NRF economist sees better days for retailers amid digital reinvention
The man from Cleveland strolled into a Manhattan shop hunting for two items: an overcoat and an overview. The first would shield him from the chill. The second would provide him even more intel on the state of American retail.
Jack Kleinhenz bagged both.
“I love the social interaction of the stores,” says Kleinhenz, chief economist for the National Retail Federation and principal of Kleinhenz & Associates, a financial consulting and wealth management firm based in Ohio. “It’s entertaining for me. Of course, that’s probably because of my job.
“I like to go in and just observe. On that visit, I tried on a coat and talked to some sales associates. I asked them how things are going, what’s new and how they’re doing.”
What he heard: They’re doing better.
Kleinhenz was in New York to attend NRF 2019: Retail’s Big Show. The industry’s annual, flagship event drew nearly 40,000 people to the Javits Center in January to see, sample and sell the latest retail goods and gadgetry.
In New York, Transform sat down with Kleinhenz to hear his views on the moods of both the sellers and the shoppers.
TRANSFORM: Heading into 2019, how hungry are consumers to spend their money in the stores and online?
JACK KLEINHENZ: The consumer is in a good place.
Financially, many households are in good shape. The ratio of monthly financial obligations to disposable income is still low, equal to what we saw 30 to 40 years ago, (according to the Federal Reserve Board). I think many people generally feel more secure – as far as their jobs and their balance sheets.
More broadly, we have some tailwinds going into 2019. We’re at near full employment. Wages have been increasing. Lower gas prices put more money into people’s hands to spend. And we’ve had some tax benefits, although it will be interesting to see what happens with tax refunds.
TRANSFORM: New tech is front and center at NRF 2019: Retail’s Big Show. Which of these technologies have the greatest ability to elevate the retail companies that embrace them?
KLEINHENZ: It’s a great question but it’s hard to measure right now. I am seeing some interesting applications, specifically of AI and robotics.
Among the retail startups here that are using these new technologies, I’d say 15 to 20 percent of these firms could potentially be very, very successful over time.
Just look at what they’re doing. They’re making it easier and more cost effective for the retailer – and they’re making it attractive for the consumer.
TRANSFORM: What does it say to you that so many companies are investing in digital reinvention?
KLEINHENZ: That we’re not standing still.
You know, I love this line from (former racing star) Mario Andretti: ‘If everything seems under control, you‘re not going fast enough.’ And if (standing still) is the case, I think those companies have to move and they have to move fast. They can’t stand on their laurels. They can’t continue to operate as they have been.
TRANSFORM: What predictions about the digital revolution in retail have not come true?
KLEINHENZ: A few years ago, people would say: ‘Well, e-commerce is going to take over.’
What have we seen? We’ve seen a lot of convergence between e-commerce and bricks-and-mortar stores. They’re learning how they can be more effective in attracting consumers by having a store presence.
Retail firms are thinking: ‘No matter where I get sales, no matter what channel I get sales, that’s where I’ve got to go. So I have to do multiple channels.’ You’re not going to lose the consumer’s interest in actually going to a store, picking up an item, seeing and using that item in person.”
TRANSFORM: When you shop, what technologies do you use?
KLEINHENZ: I’m a multi-channel user. I go online and look at specific stores.
For successful e-commerce companies, if they can get you to their website, you become more loyal to them. That’s how they’re going to be successful rather than just having a consumer type a certain product into their browser and then seeing what that browser tells them.
For retailers, it’s all about creating that loyalty and that relationship. For me, I am a loyal customer of a number of retailers. I will shop online. But I also go to the stores. In fact, last weekend, I spent all day Saturday shopping with my wife, looking for an overcoat. And I found a good fit at a good price – a good day.”
Top image: Participants fill the Javits Center at NRF 2019: Retail’s Big Show. (Getty Images)