Retailers focus for 2023: Reaping the fruits of their tech investments and championing customer loyalty

After a couple of years dominated by uncertainty, apparel retailers have a clear path of action: 2023 is the year to reap the fruits of their investments in AR, AI, and other tech to champion customer loyalty.

Earlier this week, the who is who of the retail industry met at the US largest trade event of the year to debate whereas that sought customer loyalty is to be achieved by ramping up consumer behavior analysis, inventory management, omnichannel strategies, discounted pricing or a combination of all. Indeed, if there was an overarching theme in this year’s edition of the National Retail Federation (NRF) Big Show, that was certainly that of understanding the always-connected customer and keeping their loyalty in the long term.

“The answer always lies with the customer”

In this regard, Paige Thomas, president and CEO of Saks OFF 5TH, encouraged fellow retail executives to look at their customers to get the answers they need. “The answer always lies with the customer. One part of it is engagement — customer acquisition. The other is the customer experience, the customer journey. Do everything you can to smooth the path,” THomas recommended to fellow retailers in a conversation with CNBC’s Melissa Repko during the NRF’s Big Show.

And the customers want to be back at the stores, “but just because if they have a good reason to go out”, specified an industry veteran that went back to NRF Big Show after a couple of years of absence. As highlighted in many of the US largest retail’s trade conference’s expert panels, physical stores will stay relevant and become more strategic for retail organizations as the most effective channel for customer acquisition and engagement. Gone are the times when brick & mortar stores were mere points of sale; physical stores now serve as logistics, service, and experience hubs. Consumers will go to the store to design their personalized items in real time, with the help of advanced digital design tools, try them on inside virtual fitting rooms and process their returns and exchanges with ease and convenience. Roberto Funari, CEO of Alpargatas and Giorgio Pradi, CEO of Sunglasshut agreed that retailers need to shift gears and focus on truly customer-centric business models, which demand “new ways to measure the contribution of the stores in attracting, retaining, and engaging more customers.”

“Something that we have been piloting for various clients in the fashion space is leveraging 360-degree insights based on behavioral data to optimize delivery and returns processing, helping them meet their customers were they are and increasing their brand loyalty,” said an executive from one of the vendors participating in this year’s Innovation Lab. “The big question remaining is how to convey those as added-value services” that turn shoppers into loyal, returning customers.

For Shelley Bransten, who leads the Retail and Consumer Goods Industries at Microsoft, “We are living in an age of incredible digital transformation.” However, warned Bransten, “Anything is achievable now, but with that power comes high expectations from consumers.”

Sustaining long-term growth

The ever-present supply chain problems have grown concerns amongst the retail industry that continuous delays and the loss of items will erode customer confidence. That’s precisely where a more established technology such as the Internet of Things (IoT) enters the stage. Or in the words of Willio’s CMO, “It’s all about getting real time automated visibility of the supply chain.” The chip-based tracking tags maker – backed by Qualcomm and Amazon – believes that, in the near future, IoT devices could gather demand signals from a store and automatically order.

Joining the conversation about environmentally friendly practices that wouldn’t jeopardize demand, Wilio’s executive suggested that a smart wardrobe that analyzes which items of clothing a consumer does and doesn’t use and suggests better quality items they will use more often could for example offset the environmental impact of fast fashion.

Proving the ROI of tech investments

After a couple of years’ worth of heavy expenditure in novel technologies – from augmented reality to predictive analysis, from autonomous delivery fleets to Web 3.0. stores -, the time has come for retailer to prove the return on those investments “Retailers need to learn how to do more with less. It requires working smarter, not harder, and being agile,” she added.

The likes of LVMH are paving the path in that regard. During one of the keynote sessions at the NRF Big Show, the world’s largest luxury group’s chairman and CEO Anish Melwani said that the company “has always been about innovation” as long as it enhances the heritage and DNA of the maisons of the group. Melwani highlighted the case of Tiffany & Co., which forays into the world of blockchain has resulted in one of the most successful NFT projects in luxury to date: NFTiff. “Each NFT sold for about 50,000 dollars. But purchasers received more than a .jpg or token,” highlighted the luxury conglomerate’s first executive. “What you got was the ability to purchase an actual piece of jewelry that was custom-made for your CryptoPunk.” In order to achieve that, Tiffany had to answer many questions. “How do you embrace the technology, how do you embrace the community that’s super-excited about this technology, but use it to introduce the world to what you’ve always been good at?” In this case, the solution involved modernizing the jeweler’s workshop to make a physical jewel that reflected the pixelated, 8-bit picture in an accurate fashion.

In the meantime, LVMH has been working towards leveraging their blockchain capabilities for authentication and traceability so they can deliver on their promise to different customer groups. For example, Tiffany’s customers can get a digital certificate that allows them to trace a diamond all the way back to the mine it came from. The luxury brand believes younger shoppers will care “more and more” about the source of raw materials and want to be able to satisfy that demand.

FitFlop is another retailer working on maximizing their bet on AI to realize their vision of “creating internal systems as sophisticated as the products it sells,” CTO Sal Usmani explained in a conversation with its technology partner Peak. The shoe brand is leveraging AI to understand how its customers interact with different products on the website and engage them based on augmented insights drawn from digital channels.

Phygital is king

Kyndryl CTO Kayla Broussard and WOW Concept Founder Dimas Gimeno assessed the power of data and the various leading-edge technologies enabling the phygital store. “Phygital goes beyond omnichannel to provide shoppers with seamless and interchangeable experiences. This means combining the best of the brick-and-mortar experience with the efficiencies of digital to create a unified retail enterprise”. Broussard and Gimeno agreed that today’s consumers expect a seamless, personalized shopping experience wherever they choose to engage. For retailers, that means that they need to stay competitive and find inventive ways to connect physical retail spaces with digital platforms.

For retailers big and small that comes down to understanding “what makes them special”. That was the parting thought of Domenico De Sole, chair of Tom Ford International, for his peer at Nordstrom, President and Chief Brand Officer Pete Nordstrom. “What makes you special? In your case, it’s the service — your service is legendary. What you are doing now with elevating the customer experience is great. One area for you to work on is visual merchandising, putting a sense of elegance in the way the store looks. To combine that with the service and the customer experience is an unbelievable formula for success.”