By Chairman and Chief Executive Officer Marc Cooper
In May, Solomon Partners hosted its 14th Annual Consumer Retail Dinner, welcoming more than 100 consumer retail executives. This event serves as a key industry inflection point, with participants reflecting on important changes since last year’s dinner and what they anticipate for the year ahead. This year’s conversation featured two legendary brand builders: Mickey Drexler, former CEO of Gap and J.Crew and current Chairman of Alex Mill, and Steven Silverstein, CEO of Spencer Spirit, the parent company of Spirit Halloween and Spencer Gifts.
Jeff Derman, Co-Head of Solomon’s Consumer Retail group, moderated the discussion, which focused on the theme of building iconic, durable retail brands. The conversation covered a wide range of topics, from the waning influence of the seasoned merchant and what can be done to ensure taste and instinct still prevail, to winning business models in the current economic climate.
Jeff, having led that conversation and spoken with so many industry leaders throughout the evening, what stood out to you as the key takeaways from this year’s event?
Two themes clearly stood out. The first is resilience. Last year’s dinner took place less than a month after the Trump Administration’s imposition of sweeping tariffs. Many of our clients wondered if they would even be around for the 2026 edition, as they were contemplating the monumental impact to their cost structures.
But once again, retail leaders have not only shown great resilience amid existential threats, they have adapted and emerged stronger than anyone could have anticipated. It’s a continuation of the battle-testing management teams have endured over the last half-dozen years, as so-called “black swan” events occur with jarring regularity.
Secondly, with two legendary brand builders as featured panelists, we were reminded of the ability of powerful brands and effective merchandising to appeal to people emotions, even in a time when financial considerations are driving so much of consumers’ decision making in the retail industry.
Mickey and Steven spoke passionately about the “merchant instinct,” which is focused on the combination of product obsession, taste and judgment, with the merchant serving as a curator who must trust his or her gut, not just the data. With so much of the retail industry focused on algorithms and bottom lines, they reminded us that the industry shouldn’t be relegating the merchant to second or third place in the decision-making value chain, as they believe has become all too common of late. It’s impossible to achieve something truly enduring with a P&L-first, check-the-box approach to branding and merchandising.
You’ve been advising retail companies for decades. How would you characterize the broader state of the consumer retail sector right now and where does what we do fit in?
Despite a challenging macro backdrop, consumers are managing better than many people expected. However, affordability remains a real constraint, especially as fuel and other everyday costs continue to rise.
Notwithstanding, consumer spending represents approximately 70% of GDP, so while stresses on many people are real, there is still a tremendous amount of capital being deployed across the consumer economy. A key driver of our work is focused on how tools like M&A can help position our clients’ businesses for durable competitive advantage as consumer spending shifts and behaviors evolve in response to the world around them. Whether that’s accelerating access to a faster-growth product type, price point or customer cohort, or shedding business lines that can no longer deliver sufficient return on capital and time investment, M&A is increasingly looked at as an important tool to position a business for where the market opportunity is going to be most abundant in the future.
How is artificial intelligence impacting the sector today?
For most retailers, AI is becoming table stakes. The real question is how to approach it thoughtfully without getting caught up in the hype.
Retailers are focusing on two key areas: How do they use it to drive revenue, and where can they cut costs?
On the revenue side, instead of traditional SEO, it means investing in GEO (generative engine optimization) to ensure that your collateral, data, ratings, and imagery are structured for easy discovery and display by AI chat tools. AI tools are also increasingly being deployed to sharpen merchandising decisions and further personalize the customer relationship — helping ensure the right product appeals to the right customer.
From a cost-cutting perspective, retailers are looking at inventory, supply chain, and routing optimization, as well as routine task automation and more human-like customer support from chatbots. The optimists’ view is that these implementations will be a virtuous circle with human and financial capital freed up to allow investment into initiatives that feed the top line, to support acquisitions, or to put more money back into investors’ pockets.
However, this is all moving so rapidly, and management teams are still balancing curiosity with some healthy skepticism of too-good-to-be-true claims — all with a laser focus on ROI. Larger enterprises are structurally advantaged, as scale affords them the ability to experiment and make a lot of bets. By way of example, Amazon recently announced its intent to spend $200 billion in capex in the current fiscal year, with a large portion tied to generative AI initiatives. Even if only a small fraction of that expenditure results in differentiating AI capability, it will likely still widen the moat with less well-capitalized competitors who need to be more selective in their tech spending.
What is clear overall is that what feels state of the art today will likely look archaic in only a matter of months. It will be fascinating to see where the industry is when we gather for the 2027 Consumer Retail Dinner next May.
As you look ahead, despite all the well-known macro pressures, what gives you confidence about the consumer retail sector over the longer term?
Retail has always rewarded adaptability, and that hasn’t changed. The strongest operators today are leaner, more product-centric and more consumer-focused, while being increasingly data-driven — and they’re making smart, long-term decisions even in a choppy environment. Importantly, consumers still want to feel good about how they spend their money. They will look for the product that delivers the right mix of values for them (such as price, efficacy, brand affinity, etc.) to make them feel like their money was well spent.
And, of course, there is always going to be the next brand or business model that is exciting people. Barriers to entry have always been low in retail — but have only become increasingly so as brick-and-mortar sales evolved to omni-channel commerce to social selling and, soon, AI chatbot commerce. Innovative brands — whether they be legacy leaders of scrappy upstarts — meet the customer where they are today, and where they are going tomorrow.
Overall, while pressures seemingly will always remain, the fundamentals of consumer demand will remain intact. Retailers that stay disciplined and strategic will once again be well positioned to come out of this period even stronger. And, of course, brands that combine taste, vision, and judgment will always get their fair share.