Matt Shay- President and CEO at National Retail Federation and John Furner- President & CEO, Walmart US
Innovate for Impact
On October 15th, the landmark Baker Retailing Center’s and RLC Global Forum’s 2024 CEO Summit was held at New York City’s iconic Rainbow Room. Captivating, distinguished speakers from myriad areas of the retail sector and academia regaled the audience with thought-provoking discussions of the state of retail today.
The talks ranged far and wide: how Walmart is balancing value-driven promotions with premium experiences; sustainability in the fashion world; how AI is transforming retail in terms of creativity and efficiency; the rise and effects of shareholder activism; the boom in corporate partnerships in women’s sports; the potential effects on retail of the presidential candidates’ proposed budget models; and much more.
The State of Retail: Adapting to a New Consumer Reality
The CEO Summit kicked off with an incisive overview of the state of retail today. Matt Shay, President and CEO of the National Retail Federation, interviewed John Furner, President and CEO of Walmart US. Furner leads more than 1.5 million associates and is responsible for the strategic direction and performance of Walmart’s 4,700 stores as well as its website, app, and supply chain.
Furner talked about how he handles business challenges, stating that Walmart’s guiding principle is to help people save money and live better. “We have an assortment of goods that we pay a fair price for. We should charge a fair price for those and then we should earn a fair margin, which includes investing in our associates and investing in customers all along the way. So issue by issue, that’s the filter through which I always step back and say, ‘Is this issue going to help us do those things?’”
Furner emphasized that in our society today, information spreads much more quickly than in the past. As a result, the retail industry needs to be ready for anything. “Events can disrupt you much quicker than they used to,” he said, referring to the early October port strike as an example. “The ports stopped working on a Monday night and by Wednesday we were hearing reports of panic buying in Seattle and the West coast.” Complicating things further were the two Fall hurricanes in the southern part of the U.S. He described Walmart’s assistance with relief efforts such as flying in prescriptions, baby formula, and snack foods via drones.
Shay asked Furner to describe the state of the American consumer today as we approach the holiday season. “Customers have changed the way they find inspiration,” Furner observed. “How do you get to become culturally relevant and meet consumers where they are?” He talked about the continual search for influencers and storytellers that can get products in front of consumers in a compelling way.
He also expressed an overall positive outlook for retail. “There’s still a lot of money out there; the market’s still growing. This is a huge retail economy. [It’s true that] costs have grown, but there’s still a large employment number and that’s really helping.”
Rethinking Fashion’s Footprint: Inside the Battle for Sustainability
Award-winning journalist Dana Thomas was interviewed by Teri Agins, author and former Wall Street Journal columnist. Thomas has authored several bestselling books including Fashionopolis: The Price of Fast Fashion and the Future of Clothes.
Thomas brought to light some eye-opening facts about the fashion industry. She said that the overproduction problem is linked to poor labor costs: 98% of the fashion supply chain is paid only about half of a living wage.
In addition to the poverty issue, she said, “you can’t have infinite growth in a finite [world]… We’re going to run out of resources, not just in fashion, but in everything. Overproduction is sucking resources out of the planet.”
She described the waste problem as well, saying the average garment is worn only seven times before it’s thrown away. In China, it’s only three times. “We’re just burning through clothes.” Gigantic clothing landfills continue to spread in countries in South America and Africa. And although there is a widespread belief that Gen Z’ers are concerned about sustainability, their clothing buying habits do not reflect this to date.
Will manufacturers stop producing as much inexpensive and non-sustainable clothing as they do? Thomas is doubtful, believing that changes to the law hold more promise. She pointed out that in many industries including agriculture, food, banking, and automotive, there are government regulations preventing harm to consumers, yet there’s nothing comparable in the clothing industry.
She talked about pending legislation in California and New York that may rein in the fast fashion trend and make manufacturers and brands more responsible for the clothing they potentially are putting into the waste stream. Similar laws already exist in the EU as a precedent, she said. She said changes like this could arrive in the U.S. as early as 2030.
For individual consumers today, Thomas advises the three R’s: repair, recycle, and rent. Another rule of thumb: “If it costs more to dry clean it than you paid for it, you probably shouldn’t have bought it” because you’ll probably throw it away instead of cleaning it.
Thomas shared that she’s kept some old Levi’s from the 1980s and that her daughter likes to wear them. When people are surprised Thomas kept them so long, she responds, “They were really good jeans and they’re in great condition. My daughter wears them and looks fantastic.”
“They’re the original ‘Mom jeans,’” she joked.
AI: Transforming Retail Through Creativity and Efficiency
What are the effects of AI on the retail environment? Wharton Professor Ethan Mollick tackled that daunting topic. He studies the effects of artificial intelligence on work, entrepreneurship, and education, and was named one of Time Magazine’s “100 Most Influential People in Artificial Intelligence” this year.
Mollick talked with the audience about AI today, characterizing it as ubiquitous and undetectable. He said about 70% of school students are using it, and that any research built since 2022—including legal documents—is “contaminated” with AI content. The tool is also available to anyone for free in 169 countries around the world, wiping out the advantages that the wealthy and well-connected usually enjoy regarding new technologies “Every kid in Mozambique has access to as good an [AI] model as you’ll get at the NSA or Goldman Sachs.”
On the subject of retail marketing, Mollick noted that AI appears to have considerable powers of persuasion. Research has shown that if you have a debate with AI you are about 82% more likely to change your viewpoint than if you had argued with a human. Could this lead to a personalized AI fashion advisor that talks to customers in a friendly voice about what they might want, and is more persuasive than a human being, Mollick asked?
Though widely regarded as an expert on AI, Mollick delivered the surprising message that there are no real experts. “I just spoke with executives at OpenAI last week, I talk to the Google teams fairly frequently… and I can tell you that nobody knows what’s happening. It’s not like they have a secret instruction manual on how to use AI in retail, for example, that no one else has.” He exhorted the audience to start exploring AI’s capabilities within their own organizations, and not just leave it to their IT people or consultants. “If you wait for someone else to tell you [how to apply AI], you’re going to be far too late. This is something we have to invent. I hope my talk motivated you to do that.”
Shareholder Activism: Redefining The Power Balance
An expert on corporate governance, Mark DesJardine is the Harvey H. Bundy III T’68 Faculty Fellow at Dartmouth’s Tuck School of Business and a senior fellow at Wharton’s ESG Analytics Lab.
He told the audience that shareholder activism is on the rise and explained some strategic shifts that are taking place. One is a greater focus by activists on individual directors, because of the use of the universal proxy card. “With the universal proxy card, there’s stronger attention to the bottom line than the top line. It’s harder for an activist to come up with something really strategic to grow your top line. It’s really easy if you let your company and the income statement get fat and you’re not cutting expenses the same way.” He said that while this has long been a classic move of activists, we should expect to see more of it, as well as continued consideration of ESG and increased industry specialization.
Given that shareholder activism is burgeoning, DesJardine posed the question, What can you do to protect and prepare your company?
DesJardine shared his cutting-edge research on applying AI to issues of shareholder activism, corporate governance, and investor relations. He said his AI-driven models can predict things like vulnerability to activism, how shareholders will vote, and which directors will be voted for. DesJardine demonstrated an example to the audience in which he put 225 indicators across nine dimensions, on all publicly traded companies in the U.S., into an AI program and had it identify what is causing certain companies to get targeted. According to DesJardine, this type of result is superior to having a human analyst supply you with a vulnerability report.
“Activism is here to stay and it’s increasing,” DesJardine said. “My research—the ability to anticipate activist interventions [through AI models]—will be key.” Armed with this information, companies can take proactive actions, he said—such as changes to their governance, strategy, and communications—to help avoid becoming a target.
The Power of Women’s Sports – Building Brands and Impacting Bottom Lines
Two luminaries in sports marketing and business development discussed the women’s sports market today. Naveen Lokesh, Head of Global Sports Marketing, Basketball, and Football at New Balance, and Colie Edison, SVP and Chief Growth Officer for the WNBA, participated in a talk moderated by journalist and bestselling author Daniela Pierre-Bravo.
Pierre-Bravo asked what is fueling the new boom of interest in the WNBA. Edison replied, “I think what we’re seeing really goes back to one thing: and that’s the product. Women’s basketball is the best that it’s ever been. The play on the court is so strong, we’re seeing more triple doubles, more 100-point-plus games than ever before.” She described a previous “vicious cycle” in the limited amount of women’s sports coverage: the media said there weren’t enough interested advertisers and the advertisers said there wasn’t enough viewership. But starting in 2022, Edison said, about 200 of the WNBA’s games became nationally broadcasted as compared to around 80 in the past.
She also noted that Gen Z’ers are more likely to be fans of women’s sports than older generations, and that they are 47% more likely to purchase from a brand that sponsors the WNBA. “So I think the cultural shift we’ve seen toward gender equity in sports is really amplified when it comes to the Gen Z audience.”
Pierre-Bravo observed that there is “real money there,” quoting a statistic that women’s elite sports will generate $1.3 billion in revenue globally in 2024. She also mentioned some unexpected sponsorships that have sprung up, such as fertility clinics, hair care startups, and makeup brands.
Lokesh called women’s sports today “a great gateway into sports partnerships” for smaller companies. “And for a brand like us—an endemic, hundred-year-old-plus private company with billions in revenue, we also know we want to play in that space,” he said. “So that stickiness can be a solution for all.”
He advised companies to ask themselves not ‘do we fit in’ to this type of partnership, but ‘where and how do we fit in.’ “What are your values and how can you use certain women’s sports platforms to reach your audience in an authentic, unique way? You do not want to be caught behind the curve, [given] the way the women’s sports landscape is changing and growing.”
Election Economic Crossroads: What Budget Models Mean for Retail’s Future
The Penn Wharton Budget Model (PWBM), which has received attention during the current presidential election season, is a self-stated “nonpartisan, research-based initiative that provides accurate, accessible, and transparent economic analysis of public policy’s fiscal impact.” Professor Kent Smetters, the Boettner Professor in the Department of Business Economics and Public Policy at Wharton and faculty director of the PWBM, spoke about the potential impacts of both the Democratic and Republican candidates’ budget policies.
According to the PWBM, both presidential candidates’ proposals would increase the budget deficits. The Harris campaign’s policy proposals would increase primary deficits by $1.2 trillion over the next 10 years on a conventional basis and by $2.0 trillion on a dynamic basis that includes a reduction in economic activity. The Trump campaign’s policy proposals would increase primary deficits by $5.8 trillion over the next 10 years on a conventional basis and by $4.1 trillion on a dynamic basis that includes economic feedback effects.
Smetters stated that the Harris plan is “mostly focused on the individual side of things,” citing a combination of child tax credit increases, expanding the earned income tax, enhancing subsidies for the Affordable Care Act, and offering support for first-time home buyers. The Harris campaign proposes to try to pay for that by increasing the corporate income tax rate from 21% to 28%.
Noting that Trump’s plan is more expensive than Harris’s, Smetters said it would involve maintaining and extending the Tax Cuts and Jobs Act, which he said will cost a significant amount. Moreover, Trump aims to lower the corporate tax rate to 15% which will incur a cost as well.
Ultimately, Smetters did not believe that either party was sufficiently focused on the bigger picture. “There are options that can grow the economy while reducing debt, but both candidates are doing in many ways exactly the opposite.” He characterized their approach as “the house is burning down and they’re just arguing over the furniture,” and added, “There needs to be a great awakening about the fiscal challenges we face.”
In Closing…
In his closing remarks for the 2024 Baker Retailing Center and RLC Global Forum CEO Summit, Joshua J. Harris Professor of Marketing and Academic Director Tom Robertson praised the depth, variety, and real-world approaches of this year’s presentations: bold new ideas, new demographic market segments, emerging technologies such as AI. “I hope there are takeaways for you that will be of value when you get back to work,” he told the assembled group. “And takeaways for the next few months, or even years.”
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