Shoptalk 2023 Key Takeaways

In case you missed ShopTalk 2023 last week, B. Riley Securities has you covered. This four-day event gathered over 10,000 attendees, 250 speakers, and almost 100 content sessions at the Mandalay Bay Convention Center in Las Vegas, Nevada. Prominent speakers included Ulta CEO Dave Kimbell, Target CFO Michael Fiddelke, Olaplex CEO Jue Wong, Chewy CEO Sumit Singh, among many others.

B. Riley met with numerous brands, private equity firms, and industry participants for a deep dive into the current state of the retail and e-commerce industries. One of our key takeaways was the rapid transformation of the sector driven by the emergence of new technologies, changing consumer behaviors, and evolving market dynamics.

Retailers are leveraging generative artificial intelligence (AI) initiatives to gain a better understanding of what customers want and need - and targeting them more specifically.

Summarized below are some of the key themes B. Riley observed during ShopTalk 2023:
1. Emerging technologies: AI, virtual reality, and other emerging technologies are transforming the retail landscape and creating new opportunities for retailers to engage with customers.
2. Customer experience (CX): Retailers are increasingly focused on delivering personalized and engaging experiences to customers across all touchpoints, from online to in-store.
3. Death of omnichannel retail as we know it: The boundaries between online and offline shopping are blurring, and retailers are adopting new strategies to integrate their physical and digital channels - focusing on the shopper experience rather than ultimate point of purchase.

Artificial Intelligence has Entered the Chat
Discussions about AI capabilities and its potential impact on labor, consumer behavior, and marketing dominated conversations at ShopTalk this year. While AI has been a buzzword in tech circles for over a decade, recent advancements have brought AI to a tipping point where it is now front and center in all discussions around retail. Many are still figuring out the best applications for generative AI, however there are some key priorities and recurring themes that retailers are prioritizing and exploring:

  • Increasing efficiency: Task automation, order processing, and inventory replenishment are areas in which generative AI can help improve efficiency. Mass retailers rely on constant process improvement and efficiency to grow and maximize profits, and AI can be a key partner in process flow, inventory management, and marketing.
  • Enabling seamless shopping: Generative AI can help retailers generate and serve content to consumers where, how, and how much they desire. This helps retailers remain relevant and achieve economic results through improved marketing spend and customer acquisition costs.
Generative AI has genuine potential to solve retailer pain points and create a more seamless and efficient shopping experience for consumers. It's clear that AI is here to stay and will continue to transform the retail industry in the years to come.

"There is Never Too Much Personalization - Only Personalization Executed Poorly"
This is a quote paraphrased from the Google Cloud presentation. CX and customer personalization remained another key theme throughout our conversations at ShopTalk. Consumers already share a wealth of personal data and behavior across a variety of platforms but are often frustrated with how brands use this information to target them. Too often, the personalization is either inaccurate, irrelevant, or mistargeted. (Hint! Hint! We no longer need tea for our summer bodies!)

Based on industry findings, almost three-fourths of consumers want brands to use their personal data to target them - but only if the targeting is on point. As brands fine tune how to execute personalization well, customers will feel more seen and heard, and in turn can increase conversion rates and units per transaction (UPTs). A great example cited was the #SavageXFenty showcase of new personalization suites which resulted in ~4x increase in conversion and 40% higher UPT.

It's Official - Omnichannel Retail is Dead
Another recurring theme that emerged from our discussions at ShopTalk was the death of omnichannel (as we have come to interpret it). Rather than focusing on how the industry has historically viewed points of sale, retailers are now prioritizing the shopper experience and enabling them to buy from their brand or store wherever and whenever they want, resulting in seamless shopping across channels.

At the heart of this approach is the idea of putting the shopper at the center of everything. This means understanding their journey across the entire path-to-purchase and identifying opportunities to extract value at every step along the way. By doing so, retailers can create a more seamless and personalized experience that meets the needs and expectations of today's consumer.

Market Perspectives from Industry Leaders
Michael Fiddelke, Chief Financial Officer of Target, discussed "The C-Suite on Thriving in Today's Retail Environment" and detailed the challenges and opportunities facing the retail industry, as well as Target's strategy for navigating the changing landscape:
• With inflation in the forefront, shoppers are becoming more sensitive to promotions, resulting in a change of pace for discounting. However, consumers are still seeking 'newness.'
• Traffic is a key driver of growth, and Target is creating shopping environments that promote repeat visits through (i) new merchandise, (ii) new experiences, (iii) faster delivery and (iv) services that make it easier to shop (drive-up, pick-up and returns, among others).
• Investing in own brands is also becoming increasingly important with the introduction of 10+ new brands and turning their small brands into big brands that the consumer demands. This strategy has already proven to be successful evidenced by Target's partnerships with Ulta, Levi's, and Disney.
• Consumers will ultimately dictate the percentage of sales attributable to e-commerce - brands and retailers will need to focus on the shopper journey and path-to-purchase, versus just channel sales.
• Target is exercising more cautious planning its consumer discretionary categories and inventory management.

Dave Kimbell, CEO of Ulta Beauty, discussed "How Ulta Beauty is Winning Despite Industry Disruption," the future of beauty, and how Ulta is positioned to lead the way:
• The beauty industry has proven to be an important category that continues to perform - the category is still viewed as an affordable luxury that demonstrates resilience to different economic cycles.
• Innovation continues to be a key differentiator for brands. While Ulta evaluates over three thousand brands each year, only 5% are brought onto their platform.
• With the acceleration of the connection between beauty and self-care, consumers are realizing that it's not just about how they look but also how they feel.
• Fragrance in particular has taken off during and post-COVID, becoming a main driver of the category. Consumers realizing that they often use fragrance to feel better for themselves, not just others.
• Skincare is increasingly viewed as a key category supporting health & wellness and self-care.
• As focus on health & wellness increases, this presents new opportunities for the beauty industry. Two-thirds of beauty enthusiasts are seeing a greater connection between beauty and health & wellness.
• The (re)emergence of physical retail has given rise to a thematic approach to seamless shopping. Converting in-store customers to online customers resulted in 2.5x more spend for Ulta.
• In cosmetics trends, consumers are experimenting with big, bold looks and switching back to natural looks, expressing their individuality and self-expression through makeup.

These were just some of the insights and best practices we observed at this year's ShopTalk event. For a deeper dive on our key takeaways and the opportunities in Consumer & Retail, and Beauty, Personal Care, and Health & Wellness, please reach out to our B. Riley team: Nishen Radia at (310) 405-7040 or Duane Stullich at (310) 405-7070.

About B. Riley Securities
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