Last week, I was one of 10,000 people who crowded into the Mandalay Bay Convention Center in Las Vegas for Shoptalk, a gathering of retailers, technology providers, and thought leaders who came together to opine on the future of all things retail. This year’s conference, billed as “retail’s big reunion” because it was the first in-person format in two years, was the largest ever. For those of you who couldn’t make it to Las Vegas, here are five key themes that dominated the discussion and some insights that make them relevant to beauty.
1. The Store Is Back
As one might expect at a conference dedicated to retail, one of the biggest takeaways from the week is that the good old brick-and-mortar store is back. The thing that makes this noteworthy, however, is how the store of 2022 has evolved post-pandemic from a place squarely focused on making transactions to a hub of marketing, brand experience and, yes, transactions—but with a twist. Steph Wissink, Managing Director and Senior Research Analyst at investment bank Jefferies, noted, “People have started walking the stores again—it’s part of American culture and one way we entertain ourselves—but the store experience needs to be worth it. Stores need to be back for a reason.”
The store of 2022 must walk the fine line of giving the customer an outsized experience while also being efficient for those times when a customer wants to run in, grab, and go. Marie Driscoll, Managing Director of Luxury and Fashion at Coresight Research, noted “Sometimes customers want to be romanced in-store and sometimes they want to run in and get out.” Stores that are able to strike a balance will be most successful. Driscoll referenced Sephora’s experimentation with color-coded shopping baskets as a great example of this—a red basket if you’re looking for assistance, a black basket if you’d like to shop on your own.
Even before the pandemic, the beauty world relied on the in-store experience as a place for discovery and trial, but never before has the store been such a versatile part of the overall customer experience. One of the most exciting ways the store of 2022 is evolving the customer experience is by utilizing one of the historically most underutilized assets a brand has—the sales associate. Driscoll noted that “the sales associate on the front lines of the brand experience is a brand’s most important influencer. Brands tend to think they need a celebrity for their live streams, social content and marketing but, in reality, some of the most effective influencers for your brand are in-store sales associates.”
Another important way the store of 2022 is evolving the customer experience is by upending the traditional model of shipping and logistics. Take, for example, Shipt’s partnerships with retailers like CVS, Rite Aid, Target, Walmart and, most recently, Sephora. Customers using the Shipt platform and living in proximity to these stores can have beauty products that are sold in-store delivered to them in a matter of hours. By utilizing the store as a fulfillment center, the customer now has a true alternative to platforms like Amazon and even a brand’s own DTC, and it gets them one step closer to the holy grail of instant product gratification.
Wissink said, “In 2019, stores were looked at as liabilities by investors and the capital markets but now, as an integral part of fulfillment, content and experience and the value provided by sales associates, stores have become an asset.”
2. Profits Are the New Sales
If you’ve been following our coverage of the beauty investment and M&A environment, surely, you’re already up to speed on how robust the deal environment has been over the last year. But you also know that 2022 has been a year where tremendous uncertainty has permeated the market, and trends like inflation, rising interest rates, the war in Ukraine, and stock market volatility have caused investors to rethink the way they look at investment opportunities. In case you missed it, BeautyMatter hosted a fabulous webinar on this topic last month that you should definitely check out on-demand. In short, 2022 is the year where the conversation is shifting from a singular focus on top-line growth at all costs to bottom-line profitability.
Lockie Andrews, CEO of RICH Hair Care and founder of Catalyst Consulting, said “this focus on profitability is just a natural course of how we’re progressing—this is the second wave. Brands have had enough time to do customer acquisition and now we’re in a second phase of building profits. Brands have to start showing retention and annual recurring revenue (ARR) that grows over time.” Wissink added, “2022 has brought an awareness that companies can’t lose money in perpetuity. Investors are getting impatient with the duration of customer acquisition and are looking for pathways to profitability.”
3. New Channels: Livestreaming + the Metaverse
At this year’s Shoptalk, two topics made their way into almost every conversation about the future of selling: livestreaming and the metaverse. Of course, for BeautyMatter readers, livestreaming has been a hot topic that we’ve been covering for the last several years but, until recently, its relevance has been mainly in the context of selling beauty in China and throughout Asia. It seems that 2022 is the year that livestreaming will enter the mainstream retail zeitgeist for American brands. We heard from social platforms like YouTube and Pinterest, retailers like Verishop and FabFitFun, and brands like e.l.f. Beauty about the tools they’re building and utilizing to make social commerce a growth driver.
Driscoll said, “Until now, the ability to interact with the salesperson was missing from the online shopping experience—this is the power of livestreaming. All the big companies like Estée Lauder have been playing with it, but every brand has to be thinking about it. If you’re not thinking about it, you’re behind.” Andrews added, “The accessibility factor is the most exciting piece of livestreaming. For Gen Z, this is key. Having access to a community is key.” In Shoptalk’s closing session, the audience was asked how important livestreaming will be as a growth driver in the next 12 months and, on a scale of 1 to 5, 69% of respondents ranked it as a 4 or a 5.
It seems the metaverse opportunity is a bit earlier in its lifecycle than the livestreaming opportunity but, nonetheless, a number of brands and retailers are experimenting with it to build awareness and transact in the virtual world. We heard from Brieane Olson, President of PacSun, as she outlined her company’s strategy to build and strengthen its relationship with Gen Z by selling meta versions of their apparel on gaming platform Roblox. What was PacSun’s meta bestseller? A pair of golden angel wings that they created exclusively for the metaverse.
Wissink said, “There’s currently a lot of energy being invested in the metaverse, but many brands aren’t sure what to do with it.” Driscoll said, “Meta is really a place for discovery of the brand,” and Andrews added “It’s really a phenomenal place for brands to play and for each to figure out how to reinvent themselves in the metaverse.” In Shoptalk’s closing session, the audience was asked how important the metaverse will be in the next 12 months and, on a scale of 1 to 5, only 20% of respondents ranked it as a 4 or a 5, likely a reflection of brands still trying to figure out how to harness its power.
4. Checkout + Payments: Frictionless + Flexible
Of all the retail tech we discovered at Shoptalk, none are as fundamental to driving growth and conversion as technology that enables brands to narrow the gap between browsing and checkout. But the conversation around checkout and payments wasn’t just limited to frictionless payments; it was also about giving customers options when they want them and remembering how they’ve paid in the past to keep the payment experience streamlined. Wissink said, “What we’ve heard is that customers want lots of choices for payment—from buy now, pay later options to currency choices to crypto options.” Frictionless checkout and payment options aren’t just limited to the digital experience; these options are increasingly present in the in-store experience as well.
5. It’s a Cookieless World: Get Used to It
The impending sunset of cookies and increasing consumer concerns around privacy have forced brands and retailers to change tack when it comes to creating personalized customer experiences and building out advertising and marketing. Where implicit customer data falls short is where explicit customer data really shines. In many ways, the beauty industry has been a leader in collecting a treasure trove of explicit, first-party customer data to create a personalized shopping experience and make informed and relevant product recommendations—think about how much information a customer voluntarily turns over when they fill out a skin survey or use a product recommendation tool. Creating strategies to collect explicit, first-party data is the antidote for creating exceptional user experiences in a cookieless world. For beauty brands, this can take the form of the aforementioned product recommendation tools, but valuable first-party insights can also be gleaned from customer touchpoints such as previous purchases, social media interactions, customer service data, and built-in chat and consultation tools. Customer engagement platforms such as Gorgias enable brands to mine data from social media and customer service to create personalized experiences and gain insights to inform things like product development and marketing messaging. Wissink said, “First-party data is crucial. Personalization needs to be gentle—using a contractual exchange of information with the customer to serve them in the moment.”
On the marketing front, the rise of retailer and marketplace advertising opportunities is a counter to the friction that’s been felt from the demise of cookies and the advent of privacy tools like those built into Apple’s iOS 14+. Building campaigns using first-party data from your retail partners or from first-party data aggregators like Criteo will help you to reach customers actively considering products similar to yours and allow you to grab their attention.
Other Things of Note
