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Exploring Current Trends in Retail: Sales Predictions and Technological Influence

In the past week, retail economic indicators showed a cautious yet optimistic outlook, with projected growth in US retail sales for 2024 and encouraging signs of UK consumer confidence in March. Surveys revealed that store employees prioritize enabling technology and consider it a factor in their loyalty to a company. Additionally, stores are perceived as superior to online platforms for minimizing returns and facilitating discovery, particularly in the fashion sector, as evidenced by survey data.


An AI-generated cookbook, along with its purported author, offers a glimpse into the potential drawbacks of a future heavily reliant on artificial intelligence. Several retailers faced technological setbacks that temporarily hindered their sales operations. Moreover, certain grocery customers are mobilising to boycott retailers unless they reduce prices by 15%, while self-checkout systems undergo further adjustments in stores with high theft rates. Let's delve into the latest developments in the intersection of retail and technology.





Retail Economic Indicators


In the past week, the National Retail Federation (NRF) shared significant figures. Firstly, they offered insights into Easter spending, projecting it to reach the second-highest level in NRF's consumer intent survey history, second only to last year's figures. This underscores the complexity of forecasting major spending occasions. Last year's spending surpassed this year's prediction partly due to the nine additional shopping days leading up to Easter. Despite similar participation rates between this year and last year, the anticipated average spending per person is lower at $177.06 compared to last year's $192.01.


Additionally, NRF released their forecast for US retail throughout 2024, predicting a growth rate of 2.5-3.5%, aligning closely with or slightly surpassing the Federal Reserve's targeted inflation range. In 2023, retail sales saw a 3.6% increase. This forecast reflects a moderate outlook, leaving room for a range of potential outcomes, while acknowledging consumers' continued resilience, which may or may not persist in the future.


Retail Tech & Research Data


This week brought a plethora of research concerning the influence of retail stores. Firstly, eMarketer conducted a survey revealing that physical stores exert the greatest impact on fashion discovery compared to other channels. However, the findings might not have been as conclusive as store operators desired: "nearly" 40% of consumers indicated that they discover fashion through visits to physical stores. Brand and retailer websites ranked second and third, with responses also in the 30% range. Interestingly, store preference was more pronounced among Gen Z compared to other generations.


A recent Consumer Returns Survey conducted by the International Consortium of Shopping Centers (ICSC) revealed that consumers return items purchased from brick-and-mortar stores at a significantly lower rate compared to online transactions. The survey found that the average return rate for online purchases stands at 15.2%, which is three times higher than the return rate for in-store purchases, at just 5%, spanning across various industries. Specifically focusing on apparel, online returns averaged 22%, whereas in-store returns were notably lower at 6.2%. Additionally, 87% of surveyed consumers who admitted to overbuying apparel online cited the desire to try items on at home as the primary reason. These findings closely mirror the averages observed among customers tracked within the Aptos customer base.


AI & Retail





I'm a keen follower of The Future Normal, a newsletter curated by Henry Coutinho-Mason, and in his latest edition last week, he delved deep into the dual impact of AI, highlighting both its potential benefits and drawbacks. While AI has the capacity to improve the world, it also poses risks. Two examples he cited caught my attention.


Firstly, he mentioned IKEA's initiative of retraining its 8500 customer service operators to serve as remote design consultants after introducing a chatbot to replace their previous roles. This investment in upskilling led to IKEA generating EU1.3 billion in sales in 2022, underscoring the notion that growth cannot solely be achieved through cost-cutting measures but rather through strategic investments.


The second example discussed was Kernel, a new venture by Chipotle founder Steve Ellis, which introduced a "robot-powered, partially automated restaurant concept." Despite requiring only three workers per outlet, Ellis emphasized the potential for these roles to offer higher wages and benefits, effectively transforming what might be perceived as a menial job into one paying $27/hour with paid vacation—a compelling approach to leveraging automation savings.


On the downside of AI, the issue of data inadequacy surfaces, as retailers struggle to meet AI's insatiable demand for data due to fragmented and inaccessible datasets. A survey conducted by Salesforce and the Retail AI Council of 1400 retailers revealed that nearly half of respondents faced challenges in making their data accessible, with only a minority having a comprehensive view of their customers. Despite these obstacles, AI adoption persists, particularly in the realm of personalization, with a majority of respondents employing AI for various personalized services.


Moreover, concerns arise regarding AI-generated content, exemplified by the perplexing journey surrounding a questionable cookbook and its potentially AI-generated author. While lawmakers aim to address such issues, marketplaces like Amazon monetize vast numbers of sellers and listings, prompting questions about their accountability for fraudulent activities occurring within their platforms. This raises pertinent questions about marketplace responsibility and legal accountability in the face of increasing instances of AI-related challenges, signaling potential legal and ethical dilemmas ahead.


Retail Winners and Losers


It was quite a shock to hear about Southwest Airlines' major breakdown during the holidays when their scheduling software malfunctioned after years of neglect. What's even more surprising is hearing similar tales from retailers who are actively investing in technology. First, McDonald's experienced a widespread outage of its app across multiple continents, followed by Sainsbury's having to cancel a significant number of home delivery orders for an entire day. This highlights the considerable challenges in creating a seamless customer experience, which necessitates extensive coordination among various technologies and touchpoints.


Meanwhile, Loblaws customers are threatening to boycott due to what they perceive as high prices. The discontent started last November on Reddit, in a group titled "Loblaws is out of control." Initially serving as a platform for venting frustrations, the group has evolved into an organized movement, with over 25,000 members posting photos of allegedly overpriced items. They are targeting all Loblaws banners, including Shoppers Drug Mart and T&T Supermarket, demanding a 15% price reduction across the board by May, among other demands.


This trend isn't solely about Loblaws but reflects broader issues within the grocery industry, where retailers face pressure from both cost-conscious shoppers and consumer packaged goods brands that have raised prices beyond inflation. As evidenced by Carrefour's decision to stop selling Pepsi in January due to "outrageous prices," grocers find themselves caught in the middle. Such consumer activism is likely to increase, fueled by social media's ability to connect like-minded individuals and amplify grievances.


In the ongoing debate over self-checkout (SCO), retailers like Five Below and Dollar General are adjusting SCO systems to either limit availability, restrict the number of items allowed per transaction, or increase staff assistance in SCO lanes. Target has also made changes to enhance loss prevention in high-theft stores, joining numerous others on this front.


Additionally, several retailers are diversifying beyond traditional retail. Walmart, for instance, plans to offer its AI-driven logistics solution, "Route Optimization," to third-party businesses through its Walmart Commerce Technologies subsidiary. Marks & Spencer is reportedly collaborating with HSBC to develop a "super app" integrating banking, payment, and loyalty program features. Shein is offering its small-batch manufacturing model to interested parties as a "supply chain as a service," emphasizing its quick, small-batch capacity. Amazon's Zoox subsidiary is expanding its autonomous vehicle pilot programs in Foster City, CA, and Las Vegas, NV, focusing on robotaxis for the time being.


The Bottom Line


It's validating to see one's beliefs supported by empirical research, although it's essential to approach such findings with a critical eye, mindful of potential confirmation bias. While the benefits and return on investment (ROI) of eCommerce are evident, in today's complex omnichannel landscape, it's more challenging to discern the value contributed by physical stores. Often, the loudest voices receive the most attention, overshadowing the significance of brick-and-mortar establishments.


Unfortunately, it's disheartening to observe retailers encountering barriers in their pursuit of leveraging GenAI due to data limitations, although this outcome isn't entirely unexpected. I anticipate this trend persisting throughout 2024, where successful proof of concepts may stall due to the need for extensive data organization and accessibility enhancements. Nonetheless, as demonstrated by the peculiar cookbook incident, we are merely scratching the surface of GenAI's capabilities, encompassing both positive and negative potentials. Moreover, the experiences of McDonald's and Sainsbury underscore the challenges inherent in even the most fundamental technological endeavors. Nevertheless, consumers remain indifferent to these complexities; their expectations must be met, regardless of the obstacles retailers face.


Source: Nikki Baird

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