By Craig Webb, President, Webb Analytics
LBM and hardware people were almost totally absent among the 40,000 people from 100+ countries who came to New York this week for the biggest trade show devoted to tech advances in the retail industry. But our industry has cash registers, too, and with a little creative thinking one could see how advances at the show could boost our industry’s revenues and profits.
Here are the headlines, with the details below:
It’s all about marginal growth.
Artificial Intelligence is a looming presence—but for most of us, still distant.
Electronic shelf labels get smarter and more colorful.
Software + cameras = Operational improvements, consumer insights
RFID is back
Good news! Gen Z customers like real stores, plus more consumer trends.
On the Margins
For all the adjectives devoted to describing the new products, truth is that nothing at NRF’s Big Show is a game-changer. But just about everything offered by the hundreds of exhibitors has the potential to bring incremental improvements. For instance, by using Planalytics weather-focused software to help sort out when and where seasonally sensitive goods are most needed, a major hardware distributor was able to increase its fill rate by one percentage point without having to shell out cash to stock additional goods. After all, going from a 5% to a 6% net margin seems small, but it’s a 20% boost in profits.
A.I. Mainly Benefits the Big
More than 125 Big Show exhibitors specifically touted artificial intelligence products, and dozens of educational sessions promoted A.I.’s promise. But A.I.’s value shrinks in proportion to a company’s size. Lowe’s uses A.I. to create three-dimensional digital twins of their stores, where they can create computer models to predict how a planogram change will affect sales, and how much those changes will be depending on the store’s location and customer mix.
For many LBM operations and hardware stores, the benefits they’ll see will come from how their buying co-ops and distributors are using A.I.,not how they use it themselves. But there are times A.I. can help. For instance, if you are a building material dealer that manages your own website, you’ve probably found it a challenge to write content and place images for every product in your online store. Artificial intelligence can help you create that content much faster than if you did it yourself.
Ironically, when this reporter mentioned his LBM focus to an official from a computer company pushing A.I. hard, the official said he loves hardware stores because of the people there—people who can identify your description of a broken thingamajig and tell you how to fix your problem. He gave the impression that a totally computerized, A.I.-dependent hardware store would be a sad place to shop.
ESLs Soon Will Become SOP
If your idea of electronic shelf labels are the tired-looking black-and-white tags at Best Buy, prepare to be surprised. ESLs are thinner, more interactive, longer-lasting, and far more colorful than ever. They also are likely to get cheaper, thanks in part to deals that distributors are negotiating now with some of the major manufacturers. It’s now believed they can pay for themselves in about 18 months.
ESLs relieve stores of the tiresome, time-consuming chore of printing new price tags and affixing those tags through the store—then repeating the process the next time the product’s price changes. And those changes are coming far faster today than in past years. The label can be loaded with more information than a usual tag, such as showing quantities on hand and on order, or providing product info to help close the sale.
ESLs taking up an entire shelf strip can display loads of information as well as provide animation that will attract eyes to the space. And bigger screens above or along side the shelves can complement the message. Several vendors said manufacturers increasingly are creating content for both the small and big ESLs. And dealers, in turn, will have the opportunity to sell space in their stores to particular manufacturers—power tool companies, for instance—who might in turn pay for all the ESL screens.
Tracking Products … and People
Big Show vendors touted several different ways store owners can keep track of how well their products are moving off the shelves. Fixed shelf-level cameras, robots, tracking devices, and security cameras all can be used to note when a product is missing, a planogram wasn’t set up properly, or a product is improperly priced. The object here is to reduce the number of missed sales opportunities.
Those cameras and similar devices also can watch your customers and your workers. Sales reps at several booths talked about “dwell time”—the number of seconds or minutes a customer spent looking at a product before either buying it or leaving the area. The same software also can tell managers which aisles are most frequented at particular times of the day, or whether there are crowds in one part of the store that make it harder for shoppers to buy.
Most vendors took care when discussing how well their software was at facial recognition. They would make positive references, such as being able to make a connection to a person spending time looking at a riding lawnmower outside the store and that same person’s face being spotted at the counter buying a lawnmower. That said, considering some of the software came from countries where facial recognition of potential bad characters is common, you could see privacy debates developing over how dealers would be allowed to use this equipment.
The Revival of RFID
Compared with A.i., radio frequency identification (RFID) is ancient. It also was viewed as expensive and thus of limited value for tracking goods. But advances in printing RFID tags are helping the product make a comeback, particularly given that you needn’t be super close to the tag in order to read its contents.
Companies like Walmart are said to be encouraging manufacturers to use RFID more often, and The Home Depot reportedly has examined it as well. The problem is that RFID chips are metal, so if they’re near other metal they can’t be read. That’s one reason why most of the RFID exhibits at the Big Show involved using the tags with clothes.
But that doesn’t mean RFID can’t work in our business. One vendor said he knows of garden centers where all the plant pots’ price tags have RFID chips. The garden center then does its inventory counts by having a drone fly above all the pots,
Two Consumer Trends with LBM Impliations
If you sell clothes at your stores, take note: Cities with a measurable population of people taking weight-loss drugs are seeing a rise in apparel sales, with fewer purchases of XL and XXL sizes and a corresponding increase in donations of those goods to thrift stores. Grocery stores in those same cities also are reporting declines in sales, presumably because the weight-loss drugs are curbing appetites. Keep this in mind next time you put in your orders for Dickies and Carhartt.
Consumer experts also say that Gen Z customers (the first generation of people born in this Millennium) also are more interested in going to a physical store than Millennials. They attribute this in part to how COVID kept them isolated for a couple of years, and thus in search today for ways to connect with other people and with products. “It’s about visual discovery,” an executive for Pinterest said. Thus, the future of the brick-and-mortar store may be more secure today than it has been in quite a while.