind. He said you could start at the beginning of a season or the beginning of a buy, but then it’s really up to the merchants and the planners to put it together, with marketing tying it into the overall marketing calendar.
The Trifecta of Retail: Art, Science & Technology
Importance of Striking the Right Balance
When it comes to the art and science of retail, Ken added that there’s a third component deserving its own category: technology. He said in his early career, he would have skewed 65% art and 35% science but that his perspectives have changed over time. Now, he would peg his priorities at 40% art (product), 35% technology and 25% science.
He mentioned a conversation he had with retail executive Mickey Drexler, in which the two discussed the importance of all three of these pieces. They agreed that retailers need to have an appreciation for how a business needs to be run and grown, along with the importance of great product, marketing and branding as well as platforms, process and operations. You can't just have one; but you definitely can’t survive without the product piece.
When asked about which brands are currently winning in mastering the trifecta of art, science and technology, Ken cited Faherty, Design within Reach, Alo Yoga and Ralph Lauren, along with his take on what makes each a standout brand.
NRF & New Technology
As we finished chatting with Ken, we asked him which booths he was planning to stop by at the National Retail Federation (NRF) event in 2023. He said Toolio, of course, as well as Firework, which embeds and shoppable video and livestream. We also touched briefly on artificial intelligence (AI) in retail, and Ken’s take that most brands won’t need to be in the metaverse because selling in the actual world is already challenging enough.
And although the webinar wasn't a Toolio sales pitch, Ken couldn't keep from mentioning the impact he's seen for his clients moving from Excel to Toolio. Thank you, Ken!
We invite you to watch the whole webinar on demand here, or to request a demo here.