As retailers reflect on this past year’s performance, a trend from this quarter’s earnings has emerged: core products, core customers and customer loyalty. But why does it feel like we’ve heard this story before? We have. Just in different ways. While all three areas might not be new reflections around earnings, this represents another year of survival of the fittest.
Last week direct-to-consumer (D2C) shoe company Allbirds reported that it would be returning its focus back to its “largely affluent” group of 30- to 40-year-old men and women interested in an active lifestyle in urban exploration, after generating $297.8 million in net revenue for the fiscal year 2022, a 7.3% improvement over the year before, but failing to meet its projected revenue range of $305 million to $315 million. It also missed gross profit projections, with net loss significantly widening from $45.4 million in 2021 to $101.4 million in 2023.
Allbirds has also realized it has a bigger opportunity with women, more than it initially understood.
The shoe company admitted its performance suffered last year due to a loss in focus on its core business as it overinvested in seasonal trends, colors and new silhouettes that failed to attract new consumers and proved to have lower conversion and sell-throughs.
“We overemphasized products that extended beyond our core DNA,” CEO Joey Zwillinger said during a March 9 earnings call. And to ensure a cleaner inventory position for 2024, the company plans to leverage discounts to offload products that stray away from the core customer preference.
See also: Allbirds Goes Back to Basics as Efforts to Attract New Customers Fail
Nordstrom also seemingly made a similar mistake, as the retailer once known for luxury and exceptional service turned to deep discounts to move inventory but at the expense of lower sales and profits in its fiscal fourth quarter.
The move left shareholders and spectators to question whether deal chasers, who always show up for Nordstrom deals, would stick around for the service and full-price merchandise once the promotional sales music stopped playing.
Nordstrom was once known for its steep investments in tools and technologies, such as virtual style boards and online styling appointments that led digital customers spending five times more than an average Nordstrom customer. But now, the company’s performance has been hindered by excess inventory, according to PYMNTS’ Consumer Inflation Sentiment study, “The False Appeal of Deal-Chasing Consumers.” With 74% of consumers cutting back on nonessential retail purchases, Nordstrom looked to leverage discounts more than expected between the months of November and December, so it could better position itself for the upcoming year.
That said, Nordstrom is looking to work on its ability to adapt consumer behaviors quickly while also going back to its focus of customer service and personalization and maintaining modest inventory.
“Having a healthier inventory level and mix positions us well to react quickly to changing consumer demand,” Nordstrom President and Chief Brand Officer Pete Nordstrom said in a press release. “Given the continued uncertain environment, we remain focused on executing with flexibility and agility, including conservative buy plans and faster inventory turns.”
See also: Deal Chasers Flock to Nordstrom, but Will They Stay for the Service?
Then there’s Dick’s Sporting Goods, which is singing an entirely different tune, proving that while consumers may be cutting back on discretionary expenses, they aren’t holding back when it comes to health and wellness. The company reported a net income of $236 million, which was 32% lower than its results from the year before.
“We’ve seen a shift in consumer behavior where they are prioritizing athletic endeavor sports, health and active lifestyle, and they’re prioritizing Dick’s in order to meet those needs,” Dick’s Sporting Goods CEO Lauren Hobart said on a call with analysts.
The sporting goods retailer noted that during the last quarter, the company put an emphasis on building brand loyalty by leveraging data and making investments in technology to improve its omnichannel experiences.
Looking ahead, the company is hoping to build on its 2022 momentum by continuing to prioritize customers’ evolving needs and investing in its omnichannel experiences. It plans to offer a range of price points for its products, keeping in mind the needs of entry-level to enthusiast-level customers.
Furthermore, as in-person experiences come to the forefront of demand for consumers, Dick’s Sporting Goods plans to leverage its already existing physical presence and expand to offer a contextual commerce experience in its physical retail location. The retailer plans to open 20 Dick’s House of Sport concept stores, which offer experiences such as rock-climbing walls, batting cages and putting greens.
See also: Omnichannel Athletes Make Sports and Fitness Spending a Top Priority
CarParts.com also touched on customer focus, discussing what it did right, especially during a time when used car prices looked like new car prices.
During its fourth quarter 2022 earnings call March 7, CarParts.com CEO David Meniane said, “We’ve built an incredible business centered around positive unit economics, repeat customers, and a laser focus on financial discipline” as he detailed innovations the aftermarket auto parts dealer put in place throughout the year.
Meniane drove the point home outlining three areas of focus for the site in 2022 that culminated in a record Q4: a streamlined experience on the website, faster delivery times, and click-to-delivery times.
“These tangible improvements are part of the cultural shift that started in 2022 at CarParts.com in which every decision starts with the customer. As a reminder, repeat customers account for over one-third of our eCommerce revenues, and as we continue to improve our customer experience, over time we see an opportunity to build a long-term relationship with our customers.”
See also: CarParts.com CEO Says Click-to-Delivery Experience Builds Customer Loyalty
From brands going too far astray to brands leaning into their strengths, no matter their respective outcome the common narrative has revolved around the core customer, core product and core experiences and what those areas of focus mean for the brand or retailer.
So, what will 2023 look like for the retail industry? According to these CEOs, it looks like it will be a year of intention, personalization and commitment.
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