AI will become more important in the future of retail

During the last edition of Shoptalk Europe, various topics about the future of retail were in the spotlight. If there is one thing that all experts agreed on, it is that the role of artificial intelligence (AI) in retail is becoming more important. With challenging macroeconomic conditions, high expectations and increased competition, investments in technology are becoming critical to improve productivity, address the customer experience and drive growth.

This advanced technology, feared by some, lauded by others, sounds like the future and has, in fact, been in our midst for some time. Retailers are now ready to take full advantage of it. Whether it’s to improve their sustainable image, tackle the supply chain or win over the consumer, a new era has arrived.

Technology and sustainability come together

Sustainability remains a focus for businesses and consumers. The new generations are becoming more environmentally conscious and companies know that part of their success depends on the efforts they make in this area, which in many cases is not enough.

In this context, Robert Gentz, Co-Founder and Co-CEO of Zalando, analyzes the challenges posed by today’s socially and environmentally conscious consumer. To drive growth, Zalando has increased its focus on sustainability and circularity, a more strategic approach to its business and brand collaborations. Gentz ​​also assured that Zalando aims to “make branding as easy as possible” to build their digital presence using the German retailer’s infrastructure.

Jason Crawford, vice president of digital growth at Hype, Adidas said transparency and authenticity are the key values ​​consumers want brands and retailers to uphold. Retailers should put ‘doing right’ at the heart of their message and demonstrate their commitment, rather than telling what they want to tackle or ‘greenwash’.

On the second day of Shoptalk, Jérôme Dubreuil said, Chief Digital Officer from Decathlon, which uses AI to drive sustainability. Decathlon uses the technology to encourage sustainable behavior among customers, for example by offering long-term bike rental instead of just bikes for sale. Dubreuil confirmed that AI helps to provide a 360-degree view of the consumer by, for example, registering which deposits they participate in and what they are interested in. For example, Decathlon can make personalized recommendations to help customers lead a more active life.

Bubble Skincare founder and CEO Shai Eisenman noted that many sustainability mistakes are made within the beauty industry, particularly around product refills. She explained that refill bottles need to be used 28 times to have an impact on the environment, something that many consumers are not aware of.

Web3 and the retail landscape

On the second day of the conference, Deborah Weinswig, CEO and Founder of Coresight Research, took the stage to outline how Web3 can help brands and retailers in their supply chains.

Retailers face a number of challenges and bottlenecks in managing their supply chain. Web3 technology can help improve traceability, transparency, intelligence and automation of the supply chain, helping to mitigate these challenges. As Weinswig explained, there are many benefits to using smart, connected supply chains, such as:

• Better demand forecasting
• Faster product design and on-demand production, as well as consumer-to-manufacturer capabilities
• Better traceability, compliance and circularity
• Improved labor efficiency and cost savings
• Higher speed

Weinswig said some retailers are not using Web3 in their supply chain because their software can’t handle Web3 technology. She also pointed to the lack of transparency in the global supply chain, with parts and products still sitting in containers and factories. “There are disconnected systems and there is no data consistency,” she said.

Generative AI, an interesting technology to improve the customer experience

Gentz ​​(Zalando) pointed to the rapid development of e-commerce, especially in the fashion sector, and predicted that the future of online retail will look very different in 15 years from now. Gentz ​​said a lot is happening in the content space to drive consumer engagement using 3D images and video. Zalando believes that advancements in generative AI will greatly contribute to the evolution of the online customer experience as fashion brands and retailers look for improvements to make the e-commerce journey more fun, relevant and personal.

Gentz ​​expects that generative AI will make product discovery easier, because online such technology can be a source of inspiration and interaction, in addition to typical associated elements, such as in-store shopping. For example, instead of asking sellers for advice on looks for a particular event, shoppers can use generative AI to access recommendations and discover cross-sale products.

Zalando expects ChatGPT (an AI technology) and content inspiration features to help grow the fashion industry’s share of the European e-commerce market from 20% to 40%, according to Gentz.

Customer data drives personalization and customer value

In the ‘Using Customer Data to Surprise and Delight’ session, retailers explored how data can help brands and retailers meet high customer expectations and improve the shopping experience.

Retailers and shopping centers use data to gain a more complete understanding of the shopper and personalize the shopping journey to improve the customer experience. Alex Williams, head of online retail and growth at UK retailer M&S, spoke about collecting data on products, transactions and customer behaviour. This forms the basis of the company’s internal personalization strategy, which aims to personalize its six billion digital customer interactions per year.

Williams emphasized personalization and urged retailers to look at the customer as a whole, ultimately leading to cross-channel experiences. Williams called the M&S Bullseye platforms “a competitive advantage” because he can’t achieve that with off-the-shelf software.

By working with Persado and using language profiles, M&S creates emails in thirty minutes, compared to the average two to three days it takes agencies. In the case of M&S, the personalized content, based on reward and satisfaction, increased click-through rates by five percent and generated a 10 to 20 percent increase in open rate, Williams said.

Speaking of the brick-and-mortar stores, Frédérique Cochi-Beyot, director of marketing at Unibail-Rodamco-Westfield, said URW delivers personalized promotions through its Westfield Rise solution that leverage customer data to deliver better in-store experiences. The company captures data at the mall by reducing consumer pain points while addressing the needs of shoppers. For example, the company knows that queues are a barrier to shoppers and uses video signage to inform them of waiting times and special offers. At Nespresso, this led to a turnover increase of 19.5 percent, according to Cochi-Beyot.

Creating data-driven wow moments to delight shoppers

The increase in online shopping in recent years has put the role of the brick and mortar store under a magnifying glass. Both consumers and retailers are placing more emphasis on the physical shopping experience.

Michael Gabay, co-founder and CEO of Israeli tech start-up Trigo, pointed to the need to create “surprising” moments in stores, which he believes will be one of the biggest shifts in the shopping experience in the coming years. Such moments can be created through personalisation, experiential retailing or services, and are likely to become increasingly technology driven.

This means that the physical store will become increasingly dependent on customer data. Eric Chemouny, MD of Retail and CPG Industries at Google Cloud, said knowing consumers as individuals is necessary for retailers to propose services and ensure stores meet shopper demand for product variety and availability.

Anastasia Georgievskaya, founder and CEO of Haut AI Computer Vision for Skinkare, a software-as-a-service (SaaS) platform focused on the skin care category, noted that “great” moments are created when retailers think about how they can make each shopper’s next shopping experience better than the last, rather than focusing on transactional relationships. He also highlighted generative AI, such as ChatGPT, as a future facilitator of these retail “wow” experiences.

As for the future role of the store, Thierry Gadou, president and CEO of e-shelf tagging specialist SES-Imagotag, believes brick-and-mortar stores are “the future of e-commerce” as they will increasingly provide local fulfillment for online orders. According to the manager, local e-commerce offers advantages in terms of efficiency and sustainability.

SES-Imagotag has already seen its clients, such as US multinational Walmart, put stores at the heart of their omnichannel strategies. Local e-commerce will grow at a rapid pace, and Gadou estimates that more than 50 percent of online orders will be delivered to brick-and-mortar stores in the next five to seven years.

AI, a new weapon in the fight against returns

At the Shoptalk 2023 conference, we saw a shift in thinking on the issue of retail returns, which are generally critical both in terms of lost sales and in terms of the logistics and costs involved in handling a come back to see. Zalando’s Gentz ​​emphasized the importance of returns for increasing customer lifetime value (CLV), as customers are less likely to hesitate to order if the returns process is simple. Gentz ​​said it helped Zalando develop a long-term vision of shopping convenience for customers and CLV for the company.

With 50 percent of items being returned, of which a third are related to size, Zalando now has an opportunity to collect and use data to change the fashion industry, said Stacia Carr, Vice President of Size and Fit at Zalando. Carr explains that the root cause of fit issues is the transition from tailoring to industrial production.

The company addresses sizing issues using customer feedback and computer vision. Based on shopper preferences, Zalando can select a smaller, tailored range of products in the right size and with the right product/fashion features to meet individual customer needs. This supports a 10 percent return discount on items with personalized advice on the product detail page.

In June 2023, Zalando aims to launch fitting advice based on two photos of shoppers and a virtual dressing room, using customer avatars to show the fit of different sizes and better assess which size and fit consumers prefer. These services will keep shoppers engaged and give Zalando better insight into what shoppers are likely to buy, says Carr.

This article previously appeared on FashionUnited.ES. Translation and editing by Sylvana Lijbaart.