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Retailers' digital transformations are moving from ‘scrappy to scale,' Salesforce VP explains

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Salesforce VP and GM of Retail Rob Garf joins Yahoo Finance Live to discuss the rise in buy now, pay later and how retailers are continuing to transform their business models with online and omnichannel offerings.

Video transcript

ADAM SHAPIRO: Data from Salesforce show that global digital sales during the holiday season surpassed 1 trillion with a T dollars.

Let's talk about this and where we're headed as so much more is going into the cloud, and this kind of sales is going to keep increasing. We're going to do this with Rob Garf-- he is the Salesforce vice president and general manager of retail-- and along with our colleague and coanchor Brad Smith. He's here as well.

Let me start this off though, Rob. That $1 trillion figure that I have fun with, was that pulling sales forward because of the pandemic that would have taken place anyway had we not all been stuck at home?

ROB GARF: Well, certainly we've seen a shift over the last, let's say, two years from in-store to digital, and you really start in 2020 where, over the holiday season, we saw a 50% year-over-year increase. So this year 5% globally, 9% here in the US. You know, on its surface sounds pretty moderate, but it's working off a large baseline.

Do you say it's pulled forward? I wouldn't say so. I think there's been a leveling off, and actually those retailers that can really weave together the online shopping experience with the in-store shopping experience were the winners this holiday season.

BRAD SMITH: Hey, Rob, prices, they're higher year over year. Digital sales totals also higher. But did the data reveal anything about the year-over-year pace of the transactions volume, the number of transactions that actually took place to make this possible?

ROB GARF: Yeah, we actually saw a decrease in transactions. A lot of the growth, Brad, was driven actually by higher prices. Our data here at Salesforce saw that retail prices were up 25% year over year over the course of the holiday season. So what that tells us is people were paying more for certain products, buying fewer products at fewer transactions, actually creating a large competition for market share and dollar share as they traverse across different retailers.

BRAD SMITH: And even as we think about the type of products that were being bought, we know that there was growth in buy now, pay later considering the fastest-growing categories were some of the higher-end categories-- luxury handbags, home furniture as the data revealed. So is it fair to assume that this is where BNPL was most prominent? And if not, what were some of the other categories?

ROB GARF: Yeah, you nailed it. You know, the categories I'd say broadly were experiential categories. For two years we were focused primarily on need, and now we're focused on wants. And that really manifests itself in things like luxury handbags, as you mentioned, footwear because people are actually getting back out in the world again. And as they're buying these products, you nailed it. They're really adopting buy now, pay later, which is this generation of, you know, layaway if you think about it. And what they're doing is it's about a 40% increase, in fact, in that payment option year over year.

EMILY MCCORMICK: Rob, we saw holiday sales taking place as early as October, early November this year. Do you expect this earlier holiday shopping season to happen again this year, and does that ultimately help or hurt retailers who've previously leaned more heavily on tent-pole events like Black Friday or Cyber Week?

ROB GARF: Yeah, it's a great question. I'm having this conversation with customer after customer here at Salesforce, and you nailed it. You know, I'll call it we had a Cyber Week sandwich, if you will. We saw a lot of demand pulled earlier in the year, right? Consumers were scared about product availability, increasing prices, and we saw for the first two weeks in November a 16% year-over-year increase. And then for the last two weeks leading up to Christmas, we saw an 18% year-over-year increase. That's uncharacteristic. There was a smoothing out of this demand.

And to your point, this is actually a dream come true for retailers. They want to, in fact, actually see that smoothing out of demand and not seeing as much of those spikes, and so we saw it. And I think, by the way, this is actually introducing a whole new holiday calendar that retailers and consumers, for that matter, need to get used to for years to come.

ADAM SHAPIRO: Talk to the investors who are watching right now. I'm looking at your sale-- at Salesforce.com, CRM. Shares are up today a little bit over 1%, and you just mentioned the conversations you're having with your clients, with your customers. How do you take them to the next level? And then what the investors are interested in is that you're successful but the stock is looking a little pricey, even if you're seeing growth ahead. So what is it that you're going to do with these customers that I, as an investor, need to know because you guys are on fire?

ROB GARF: Yeah, well, I can't talk specifically about our stock price, but what I can say is every retailer is going through a digital transformation, and it's only been accelerated over the last 24 months. So many retailers have been really scrappy, really pulling together buy online, pickup in store, buy now, pay later types of capabilities, and these are sticking.

But a lot of it, by the way, is put together through baling wire and masking tape, if you will. So now what we're seeing is retailers are moving from scrappy to scale, and they're investing in technologies that really weave together the entire shopping process.

You know, our research here at Salesforce shows that every consumer spends, on average, nine different touchpoints across the entire buying journey. And what that means is in the past it was really a fragmented journey and probably related to bad experiences. And the same research showed that 80% of consumers said after three bad experiences, they're going to abandon a brand.

So the point here is our technology weaves together the entire shopping process from inspiration to purchase to service, both in the digital and physical worlds.

BRAD SMITH: Hey, Brad, while we have you, Salesforce also summoned the metaverse into the chat and into the data as well, saying that as retailers begin to build in the metaverse that it's clear that shoppers are ready to purchase across new channels. So what's the reality or anticipated ramp time for metaverse transactions playing a material role in future digital holiday-season sales?

ROB GARF: Yeah, this is something, Brad, that we've been looking at for quite some time. We call it shopping at the edge. I mean, retail, if you think about it, from the beginning of time was all about pulling consumers to their brand. And now it's about pushing their brands to wherever the consumers are, and they're increasingly traversing social, messaging, gaming, voice. The cool kids are talking about metaverse. So it's about pushing that brand, the price, the promotion, the inventory to wherever the consumers are.

Our research shows that transactions off of the retailer's property are going to increase 30% over the next couple years. So it's really been accelerated, by the way, with some of these big tech platforms getting in the game, but it's something that we've been seeing for quite some time, shopping really changing from this discrete event to really this embedded event in our daily lives. Which much of it, by the way, is in digital.

ADAM SHAPIRO: All right, we appreciate your sharing all of this with us. First, Brad Smith, always good to have you here. Congratulations to Rob Garf, Salesforce vice president and general manager of retail. We'll be right back.

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