NRF 2023: Themes and Takeaways
This year, Tusk Ventures invited us to exhibit at the NRF Innovation Lab during the NRF Big Show in New York. The Innovation Lab is a section of the trade show where the most cutting edge companies exhibit new solutions. While we were excited to attend, we were initially a bit cautious that our ecommerce focus may not align with many of the attendees who would be focussed primarily on the brick and mortar channel. We were pleasantly surprised, however, by the robust omni-channel thinking that so many attendees brought to the show and the great conversations we ended up having. With that in mind, below are six of the trends that we observed at this year’s NRF and how we think they may evolve in the future.
1. Vertical integration > modularization
In ecommerce, merchants have increasingly begun to choose headless, modular solutions for their backend systems. These allow a level of agility, flexibility, and innovation that is required in today’s ever-changing digital landscape.
At NRF we noticed the opposite trend for physical retail platforms. Many of the solutions\ providers that are helping retailers to manage things like inventory, point of sale, and in-store merchandising are vertically integrating. They are continually bolting on new offerings. A few years ago, there were a handful of companies providing their own digital shelf tagging, or footfall tracking solutions, now every major retail solutions provider seems to have an offering in these categories. This integration means that retailers can now use one provider for all of their in-store needs. In the short term, this is great for retailers who no longer have to focus on stitching together disparate systems to create a coherent store management platform.
In the long term, however, this makes us more bearish on the overall rate of innovation in large brick and mortar stores. The beauty of a more headless and modular approach is that a given brand or retailer can quickly replace and or integrate new solutions to test new experiences for shoppers. The more vertically integrated platforms will likely prevent that agility and could slow the rate of net new innovation overtime.
2. Anywhere commerce is everywhere (sort of…)
For the past few years, we’ve been watching as the market decides what to call the next wave of ecommerce. This is the version of ecommerce that collapses the space between product discovery and product purchase by moving merchant’s products (and the opportunity to transact) into social media feeds, publisher sites, live streaming environments, and any other digital experience. Many terms have been introduced: Distributed Commerce, Everywhere Commerce, Anywhere Commerce are all great examples.
This year at NRF we saw Anywhere Commerce clearly emerge from the pack as a term that many different solutions providers were using. Importantly, though, none of these companies were actually providing the ability to facilitate the transaction that we think constitutes commerce. Commerce is the exchange of money for goods and services. In an ecommerce setting, it’s the ability to checkout with the knowledge that an accurate order has been created in a Merchant’s system, and that it will be fulfilled. While many exhibitors at NRF were talking about Anywhere Commerce, they were more focused on tracking products through a supply chain or on making sure that payment could be submitted in multiple environments. None were focussed on actually facilitating checkout anywhere.
We feel strongly that Anywhere Commerce is a useful term for the future of ecommerce and selling at the edge, but we’ll also keep a close eye on the context in which it gets used. The more Anywhere Commerce becomes a catch-all to describe things that are not, in fact about the exchange of money for goods and services, the more it can confuse the very stakeholders who may be driving the next wave of ecommerce innovation.
3. In store experience is about reducing friction
Merchants currently face a challenging climate. Lower consumer spending power makes driving new purchases much harder. Meanwhile digital advertising is more expensive and less effective than ever before, making new customer acquisition increasingly difficult.
In more favorable economic climates, merchants were focussed on creating interesting experiences (especially in physical retail) for their customers, with the confidence that this would create a great brand halo and hopefully encourage a purchase.
This year at NRF it was clear that a lot of the in-store experience innovation was more focussed on reducing friction to purchase rather than driving a deeper experience of a product. Touchless checkout solutions (similar to that found in Amazon Go stores) were among the most common solutions here.
Interestingly, reducing friction is something ecommerce does extremely well already, and we’re left wondering who will crack the nut on meaningful in-store experience innovation outside of the Quick Service Retail (QSR) channel. (So did Bill Gurley)
4. The front end trap persists
The Front End Trap is fairly simple. It’s what happens when a product team tries to add a new feature (and new product functionality) by thinking primarily about the UI and UX mechanics of that feature. In doing so, they set aside the infrastructure requirements to deliver the core utility that the UI promises. This is a “trap” because a product team can get deep down the path of designing new product functionality, only to find out they can't ship the feature as designed (or that it will take longer and be much more expensive) because there is no scalable back-end solution to support it.
We saw this time and time again at NRF. It was especially apparent among retail and ecommerce service providers. These companies range widely from those who augment shipping and tracking services, to those building AR- or live-shopping, to those providing VR environments in which to test merchandising. Regardless of their product or service, many had not yet figured out how they would connect and sync with a merchant's products on a scalable and real time basis. And almost none of them had considered how they would incorporate checkout functionality that could work seamlessly with a merchant’s store.
Currently, most of these solution providers use outdated systems and manual processes to get product data from one place to another. And while there is widespread acknowledgement that direct integrations with a merchant’s ecommerce system are the correct way to get this data and keep it up to date, most providers don't want to spend their time building ecommerce integrations. This is why Violet exists, and it was great to see that the need for ecommerce integrations continues to grow.
5. The blockchain was not in attendance
As interesting as the patterns we observe at NRF, were the themes that were notably absent. A few years ago there was an enormous amount of hype around the supply chain applications for blockchain based technologies. More recently, the focus turned to tokens (both fungible and non) and the ability for Web 3 to rewrite the rules of consumer behavior and ownership on the internet.
This year, however, you were hard pressed to find anyone talking about either. The absence was notable. Does that mean that the blockchain, cryptocurrencies and the use of cryptographic tokens are dead forever. We doubt it. The utility and flexibility of certain blockchain based technologies may well come back around in a more measured and rational form that is directly connected to real use cases. But at least for now, retailers are looking for innovation off the chain.
6. Vertical Integration vs. In Store Innovation
We also wanted to call out one other trend that E-Marketer identified and that we thought was interesting - it points to the fracturing of social into more specific niches:
“Social media gets more personalized and people have more FOLO
What’s FOLO? FOLO squared, a term one presenter coined, equals the fear of logging on and the fear of logging out. Logging on brings anxiety of facing a flood of bad news. But if you don’t log on, you could miss the next big thing. For retailers who market on social media (which should be all of you), understand this user behavior and know you are going to have to work that much harder to reach consumers, Davidkhanian said.
As an antidote to FOLO, other presenters said social platforms would become more siloed around generations and behaviors. ‘It’ll be even more segmented and niche that you’ll go specifically to a platform where the conversation feels super authentic to you or [has] little community groups,’ Davidkhanian said. ‘I guess it’ll look a little bit like Reddit or the next iteration of that.’”
At Violet, we’re confident that these niche channels will lead to more authenticity and connection - and that the only way that every merchant will be able to reflect products and offer buying opportunities in every one of these communities is with a universal commerce API like Violet.
All in all, NRF was a tremendous success for us. We talked with lots of market-leading, forward-thinking merchants and channels, we confirmed many of our previous learnings about their challenges, and we learned a lot about the specific needs of new types of customers. It was a great start to 2023.