The DCPerform Podcast: ‘Tis the Season for Holiday Retail Shopping

EPISODE 5:

It’s the most wonderful time of the year for holiday shoppers, but how are retailers keeping up with holiday demands? Stream the holiday edition episode of the DCPerform Podcast with guest Jim Hull from Icertis.

We discuss how the next-generation has evolved the holiday retail shopping experience, returns season, and how retailers are responding. Happy Holidays from DCPerform!

Thanks for tuning in to the DCPerform Holiday Podcast!

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Episode Transcription:

Rachael and Wonil: Hello and welcome back to the DCPerform podcast episode number five I’m Rachael Weber and I’m Wonil Gregg and the holidays are among us. This is our holiday edition episode. Thank you for joining us. I mean, I can just feel it in the air. We’ve got cheer meister over here, full gear. We’re ready to rumble.

It’s the best time of year. This is when everything that you’ve done all year long, whether it’s professionally, personally or family wise, it all comes down to this time when you get to celebrate all the hard work time, the love that is with your families and your friends, and share it with the people who are the most meaningful to you. And today joining us, we have Jim Hull from Icertis, and he’s going to talk us through what the holidays are like from a retail industry perspective.

We’ll talk all the way from the sourcing of where the materials are purchased, through the logistics networks, through the financial reporting, ultimately to the end customer. And you’ve heard us say before that wow experience on Christmas morning when you open up those gifts. So thanks for tuning in and welcome back to the DCPerform podcast episode number five, Happy Holidays. Woo!

Rachael: We have Jim Hull here joining us today. So great to have you, Jim.

Jim: Great to be here. Thank you. Looking forward to it.

Rachael: Jim, do you want to give a little background about what you do for service, what it has to do with the retail industry and all that stuff?

Jim: Oh, you bet. So going all the way back, I was actually an officer in the Navy at some time in manufacturing leadership roles, then moved over into retail supply chain primarily and spent a bunch of time at Staples. CVS Health spent some time at Blue Yonder and most recently moved to a company called AI Service and AI Services. Essentially a contract intelligence platform, which allows companies to both digitize and then use artificial intelligence to find all of the stuff that’s hidden inside contracts, basically trying to understand which clauses are most deviated, which clauses are some of the biggest challenges with particular vendors or suppliers or customers.

Wonil: Jim You’ve said clause twice and you’re wearing a Santa Clause. Okay. So, you know, when I think about what you just described, it’s almost like instant replay for Santa Clause and the elves, right? They’ve got to get their manufacturing in. They’ve got to find their tier one, two, three providers. And, you know, right now all they’re trying to do is put the stuff together, get it in the bag, get it on the sleigh and get it delivered. Then you do your instant replay and you figure out how to you can do all those things better
with your vendors and providers. Let me just throw some numbers at you, Jim. I’d love to hear how you respond to this. NRF came out at that 166.3 million shoppers expected from Thanksgiving through to Black Friday and also Cyber Monday. And they also said that a large significant portion of those
surprisingly, were the next genners, that 18 to 28%. And that’s that’s something a little different. The perception is that they’re e-com shoppers. Right? And to have them show up in the stores at such large amounts, they estimate that as much as 60% of their shopping this year is going to be in stores.

Jim: Very interesting pivot that we’ve seen this year, that that whole gen-z component, they do have some disposable income now. They’re a little less price sensitive. The millennials were much more price sensitive. But it’s all about the social. It’s about a social experience where those Gen Z are actually
bringing back the mall. That target group most likely made their decision of what product they were going to buy already. And they actually just went to the retail location for the experience. They go into a store. The expectation for them is we’re going to buy.

Wonil: I know how much some of the corporate social responsibility programs like sustainability, diversity, those types of things are impacting that generation’s desire to by connecting that with a certain brand. What else are you seeing out there?

Jim: The Millennials, and then even more so, the Gen Z are very sensitive to a brand’s reputation in that space. They want to feel good about what they’re going to buy. And so a lot of that research has happened ahead of time, and they depend a lot on what they’re hearing from their friends. If you as a brand suddenly get a, you know, a black ball or a Gen Z, suddenly think that you’re not a good brand to buy, it will spread like wildfire. Flipside If you’ve got a really strong, really solid ESG play and you’re seen as a brand with a heart or a brand with a goal and making the right decisions, the younger generations will take their growing spending power and flock to those brands.

Wonil: Let’s talk about buying power and how something that doesn’t matter what generation you’re in, it impacts all of us. And that’s inflation and RF is recording that. They’re expecting up to a 8% increase in overall retail sales this year. Yet inflation is cruising at about 10%. So when you consider that and then the impact of that has that figure has on what has what has to be bought and inventories that are carried, it looks like inflation is eating up all the disposable income that people have. And essentially they’re going to be getting what they would have had the year before as far as dollar value that they’re spending more.

Jim: Part of the wrinkle in trying to figure out how people are going to spend money this year is experiences certainly are front and center, but you can put those experience around the purchase of stuff. But what we’re seeing is that the stuff that individuals are choosing to buy has shifted because now you’ve got that core inflation hitting you in terms of food and gas and stuff like that. The importance of where those dollars are going to be spent and really kind of selecting how I as a consumer is going to spend what my relatively tight dollars are as a retailer. You only get one swing at the back if you’re not resonating or you have the wrong stuff or you don’t have a solid experience built around that. So you might actually be challenged to get out of all that and enjoy this year without having to take drastic price cuts in an inflationary world.

Wonil: Something near and dear to your heart, Rachael – the wanting to get stuff for Christmas or go on memorable events and experiences, which way are you going?

Rachael: Definitely memorable events and experiences, hands down. Yeah, I there’s not a gift in the world that I would trade over time with my family and friends, you know? Nothing beats it. Jim: The New York Times actually did a study, the average age at which somebody has their first child over the last
year call it 20 or 25 years, has dramatically shifted as those kids happen later in people’s lives. It’s actually pushing out that buying of stuff around the holidays and making it much more around to exactly like you said, is, you know, a an experience.

Wonil: Now flipping back to the experience side, 28.6 billion spending expected for gift cards. And those gift cards break out between restaurants, department stores and bank issued. And they’re all like within two or 3% of each other, 27% to 25%. What do you think is driving that versus people going out and
getting stuff for people and knowing that a lot of stuff was acquired during the last couple of years?

Jim: So as folks ended up at home, they couldn’t get out. They weren’t getting those shopping experiences. And so a lot of folks did use online to kind of basically capture a lot of the things that they would have gone out and got already. And so now if you’re a gift giver, you know, picture yourself as a
parent or grandparent trying to think about what am I going to get for, you know, X person? I don’t even necessarily know what they already have now. And
so the fall back to a gift card is just a it’s now become an acceptable gift.

Wonil: So on the finance side of that, though, that must just wreak havoc for evaluating category level buyers, for being able to reconcile your books and being able to learn from previous comp sales if these purchases that are on cards are all delayed until whenever, how does that work?

Jim: In order to plan your holiday season, you have to look deep into January purchases to understand what you need for the following year, because January purchases driven by gift cards is going to be part of your holiday season. And some of it will even flash into February, which a lot of retailers are in this February to January cycle.

Wonil: So that dark closet in every retailer’s business, the returns world, the tolerance for returns was used to be no questions asked, that there is a shift going on in the marketplace. Are you aware of that?

Jim: I am, yes. You’re right on. Generally, there were companies who would say no questions asked, returned whatever you want to return. There are companies that are now starting to put these limits on how quickly you can return, how much you can turn will give you a credit not money, that companies
are going to have to dial it in and build a relationship with the customer so that you can now manage the returns in a way that is profitable for the company but meets the customer’s expectation and also comes back to the vendor agreement.

Wonil: So, I mean, I’m sure there’s there’s a amount of returns, tolerance from the vendors. What’s an acceptable amount of loss of inventory or margin because of returns? And I’m sure that landscape has changed as well.

Jim: Oh, absolutely. Yeah. The risk shift between the vendor and the retailer, especially on returns that are not sellable. But if you’ve got to repackage it or if it was worn and it basically has to go all the way back through the processing and recycling route, there’s massive costs there. When we deal with these contracts, what we’re starting to see is a lot of really intense focus on those type of clauses around who is going to carry how much of that risk between the two companies.

Rachael: It’s interesting, too, because from a customer experience perspective, I recently actually made a decision to buy a certain product from a large department store like Nordstrom. I decided to buy that product from there because I know their return policy is just so awesome. You can literally return something like two years later. But I, it was such a low-risk return policy rather than buying it from, directly from the brand. And it’s like I bought a running shoe and I was like, Well, what if something goes wrong with it? You know, something falls off. I immediately decided I’ll just buy it from Nordstrom because they’ve got my back no matter what, and I can make that return, I probably won’t return it. But I just felt like a safer decision buying there as opposed to going directly to the retailer.

Wonil: Rachael’s preparing for a marathon, so when she says that something might fall off her shoes, it usually means someone carrying some stuff to make it harder.

Jim: But it’s a great observation. I mean, Nordstrom brand and they are at a level in customers minds where it’s like you’ve got their back, they will help you shop, they will help you find, yes, they charge the premium. But for certain customers, that premium is well worth it because you know that that is a safe purchase. And when you go in that story, there’s going to be somebody there to help you.

Rachael: So what kinds of technologies are giving brands or providing brands greater visibility to, I guess, pre holiday experience, post holiday experience going into the next year? What kind of technologies are we looking at?

Wonil: Jim, I’ll let you and your blue yonder stuff kick in here… go for it.

Jim: Three things because there’s always three things as you ever learn at Harvard Business School. The first is I’m going to just say retail media networks that that has just taken its own life and is now getting more and more and more ingrained in every retailer that’s out there. And this is essentially the ability to capture data about why and how a customer is making a decision and then monetize that data in a bunch of different ways. Second is the data that sits behind that. So now you think about the data capture. There are literally hundreds of data points being selected. Every time you go in and make a purchase, every one of those data points tells that company a little bit something about you. And so now the third biggest technology is artificial intelligence. And so you think about the different artificial intelligence engines
that are out there that can now take this ubiquitous data, pull it all together and start to make decisions out of it.

Wonil: You’re starting to see things like not only micro targeted marketing, but individualized, personalized marketing in the moment, next year’s not that far around the corner. And there’s already so many things happening at a macro level that could affect holidays a year from now. What do you see on the horizon? What are retailers, top retailers talking about that starting to impact their buying thoughts in February, March, next year?

Jim: I wish I had the crystal ball because I would be a very rich man and probably next year working all day. Companies are still trying to get their global supply chains in order. Guaranteed. There are companies out there who are thinking about whether the massive offshoring that was done was the right
choice. Now, in this new world of highly potential for high disruption in the global supply chain, so there’s probably some on shoring or near shoring conversations that are happening. This is just Jim’s, you know, two cents. But I think we will see a negotiated end to the Ukraine war sometime over the course of 2023, knock on wood. So that’ll help to normalize and stabilize some of the European supply chain. But that said, there’s going to be something else. There always is something else. Companies are less willing to put really big risk, risk at the majority of their part out there that we as a company are a little bit more protected. And we’ve got that resiliency and stability while also making sure that we are following our ESG commitments.

Rachael: We’ve been talking all about this holiday stuff, so why don’t we share a little bit of experiences about our own retail shopping experiences during the holidays? Wonil, do you have any notable experiences that you can share?

Wonil: I haven’t started yet, but it it’s fair to say that from previous years, you know, I’m more of a in store. I like to, you know, have the experience of being in store, sharing it with my son or my daughter or my wife or the family and, you know, making a day of it. And then typically I go like the day before or two days before and do my secrets secret stuff. And then it’s a mad scramble for wrapping and getting it out there.

Rachael: So now I’m just putting this together. I seriously only do gifts that are an experience. My dad is a huge wine person. He loves going wine tasting. So what I did is I put together a surprise like blind wine tasting and I had everybody guest and I created little cards, you know, it was fun. So it was something fun we could do on Christmas Day with the whole family.

Jim: We’re in a very similar place where, you know, if you go back to last year, the big gift was we lucked out. We had none of us had ever been to Scotland. And so we were able to put together a trip to Scotland. We will have memory, we have pictures, we have memories, we have, you know, videos and all
of that. And, you know, inside jokes that as we get together this coming Christmas, it will all just be sharing those experiences. And, you know, maybe we’ll gift a board game or maybe we’ll gift, you know, a particular kitchen, something that one of my daughters mentioned. But it’s going to be embedded
around some experience that we’re looking forward to sharing with them. So it is the trend we see. Macro is playing out very micro as well.

Rachael: Great stuff. Well, Jim, thank you so much for joining us. Oh, this is a my pleasure. We had this was a lot of fun, a lot of holiday cheer going. I know I’m Scrooge over here in my dark color, but we’ve got the two cheer meisters here. So I appreciate you guys holding down the holiday spirit very much.

Jim: No, this is great. I appreciate it and look forward to chatting with you guys more and wish everybody a great holiday season and looking forward to 2023.