Introduction

Coresight Research is a research partner of Shoptalk 2024, which is taking place during March 17–20 in Las Vegas, Nevada. Shoptalk is an annual retail conference focusing on the trends, business models and technologies that are shaping the future of retail. This year, the conference covers five major themes in retail: employing AI (artificial intelligence) to transform your business; harnessing brand power and building brand trust; building loyalty via seamless customer journeys; creating unified retail experiences; and navigating changing industry relationships.

We present key insights from day one of the event, with highlights covering AI opportunities, associate enablement, brand building, retail media and more.

Source: Shoptalk

 

Shoptalk 2024 Day One: Coresight Research Insights

1. Employing AI To Transform Your Business

In a session focused on the AI opportunity for in-store operations and experiences, Mandeep Bhatia, VP, Global Digital Product & Omnichannel Innovation at Tapestry, described GenAI (generative AI) as a “game changer.”

Experimenting over the past six months, the retailer has created an associate app that utilizes GenAI. Associates can “talk” to the app, providing instant feedback. The company then synthesizes the information and learns from it “in real-time,” reducing previous feedback latency. As an example, Bhatia explained that during the holiday season, Tapestry learned that associates and customers did not like the music in stores through a note submitted via the GenAI app. Within a week, the music was changed.

Tapestry believes that effective AI adoption starts with empathy toward team members “from day one.” Companies need to focus on removing friction to make it easier for associates to use AI and other emerging technologies. “I fundamentally believe that happy associates lead to happy customers,” Bhatia said.

In the future, Bhatia is excited about the use of AI in fashion, noting particular opportunities for AI-powered product recommendations and virtual try-on.

In the same session, Chandhu Nair, SVP, Data, Analytics and Computational Intelligence, Customer & Marketing Technology at Lowe’s, explained that AI is helping the company redesign store layouts in ways that increase sales. Lowe’s is also currently working to use emerging technologies to help customers visualize what home-improvement projects will look like before items are purchased.

We also saw an emphasis on the use of AI to drive sales through personalization from Christopher Thomas-Moore, Chief Digital Officer at Domino’s. He highlighted that AI helps “offer the right thing to the right customer at the right time,” clarifying that Domino’s doesn’t want to show advertisements for meat-covered pizzas to customers who have only ever bought vegetarian pizzas.

Bhatia advised companies that when adopting AI, they need to “test and learn.” He added, “There has to be some tolerance for risk.” Thomas-Moore built on this sentiment, stating that “testing is fundamental” as the AI space requires “some allowance of discovery.” He and Nair recommended that businesses “start small” and be willing to refine/let go of technologies. Companies need to weigh the risks of adopting AI versus the benefits of participation, but even failures can teach companies about what works and what doesn’t work.

Nair added that before fully adopting AI, companies need an adoption plan, to help build trust around AI (and other technologies). He used elevators as an example: when buildings first installed elevators buildings had elevator attendants in them. These attendants not only taught people how to use elevators but also to trust them. Companies need to think about trust around AI in a similar manner.

The speakers all agreed that the key to AI success is good data.

Left to right: Nair, Thomas-Moore, Bhati and Melissa Gonzalez, Principal at MG2 and Founder of The Lionesque Group (Interviewer)
Source: Shoptalk

 

Across multiple sessions (including those detailed above), speakers made one thing clear: companies must test emerging technologies, including AI and GenAI, and be willing to make mistakes. What works for one retailer may not work for another retailer, so it is vital to solicit employee feedback when implementing new technologies. This is especially important as, if technology helps employees do their jobs, it will lead to happier customers and better sales. However, if technology proves to be a hindrance, employees will not use it (or will at least attempt to do so).

2. Creating Unified Retail Experiences

The applications of technology for employee productivity were also highlighted in the session, “Setting Store Associates Up for Success Through Tech Enablement.” Jon Alferness, EVP & Chief Product Officer at Walmart US, discussed Walmart’s Me@Walmart app, which brings together personal and work needs of Walmart associates into one app, automating repetitive/heavy-lifting associate tasks. According to Alferness, although the Me@Walmart platform took many years to develop, the “long journey” was worth it, as it has increased associate and customer satisfaction by 1.4% at Walmart.

He added that feedback from associates using the app has been “absolutely critical” to the ongoing improvement of the app and to unlock business efficiency gains. For example, store associates were working to understand what was in boxes in the back room, and suggested “unlocking the inventory” via data connectivity; the company now uses computer vision to provide visibility into stock in the supply chain, back room and on the floor.

Reiterating the focus on AI that we heard throughout the show floor and sessions on Shoptalk day one, Alferness said that Walmart envisions the future of the Me@Walmart app/platform as being shaped by GenAI, to predict what the associate needs to do next and bring it front and center, so that they can do it quickly, efficiently and easily. The company plans to bridge voice, text and video as both input and output mechanisms to help associates understand things quickly (such as where a product is located).

Alferness discusses the development and benefits of the Me@Walmart associate app
Source: Shoptalk

 

Katie Reeves, Managing Director, North America at COS, discussed the retailer’s “SmartStore” initiative, which—similar to Walmart—employs a store associate app to help associates find products quickly, whether in the store or in the supply chain. The initiative is a two-pronged approach, also employing e-readers in stores. It was developed in response to the feedback COS solicited from all departments and teams, including store associates, which revealed that laborious tasks prevented store associates from helping customers.

Reeves discusses COS’s “SmartStore” initiative, which employs a store associate app and e-readers in stores
Source: Shoptalk

 

Mattress Firm is another retailer that spoke at Shoptalk about the benefits of its associate-enablement technology. The company’s EVP and Chief Digital Officer, George Hanson, said that store associates receive more “sleep training” than doctors do during medical school. With this training, associates are able to help customers understand the connection between the products Mattress Firm sells and their own sleep health, as well as between sleep health and overall wellness. Combined, this information helps customers understand “why they need a new mattress.” Mattress Firm stores also feature sleep-diagnostic technologies that can help customers determine their sleep issues: The company has seen a 10% overall increase in conversion due to sleep-diagnostic technologies, Hanson reported.

Reeves and Hanson agreed that technologies to assist store associates and enhance in-store operations drive more than just efficiency: they help the retailers meet demand from modern consumers for more than just a shopping trip—customers are looking for meaningful and engaging experiences/moments when shopping.

When asked about how to encourage tech adoption among associates, Hanson emphasized the importance of educating staff, helping them understand how the tech not only helps the customer, but helps them as well. Reeves recommended that companies are patient and honest with associates and keep them informed of where the technology stands and any potential problems.

Hanson reveals that Mattress Firm has seen a 10% overall increase in conversion due to sleep-diagnostic technologies
Source: Shoptalk

 

Challenging, time-consuming tasks, such as finding and holding inventory, take store associates’ time away from helping customers and building connections with them. Today, emerging technologies, including computer vision, augmented reality and GenAI, can reduce time-consuming and repetitive associate tasks, freeing up their time to work with customers and increase conversions. In short, back-end investments have front-end impacts.

3. Harnessing Brand Power and Building Brand Trust

Discussing how PacSun is building its brand power among target demographics, Brieane Olson, CEO of PacSun, revealed that the company is focused on Gen Zers, having launched its gender-fluid line in 2021, and continues to receive constant feedback from young consumers via social media. PacSun is implementing initiatives to connect with Gen Zers and provide a “multi-channel, seamless” shopping experience for this digitally native demographic, Olson said. Supporting such strategies is the fact that there has never been more data at retailers’ fingertips, she highlighted. The company is working toward becoming the “first retailer in the space” to use BitPay (a crypto app) to accept crypto payments.

In terms of building customer loyalty with Gen Zers, Olson emphasized that PacSun always considers where consumers are spending a lot of their time. As such, the company has partnered with gaming platform Roblox to offer special benefits for loyalty club members.

Olson (left) discusses PacSun’s focus on Gen Zers with Hilary Milnes, Executive Americas Editor of Vogue Business (Interviewer) (right)
Source: Shoptalk

 

Thinking about brand building among consumers overall, Olson explained that consumers are demanding companies practice “conscious capitalism.” PacSun is building a future that its customers want to be part of, and it is doing so through co-collaboration and co-creation with influencers and customers, she said. Today, there is a greater emphasis on feedback and participation versus the old ways of doing business (the brand controlling everything) and feedback comes from “across the entire funnel.” Crucially, consumers “are no longer buying things; they are buying into things… They want to be a part of brands that are making a difference,” Olson explained.

Pamela Catlett, SVP, Marketing of Brilliant Earth, echoed this in her session with Chelsea Hirschhorn, Founder & CEO of Frida, about brand power and trust. Catlett states that brand building is about “staying true to your purpose and promise to consumers,” and Brilliant Earth works to educate consumers to increase visibility of the company’s efforts to do this.

Authenticity plays a big role in brand building. Frida achieves this through this real, raw content creation. The company is “influencing the influencers,” Hirschhorn said—namely, medical care professionals who are popular on social media—to build brand trust. She also underscored the importance of “delivering the right messages at the right time on the right channels,” instead of spreading the same message across all platforms.

When questioned about how brick-and-mortar stores affect brand building/storytelling, both speakers said that engagement with store associates is paramount. Brilliant Earth uses an appointment system to foster “personal exchanges” between sales associates and customers, including brand storytelling (the company has now expanded into indoor malls).

Left to right: Catlett, Hirschhorn and Alexa Tietjen, Content Director at Shoptalk (Interviewer)
Source: Shoptalk

 

To build a successful brand, companies need to meet customers where they spend a significant amount of time, building trust with them in those spaces via one-on-one conversations, partnerships, and content creation. Authenticity plays a major role in building a brand: social media can be used to tell authentic stories, building trust with consumers.

4. Navigating Changing Industry Relationships

Retail media networks (RMNs) data monetization and business-to-business (B2B) collaborations are some of change agents impacting key relationships in the retail industry. These can provide robust new revenue streams for retailers beyond the sale of goods. They offer a way to capitalize on existing assets (such as customer data and digital platforms) and adapt to changes in market conditions while minimizing risks associated with traditional sales.

In the mainstage keynote on day one, Colleen Aubrey, SVP, Ad Products & Technology at Amazon, explained that shopping is a journey, not just a “find, click, exit” series of steps. As such, RMNs need to be informed by the same signals that customers are looking for. Sponsored products help a brand connect with the customer during the shopping journey, but more important is that ads bring forward important attributes—pricing shopping speed, reviews, images—that are misleading if incorrect, Aubrey explained. In retail media, the priorities of the brand and customer are inherently aligned; no brand wants a disruptive interaction.

Amazon drills down into hundreds of pages of metrics every week to assess the match of ads to the context, determining what was meaningful in each interaction, which Aubrey underscored as critical to the ongoing improvement and success of an RMN. She also stressed that it is “important to meet customers where they are: in the living room, websites and apps, or twitch stream.”

The vast proportion of customer behavior today is digital—for example, streaming is outpacing live TV—Aubrey explained. This means that it is more organic and flexible. Streaming video into the online store supports a unified customer experience (crossing over with another key theme of Shoptalk that we discussed earlier) that drives a lift in page views and conversion rate, Aubrey said.

She believes that retail media is “not for the faint of heart.” It is not search advertising, which Amazon learned early on by making a mistake: it focused on keywords in targeted language rather than on the attributes of brands and products in a store, Aubrey explained.

Amazon did not set out to create and dominate the retail-media category; rather, the initial focus was to provide information on products that were not hosted on Amazon.com. In the process, the team learned that shopping was a journey, not a point-and-click action. Attributes are the key data for a RMN, which differs greatly from an online product search. In its own journey, Amazon has found that the ideal RMN aligns the goals of brands, retailers and consumers, and that advertising is one part of a great shopping experience.

Adding a final comment on GenAI, Aubrey referenced Amazon Ads’ beta launch of its AI-powered image generation tool at the tail end of 2023. When you generate a retail image ad, there is no room to misrepresent what the product looks like, including its use case and size, she said. This is imperative to brand trust. Aubrey warned that GenAI is not magic and it’s not the solution for everything.

Aubrey discusses the keys to success for RMNs
Source: Shoptalk

 

What We Think

While Amazon’s RMN started out modestly and in a different direction, its team has learned and evolved over time to become a leader in the category. Amazon also recognizes the need to meet consumers where they are. In this direction, Amazon has a direct connection with consumers via its Fire TV sticks and hosting of Thursday Night Football on Prime Video, enabling it to combine entertainment and commerce in innovative new ways.

Much of the conversation during day one of Shoptalk 2024 centered around helping store associates by removing time-consuming and laborious tasks, allowing them to spend more time helping customers and engaging with them. Via a combination of emerging technologies, namely AI and GenAI, as well as a comprehensive feedback loop, brands and retailers can turn back-end investments into front-end sales.

Coresight Research views GenAI as a key inflection point within the field of AI, and it builds upon decades of work in AI and machine learning. The technology enables retailers to speed up the product-development process, improve decision-making through enhanced data analysis, and personalize digital campaigns.

However, companies cannot simply implement new technologies, as what works for one company may not work for another. Retailers must start small, test, and be willing to face failure and take on feedback.

Implications for Brands/Retailers

• To build a successful brand, companies need to meet customers where they spend a significant amount of time, whether that is in the metaverse or at the mall. Companies also need to build a seamless pathway between those touchpoints, so customers can move between them without friction.
• In an era of heightened sensitivity and microscopic focus on missteps, brands must be crystal clear on what they stand for, the purpose of their brand and products, and who their customers are, with little margin for error.
• Back-end investments can turn into front-end sales: when employees are happier and have more free time, they can better engage and interact with customers, leading to increased sales.
• It is important for retail companies to test new technologies thoroughly before implementing them company-wide, in order to learn what works best for them.
• The retail media market is poised for substantial growth and transformation as more advertisers recognize the benefits of this channel and more retailers enter the market. To capitalize on the continued growth of retail media, retailers need to effectively differentiate their offerings through unique features and data insights. Brands and retailers can benefit from Amazon’s learnings and missteps in its journey to build and fine-tune its RMN.

Implications for Technology Vendors

• Amazon’s accumulated knowledge and experience in creating its leadership position in RMNs represents a substantial barrier to entry for new competitors.

Impacts from AI

• Amazon laid out some of the risks in using AI in product imagery, including to brand trust. The representation of a product has to be completely accurate, such as its size and use.