Looking Ahead to Holiday 2022 with Salesforce's Rob Garf

This episode of the RETHINK Retail Podcast was recorded on August, 22 2022. 

In this episode, RETHINK Retail Co-Founder and Managing Director Paul Lewis welcomes Rob Garf, Vice President and General Manager for Retail at Salesforce, to the show to discuss what’s in store for Holiday 2022.

During their conversation, Rob shares insights from Salesforce’s recently released 2022 Holiday Predictions and Holiday Planning Guide for retailers. Hear why retailers that have brick-and-mortar locations are going to grow at a 1.5x higher rate than those without, why retailers are caught playing discount chicken, and why Rob believes “margin will be the Grinch that Stole Christmas.”

About the guest: With more than 25 years of global retail experience as practitioner, industry analyst, strategy consultant, and software leader, Rob Garf is no stranger to the industry and the challenges retailers face.

He currently leads retail strategy, product, and insights—and advises senior executives globally on digital transformation. Rob is also a frequent industry speaker, a member of NRF’s Digital Council, and Chair of the Retail Customer Advisory Board.

Read Salesforce’s 2022 Holiday Predictions Report: https://www.salesforce.com/blog/holiday-shopping-predictions/

Read Salesforce’s Holiday Planning Guide: https://www.salesforce.com/resources/retail/holiday-readiness/

 

TRANSCRIPTION

Paul Lewis:
Hello, and welcome to another episode of the RETHINK Retail Podcast. I’m your host, Paul Lewis, and I’m pleased to welcome Rob Garf to our show today. Rob is the Vice President and General Manager for Retail at Salesforce, with more than 25 years of global retail experience as a practitioner, industry analyst, strategy consultant, and software leader. He’s no stranger to this industry and the challenges that retailers face. He currently leads retail strategy, product, and insights and advises senior executives globally on digital transformation. Rob is also a frequent industry speaker, a member of NRF’s Digital Council, and chair of the Retail Customer Advisory Board. Welcome to the show, Rob.

Rob Garf:
Hey, thanks for having me, Paul.

Paul Lewis:
So recently Salesforce released its 2022 Holiday Predictions and its Holiday Planning Guide for retailers, which for those of you listening, we will link both pieces to this episode in the description. But Rob, can you set us up a little bit sharing what your team uncovered and how you went about getting this pulled together for everyone?

Rob Garf:
Yeah, absolutely. I guess it’s worth just giving a little bit of background on how we get the data and the insights. As you mentioned, I oversee a team of essentially industry analysts. We stay out in the market understanding where the industry is going. That allows us to not only guide our product and solution strategy but have really interesting conversations at the board level with our retail customers. And we do that primarily based on our Shopping Index. Our Shopping Index bubbles up all the data that flows through our platform. Obviously, we strip out all PII data, but in aggregate with billions and billions of shoppers on a quarterly basis, it essentially becomes the de facto standard of what’s happening in digital, and we use that each year. And gosh, we’ve been doing this at least the last five years, if not longer, to publish our Holiday Predictions. And that’s why I think we’re going to be talking about today.

Paul Lewis:
Awesome. Well, thanks for giving us that background. And let’s start with something positive. I think we could all use some good news about this time in the year. So how is holiday looking for 2022 for brick-and-mortar, and what are you seeing in terms of hybrid rates and what happened last year? What are you seeing out there in the market?

Rob Garf:
Yeah. One of our predictions actually, Paul, is that those retailers that have brick-and-mortar locations are going to grow at 1.5 times higher rate than those without. And a lot of that is driven by the fact that demand is not only generated but also fulfilled by the physical store. We’re all familiar with that famous Forrester stat about how much the store sales are influenced by digital. We looked at it the other way around and looked at, especially, with not only valuable locations and inventory setting within those locations, but the store associate and the changing role of the store associate, they are having such an amazing impact on digital. So it’s not looking at just digital, not just looking at physical, but really weaving them together and understanding the enterprise sales, impact, and performance for the holiday.

Paul Lewis:
Yeah. I think that’s really important that you’re looking at how the things work as a whole, right? From a engineering standpoint, we want to look at things in isolation, but everything is actually this much more fluid relationship. And so looking at how physical is impacting digital and vice versa, that complete loop is really important.

Rob Garf:
Yeah. In fact, our research shows that 60% of digital sales are now influenced by the store. So, of course, throughout the pandemic, there was the headline after a headline about the store is dead and digital is taking over and we’ve accelerated 10, 20, 30 years. And certainly, don’t get me wrong, we saw a COVID bump in digital, for sure. We are seeing a leveling-off, but that doesn’t mean digital is going away either, right? It’s really as you just mentioned Paul, this blend of both, and really breaking down the friction in the shopping experience.Loyalty was really redefined during the pandemic, really focused on health, safety, convenience, and trust. And to me, the common denominator there is removing friction from the shopping process. And we’re not waking up now as we come out of the pandemic as shopper saying, gosh, I want to have that clunky shopping experience again, right? And in order to get there, you do need to get to this hybrid or this blend approach as we’re talking about here.

Paul Lewis:
Yeah. I think that that’s so spot on. For myself personally, grocery always lagged behind moving into the 21st century. And once I got used to having someone else do my grocery shopping, I won’t be going back to walking down the aisles at the grocery store. Well, certainly not with the same frequency that I did before because most of it is now done for me and I pick up curbside or have it delivered. So I think you’re seeing a lot of habits that happened during COVID are now people want… They want to go back into stores, but they want that high quality and convenience.

Rob Garf:
That’s right. And it’s not going to snap back, this behavior as you just described, like a rubber band. We’re going to hold onto, in many cases, this new shopping behavior. What we saw really fueled this digital growth in 2020 based on our Shopping Index, Paul, we saw a 40% increase in net new digital shoppers. So these are people that were obviously… They were hanging out online, they were hanging out with social and their friends and family. They were sending email, they were doing research and discovery online, but they weren’t clicking the buy button, but we saw a huge surge in that. And those people and others as well were shopping in a whole new categories.You brought up grocery, the food and beverage category grew according to our Shopping Index, triple digits. I’m actually talking to one of the leading grocery retailers later today and we’re going to talk about, again, that their stores are still so important, whether it’s because you want to go back in and touch and feel the fruit and make sure it’s fresh, or you want to make sure that you can get the products in and around the store that you might create a shopping list for at home. But again, it’s this blended shopping experience that will ultimately help remove the friction between research and discovery, and then ultimately buying.

Paul Lewis:
And let’s flip things for a second too though. I mean, I think another thing that’s on everyone’s mind is inflation, right? It’s the worst it’s been in four decades. Are you seeing any new consumer trends come up and how do you see that potentially impacting the holiday season?

Rob Garf:
Yeah, of course, that’s going to have a big impact on the holiday season as it has for the last six or so quarters. We’ve been tracking in our Shopping Index, the average selling price, and that’s progressively going up. Our predictions show that it’s going to go up another 10% on average over the course of the next several months. I guess inflation is the easy way to talk about it, but there’s so much more when you unwrap it, Paul. And I know you’re talking to retailers all day long and you see this, but it’s obviously the cost of doing business or the cost of goods sold are off the charts in terms of labor, supply chain, manufacturing, and sources of raw materials. But you also, of course, have this glut of inventory in many cases as well.The bullwhip effect if you will, we saw spikes and demand at certain categories. Retailers tried to chase that demand, that product got stuck in the Port of LA. And by the time it got in through the domestic supply chain, we already missed the window of that demand. So that’s a long way of saying inflation, but when you unpack it, a lot of other variables are impacting. What we’re seeing is again, over the course of the last six quarters, a progressive increase in average selling price. What that means because people’s salary and income are not increasing at the same rate and their discretionary spend is not increasing either is that they’re buying fewer products, fewer items at fewer retailers. And so we’re seeing that in our data, in terms of average selling price go up, order or number of products within an order or basket are decreasing, which definitely puts pressure on retailers to not only look at their top line. But we’re really concerned this holiday season, Paul, that margin will likely be the Grinch that Steals Christmas.

Paul Lewis:
Yeah. I know that in our discussions with retailers, and one of the reasons that I think that they’re looking for information and insights from you and from us and others, is that they’re faced with just so much change right now. We call it a kind of this quadruple stack wave of economic, cultural, supply, and technology. All of these things are changing at faster than ever rate, 40 year high in inflationary numbers and things like this that they’re getting caught in. And so being nimble and being able to have insights and predictions as to where things are going is critical for the savvy retailers who are trying to plan their strategies.

Rob Garf:
Yeah, by the way, I love that phrase. I’m going to borrow that if that’s okay. I’ll just give you all the credit in the world. But I love that convergence you’re talking about. What I’m seeing and part of our predictions is around the earlier start to the holiday season. This has been a dream for retailers since the beginning time, or at least the last couple of decades I’ve been tracking this space. And I’m a little worried that we’re going to chase the discount too early and too often. You saw it around Prime Day this summer, certainly the halo effect of the demand that was created for anybody not named Amazon, there was a lot of discounting happening. And what I’m concerned with this convergence of factors that you just described, and I’m not going to do it justice just yet, is that retailers are going to really play what we’ve been calling discount chicken.And that’s the idea that retailers go into each holiday season with a really well-thought-out promotional calendar. Of course, this year it’s earlier and earlier than it’s ever have been before. And then what happens typically is after the first weekend, the retailers in their Monday morning merchandise meeting rip up that plan and call an audible and try to chase the discount and chase the demand and try to drum up the demand earlier and earlier. The problem is, consumers have become conditioned to this and wait until Black Friday or Cyber Monday for that last and final and biggest deal.Last year, it’s important to point out, that didn’t happen. I think actually retailers won for the first time, the game of discount chicken because the products just weren’t there and they weren’t discounted, they weren’t compelled, they didn’t need to discount. However, we’re worried the cycle is going to come back to where it’s been for decades, with retailers really looking to discount. So we’re really talking as you talked about the insights, the ability to be agile with our customers to understand how you can drum up demand without necessarily eating into that margin too early and too often.

Paul Lewis:
Yeah. And I think that’s a good segue into one of the questions I wanted to ask you, which is in your report you mentioned that 51% of consumers are going to most likely purchase less holiday gifts than last year. I’d love to know your thoughts on the impact of that and then how do retailers prepare for potentially reduced consumer spending at that time and how do they maintain loyalty?

Rob Garf:
Yeah. Well, there’s a lot there, but well, I’ll say there’s an ebb and flow to the demand in certain categories, so it’s hard to say like blanket statements around demand for the industry. But as you start to unpack it, as we look at our data, there has been a shift. Through the pandemic we spend a lot of time at home, so furniture, home appliances, consumer electronics, really surge. Outdoor, actually from an apparel perspective, did really well because we’re outside trying to get some exercise, get away from our screens for a little while. As we see a shift getting back in the world and we see hopefully the light at the end of the COVID tunnel, people want to get out in the world again, right? And so that means travel, entertainment, dining. And so gift giving is going to be experiential to a large degree. And then what gifts go along with that and help really accentuate that experience.Luggage and handbags according to our Q2 Shopping Index did really, really well. Outdoor and active footwear did really, really well. Some of those that are waning in terms of categories are toys, electronics, home appliances. And again, we’ll see the bullwhip effect. I’m a little concerned that many buyers over bought around the demand about a year ago and we’re seeing a little bit of leveling-off in those categories.So in terms of loyalty, we do predict that about half of consumers are going to switch a retailer brand this holiday season because they’re seeking value, which in many cases is code for a better price. So I’ve been talking to retailers around the world about just what loyalty means and how to garner that. Especially, as cookies go away, marketing becomes more expensive, how do you harness your first-party data, how do you activate that data, operationalize it if you will, and really provide the right message? Which might not be a discount, it might be a personalized product or message. It might be leaning into sustainability, which is a big topic for many consumers, especially younger generations. And finding that emotional connection to really find the value, meaning show the value to the consumers as to why to stay with that retailer brand.

Paul Lewis:
Yeah. Cultural, we see it as one of the big waves that are out there. And it is that new way that consumers are looking at the environment and even, again, the behavioral trends. I learned something when you said people were buying the athleisure to go work out. I just wore sweatpants because I could. But good to know I could have been doing more working out.I think this has been really insightful. I always enjoy looking through the reports, the information that Salesforce and you and your team put together. I think there’s a lot of really great information for retailers. And again, we encourage people, we’ll have the links so that you can go download those. But if people want more information, is there a way that they can get in touch with you? Or is there other areas on Salesforce that might have information helpful for retailers?

Rob Garf:
Yeah, absolutely. Thank you for calling that out. I’d encourage everybody to check out… In addition to links, you’re going to send our Shopping Index. It’s a quarterly basis of what’s really happening in digital. You can slice and dice it by geography, by vertical, by device. The probably easiest way, as we all do, just type in Salesforce Shopping Index and it’ll come right up.I’d love for anybody to follow me. I’m certainly continually providing my point of view on the industry, backed up by data on Twitter. So RetailRobGarf, you can check it out. And I try to update my LinkedIn at least once a week, Rob Garf at LinkedIn with the latest insights and perspective and stories. And also, by the way, just really interesting people I get to meet with throughout the course of the week, generally on the road or the last couple of years have been connecting with friends in the industry virtually. And I always learn from them, I’m always or generally inspired by what they have to say, and I like to share that with the rest of the retail community.

Paul Lewis:
That’s great, Rob, I really appreciate that. And we’ve enjoyed having you on the show today. Thanks for coming on.

Rob Garf:
Thanks for having me. I really appreciate you allowing us to bring this data and insights to life. Thanks so much, Paul.

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