The challenges are growing and were quite evident during the National Retail Federation’s “Big Show” convention this week at Manhattan’s Javits Center. The event, which drew 40,000 attendees and 1,200 brands and staged 125 sessions, was permeated by a tone of uncertainty for the months ahead. Dominating the discussions — on stage and in the convention hall — were the specter of tariffs, the disconnect between the state of the U.S. economy and consumer sentiment, and the growing impact of generative AI.
AI will enable businesses to reduce capital investment, while also reducing headcounts. At recent past Big Shows, sustainability, DEI, the circular economy, and recession prospects were more center stage.
“The supply chain is going to benefit the most from AI more than any other area of retail,” said Azita Martin, vice president and general manager of Nvidia.
“Is ChatGPT going to take away your job? No. But somebody using generative AI is going to take your job,” said Martin.
“We really haven’t had a technology revolution as large as this since the start of the internet,” said Doug Herrington, chief executive officer of Worldwide Amazon Stores, in a conversation with NRF CEO Matthew Shay. “The rise of the social platforms was quite large, but nothing as large or as extensible. It’s been really amazing, and a ton of fun to be part of.”
Herrington said that after he started having Amazon teams come to his office to talk about potential applications for AI, he thought the meetings would peter out after a couple months, but they’re still going strong and the changes can be seen on Amazon’s website. For example, Amazon’s AI chatbot Rufus has already answered 500 million questions that couldn’t have been easily addressed through the search bar. Product titles are being rewritten on the fly to suit what shoppers are looking for. Customer reviews are being summarized. And the company is using AI to help shoppers zero in on the right fit for fashions.
“We give you a very explicit recommendation that’s quite accurate,” Herrington said. “When I see that recommendation now I follow it.”
Inside the Big Show at the Javits Center.
“2024 was a successful year in the face of a lot of challenges like lingering inflation, elevated interest rates, geopolitical issues and events with labor and the ports, and we’d love to say that’s all in the past, and that this year is going to be smooth sailing, but this year will bring more uncertainty and more challenges,” John Furner, chief executive officer of Walmart U.S. and chairman of the NRF, said in his welcoming speech to the crowd, where he also interviewed Nvidia’s Martin.
“You’ll probably remember our forecast last fall was for growth to be between two-and-a-half and three-and-a-half percent, and at the NRF, we expect the result to be at the top of that range,” said Furner, referring to the retail industry’s holiday sales.
The loss of life, homes and businesses caused by the Los Angeles wildfires was recognized by several speakers, including Furner, who cited “the vital role retailers play in helping communities.” He pointed out that last year Walmart and other retailers provided water, food, supplies and basic necessities to those in need in the Appalachian region which was devastated by Hurricane Helene.
“We turned our parking lots into places of hope for people who lost everything — a place to get a hot meal, a shower, do laundry, or in some places just charge a phone,” Furner said.
“This week, we have all watched the tragedy in California with the wildfires. We are there and will continue to be there to support the people who need our help. We’ll be there and that is our industry at its very best,” Furner said.
Walmart’s John Furner and Nvidia’s Azita Martin.
At the convention, the consensus among prognosticators was that it was too early to determine the economic impact of the Los Angeles wildfires on the region, with the devastation spreading and first responders still battling the flames which broke out a week ago.
Industry analysts and economists at the Big Show characterized the U.S. economy as strong with unemployment low at 4 percent, borrowing rates coming down, inflation on goods declining but prices staying high on services, and consumers being resilient and still spending enough to satisfy retailers. Yet many Americans feel cash-strapped, burdened by high prices and inflation, and believe the economy isn’t working for them.
David Solomon, the chairman and CEO of Goldman Sachs Group Inc., is bullish about the 2025 economic outlook despite the inevitable “bumps” and “ditches” to be navigated along the way.
In a keynote session Tuesday morning, he said: “We are privileged to live in the greatest country in the world. That doesn’t mean we don’t have all sorts of challenges and issues we have to work through.” But the picture is bright, he believes, “when you look at the continued acceleration in technology, the implications for productivity, the implications on health, well-being, and just the incredible position of privilege we have as a nation.”
Although he’s upbeat, he acknowledged that “we’re in a more-fragile place.” Inflation has taken its toll on consumers, particularly when it comes to food and services, and the new administration’s threat to deport migrants — a group that is essential to labor growth. But incoming president Donald Trump’s announced plans for deregulation could also be a “powerful catalyst for investment,” he said. He said that talking to other CEOs, they all “felt very challenged and were deferring investment to deal with regulatory pressure. And this administration sent a clear message. They want to swing that pendulum back. That’s very constructive for growth and investment. But we’ve got to watch closely and see how these policy positions balance out.”
Jack Kleinhenz, the NRF’s chief economist, said: “The momentum of 2024 should continue into 2025, but at a slower pace. There is good reason to expect healthy growth, but there are a lot of moving parts and there is uncertainty over trade, immigration and regulation, and probably we will see some volatility, especially in the stock market.”
Regarding the disconnect, Kleinhenz said, “The character of the economy remains a subject of debate,” adding that about two-thirds of consumers believe a recession is looming while roughly a quarter of economists see a recession happening.
“We’re going to see positive momentum in consumer spending but cooling from the last 12 months,” said Greg Daco, chief economist for EY, who joined Kleinhenz and Sarah Wolfe, senior economist and strategist at Morgan Stanley Wealth Management, on a panel on the economy.
“While consumers aren’t leveraged excessively, we are starting to see delinquencies rise on credit cards and auto loans,” said Daco. His outlook on the U.S. economy is “subdued” though he also said the U.S. continues to outperform global markets.
Matthew Shay
Steve Sadove, senior adviser for Mastercard and former chairman and CEO of Saks Inc., said that the retail industry last year exhibited some “normalization” in terms of shopper behavior and brick-and-mortar sales versus e-commerce. Store sales last holiday season rose 1 to 2 percent, but accounted for 80 percent of industry commerce. Digital sales rose 7 to 9 percent, well under the double-digit gains seen in years past, Sadove said.
With shoppers, “We are getting back to behavioral trends seen historically,” Sadove said, during a session with Sucharita Kodali, vice president and principal analyst at Forrester.
Price promotions during the season were “active but not out of hand with margins likely well controlled,” he said. “Anybody who didn’t promote didn’t win.” Super Saturday, the last Saturday before Christmas, was “huge” he added, referring to the shopper turnout.
Commenting on 2025, Sadove said: “The first thing that comes to mind is uncertainty.” With the possibility of new tariffs, “You really will have to move on a dime. I don’t know anyone who isn’t being somewhat cautious on inventories. But [retailers] are optimistic. Consumers are still spending. People are going back to work [in the office] most days of the week,” which means they’re out and about, likely to visit stores more often and support businesses near their offices.
“You have to be prepared for tariffs. Retailers need to understand price elasticity by category and stock keeping units,” said Prashant Agrawal, founder and CEO of Impact Analytics, a software firm focused on retail supply chains, merchandising strategies and data engineering. “You have to ask where is there room to absorb the costs of tariffs or pass them along to consumers. You have to make sure key value categories are protected. Most people don’t look at this scientifically.”
As usual, there were plenty of CEOs on hand to talk about how they’re looking to transform in 2025.
Target Corp.
As CEO of Target for the past 11 years, Brian Cornell has thought a lot about growth.
Over his tenure, the company has grown by about 50 percent, adding $35 billion in revenues and adding 250 new stores and tens of thousands of employees for a total workforce of over 400,000.
That growth didn’t happen in a boardroom and wasn’t the product of some PowerPoint presentation, Cornell said.
“It came down to great people,” he said. “That investment in talent and connecting that to culture is just so important.”
And Cornell said Target plans to keep building, so he’s focusing on the next generation of leaders.
“We have to build a pipeline for tomorrow and we’ve got to run the business, but also think about where we’re going to be in five or 10 years,” he said.
In a conversation with Michael Bush, CEO of Great Place to Work, Cornell had one of those leaders, group vice president Abubakarr Bangura.
“A cornerstone to my growth story has been surrounding myself with the right teams, also with the right mentors,” said Bangura. “I say the right mentors and the right teams because these are leaders that they are not shy to tell me what I need to hear all the time. And because of that cultural openness and the ability to provide honest feedback that we’ve established at Target, that feedback has helped me both professionally and personally.”
Foot Locker Inc.
Mary Dillon, president and CEO of Foot Locker Inc., was talking up her efforts to bolster the sneaker retailer despite what she acknowledged was “a little bit tough” of a macro environment — and a world of change where there is no real status quo.
“The status quo is that it’s always going to change,” said Dillon, who used to run Ulta Beauty. “To be successful you have to constantly innovate, really understand the customer journey.”
Foot Locker is working to sharpen its positioning as the global, go-to testing ground for “all things sneakers,” by remodeling stores, empowering associates and working closely with brands.
While the company works digitally to connect with consumers — it relaunched its app last year — Dillon remains a brick-and-mortar believer.
Asked about the state of brick-and-mortar retailing, Dillon said, “If it’s a category that people will care about having a physical experience, then you better make a great physical experience.”
That means having enough capital allocated so stores can be refreshed.
“To me, it’s always about starting with customer insight, making sure you know what you’re solving for as you’re improving the brick-and-mortar experience,” she said.
Lululemon Athletica Inc.
Calvin McDonald, CEO of Lululemon Athletica, said during a keynote session that he was “optimistic heading into 2025,” and expects the consumer to still be willing to spend on products that offer value and innovation. “There’s no doubt the consumer is willing to spend, you just have to give them reasons to.”
Since McDonald took the helm of Lululemon in 2018, sales have doubled. But the former Sephora Americas chief, and Ironman triathlete, has lofty goals. He wants to build the company into “a global athletic powerhouse,” one that can rival the biggest players in the business such as Nike and Adidas. When he joined the business, sales were under $3 billion; the plan is to hit $12.5 billion by 2026, a figure he said the company is already “ahead of schedule” achieving.
Although Lululemon got its start as a women’s yoga brand, it has successfully branched out into menswear — a key growth opportunity — and other categories. “What’s really unique about the brand is it has permission across so many wearing occasions, not just on the performance side of the business,” he said. “We have high-performance, high-style, very versatile apparel.” Footwear is also seen as a “white space,” he said. Lululemon designed styles specifically for women, contrary to what 95 percent of the industry offers, which are shoes built for a man’s foot. “There is still opportunity to create and innovate,” he said. “And when we do that, we see success.”
But not everything has been a home run. The company’s move into self care and kids were both discontinued because they weren’t core to the business.
“From a financial perspective, we’ve already doubled the business, so why not double again,” he said. “I really want to drive a global presence of this brand around the world. There are definitely markets that we’re not in today. We’re opening up Italy next year. We’re opening up Denmark, Turkey, Czech, Belgium. We have opportunity in India. We’re in Korea, Japan, our business is doing so incredibly well. So I just want to continue that.”
The company’s stores are key to the plan, he said, but he doesn’t plan on doubling the current number of 700 units. Instead, he believes the company can ultimately operate around 1,000 stores globally as it works to raise the total of brick-and-mortar sales to 50 percent from 45 today. “Physical retail will always be part of the brand,” he said.
And that was a sentiment that permeated the Big Show.
