Large group of cheerful business people with a trophy in the office.
It is that time of the year again. It is time to raise a glass to the best of the best from the world of retail as 2021 comes to a close.
This past year was a strange year to say the least. It felt like nearly every headline was dominated by either COVID, supply chain issues, labor shortages, or some combination of all three. Yet, the year still gave us many notable moments and achievements, many of which still signal a much brighter retail future ahead.
So, without further ado, here are this year’s 2021 Retail Award winners:
Retailer of the Year – Kroger
Of all the awards on this list, this one was probably the most difficult to hand out. Many retailers had absolute banner years, especially when looking at their financial performances and stock returns year-over-year. Any number of players – from Target, to Nike, to Albertsons, heck, even to Crocs – could have made this list.
But the one retailer that stood out above all the rest this year?
Kroger.
Financially, Kroger’s stock price was trading at roughly $30 per share one year ago and now sits at just under $45 per share. Moreover, the company now expects the two-year annual comp stack at the end of its fiscal 2021 to finish out somewhere between 13% and 14%.
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While all these results were fantastic, there is still one other huge reason Kroger rose to the top this year, and it can all be summed up with one word.
And that word is guts.
Kroger had the guts to go into, not one, but two marketplaces without stores.
This past year Kroger unveiled plans to open up “store-less” (my quotes) e-commerce operations in both Florida and New York, leveraging state of the art warehouse automation by way of its partnership with Ocado. All of which is an impressive feat considering that the Kroger/Ocado partnership is barely three years old because three years is generally the time it takes most retailers just to have a meeting about doing something innovative, unless of course a pandemic is involved.
Meanwhile, retailers like Walmart continued to talk up investments in automation at the start of 2021 only to unveil in September that it planned to use Instacart to attack the very same New York market instead.
Talk is cheap, and therefore this year’s award goes to the retailer that had the temerity to make a move, to stand by the decision, and to put an idea into market in a novel way that will likely pay dividends over time.
CEO of the Year – Nike CEO John Donahoe
While a retailer, Nike’s business has always been more about wholesale. It consistently has had to rely on selling its products through other retailers’ stores. As a result, if one had made a list of all the companies that could have been more adversely impacted by the pandemic relative to others, Nike likely would have been on that list.
But that didn’t turn out to be the case at all because John Donahue, since his tenure began in January 2020, has carried the torch of doing what it takes to become a good omnichannel retailer.
Good omnichannel retailing isn’t sexy. As Sam’s Club CTO Vinod Bidarkoppa once said, “you often know it when you can’t see it.” And that is because it is oftentimes more about blocking and tackling to remove friction than it is about the latest tech for tech’s sake.
Nike is best-in-class in its omnichannel approach. Its mobile app is the tops, and this year Donahoe also saw another point of potential customer friction, Nike’s wholesale network, and made a point to shed the relationships it no longer needs in favor of the ones that it does.
Case in point – at the close of the year, Nike ended its relationship with DSW and then also augmented its omnichannel approach with Dick’s Sporting Goods by linking the two companies’ loyalty programs together.
Despite Nike’s motto, Nike doesn’t do anything to “Just Do It.’ It is smart, calculated, and willing to do the unsexy work to be successful, which, final point, is also why the recent acquisition of the NFT collectives studio RTFKT should be taken seriously.
As techy as the word “NFT” sounds, the fact that Nike is doing it means that it is not just tech for tech’s sake and that it is also likely another arrow in John Donahoe’s omnichannel quiver that could pay off years down the road, especially considering that there are probably many of his contemporary retail CEOs who think “NFT” is actually an acronym for a 1990s boy band.
Retailer Most Likely to Struggle in 2022 – Instacart
While there were almost too many worthy candidates for retailer of the year, there was one retailer that clearly stood out, not head and shoulders above, but knees to ankles below the rest heading into 2022.
And that was Instacart.
After being gifted 2020 on a silver platter, Instacart appears to be on the verge of 20 years from now everyone looking back and saying, “Gosh, remember during the pandemic, when it hit the fan, and we all had to use that one company to get our groceries? What was its name? Webvan?”
Internally, things at Instacart are already starting to smell to the high heavens as multiple high profile executives have begun defecting from the company faster than a Gopuff delivery.
Strategically, the company can’t decide what it wants to be when it grows up, offering retailers everything from warehousing and curbside pickup as a service to making quite possibly what could one be one of the worst retail acquisitions of the last 10 years when it got into smart carts, aka the dashboard GPS to Amazon Go’s iPhone.
Not to mention the fact that competitively its core service (i.e. same day delivery) is also on the verge of being white labeled right out of what little profit it does have by way of same day delivery orchestration software that is now gaining traction in every segment of retail, from grocery to apparel, let alone all the players trying to muscle it out of the instant delivery market and all the retailers trying to take back control of their operations and front-facing customer relationships.
Say what one will but the whole situation reminds me of that old SNL sketch where Chevy Chase is a pitch man trying to sell a floor wax that doubles as a dessert topping.
As tantalizing as it can be to believe that high valuations and funding rounds give one the license or the leeway to venture into new territories by virtue of deep pockets, it is next to impossible to be everything to everyone.
And, especially when all the parts that make up that “everything” also seem like they are at risk of being done better, faster, and cheaper by someone else in the long-run.
Headline of the Year – Amazon Opens a Full Scale “Just Walk Out” Grocery Store
This award wasn’t even close. If there was one earth shattering headline from the past year, it was that Amazon, in just three years since it first debuted its “Just Walk Out” technology, made that technology ready for primetime.
This past June Amazon opened up its first full-scale grocery checkout-free shopping experience in Bellevue, Washington, meaning Amazon customers, at what is a 25,000 square foot grocery experience, can now shop whatever they want – from fresh meat and produce to macaroni and bananas – without ever having to stand in line to pay ever again.
All it takes is scanning a QR code in the Amazon app, sliding a credit card, or waving your palm to enter the store, and, voila, the traditional grocery shopping experience that everyone has known and loved since Piggly Wiggly first introduced it in 1916 suddenly has become a thing of the past (for a video of how Amazon’s palm payment system works, see below).
Don’t look now but Amazon also just closed out the year by announcing its first-ever 40,000 square foot “Just Walk Out” grocery store, which, if you are keeping score at home, means that Amazon can now deploy its technology in a retail operation nearly 13 times the size of its next closest retail competitors, who are all just pushing the envelope on 3,000 square feet right now.
To further drive this point home, Amazon now has over 30 “Just Walk Out” stores in operation. No major U.S.-based retailer has built even one of the same size and scale of even the most diminutive of Amazon’s efforts, Amazon Go, to date.
Will 2021 be the next 1916?
It sure as hell could be.
Headline of the Year that Deserved More Attention than It Received – Popshelf
Dollar General is a force to be reckoned with. While currently ranked 16th on NRF’s Top 100 U.S. Retailer rankings by sales volume, one could fully expect Dollar General to crack the Top 10 by 2030.
One reason being is its new concept store, Popshelf.
Popshelf is totally in keeping with the ethos of Dollar General. Its product line features home decor, seasonal goods, and health and beauty items, with the majority of its products priced below $5. Essentially, it is Dollar General’s play to attack Walmart and Target’s margin base, much in the same way that it has with its traditional dollar store concept for years.
And Dollar General plans to build a veritable sh*tload of them, roughly 1,000 of them, by 2025.
According to Dollar General’s Q1 2021 earnings call, the gross margin performance across the eight Popshelf stores that opened between October 2020 and March 2021 was 40%, almost eight percentage points higher than what a traditional Dollar General generates. Moreover, the annualized volume across these same stores ranged from $1.7 million to $2.0 million per store, a figure that dwarfs the $1.4 million a typical Dollar General stores sees in its first year of operation.
Now, with all that said, let’s get back to the heart of why this headline is underreported.
Because even at a fraction of the early stores’ run rates, say $1.0 million in annualized sales, the impact of 1,000 of these stores would equate to $1.0 billion in additional revenue.
But who is to say that Dollar General will also stop there?
Dollar General operates damn near 20,000 stores. If this concept works at a $5 price target, there is nothing to say that it could not also be rolled out to many more locations as either an additive standalone storefront or as a concept within existing Dollar General stores themselves.
A billion dollar idea is the least Popshelf stands to be when it is all grown up, and that statement in and of itself is impressive.
Retail Technology of the Year – Computer Vision
Computer vision, the underlying technology that powers Amazon’s “Just Walk Out” platform, won this award in 2019 and 2020, so at this point it may as well just be called the “Technology of the Century” based on the likely substantive impact it will have on retail overall.
Computer vision can make shopping experiences checkout-free, have a significant impact on theft, improve inventory accuracy on shelf, monitor pricing on shelf, assist with quality assurance on a website, be used as a visual search tool to aid consumers in finding an item when they don’t know the words to describe it, and the list could go on and on . . . and on . . . and on.
When you roll all these potential value streams together, it just gets too hard to make a case in favor of anything else.
Most Overhyped Technology of the Year — Digital Marketplaces
Every retailer and its brother wants to build a digital marketplace. Walmart has one, J Crew has one, Giant Food has one, and, heck, even Macy’s wants one.
All of which calls to mind one simple question – if marketplaces are so easy to do and everyone can do them, what’s to differentiate one from the other in the long-run?
The answer is simple.
Nothing.
The digital landscape is already crowded with its share of marketplaces, like Amazon and eBay, which offer far more than most traditional brick-and-mortar retailers ever could (which should tell you something on its own). Therefore, unless you are a Walmart, a Target, or maybe even a Hy-Vee or a Kroger (and that too could even be a stretch) where your customer has a predilection to look to you as a one-stop shop, the chances of you gaining anything strategically from a marketplace initiative are few and far between.
The money it takes to stand up a marketplace would be far better served being put towards something that is more differentiating in the long-run, like, for example, computer vision tech, RFID for improved ship from store and BOPIS accuracy, or even in building up one’s own retail media network.
Best New Partnership of the Year – Starbucks and Amazon
This one was another easy pick. The newly announced Starbucks pickup-only store paired alongside an Amazon Go is a match made in heaven for a number of reasons.
First, an Amazon Go-style convenience setup wrapped around a Starbucks pickup-only operation significantly broadens the assortment choices available to traditional Starbucks goers who want to work, study, or just hang out. Instead of being forced to nosh on something from under the traditional Starbucks glass hood, now Starbucks customers can have the option of everything from standard convenience store wares, like pops, chips, and candy, to even local items, like those from Magnolia bakery that debuted in the first New York City store.
Second, it gives Amazon Go an instant traffic hook. Getting one’s daily Starbucks is still just about one of the most bankable retail trip drivers out there, whereas Amazon Go is still just a nascent experience for many.
Third, unlike so much Amazon undertakes in scaling its tech platforms, with this partnership there is virtually no threat of Amazon disintermediating the other party. As a result, this situation does not present near the same peril, for example, that Sainsbury’s or OTG Group face in licensing Amazon’s “Just Walk Out” tech for their grocery and airport convenience operations. As stated above, Amazon is clearly going after the grocery business with Amazon Fresh, and now, with this announcement, it clearly has their eyes on convenience, too.
Starbucks, however, is in a different position and therein lies the beauty of the partnership – Amazon can’t just go out and do Starbucks.
Starbucks is chemically ingrained in consumers from a product-first standpoint. It would be tough for Amazon to crack the code on that. And, for Starbucks, the whole idea of putting a coffee shop inside of a much larger retail operation is something it has been doing for decades, so in many ways the whole concept feels like a natural extension of what Starbucks already does.
All of which also paves the way for Starbucks to become a centerpiece of full-scale Amazon Fresh stores as they roll out down the road in the years ahead as well.
Best Strategy Move from a Struggling Retailer — Kohl’s Sephora Partnership
Normally a perennial annual review punching bag, this year Kohl’s did something that deserves a ton of recognition.
Kohl’s move to pick up Sephora on the doorstep of JCP’s ineptitude was pure genius.
Near the start of this year, Kohl’s and Sephora announced plans to put roughly 200 Sephora shop-in-shops within Kohl’s stores by the Fall of 2021 and to deploy 850 in total by 2023.
The strategy behind the idea and the early results look to be paying off as well.
From a strategy perspective, the idea is a no brainer. It gives Kohl’s another one-stop shop hook similar to what Target is attempting with Ulta, with products and brands from a prestigious partner that one cannot find anywhere else and whose purchase process is relatively more immune to the siren song of e-commerce.
But, more importantly, since the introduction of the concept into Kohl’s stores, the idea could also generate some serious traffic in the long-run. According to an analysis by Placer.ai of the first four Kohl’s stores to receive a Sephora this past summer, the results could not be better.
Traffic-wise they appear to be outpacing the chain by as much as 30% in some weeks, customers are staying inside of the Sephora stores longer, and they also appear to be pulling customers from a wider trade area.
Now, granted, four stores is a small sample size, but if the traffic numbers play out at even a fraction of this early level, then that is a heck a lot of dry powder still left in Kohl’s keg as it looks to take the concept from 200 stores to 850 stores over the next two years.
