Introduction

Coresight Research is a research partner of Shoptalk Europe 2023, which is taking place during May 9–11 in Barcelona, Spain. Shoptalk Europe is an annual retail conference focusing on retail innovation.

We present our top insights from the first day of the event.

Shoptalk Europe 2023 Day One: Coresight Research Insights

Shopper Engagement: Sustainability-Focused Consumers and the Emergence of Generative AI

Sustainability Is Top of Mind

It is key for retailers to understand today’s consumer, whose priorities may have shifted due to Covid-19 and its aftermath. Ayla Ziz, SVP of Global Sales & Chief Customer Officer at Danone, highlighted key changes that the company has identified:

• Health has become more of a consumer concern since Covid-19. Appealing to health-conscious shoppers, 80% of Danone’s product portfolios are classed as healthy.
• Consumers are venturing back to stores following their shift to e-commerce amid the pandemic. They are looking for experiences, and demand for away-from-home products has increased as consumers spend more time outside. To tap these trends, Danone has developed four Alpro (plant-based milk alternative) variants developed for baristas and is facilitating access for discounters to Danone products.
• Digitalization has become more important for brands to connect to consumers.

Another consumer focus in the current environment is sustainability. Danone believes that sustainability and growth go hand in hand, with Ziz stating, “Sustainability without performance has no impact.” For Danone, there are three pillars to sustainability: health, nature (preservation and regeneration) and community. Ziz explained that it is really important for consumers to know how engaged brands are in sustainability. As one of its sustainability KPIs, Danone aims to reduce methane emissions by 30% on dairy products by 2030.

Ziz discusses consumer demand for sustainability

Source: Shoptalk Europe

 

Robert Gentz, Co-Founder and Co-CEO of online shoe and fashion retailer Zalando, discussed the challenges presented by today’s socially and environmentally conscious consumers. In order to drive growth, Zalando has increased its focus on sustainability and circularity, taking a more strategic approach to its operations and partnerships with brands. He also said that Zalando is committed to “making it as easy as possible for brands” to build their digital presence using Zalando infrastructure.

Jason Crawford, VP of Digital Growth at Hype, Adidas, said that transparency and authenticity are most important values that consumers want from brands and retailers. Retail companies need to put “doing good” at the core of their message and then demonstrate their commitment to that cause—not just paying lip service to the concept, or “greenwashing.”

Shai Eisenman, Founder and CEO of Bubble Skincare, said that there is a lot of greenwashing in the beauty sector, particularly around product refills. She explained that refillable bottles need to be used 28 times to make an impact on the environment—something that many consumers do not know. As with many retail sectors, Bubble Skincare believes that there is room for improvement in beauty when it comes to sustainability, including in packaging.

Generative AI Poses an Exciting Opportunity To Enhance the Customer Experience

Highlighting the fast development of e-commerce, particularly in the fashion space, Gentz (Zalando) posited that the future of online retail—say, in 15 years—will look much different to how it does today: “We will look back and scratch our heads” and wonder why we operated the way we do now, he said. Gentz said that there is a lot happening on the content side to drive consumer engagement, such as 3D imaging and video. However, crucially, Zalando views advances in generative AI (artificial intelligence) as likely to be a huge contributor to the evolution of the online customer experience as fashion brands and retailers look to become better at making the e-commerce journey more fun, relevant and personal.

Gentz expects generative AI to largely facilitate product discovery. In online fashion, such technology offers a source of inspiration and interaction—elements typically associated with shopping at physical stores. For example, rather than consulting store associates for advice on outfits for an upcoming social occasion, shoppers can use generative AI to access recommendations and discover relevant products.

Zalando expects ChatGPT (generative AI technology from OpenAI) and content inspiration features to help boost the fashion sector’s share of the European e-commerce market from around 20% currently to 40% in the future, according to Gentz.

Gentz emphasizes the potential of generative AI in the evolution of the online customer experience

Source: Shoptalk Europe

 

Giorgio Busnelli, Director of Consumer Goods Europe at Amazon, said that AI is one of two pillars for the company in the physical grocery retail sector—the other being omnichannel, which incorporates workforce management tools and the Amazon Fresh format with Amazon’s Just Walk Out technology. In terms of AI, Busnelli claimed that it can be a “breakthrough” in the grocery space, but he emphasized that although generative AI is a hot topic, Amazon has been investing in machine learning (ML) for some time. Now, using large language models (the basis of generative AI), Amazon can enhance the customer experience in new ways.

Customer Data Drives Personalization and Customer Lifetime Value

In a session called “Using Customer Data To Surprise and Delight,” retail executives explored how data can help brands and retailers meet heightened customer expectations and enhance the shopping experience.

Retailers and shopping centers are using data to achieve a more comprehensive understanding of the shopper and personalizing the individual path to purchase to enhance the customer journey. Alex Williams, Head of Online Trading & Growth at UK-based retailer M&S, spoke about capturing data on product, transactions and customer behaviour to form the basis of its Bullseye in-house personalization strategy, which the company aims to use to personalize its 6 billion digital customer interactions annually.

Williams discussed how M&S is implementing personalization

Source: Shoptalk Europe

 

In executing personalization, Williams urged retailers to begin with a single view of the customer, which over time will support the creation of experiences that span across channels. The M&S Bullseye platforms creates a competitive advantage for the retailer that it could not achieve through off-the-shelf software, Williams said.

Working with Persado and using language profiles, M&S is building emails in 30 minutes, versus two to three days with agencies. Based on reward and gratification, personalized content has increased the click-through rate by 5% and driven a 10%–20% increase in the open rate, according to Williams.

Source: M&S/Coresight Research

Elsewhere at Shoptalk Europe, we observed a shifting mindset around retail returns, which typically represent a pain point for retailers both in terms of lost sales and the required logistics and costs involved in returns management. Gentz emphasized the importance of returns in driving customer lifetime value (CLV) as customers will be less likely to hesitate to order something if the returns process is easy. Gentz said that this has helped Zalando take a much more long-term view of driving convenience for shoppers and CLV for the business.

With 50% of items returned, one-third of which are due to size-related issues, Zalando has an opportunity to capture and use data to change the fashion industry, according to Stacia Carr, VP of Size & Fit at Zalando. Carr explained that the root cause of fit issues was the transition from made-to-fit apparel to industrial manufacturing. The company is addressing sizing issues with customer feedback and computer vision. Based on a shopper’s preferences, Zalando can curate a personalized, smaller assortment of products that are the right size and have the right product/fashion attributes to appeal to their individual needs. This supports a returns reduction rate of 10% on the items that include personalized advice on the product detail page.

In June 2023, Zalando plans to launch fit advice based on shoppers taking two photos and a virtual dressing room, which will use customers’ avatars to display the fit of different sizes and better assess which size and fit is preferable. These services will keep shoppers engaged and provide Zalando with better insights into what shoppers are likely to purchase, Carr said.

Carr discusses how Zalando is using customer data to solve sizing and fit issues

Source: Shoptalk Europe

 

Targeting Gen Z Shoppers Requires Specific Engagement Strategies

Now the world’s largest generation, Gen Z has captured the attention of most retailers and brands. This digitally native group is financially conscious, values sustainability and authenticity, and is eager to shop on new platforms and channels. Eisenman (Bubble Skincare), Crawford (Hype, Adidas) and Alan Tyldesley, Retail Category Development Officer, EMEA, at Spotify joined Debbie Ellison, Global Chief Digital Officer at VMLY&R COMMERCE to share how they are engaging with and developing products and offerings for Gen Z shoppers.

According to Tyldesley, more than half of Gen Z complain of too much visual stimulation. Spotify, using the power of music and sound, provides a place of exploration, discovery and comfort away from the uber-stimulation. Tyldesley explained that 80% of Gen Z use audio and music as a means to explore different facets of their personality so they can “show up in different ways.” Personalization and discovery are core pillars at Spotify, supporting AIDJ, a personalized tool that sits on the Spotify app in beta. Describing the tool, Tyldesley said, “It knows your taste better than you do, analyzes what you love and adjusts based on time of day, mood and other variables.”

Eisenman spoke about the return of Gen Zers to physical stores, saying that 80% prefer physical stores, and more than half of those prefer mass merchants. Bubble Skincare surveys 1,500 consumers every three to four months and connects with its community of hundreds of thousands of app users to let shoppers influence the manifestation of the brand, such as by group sourcing product names and packaging ideas.

Reiterating consumer demand for authenticity and transparency, this time in marketing and brand values, Crawford said that “Gen Z will sniff out opportunistic insincerity.” Collaborations can drive brand heat, attract new customers and enhance brand relevance, but brands must understand the cycle of influence and synergy and to be clear on the values and direction of the brand when considering collaborations.

A session on catering to the Gen Z consumer

Source: Shoptalk Europe

 

Emerging Channels: Brands and Retailers Turn to Retail Media To Add Value

Continued macroeconomic uncertainty is driving more retailers to new and emerging channels to generate alternative revenue streams.

Amid the opportunities for monetizing data and growing retail media revenues, Ziz (Danone) noted that it seems that “everything is for sale right now” and that brands and retailers must not lose focus on what is key: these opportunities are made relevant by “creating profitable growth for all of us,” Ziz said. Rather than talking about “monetizing,” companies should focus more on how they put data at the service of growth.

Frédérique Cochi-Beyot, Chief Marketing Officer at Unibail-Rodamco-Westfield, has the unique perspective of hosting both shoppers and retailers at Unibail-Rodamco-Westfield, which is using its Westfield Rise retail media solution to provide tailormade experiences that tap customer data to provide better physical retail experiences. The company is capturing data in the mall and reducing consumer painpoints in tandem with addressing shopper needs. For instance, know queueing is the anathema of shoppers, the company uses video signage to inform shoppers of wait times and special offers. At Nespresso, this resulted in a 19.5% sales lift, according to Cochi-Beyot.

Cochi-Beyot outlines the Westfield Rise retail media solution

Source: Coresight Research

 

Store Experience: Amazon Has Ambitions in Omnichannel Grocery

Greater usage of online shopping in the past few years has focused minds on role of the retail store. Consumers and retailers alike are placing greater emphasis on the in-store shopping experience.

As we highlighted earlier, Amazon is focused on grocery retail, with Busnelli stating, “Winning in the grocery space is essential for any retailer, including Amazon.” This is interesting to hear from the e-commerce giant, which believes that multiple formats are key to the company creating a compelling value proposition to customers. Amazon has a fundamental belief that there is no such thing as a digital or physical customer; instead, shoppers keep bouncing between channels, Busnelli said. Amazon wants to be able to serve these omnichannel consumers in the best possible way at any point in time—giving rise to the need for an established store portfolio.

Amazon’s strategy is quite simple, according to Busnelli: to offer the broadest selection with the best convenience. Busnelli noted that Amazon’s competitive advantage is based on selection and convenience, such as offering same-day, one-day or two-day delivery.

Busnelli explains Amazon’s ambitions in the grocery space

Source: Shoptalk Europe

 

Amazon is also keen to continue incorporating technology in the supply chain as it continues to penetrate the grocery and FMCG sector. Busnelli stated that the best combination for a best-in-class relationship with vendors is “a mix of human touch and automation.” Automation helps Amazon understand which products to carry at which points in the year, while vendor partnerships and the human connection are crucial in informing launch strategies for new products.

Looking ahead, Busnelli reiterated Amazon’s stance on the role of technology: the company believes that the future of FMCG in Europe is a “combination of humans and technology,” he said.