Shoptalk 2023: AI, more important than ever for the future of retail

During the latest edition of Shoptalk Europe, many topics about the future of retail were discussed, but if there is one thing that all the experts attending the congress agreed on, it is the role of AI (artificial intelligence). With a challenging macroeconomic environment, heightened expectations and intensified competition, investment in technology will be crucial to improve productivity, enhance the customer experience and drive growth.

Feared by some, lauded by others, this cutting-edge science that sounds like the future is actually already with us, and retailers are poised to take full advantage of it. Whether to improve their sustainable legacy, refine the supply chain or win over the consumer, a new era is dawning.

Technology meets sustainability

Sustainability remains a central focus for businesses and consumers. The new generations are becoming increasingly eco-conscious and companies know that part of their success depends on mastering this subject, which in many cases they have been failing to do.

In this regard, Robert Gentz, co-founder and co-CEO of Zalando, analysed the challenges that today's socially and environmentally conscious consumers pose. To drive growth, Zalando has increased its focus on sustainability and circularity, taking a more strategic approach to its operations and brand partnerships. Gentz also assured that Zalando is committed to "making it as easy as possible" for brands 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 most important values consumers want brands and retailers to uphold. Retailers must put ‘doing good’ at the heart of their message and demonstrate their commitment to that cause, not just pay lip service to the concept or greenwashing.

On the second day of Shoptalk, Jérôme Dubreuil, Decathlon's chief digital officer, said the company is using AI to drive sustainability. Decathlon is using technology to drive sustainable behaviour among customers, for example by offering long-term bike rentals instead of only bikes for sale. Dubreuil confirmed that AI helps provide a 360-degree view of the consumer, detecting for example which sports they participate in or are interested in. This way Decathlon can provide personalised recommendations to help customers lead a more active life.

Founder and CEO of Bubble Skincare, Shai Eisenman, noted on her part that there is a lot of sustainability faux pas in the beauty industry, particularly around product refills. She explained that refillable bottles need to be used 28 times to have an impact on the environment, something many consumers are unaware of.

Web3 and the retail landscape

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

Retailers face a number of challenges and constraints in managing their supply chains and Web3 technology can help improve traceability, transparency, intelligence and supply chain automation, helping to mitigate those 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 manufacturing, as well as consumer-to-manufacturer capabilities
• Increased traceability, compliance and circularity
• Improved labour efficiencies and cost savings
• Increased speed

Weinswig said that some retailers do not use Web3 in their supply chains because their software is not Web3 compatible. She also pointed to the lack of transparency in the global supply chain, with components and products still in containers and factories, "There are disconnected systems and no consistency of data," she said.

Generative AI, an exciting tool to improve customer experience

Highlighting the rapid development of e-commerce, particularly in the fashion sector, Gentz (Zalando) predicted that the future of online retail, in 15 years, will be very different than it is today. Gentz said a lot is happening in terms of content to drive consumer engagement using 3D images and video. Zalando believes that advances in generative AI will contribute greatly to the evolution of the online customer experience, as fashion brands and retailers look to improve to make the e-commerce journey more fun, relevant and personal.

Gentz expects generative AI to greatly facilitate product discovery as online such technology can be a source of inspiration and interaction, among typically associated elements, as is the case with in-store shopping. For example, instead of asking shop clerks for advice on looks for a particular event, shoppers can use generative AI to access recommendations and discover cross-sale products.

Zalando expects ChatGPT (OpenAI's generative AI technology) and content inspiration features to help increase the fashion industry's share of the European e-commerce market from 20 percent today to 40 percent in the future, Gentz said.

Customer data drives personalisation and customer value

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

Retailers and shopping centres are using data to gain a more complete understanding of the shopper and personalise the shopping roadmap to enhance the customer journey. Alex Williams, head of online retail and growth at UK-based retailer M&S, spoke about gathering data on products, transactions and customer behaviour. This forms the basis of the company's internal personalisation strategy, which the it intends to use to personalise its six billion digital customer interactions per year.

In emphasising personalisation, Williams urged retailers to take a comprehensive look at the customer, which will eventually support the creation of experiences that span all channels. Williams mentioned the M&S Bullseye platforms, which create a competitive advantage for the retailer that it can't achieve through standard software, he said.

By working with Persado and using language profiles, M&S creates emails in 30 minutes, compared to the average two to three days it takes agencies. In M&S's case, the personalised content, based on reward and gratification, increased the click-through rate by 5 percent and generated a 10 percent to 20 percent increase in open rate, according to Williams.

On the physical shop side, Frédérique Cochi-Beyot, marketing director at Unibail-Rodamco-Westfield, said that through its Westfield Rise solution, URW delivers personalised actions that leverage customer data to provide better in-store experiences. The company captures data in the mall by reducing consumer pain points while addressing shoppers' needs. For example, knowing that queues are a barrier for shoppers, the company uses video signage to inform them about waiting times and special offers. At Nespresso, this resulted in a 19.5 percent increase in sales, according to Cochi-Beyot.

Creating data-driven wow moments to delight shoppers

The increase in online shopping in recent years has focused attention on the role of the retail shop. Both consumers and retailers are placing greater 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 shops, which he believes will be one of the biggest shifts in the retail experience in the coming years. Such moments can be created through personalisation, experiential retailing or services, and are likely to be increasingly driven by technology.

This means that the physical shop will become more reliant on customer data. Eric Chemouny, MD of Retail and CPG Industries at Google Cloud, said that knowing consumers as individuals is imperative for retailers to propose services and ensure that shops meet shoppers' demand in terms of product variety and availability.

Meanwhile, Anastasia Georgievskaya, founder and CEO of Haut AI Computer Vision for Skinkare, a SaaS (software-as-a-service) platform that caters to the skincare category, noted that 'amazing' moments are created when retailers think about how to make each shopper's next shopping experience better than the ones before, rather than focusing on transactional relationships. He also highlighted generative AI, such as ChatGPT, as a future enabler of these 'wow' experiences in physical retail.

On the future role of the shop, Thierry Gadou, president and CEO of e-shelf tagging specialist SES-Imagotag, believes that physical shops "are the future of e-commerce" as they will increasingly provide local fulfilment for online orders," said Gadou. According to the executive, local e-commerce provides efficiency and sustainability benefits.

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

AI, a new weapon in the fight against the returns issue

Throughout the Shoptalk 2023 conference, we saw a shift in thinking on the issue of retail returns, which generally represent a critical point both in terms of lost sales and the logistics and costs involved in handling them. Zalando's Gentz stressed the importance of returns in driving customer lifetime value (CLV), as customers are less likely to hesitate before ordering something if the returns process is easy. Gentz said this has helped Zalando develop a much more long-term view of shopping convenience for shoppers and CLV for the business.

With 50 percent of items being returned, a third of which are due to size-related issues, Zalando now has the opportunity to collect and use data to change the fashion industry, according to Stacia Carr, vice president of size and fit at Zalando. Carr explained that the root cause of fit issues is the transition from made-to-measure clothing and industrial manufacturing.

The company is addressing sizing issues through customer feedback and computer vision. Based on shopper preferences, Zalando can select a smaller, customised range of products in the right size and with the right product/fashion attributes to meet individual customer needs. This supports a 10 percent return reduction rate on items that include personalised advice on the product detail page.

In June 2023, Zalando plans to launch fitting advice based on shoppers taking two photos and a virtual dressing room, which will use 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, Carr said.

This article was originally published on FashionUnited.ES. Translation and editing from Spanish into English by Veerle Versteeg.