The modern retail consumer is becoming increasingly elusive. They leverage a multitude of channels to create a complex, non-linear footprint but want their experiences to be seamless and consistent at every touchpoint. They come into physical stores much less than before but have higher expectations of the in-store experience. They are concerned about data privacy and security but demand hyper-personalization.
In their quest to serve the exacting 21st-century consumer, retailers also have to contend with the volatility of climate change, a shifting geopolitical landscape, and the much-needed focus toward ESG commitments.
Persistent Systems kicked off the National Retail Federation (NRF) 2024 with our proud sponsorship of SuperSaturday, a philanthropic event conducted by the Retail Orphan Initiative on Jan 13, 2024. It was followed by three exciting days at Retail’s Big Show in the Javits Convention Center at NYC from Jan 14-16. Our team attended some enriching discussions, met several industry thought leaders, and came away with valuable learnings on how the retail sector can navigate the current challenging crossroads. Here, we share these along with a few observations of our own.
The Outlook for 2024
Industry experts expressed cautious optimism as we stepped into the new year. Fears of a recession, run-away inflation, and geopolitical unrest notwithstanding, consumer sentiment this holiday season was reasonably optimistic. The healthy sales numbers have led to a guarded, buoyant outlook for the coming year despite the uncertainty around two raging wars and supply chain constraints.
Total nominal Bain-defined retail sales grew 3.8% year over year this holiday season (November and December), close to the 3.0% growth forecast but below the 10-year average of 5.1%.
Nonstore sales growing 9.2% year over year this season accounted for nearly 28% of sales—its highest seasonal share to date.
A Massive GenAI-led Shift
Like all industries, retail, too, is excited about the new tech on the block. Retailers, big and small, have been testing the waters in 2023 and have established that GenAI is an effective tool to help design the hyper-personalized, conversational experiences modern consumers want. This year, the industry will be making big, bold investments in this technology. But drawing from our experience implementing technologies in the retail space over the decades, we believe it is crucial to build a strong business case for embedding GenAI across workflows, even as enterprises prove out the various use cases with quick Proof of Concepts.
- 81% of retail decision-makers feel the urgency to adopt generative AI in their business.
- 72% feel ready to deploy generative AI technology today.
- Retail decision makers have coalesced around five use cases where they’d like to deploy GenAI.
- Customer service automation.
- Marketing support and product description generation.
- French retailer Carrefour has used gen AI to create more than 2,000 product description sheets for its eCommerce site
- Creative assistance.
- Conversational commerce.
- Store associate knowledge and support.
Before embarking on large, shiny projects that need massive outlays, we must ask: which process needs GenAI as a core technology, which one as a supporting tool, and which one does not at all? Does GenAI help my employees work better, does it improve customer satisfaction, does it optimize my supply chain better, and more such crucial questions.
Prior to implementation, we need to pay careful attention to how we can create real, sustainable value with GenAI for retail businesses and their consumers. Based on this, formulate prudently thought-out approaches and well-defined goals, and lay out KPIs to measure success and business value.
Customer is King – But Employees are not Far Behind!
Today’s consumer zig-zags across digital and physical channels and expects the retailer to keep up. Retailers and their partner companies have recognized this new consumer and are delivering with reasonable success. A Forrester study commissioned by NIQ shows that companies that invest in omnichannel intelligence solutions fare better than those that don’t. At NRF, there were plenty of showcases around delivering hyper-personalized, frictionless omnichannel experiences – powered by data and analytics, AI, computer vision, intelligent kiosks, intelligent carts, and other cutting-edge tools. But what caught our attention was the importance that employee experience and productivity tools targeted at employees got at the event.
There is an increasing change in mindset about delivering superior experiences for employees as well, which in turn results in efficiency-led cost savings and a frictionless experience for consumers. From data-driven decision-making for merchants to tech-enabled assistance for seamless curb-side order delivery to digital assistants on mobile devices that provide real-time information access, there’s a plethora of investments going into this space.
As the world’s largest retailer says, “People led, Tech Powered” indeed! This is a welcome change that will go a long way in addressing the challenges the retail industry faces around worker safety and low wages.
The Tricky Territory of Returns Processing
Consumers want to experiment with the latest offerings and trends. When these purchase decisions do not work, or when a consumer has simply made an incorrect choice, they want the retailer to facilitate a smooth returns experience. But this comes with considerable cost and effort.
A recent study found that 63% of surveyed retailers are tackling this challenge, which has been further convoluted by eCommerce. Irrespective of tech advancements that help to make an online shopping experience very similar to an in-person one, there is a margin of error in these approximations that drives up the percentage of returns and the attendant outlays for reverse logistics.
The industry is experimenting with many methods to urgently improve returns management. A few retailers are charging for returns. But the use of analytics to grasp the consumer behavior that leads to returns and creating experiences that minimize this behavior is the goal. Many highly competent vendors currently offer solutions in this space, and the accuracy and cost-efficiency are certain to improve, creating a win-win.
Lessons from the Hyped Technologies of Yesterday
The Metaverse, AR and VR were meant to deliver virtual, immersive experiences at scale. Currently, while the latter two are seeing specific applications and some adoption, the hype around Metaverse has certainly died down. Metaverse is rarely considered a strategy when retailers scout for technologies to create state-of-the-art digital CX.
The barriers to Metaverse adoption are well-known and do not present an exact parallel to the GenAI scenario, but the trajectory of adoption for other emerging technologies offers useful lessons as the retail industry scales up GenAI.
In a Nutshell
The retail industry will continue its exciting tech-led transformation to exceed the expectations of the modern consumer. Data, analytics, and GenAI will lead the charge, streamlining multiple processes and unlocking innovation and frictionless consumer journeys.
We are excited to be participating and, in some cases, leading this change in the coming year.
Reference:
https://www.bain.com/insights/2023-holiday-shopping-inside-latest-retail-sales-snap-chart/
