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. (Not all our reports will cover all five themes.)

We present key insights from day two of the event, with highlights covering AI, collaboration, innovation, loyalty programs, personalization and more.

Shoptalk 2024 Day Two: Coresight Research Insights

1. Employing AI To Transform Your Business

Karin Tracy, Head of Industry – Retail, Fashion, Luxury at Meta, provided a compelling demo of the company’s multimodal GenAI language model in which she asked her Ray-Ban Meta smart glasses what she should wear for her Shoptalk presentation. The platform responded that she should wear a pantsuit for a more-professional experience, followed by a recommendation for black shoes. She then spoke with the glasses, which led her to the Madison Avenue boutique of designer Veronica De Piante. She said that Meta possesses the largest product discovery engine and that 40% of Instagram content is recommended by AI.

Tracy discusses Meta’s multimodal GenAI language model
Source: Shoptalk

 

In an interview, Maria Renz, Global Head of Commerce at Google, outlined the ways in which Google is leveraging AI, highlighting new “power tools”:

• The Chrome browser now tracks abandoned shopping carts, where the browser communicates with the consumer to complete the sale.
• The Google Lens image-recognition technology is used more than 12 billion times a month. In the app, a user can snap a photo that feeds into Google’s search engine to return results of visually similar products.
• Premium Android devices have a feature called Circle to Search, enabling a user to circle an item in a digital photo or video, discover it (quickly finding similar, shoppable options from retailers across the web) and purchase it without leaving the app.
• Shop with Google AI produces AI-generated, photo-realistic images from a search (such as “women’s stylish business suit green”) and real, buyable items below that the user can shop.

Renz said that AI is “enabling a different level of interaction” between brands and consumers, as it is driving the next level of personalization. For example, in the area of virtual try-on for apparel, AI enables brands to enhance diversity in model shots so that consumers can view how items look on someone who accurately represents them (height, weight, body type), down to the drape of the fabric.

Renz discusses new AI-powered offerings from Google
Source: Shoptalk

 

Personalization through AI is a theme that seemed to run throughout day two at Shoptalk. Debjani Deb, Co-Founder and CEO of Session AI, stressed the importance of behavioral AI in helping companies understand their customers and personalize their offerings in the “age of the anonymous,” as third-party cookies die and stricter privacy laws are enacted. Today, companies do not know anything about 90% of the visitors to their sites, she said. As a result, they typically focus their investments toward the 10% they do know.

By recording clicks, behavioral AI can predict a shopper’s next click and identify what shopping mood they are in—i.e., if they will not buy anything, if they are on the fence, or if they are likely to buy. This allows retailers to push the right experiences toward the right consumers. For instance, with an anonymous user that is unlikely to buy, they can nurture that relationship to increase the likelihood of a return visit, rather than promoting a product for a hard sale.

This type of technology also allows companies to put their promotion spending where it really matters: those who are likely to buy do not need incentives, so promotions should only be offered to those on the fence, something Session AI’s solution allows. Ultimately, this leads to a 35% reduction in promo spend for companies, according to Deb.

Also delving into AI-powered personalization was a panel featuring Kevin Lewis, Chief Growth Officer at Alimentation Couche-Tard, Kamanasish Kundu, VP, Head of Digital & Ecommerce at Kendra Scott, and Jessica Lachs, VP of Analytics & Data Science at DoorDash.

Lachs said that Door Dash is working to make transactions feel seamless and the app “more delightful,” with app surfaces personalized to each user. Other examples of current offerings from the panelists included personalized conversations with customers and the ability to leverage customer data to upsell customers at the point of purchase. Challenges for retailers include managing the disparate parties of customers, retailers and delivery employees, selling a large number of diverse products with multiple SKUs (stock keeping units) and the need for personalization to manage substitutions in grocery.

Left to right: Lewis, Kundu, Lachs, and Mark Abraham, Managing Director & Senior Partner, Boston Consulting Group (Interviewer)
Source: Shoptalk

 

Although “marketing and personalization get the hype, AI adoption is much greater,” according to Chuck Reynolds, Managing Director & Partner at L.E.K. Consulting. He emphasized that AI’s impact is still in its infancy. As the interviewer in the ”Evaluating AI’s Long-Term Opportunities and Challenges” session, Reynolds led an exploration of the panelists’ experiences with testing and implementing AI at their companies: Lyst, Macy’s and PacSun. The approaches varied widely, from highly customized installations to relying mostly on off-the-shelf tools; however, all tools needed to be adapted to the retailers’ unique businesses.

Shirley Gao, Chief Digital Information Officer at PacSun, highlighted that it is equally important to invest in consumer-facing AI and enterprise AI—i.e., to enhance the customer experience and to raise productivity internally—and companies need to strike the right balance to suit their needs. Emma McFerran, CEO of Lyst, echoed this point, adding that it is fundamental that companies select AI solutions that drive maximum value to the business.

Gao (left) and McFerran (right) discuss factors to consider when investing in AI
Source: Shoptalk

 

2. Harnessing Brand Power and Building Brand Trust

In a session on unlocking market growth, Shailesh Jejurikar, Chief Operating Officer at Procter & Gamble (P&G), discussed the evolution of its laundry products as an example of how the company has innovated over time to build brand power—from the development of Tide detergent products in World War II to the launch of the “Tide evo” fiber tiles in early March 2024. Over four decades, the market has grown 4X, while P&G has grown 5X, he said.

Jejurikar explained that product development starts with an innate understanding of the consumer. P&G identifies opportunities presented by consumer trends, such as more women joining the workforce in the 1940s creating the need for more help at home: enter Tide synthetic detergent. Decades later, the emergence of driers created the need for Downy dryer sheets. Fast forward, and the focus today is very much on environmental sustainability, driving increasing demand for detergent to deliver quality cleaning at low temperatures and with a low footprint. The super-concentrated Tide PODS detergent represented one step forward in innovation, and now, Tide evo begins a revolution in laundry, according to P&G. Tide evo is manufactured in a facility powered by renewable energy, features recyclable paper packaging, and is designed for cold water washing.

Jejurikar emphasized that gaining insight into consumer behavior in their home is critical to unlock opportunities for growth—i.e., how often do consumers use Febreze spray and how much do they use each time?

Jejurikar revealed that a major challenge in retail is on-shelf availability, a contributing factor of which is a lack of end-to-end data integration in supply chains. This causes other issues, too, such as a large percentage of trucks traveling empty because freight for their return trip could not be arranged. P&G views supply chain integration as a huge opportunity to save time and costs and reduce environmental impacts. “Getting data flowing and available to all parties” and “thinking of it as one supply chain” are key for P&G in rethinking how supply is done, Jejurikar said.

Looking ahead, P&G expects that it can use AI to develop new products faster and with “better-performing chemistry,” according to Jejurikar.

Jejurikar details P&G’s product innovation over time
Source: Shoptalk

 

Mattel, like many other companies at Shoptalk 2024, discussed the importance of collaboration to build its brand. Currently, the company is working to unlock its IP (intellectual property) with new entertainment offerings and brand partnerships, and the results are clear: last year, the company gained share in every segment across the world, according to Robbie Brenner, President, Mattel Films, Mattel. She explained that Mattel is centered around three values, which are all informed by a goal of “expertise in every vertical”: innovation, collaboration and execution.

Previously, the company was more focused on building individual brands (Hot Wheels, Barbie, etc.) rather than the Mattel brand. However, that changed with the Barbie movie, as Mattel was a character within the film. Next year is Mattel’s 80th anniversary, and Steve Totzke, President and Chief Commercial Officer at the company, told the Shoptalk audience to “expect big things,” around the Mattel brand. “The best is ahead for Mattel,” he said.

Mattel is also focused on demand creation, considering itself a “pioneer in the space.” Currently, to create demand, the company is utilizing both its social media accounts and Mattel Creations, its direct-to-consumer (DTC) site.

Totzke (left) Brenner (middle) and Krystina Gustafson SVP Content at Shoptalk (Interviewer; right) discuss Mattel’s approach to collaboration
Source: Shoptalk

 

3. Building Loyalty via Seamless Customer Journeys

Target’s keynote, “Meeting Consumer Expectations to Maximize Relevancy and Loyalty,” focused on its recently announced decision to completely revamp its Circle loyalty program, turning it into a three-tiered program, while also making it easier to navigate and understand, and even more “anchored to relationships.” Lisa Roath, EVP and Chief Marketing Officer at Target, explained that the first tier is free, the second tier is for Circle card holder (previously “Red Card” members), and the third tier is the Circle360 paid membership program. The messaging for the new loyalty program will be clear, consistent and feature consumer-facing language rather “corporate language,” Roath said.

Target developed the new program via focus groups, surveys and “shopalongs”, making it customer-grounded. The company listened to complaints about the previous program and took action to drive improvements: for example, it has removed “Tap to Add” discounts in the Circle app, as customers often found these discounts stressful and hard to complete. Target invested a lot in the UX of the Circle app, making it feel more personalized. The company is aiming to make the app feel like a customer is “walking into [their] favorite Target store,” Roath said.

As the new loyalty program grows, Target aims to not only maintain but deepen guest engagement and sentiment. It is doing this, in part, via partnerships, as partnerships are “a core part of [its] business,” according to Roath. For instance, linking the Ulta Beauty and Target Circle apps will provide users with 2X Ulta loyalty program points on select purchases.

Target wants the new loyalty program to show up in more culturally relevant ways. For instance, it has a year of refreshed creative content for the new Circle program built around the idea of “micro-joy,”—as Roath explained, this is the feeling you get when your Starbucks order is delivered to your car via the Target app.

Roath revealed that the Target Circle program has roughly 100 million members in the US, and those members spend 5X more, on average, compared to other shoppers.

As many brands and retailers have discussed at Shoptalk, it is important to have consistent, personalized experiences across all channels—a goal Target hopes to achieve with its new loyalty program.

Roath (left) discusses Target’s Circle loyalty program with Krystina Gustafson, SVP Content at Shoptalk (Interviewer; right)
Source: Shoptalk

 

In the session, “Engaging Digital Shopping Technologies,” Matt Smolin, Co-Founder and CEO of brand loyalty and membership platform Hang, explained that the company is looking to reinvent loyalty programs away from one-size-fits-all and the current focus on post-purchase rewards. Reiterating the emphasis we saw on personalization that we saw throughout day two (see the earlier insights on AI), Smolin said that Hang’s “radically new type of loyalty experience” is personalized, digitally immersive, and offers pre-purchase incentives and interactions.

The company’s solution shows how many rewards a user will earn as they put items into the cart. Those rewards are distributed via “mystery boxes” that the user opens to receive their rewards (inspired by loot boxes from video games). Hang also “fosters intrinsic motivation with gated experiences that are fun and habit-forming,” Smolin said. For instance, the company built a word game for Ulta Beauty’s loyalty program that gave users rewards for playing every day: 40% of users who play the game come back the next day, according to Hang.

Hang leverages AI for personalization, to give customers rewards “they actually care about,” Smolin said. He revealed that Hang’s loyalty programs have resulted in a 68% increase in spend per loyalty member, on average, and a 8.2X average ROI (return on investment).

Smolin explained how Hang is reinventing loyalty programs
Source: Shoptalk

 

In the same session, Alexandre de Vigan, Founder and CEO of Nfinite, offered an alternative view on how companies can differentiate themselves in a time of inflation, where shoppers have less money to spend and retailer profitability is being impacted by supply-side price increases. Brands and retailers are fighting for a “less important part of the cake,” leading to customers being “attacked” with ads and promotions, he said.

Nfinite believes that effective and engaging product imagery is essential as e-commerce keeps growing, followed by high-quality product information. These factors hold critical influence over consumers when browsing porudcts and making a purchase decision. Nfinte’s CGI (computer-generated imagery) solution creates hyper-realistic product visuals. According to the company, it increases engagement by 20%, add-to-cart rates by 10% and average cart value by 5%, on average.

De Vigan highlighted the importance of effective and engaging product imagery in e-commerce
Source: Shoptalk

 

To effectively meet the expectations of the modern consumer, PepsiCo and ThredUp discussed the importance of breaking down silos and bringing teams together. Company-wide problems cannot be solved by a single department; instead, teams across companies need to come together to solve them. Parth Raval, Chief Growth Officer, PepsiCo Foods North America, PepsiCo, warned that this could, initially, lead to debate and conflict; however, those processes are necessary in order to find solutions that will work across the organization.

During the pandemic, ThredUp saw returns grow from around 18% to around 33%. It brought all its teams together to solve this organizational issue and launched the “Keep for Credit” program. This enables customers can keep an item if it would net ThredUp $10 or less in revenue (the level at which the company determined a return would not be profitable). The program worked: the returns rate dropped from 33% to 17% within a year of implementation.

PepsiCo has also implemented initiatives to address key pain points, and Ravel stressed that PepsiCo designs to add value for customers. For instance, after asking customers about their likes and dislikes regarding the company’s multipacks, the company built stronger boxes to mitigate damage; these new boxes are also more sustainable. By listening to its customers, PepsiCo found a win for shoppers and a win for the environment, which, ultimately, turned into a win for the company, Raval said.

Raval stated that there are so many ways for consumers to purchase products these days. As such, companies need to “dig harder” when it comes to data, listen to their customers, and think long term (“next year or two”) and innovate around what they want in the long term.

Left to right: Parth Raval, Chief Growth Officer, PepsiCo Foods North America, PepsiCo; Dan DeMeyere, Chief Product & Technology Officer, ThredUp; Jeriad Zoghby, Chief Commerce Strategy Officer, Interpublic Group (Interviewer)
Source: Shoptalk

 

4. Creating Unified Retail Experiences

In a session on maintaining a modern e-commerce tech stack, Vikalp Tandon, Managing Director, Global Commerce Lead at Accenture, noted that online retail has evolved substantially since its start in the early 1990s, and now companies are “building platforms so shoppers cannot see the boundaries” between channels. Tandon predicts that the next decade will be very different, with Web3 combining the physical and digital, while AI copilots will help shoppers find exactly what they need quickly.

Tandon believes that companies need to “inverse the funnel”: they should think about the platforms they need first, regardless of the channels that they have typically used in the past. He recommended “life centricity,” which he described as “a strategy of tapping into the external forces profoundly shaping customers lives and then connecting technology and human expertise to offer personalized solutions that drive growth and relevance.” According to Tandon, life-centric business are 3.2X more likely to outperform peers in revenue from new business and 2.8X more likely to outperform peers in profitability growth.

Tandon interviewed Jason Gowans, SVP & Chief Digital Officer at Levi Strauss & Co., who revealed that Levi’s sees DTC becoming nearly 60% of the business and that its e-commerce business will double in the coming years, requiring the company to develop a modern e-commerce stack that will “last into the future.”

To build its e-commerce capabilities, Levi’s is taking two approaches, Gowans explained:

• In larger regions, such as Europe and the US, it is “digital decoupling,” meaning it is “enabling an IT system transformation by gradually replacing legacy components through cloud-native application development.”
• In smaller markets, it is taking a “Greenfield development” approach, where it simply builds a new technology stack and migrates to the cloud immediately.

When asked what challenges Levi’s faced when developing its new technology stack, Gowans pointed to the need to deploy different strategies depending on each region’s technological ability and adoption rates, as well as ensuring that engineers are building solutions for customer problems, which could be achieved through integration rather than building new things.

Underscoring the foundation of unified commerce, Gowans stated, “Wherever your customer is, you want to give them the best experience possible.” He also stated that lessons learned in DTC can be applied to wholesale, and that they do not have to be siloed.

Tandon (left) and Gowans (right) discuss how Levi’s is building its e-commerce capabilities
Source: Shoptalk

 

A key learning here is that companies, no matter the industry, must focus on all business models and making the barriers between channels invisible. They should strive to provide frictionless, engaging shopping experiences regardless of the channel, meeting the customer where they are.

What We Think

One thing that was agreed on by multiple panelists across numerous sessions is that the time to embrace technology has come. Given consumers’ acceptance of technology and the continued growth of e-commerce, companies can no longer afford to not innovate or experiment. Furthermore, innovation and experimentation processes themselves must change. The barriers between teams and departments must be dissolved—a topic covered by companies from across the retail space, including Levi’s, PepsiCo and ThredUp. Quite often, insights and learnings from one channel or vertical can be applied across the company, meaning that growth in any one area could ultimately lead to growth across an entire company.

Google discussed several groundbreaking new apps in its Shoptalk keynote interview, all leveraging AI and offering new features for consumers in visual search, which the company is combining with its commerce capabilities. Visual search technology has practically come to the level where a consumer can snap a photo of a piece of apparel on the street or runway and instantly purchase it. However, the leveraging of Google’s dominant market share with actions to restore abandoned carts may unnerve some consumers.

Meta has a wealth of AI and GenAI technology (including its own LLAMA large language model and PyTorch machine-learning library), which it is leveraging to create better experiences for consumers and businesses, including enhancing omnichannel retailing and unleashing creativity. Meta’s activities in developing the metaverse and products such as the Ray-Ban glasses give it a lead in combining visual and graphics technology with AI to create immersive experience for shoppers and consumers.

Many of the panelists at Shoptalk were asked if AI is under, over or correctly hyped, and the general consensus was that AI is over-hyped in the short term, but its benefits are underestimated in the long term. Ultimately, AI is a tool for solving business problems, enhancing productivity, or using its computing power to improve customer experiences. Retailers that have clearly laid out their needs will use the technology efficiently and not have to seek uses for it. One of the key benefits of AI is that it will likely enable users to create uses that have not yet been imagined.

Although powerful tools like AI are needed for personalization at scale, Shoptalk panelists have discussed how their companies are leveraging the customer data they possess to increase the level of personalization offered to their customers, resulting in more-customized user experiences and revenue lifts, including upselling opportunities.

Implications for Brands/Retailers

• In a competitive market, implementing AI-powered solutions is not only a strategic move but an essential competitive advantage, ensuring sustained growth and adaptability in an ever-evolving retail landscape. Retailers and brands should implement AI to solve problems or increase productivity in ways that are consistent with their corporate cultures. Retailers and brands that possess a clear vision of their needs and can match them to the capabilities of AI technology will excel.
• Visual search is appealing to consumers, and retailers and brands will be well served to make their data and product pages available to operators of visual search engines and tools.
• Retailers and brands can gain access Meta’s Facebook and Instagram users as well offer unique GenAI and ML-powered experiences for shopping and entertainment.
• Leveraging customer data enables retail companies to know their customers better and implement effective personalization strategies to drive revenue. Retailers and brands should implement types of personalization that drive long-term engagement with their target audience, beyond simply generating personalized offers or communications for quick sales.
• Retailers can benefit from data sharing with supply chain participants, such as in logistics efficiency and on-shelf availability.
• In the evolving landscape where customers effortlessly transition between brick-and-mortar stores and online platforms to shop, retailers must strive to craft frictionless, engaging shopping experience that meet consumers where they are.

Implications for Technology Vendors

• Google is connecting the dots between its AI image-processing and commerce capabilities, creating substantial barriers to entry and making it a tougher competitor.
• Meta has amassed a substantial amount of technology in its metaverse work and in its AI and ML models, which give it a considerable competitive advantage over new entrants.
• Technology vendors can offer personalization solutions for enhancing communications, increasing loyalty or through increasing revenues.
• As AI technology remains in its early stages, there is a rich spectrum of opportunities available in the development of models, applications and governance and compliance tools.

Impacts from AI

• AI is powering Google’s visual search capabilities, and the newest apps (such as Circle to Search) combine traditional and generative AI.
• P&G views AI as a tool to accelerate product development, including through enhancing its use of chemistry.
• Meta, with its immersive devices and AI technology, is uniquely able to combine video, AI and commerce to offer immersive, compelling shopping experiences.
• The power of AI should enable retailers to offer real personalized communications and services to their customers or customer segments, offering personalization at scale.
• AI can accelerate the completion of work and ideation today, and the fast pace of the technology’s development is creating new applications and use cases practically on a monthly basis.