The National Retail Federations Role in Retail Advocacy

In this episode of The Voice of Retail podcast, Tim Phelan discusses the current state of the retail industry with Matthew Shea, President, and CEO of the National Retail Federation. They explore the significant role of retail in the economy, the evolution of retail practices over the years, the impact of economic conditions on consumer behavior, and the importance of innovation and technology in retail. They also highlight the upcoming NRF annual show and its relevance for retailers of all sizes.

The Connecticut Retail Network is The Voice of Retail, at the State Capitol and across the state. Our podcast features timely conversations about retail topics and trends, with retail industry leaders and business owners from throughout the state. It’s a podcast for retailers – and their customers! To learn more about us please visit https://ctretailnetwork.com/

Chapters

• 0:00 Introduction to the Retail Landscape
• 1:59 The Role of Retail in the Economy
• 4:53 Changes and Trends in Retail Over Time
• 12:11 Current Economic Conditions for Retailers
• 19:56 Innovation and Technology in Retail
• 26:44 The Importance of the NRF Annual Show

Transcript

Tim Phelan (00:04.63)

Welcome to the Voice of Retail, the podcast of the Connecticut Retail Network. I'm Tim Phelan, president of the Connecticut Retail Network and your host for this podcast. We're looking forward to providing insight into the retail industry in Connecticut from the perspective of retailers and retail customers. And we are glad you joined us for this podcast. The retail industry is the nation's largest private sector employer, contributing $5.3 trillion.

to annual GDP and supporting more than one in four US jobs, 55 million working Americans. The Connecticut retail network represents the retail industry in the state of Connecticut, an industry that supports more than 470,000 jobs. It contributes more than 34 billion to our state's economy. 24 % of the jobs in Connecticut, nearly one in four are supported by the retail industry. And more than 98 % of all retail companies

are small businesses employing fewer than 50 people. The Connecticut retail network is the voice of retail at the state capital and across the state. Our podcast will feature timely conversations about retail topics and trends with retail industry leaders and business owners from throughout the state. It's a podcast for retailers and their customers. Retail businesses are everywhere in Connecticut. They are small and large, local and national in large cities and small towns.

New retail businesses continue to emerge and longstanding retailers achieve milestones of longevity each and every year. It's an industry that sees near constant change and is resilient and responsive. For many people, retail was your first job. And for many others, retail is your career. So we look forward to you joining us today as we discuss many topics with our guest, Matthew Shea, a friend of ours for a long time and Matt is

the president and CEO of the National Retail Federation, a position that he's held since 2009. Before joining the NRF, Matt was the president and CEO of the International Franchise Association, where he worked to support franchise businesses. His career also includes roles at the U.S. Chamber of Commerce and as chief of staff to then Senator John Warner. Matthew has a strong background in public policy and advocacy.

Tim Phelan (02:29.134)

but experiencing government relations and strategic management. He is known for his leadership in advancing retail industry interests and addressing key issues affecting the retail sector. But most importantly, Matt is an old friend of mine and got his start with the late great John Mahaney, the chief at the Ohio Retail Council. So Matt is one of us, as we say in the State Retail Association world. And Matt, it's a pleasure to have you on.

today. Tim, thanks. It's great to be with you. And I appreciate the invitation. And I congratulate you on all the amazing work you and your team do in the state of Connecticut for retailers there and the economy and consumers and employees and associates in those businesses across the state. So I'm happy to have a chance to chat with you. And yes, once a state retail exec, always a state retail exec.

So I will, I always try to remember my roots and where I learned all the important stuff. And it was in the state Capitol doing the issues that matter to people at the local level. Well, there was something going on going on at the retail council of Ohio back in the day because a you and a bunch of other folks graduated from the Haney School of State Association Management and really spread out throughout the country.

Yeah, the school of it was at the time it was the school of wayward boys. It's now broadened to include both genders. But back in the day, yeah, and there were a few that went on to Wisconsin, Minnesota, Michigan, various other places. We can't forget our boy in Massachusetts, Hurt. Can't forget. And ultimately, right there close to home.

John Hurst in Massachusetts for many years, who was one of the first to leave the nest. So. You know, one of the things about running a state retail association is that retail gets in your blood. Right. And, know, we don't we don't work in retail necessarily. We don't run stores and that stuff, but it does. The industry is infectious and it does get into your system. And we've both been doing this for a long time. What do you what have you seen as some of the biggest changes, trends and changes that have happened?

Tim Phelan (04:54.338)

since the time you got involved, probably right up until now. Yeah, I agree with you that it does get in your blood. And I also agree, you know, some of the work that I had the opportunity to do when I was really, you know, a kid in my early and mid 20s at the Ohio Council of Retail Merchants, when we traveled around the state and we...

know, the state of Ohio was actually Columbus is sort of in the center of the state capital, but it's a big state, 88 counties and lots of county seats, lots of driving time. And we used to drive around in the summers and visit state legislators, members of the Senate and the House in their districts and do events with local retailers and other businesses in those districts. And we had

33 senators and a hundred state representatives. And you get to spend a lot of time with the true Main Street retailers, with independent retailers, with the sort of, you know, so-called mom and pop retailers, but people whose families had been in those businesses for many years and people who were just starting a new entrepreneurial venture and everything in between.

And I think you're right, it gave us, gave me a chance to see up close the role and the impact of these people on their communities and how important and valuable they were. And I think, you know, over the last 30 years, that's still true. know, lots of things about retail have changed. know, brands have come and gone, companies have come and gone. The distinction between

different shopping channels. know, I the internet basically didn't exist 30 years ago. Even 20 years ago, we didn't have for online shopping the way we think of it today. 10 years ago, we didn't have mobile shopping. Five years ago, we didn't have social commerce. So lots of things have changed. I think what has not changed is the important role that retailers

Tim Phelan (07:21.72)

play at the local level, that small businesses play, that independent retailers play in their communities. And we just had many of those retailers in Washington recently for some events on Capitol Hill and celebrating America's retail champions and visiting with members of Congress. And I'm always energized by the passion and the risk taking and the vision.

of people that have the courage to go out and start these businesses or these families have been committed for so many years. It's really inspiring. Yeah, it is. I see it here. Matt, you're right. The courage it takes for these men and women to stay in business and work through all the challenges in retail and thrive through it. You you talked about your advocacy program in D.C.

it does kind of raise another issue that I think is an ongoing challenge for all of us, is to get the local retailer to understand the impact and importance that they have in moving and shaping policy and legislation at the, in my case, at the state capitol and in the NRF case at DC. Can you talk a little bit about how important that is when a member of Congress or Senate or a

In my case, a state rep gets a phone call or an email or a notice from a local retailer. What that impact has on them? Tim, I think that engaging the people we have the privilege of representing, retailers of all shapes and sizes that are engaged in the whole diverse range of the retail industry, that's the most effective way in which to

communicate with a legislator. you know, as much as you and we and our respective teams and our colleagues around the country do this sort of day in and day out, we're simply messengers for the people we represent. And the retailers themselves are always the best messengers when it comes to having the conversations about

Tim Phelan (09:45.922)

their businesses and how their businesses operate and what they see as opportunities, what they're experiencing as challenges, how they believe our elected leaders can help. you and we, and we're all sort of a platform for the storytelling that our members do much more effectively than we can do ourselves. And in between those times when our members can't be here because they're obviously

running their businesses every day, we can communicate the messages. But the most effective way to do it is always to have that, in our case, the retailers telling that story themselves here in Washington, but often even more effectively at home in the district, which is easier to do with state legislators even than members of Congress, but they're both critical. I think in general,

I don't know people tend to underestimate the importance of doing it. I think part of it is just a practical challenge of finding the time to do it and making the connection. And I think that's a really important role that we can play is to facilitate the meetings. Because I think most of our members are happy to have the conversation, but they don't always have the time or the resources or maybe the experience.

to know exactly the most efficient way to schedule and set up and conduct a meeting. But I think if we can play that role, then I think most of our members are happy to do it and they want to do it. It's just sometimes they're not sure exactly how to do it. I guess maybe that's what you and we can do is to the extent we're able to facilitate that and we kind of take some friction out of the experience that that's a real value add that we can provide for our members.

Yeah, really good point. We have to make it as easy and as efficient and possible for them to do it. And one of the reasons it's so important for them to contact their and get involved with their local legislator or congressional member of Congress is the impact that legislation has on them and the impact really that the industry itself that we represent has on both the local economy and the US economy. So how do you view from your seat? do you see as the current

Tim Phelan (12:12.118)

know, economic conditions that retailers are operating under specifically, you know, inflation and a lot of conversation about supply chain problems during and beginning and middle and end of COVID. How are things looking from an economic standpoint? So from what we see, and we, we have a research team here on staff, we've got a chief economist. We partner with

a firm called Affinity that's collecting real-time sales data and credit card transactions. And we release on a monthly basis in partnership with CNBC, the CNBC NRF retail monitor that comes out the first week of each month and gets talked about on air on CNBC and on their website and places like that. And so we do a lot of work in and around

trying to understand what's happening in the economy and for the consumer economy in particular. And I guess I would say that at the moment, what we're seeing is some moderation in consumer spending, some sort of reversion back to the mean in terms of

behavior that looks a lot more like pre-pandemic than pandemic or post-pandemic spending and consumer behavior. so consumers are, because really when you think about it, the key indicator for consumer spending and consumer behavior is employment and wage growth. the employment numbers are still very good.

They've ticked up a little bit to slightly above 4%. The unemployment rate's a little bit above 4 % now. But the increase over the last few months in the unemployment rate from 3.7, 6, 7 % to 4.41 has been driven primarily by new entrants to the workforce rather than by layoffs and people losing their jobs. So yes, the unemployment number is up.

Tim Phelan (14:38.53)

but it's up for good reason, which is more people are trying to come into the workforce as opposed to people losing their jobs. And so I think that's a generally positive indicator. The half of this, the other piece is wage growth. And in the immediate aftermath of the pandemic, we saw an enormous jump in wage growth for all...

demographic segments, all income quintiles. And that has moderated somewhat. And so now we still see wage growth of 3.5 or 3%, 5%, 6%, 7%, 8%, which is growing in excessive inflation, which is now below 3%, either CPI or PCE. So wage growth is in excessive inflation.

And yet wage growth has moderated. So it's running ahead of inflation, but it's running below the really hot wage numbers we saw in 2021, 2022. So I think those two things taken together, the slight increase in unemployment and the somewhat moderation in wage growth, those two things indicate a still healthy economy.

but one that is kind of returning to a pre-pandemic sort of 2019 look and feel. And so I think at this point, our sense is that we're in a good position to continue this sort of moderate growth in the economy and that we're not in danger of entering a recession.

And other thing we're seeing because inflation is impacting consumer spending and consumer behavior is consumers have moved away from the discretionary spending, in some cases the luxury spending, but lots of the spending that took place in the immediate aftermath of the pandemic in certain categories that were much more discretionary. People are moving back to the things they have to spend money on. They're spending on groceries.

Tim Phelan (17:03.342)

and household necessities, and they're spending on energy and on transportation, housing, but not as much on the discretionary side. So I think, again, I think that's all consistent with sort of pre-pandemic behavior, and it's not an indicator of a pending recession. know, time like So as we talked a little bit before we started, we're to be pre-taping this. So we know that in September, the Fed is

scheduled to meet again and your sense and from what we are hearing in the papers and the papers listen to me, hearing in the news is that the Fed is contemplating a rate cut. What is your sense of that and how if that happens, how would that impact consumers? Well, I mean, our sense is and our economist and our research team

I think agree that it's likely that the Federal Reserve will conclude it's appropriate to begin easing financial conditions a bit and will probably support a modest rate cut at the September meeting and leave open the possibility of additional rate cuts over the

of the remainder of the year at some of their meetings before the end of the fourth quarter. So, you know, a lot of people talked about, there be a rate cut the last week in July at the Fed's meetings? you know, there's some people that believe we're headed towards a recession, that the unemployment numbers are, you know, kind of increasing at an unacceptably high rate. And we're not in that camp.

So, I mean, I think we see moderation and we see consumers behaving more deliberately, but we don't see the urgency for a cut, but I do think there will be a cut in September and then there'll maybe one or two more before the end of the fiscal year. And then we'll see where we go in 2025. But I think the Federal Reserve generally has gotten it pretty right in terms of the way they've handled the last.

Tim Phelan (19:28.398)

16 months of rate increases and keeping them higher for longer. The economy's held up very well. And if you talk to people outside the US, in most places around the world, they would take our economy and trade it in a minute for what they have in their own economies. So relative to the world, the US is in very good shape. Can we shift back to just a little bit about trends in retail and how retail is

changed over the years since the time we both got started in it. And that's in regard to innovation and technology, the use of technology by retailers. You must have seen that. You probably saw it up close and personal, little closer than I did. I know when COVID hit, our members, particularly our Main Street retailers, had to reinvent themselves overnight. And the use of technology has just been amazing.

So can you talk a little bit about how you've seen that change retail over the last 25, 30 years? Yeah, think that part of the reason that retailers have evolved as they have throughout the history of the industry, but especially in the last few years is because the retail industry is probably the most consumer

driven industry that exists. so consumers sort of push retailers to continue to innovate and challenge themselves and as you said, reinvent their businesses. And the pandemic forced a real rethink of both current practices as well as I think accelerated the adoption of some existing practices. And so

I mean, some of the things that we now, four years later, take for granted, whether it's buy online and pick up in store or curbside pickup or same day or within the same couple of hour delivery, some of these things related to fulfillment and distribution, some of those existed before the pandemic.

Tim Phelan (21:55.534)

but they hadn't been widely adopted and not all retailers were really prioritizing those. so, some of it was truly new behavior, but a lot of it was, let's just accelerate the adoption and implementation of some concepts that already existed and consumers embrace that. And I think the other big thing that, if you go back to 2016,

you know, the third and fourth quarter of 16, first quarter of 17. know, every time it seemed like we talked to the media or we watched the business news network, so picked up a newspaper. Every headline was retail ice age and retail Armageddon and retail retrenchment. it was the end of retail because online players were going to

know, destroy retail and people were closing stores and going out of business. And, you know, four years after the pandemic, here we are. And we see store openings at an all time high. We see openings outpacing store closures. We see digital players, know, digitally native players, companies that were founded as online only brands.

opening stores themselves. see traditional bricks and mortar retailers finding new and creative ways to use their stores to create experiences for consumers that drive greater engagement, greater sales. They use them for fulfillment. They think of their store network as an extension of their distribution centers. so fulfillment and pick and ship comes

online doesn't just look at what's in the distribution center, it looks at every single store. And you can ship goods from a store to a consumer much closer in proximity to one another than you can from a distribution center that's four, five, or six, or 10 states away. So I think there's been this renewed emphasis on the importance of the store, and in some ways, paradoxically,

Tim Phelan (24:20.824)

for some people that in the digital age, the store is more important than ever. And that seems almost like an oxymoron. But when you think about the advantages of having a physical interaction, part of coming out of the pandemic, I think for all of us was that we all realized how much we missed in-person interaction. We're social creatures. So we wanna be back in stores. And all the research we do,

around the holidays especially and around Thanksgiving weekend and Black Friday and Cyber Monday and all the things that happened that weekend is the age group, the demographic age group that most enjoys going out and shopping in person is the 18 to 25 year olds. The younger people in this country want to be out in a social environment. people tend to say, the

They're going to sit home and play video games and they want to do everything on their phone, but they want to be out. And I think that that's part of the reason. And that's one example of why stores are so important. So I think there've been lots of changes, but I think the, you know, the one thing that has been validated is the value of a physical presence. If you create the right environment and not every store will be, you can't just have a, a physical footprint and expect it to be successful on its own.

You have to bring it to life and you have to be creative and resourceful and imaginative. And retailers who are doing that are finding great value in their store network and their bricks and mortar retailer. But there will still be losers. There will still be retailers who aren't able to do it as effectively. So it won't work everywhere. But for those who can do it, it will continue to be enormously successful. Yeah, I mean, it's really it really is about the retail industry always.

having, as you said, winners and losers, changes in technology, who can keep up, who can't, who emerges and why, why do consumers shop at one place and not another place? Fascinating, never ending evolution of the industry. I'm gonna let you go, Matt, but after the, just one quick note, if you can, one of the big, pardon the pun, big parts of the National Retail Federation is your show in

Tim Phelan (26:45.422)

January, the big show. Can you talk a little bit about how that show has evolved over the years, why it's important, and why smaller independent retailers should consider attending it as well? Yes. Tim, the NRF annual meeting and convention takes place in New York City at the Javits Convention Center in January of 25, January 12, 13, 14.

We will have close to 50,000 attendees. We'll have more than a thousand exhibitors, 5,000 brands represented. 25 % of our attendees are global attendees. It is a true global retail show. And historically, the NRF show was a technology show, but

In recent years, it's become even more so as a venue for showcasing the latest and most futuristic technology applications from solution providers to help retailers operate more efficiently, more successfully, more effectively across the entire retail experience. We have a number of

interesting sort of pop-up stand-up. We've got an innovation zone. We've got a startup lab that really showcased some cutting edge new businesses. And then we've got the other thousand retailers out on the show floor. And then we have a keynote stage that features conversations with CEOs of major retail brands. Brian Cornell, the CEO of Target, John Ferner.

CEO of Walmart US, Javi Quinones, the CEO of IKEA, and many, many, more. And I think while it can be a challenge for retailers to be away from their business for a day or two, I think that there are a couple of benefits. One is just

Tim Phelan (29:05.866)

One is seeing the technology being exposed to various solutions and solutions that have application right now for businesses of all shapes and sizes. So there are applications for everyone, not just the largest retail brands. And I think the storytelling, of course, from the attendees and the opportunity to hear from, learn from, but I think the real benefit is just that we've convened

so many thought leaders from across the industry and the accessibility of those leaders for everyone that attends, that it isn't the sort of event where there's a separation between the leaders and the attendees. mean, these people make themselves accessible. They spend a few days. They're out talking to people. They want to learn from everyone. And it really is a great retail gathering and an amazing place to be.

If you can join us, we'd love to have you and as many of your members as you can bring. Well, for us in Connecticut, it's easy to go. We just jump on a Metro North or we can drive in. I've been a handful of times. You've added a new feature now for state retail associations to bring some legislators in. It's really an unbelievable show. Valuable information is shared in breakout sessions. As you mentioned, you get to listen to thought leaders. Retail leaders give

keynote addresses, and it's just a really great vibe in the whole place. really, you walk away, for someone like me, you walk away just like shaking your head again at the amazement of the industry and its breadth of importance in the economy and just the interaction that it has with consumers in a bunch of ways that most people don't realize that they do when you're...

you think about the retail industry. I'm big bullish on the big show. think it's a great job. It's a great event. You guys do such a great job really putting it all together. So congratulations to you and your team for that. Thank you. And Matt, I'm going to let you go. Thank you again so much for your time. I know you're a busy man. got lots going on and for you to take some time to help us on one of our first episodes is really great. And I hope we can have you back again.

Tim Phelan (31:32.962)

Well, thank you. I always love to see you and be with you and honored to be invited to join the conversation and look forward to seeing you, I hope soon. And in the meantime, always happy to come back and continue the conversation. All right. Sounds good. Thanks again, Matt. Thanks everyone for listening to this week's CRN, the Voice of Retail podcast.