Introduction

Coresight Research is an official research partner of Shoptalk Europe 2024, taking place June 3–5 in Barcelona, Spain. Shoptalk Europe is an annual conference that unites retail and e-commerce professionals to discuss the latest trends, innovations and challenges in the retail industry.

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, creating unified retail experiences, next-generation demand creation, and navigating changing industry relationships.

We present key insights from day two of the event, with highlights covering the impact of generative AI (GenAI), the importance of listening to customer feedback, the essential components of a unified retail experience, and how the path to purchase is transforming into an “infinite loop,” among other topics.

Shoptalk Europe 2024 Day Two: Coresight Research Insights

Employing AI To Transform Your Business

Much of the conversation on day two of Shoptalk Europe 2024 centered around the potential for GenAI to utterly reshape the retail landscape. In the informative session, “Pioneering Applications of Generative AI,” Daniel Krantz, Division Lead, Digital Product and Customer Experience, at Otto Group, stated that, when applying GenAI, the company is focusing on different steps of the customer journey and listening to their customers, allowing their opinions to inform company decisions. Krantz also shared some of the structural applications that the Otto Group is using to improve conversion, retention and the customer experience:

• Aggregated reviews—The company uses AI to collect and analyze customer reviews, allowing potential customers to ask questions to a GenAI-powered large language model (LLM) and receive personalized answers. For instance, shoppers can ask natural language questions such as, “How loud is this washing machine?” and receive customized answers.
• Enhanced search—The Otto Group also developed a new “natural language search function”—which it calls “Search Buddy”—that allows users to use natural language when searching for products instead of keywords. For example, instead of searching “a blue dress,” shoppers can search “I am going to a wedding in Italy, what do you recommend?” Per Krantz, Search Buddy has led to a 1.3% increase in the company’s click-through rate, a 3.8% increase in its add-to-cart rate, a 0.8% increase in its customer-conversion rate and a 5.8% increase in its average order value.

In a later session, Gareth Locke, Chief Growth Officer at Mytheresa, echoed these ideas, noting the potential for AI to improve website search functions. In the future, Locke said he could envision search transforming from the current, long-list format that “nobody wants” to a “much more natural, human process” that resembles a conversation, albeit one with an AI tool.

David Ting, Chief Technology Officer and Global General Manager at Zenni, covered how Zenni uses GenAI to create personalized, creative product images and marketing messages, as well as test product variations at scale. Later, Henny Steiniger, Vice President, Services, Customer Experience, Care and Loyalty, at MediaMarktSaturn, reminded companies of the importance of boosting organization-wide education when adopting new tech, including GenAI. At MediaMarktSaturn, the company has created a multidisciplinary team of self-selected members from different functional teams, from HR and procurement to IT and customer experience, to better implement AI.

All the panelists agreed that, rather than building entirely new GenAI applications across all aspects of the customer journey, companies should listen to their customers before implementing new tech, innovating based on their needs and demands. Additionally, when organizations are reviewing their innovation and implementation processes, it is critical that they establish a framework and assessment criteria that supports cross-department communication and accessibility and enables speed and security.

In one of the day’s biggest sessions, “Shoptalk’s European Retail Zeitgeist: Retail Reimagined,” Rebecca Bemhena, Vice President of Content, Europe, at Shoptalk, and Ben Miller, Vice President, Original Content and Strategy, at Shoptalk, offered three strategies for successfully deploying AI in the retail space: balance risk with a culture of experimentation; ensure full business ownership is critical and clear; and remain focused on applications that solve real problems. They also noted that retailers should adopt a two-step approach to AI adoption:

1. Establish governance, guardrails and policies before testing internally.
2. Launch customer-facing tools and services.

During the midday “Techtalks” sessions, two speakers from Amazon explored how the e-commerce giant is currently using GenAI. Kevin Kennell, Solutions Architect at Amazon Web Services (EMEA), explained how, if multiple companies use the same AI model, then data becomes the differentiator. While there is a lot of conversation around the model, the model is only the tip of the iceberg; according to Kennell, data is the bulk of the iceberg. As such, brands and retailers should look to build a strong data foundation by using specialized storage and databases, integrating data sources from across the company and creating safe processes through strong governance policies.

Shortly after, Aparna Galiasso, Head of North America Retail and Consumer Goods at Amazon Web Services, discussed Rufus, Amazon’s new GenAI-powered conversational shopping experience that aims to “fundamentally change what SEO and ad placement looks like.” According to Galiasso, with Rufus, Amazon can have more productive conversations with customers in a variety of ways, including:

• Advertising and marketing—Per Galiasso, Rufus can produce creative and personalized copy at scale.
• Apps and emails—Rufus can personalize emails at scale and improve app engagement by changing descriptions, photos and messaging to better resonate with specific users.
• Product descriptions—Rufus can generate tailored product descriptions that resonate with individual shoppers.

Locke at Mytheresa similarly discussed how the company is using AI to make personalized product recommendations. However, Locke also stated that the company combines these recommendations with manually merchandised and edited “key pages,” enabling it to deliver “the finest edit in luxury.”

On a similar note, Tian Su, Vice President, Personalisation and Recommendation, at Zalando, highlighted the company’s GenAI-powered Lambda OS system, which provides hyper-personalized conversations with customers, handling millions of interactions simultaneously. So far, the system has logged over half a million conversations, with engagement times lasting 3X longer than the time used for traditional search bar inputs, according to Su. Following Su, Baltazar Ozonek, Vice President, AI and Innovation, at Pandora, stressed the need for a solid data foundation and the right technology to scale AI and personalization efforts. Throughout the session, all panelists discussed the importance of starting with the customer experience, as well as the need for collaboration between IT, business and store teams to ensure successful AI implementation. Only then can companies leverage their data and advanced AI technologies to create meaningful, personalized interactions with shoppers.

Near the end of the day, Benjamin Thompson, Head of Digital Transformation at Endeavour Group, presented another idea: Thompson argued that GenAI has become something of a buzzword and that many are likely overestimating what it can do in the short term. According to Thompson, the danger is that traditional retailers could feel that they need to jump on board immediately or risk getting left behind, when, in fact, they are not yet ready to adopt GenAI. Thompson explained that achieving major results with GenAI will require brands and retailers overcome the challenges presented by increased employee training time, ensuring the GenAI model produces quality results and gaining organizational buy-in.

Thompson (right) discussing the impact of AI at Endeavour Group with Mike Tattersall, Managing Director, Innovation, and Chief Commercial Officer at True (left)
Source: Shoptalk

 

Another technology, radio-frequency identification (RFID), was also discussed on the second day of the event. Gustav Zetterström, Senior Vice President, Global Head of Emerging Technology, at H&M, discussed how the company is leveraging RFID technology, stating that the company is using the tech for everything from tracking products in real time to powering smart mirrors in fitting rooms by providing instant inventory updates. H&M also leverages its RFID data to better inform store-level inventory decisions, often resulting in reduced SKU (stock keeping unit) counts and store-level inventories that are optimized for local trends and styles. “To have this level of data and understand what is happening in the stores will revolution the experience for shoppers,” Zetterström predicted.

• For more on RFID technology, please see our report RetailTech: RFID Is the Technology That Keeps on Giving to Retailers (and Associates and Consumers).

Taking a broader look at technology implementation across the retail space, David McIntosh, Vice President and General Manager, Connected Store, at Instacart, explained how shoppers have told Instacart that they love the convenience and personalization of its e-commerce offerings, and that they want that level of convenience and personalization in physical stores. However, on the store-side, Instacart is receiving questions about how to digitalize in-store shoppers.

According to McIntosh, Instacart’s vision of a “connected store” sits at the intersection of those two conversations. Moving forward, Instacart believes that every element of the store—from counters and shelves to shopping carts—will be digitized. For instance, smart shopping carts could enable shoppers to place a deli order from anywhere in the store or allow CPG (consumer packaged goods) companies to offer personalized deals and coupons to in-store shoppers.

McIntosh describing Instacart’s vision of a “connected store”
Source: Shoptalk

 

Harnessing Brand Power and Building Brand Trust

In their session, Bemhena and Miller of Shoptalk covered many of the event’s themes, including harnessing brand power and building brand trust. When it comes to brand power, Bemhena argued that retailers should look to tap the storytelling opportunities presented by cultural trends, provided that the retailers focus on authenticity.

In a later session, “Building Innovative Products and Brands for Today’s Consumer,” Sanjay Luthra, EVP, Managing Director Mattel (EMEA), and Global Head of Direct-to-Consumer (International) at Mattel, discussed the company’s approach to connecting with fans and collectors through limited-edition products and collaborations, highlighting the importance of nostalgia in creating brands that appeal to adults. According to Luthra, two key strategies have led Mattel to success in this regard:

• Launching collaborations that create excitement and exclusivity—Luthra discussed two recent collaborations between Mattel brands and other companies, the collaborations between Off-White and Monster Mattel and Monster Cards and Gucci, both of which quickly sold out.
• Listening to the consumer—Following the release of the Barbie movie, Mattel listened to its community and saw a need to develop a sweatshirt based on the character of Ken, portrayed by actor Ryan Gosling. The company ultimately sold over 100,000 units in the first days of the sweatshirt’s launch.

Luthra (left) discussing Mattel’s strategy for building brand trust with interviewer Anne Mezzenga, Co-CEO of Omni Talk (right)
Source: Shoptalk

 

Deri Watkins, Regional President (Europe & ANZ) at Mars Pet Nutrition, also discussed the ways in which the company seeks to appeal to and connect with its customers. According to Watkins, the average lifespan of a pet (14 years) means that the company’s customers change regularly, and, as a result, it must keep a close watch on trends. Today, consumers adopting pets are much younger than those who adopted pets previously, meaning that Mars must change the way it interacts and connects with its customers.

Watkins stated that some 40% of Gen Zers want to buy their pet products digitally, making social commerce a serious growth opportunity for the company. To this end, Mars is building relationships with younger consumers by utilizing its roughly 3,000 pet hospitals to provide advice on how to buy a pet (such as which breed to select) and how to take care of them. The company is also deploying personalized marketing messages, with one campaign for its Whiskas brand producing hundreds of pieces of customized content to deliver an 80% “addressable” campaign.

In the luxury sector, Locke of Mytheresa noted that the company primarily sees two types of opposing customer behaviors on its website: shoppers looking for what’s on sale and shoppers looking for what’s new. As the company wants to engage with both customer groups, it segments its customers, changing whether they see more full-price or on-sale products based on their segmentation. Mytheresa carries this customer segmentation over to its newsletter as well, where sale or full-price customers see different messages.

Creating Unified Retail Experiences

Miller of Shoptalk argued that it is time for retailers to move on from the channel-centric view of “omnichannel,” instead embracing the consumer-centric view of “unified commerce.” However, implementing unified commerce is more than tying channels together—it requires technology, data and organizational structures. According to Miller, unified commerce should be built around four components:

1. A unified tech stack, with retailers potentially needing to rationalize their stack over time.
2. A unified data platform to enable the harmonious exchange of data and a single view of the customer and operations.
3. A unified corporate structure that finally breaks down siloes.
4. A unified customer experience; this experience will be enabled by the prior three components and focus on enhancing in-store elements, creating a throughline that reflects shoppers’ journey across digital and physical stores.

Bemhena and Miller agreed that unified commerce can unlock benefits beyond the customer experience and that physical stores remain a critical part of a unified commerce strategy, meaning that retailers should carefully consider investments in in-store technology and training.

In the session “Global Insights on Future-fit Grocery Ecommerce,” we heard Gregor Ulitzka, President, Europe, at Ocado Group, about the company’s highly automated customer fulfillment centers (CFCs); however, Ulitzka also explained that these CFCs are not required for all online grocery operations. He explained that online grocery is a journey for retailers, one that can start with simple in-store fulfillment before growing to dark stores and, eventually, to full-scale automation when it makes sense.

In the same session, Ulitzka was asked about the “valley of death in profitability” that retailers can experience when opening automated CFCs that remain underutilized over the first few years. Ulitzka responded by explaining that Ocado invests in partner success and growth “to steer demand and customers” and maximize utilization. He also stated that the company’s retail partners with large-scale e-commerce businesses typically see 70%–80% utilization of CFCs from the start.

• Ulitzka also spoke on how availability, range and affordability are driving consumers to shop online, according to Ocado Group. This mirrors a discussion we heard on day one of Shoptalk Europe 2024, where speakers from Amazon covered how the e-commerce giant’s “Everyday Essentials” strategy in the grocery space is based on convenience, pricing and selection.

Ulitzka speaking during the “Global Insights on Future-fit Grocery Ecommerce” session
Source: Shoptalk

 

Unified commerce experiences also require strong fulfillment and last-mile tactics. Nick Burton, Chief Information Officer at Screwfix, discussed how the company leverages real-time data to personalize the customer experience, reduce fulfillment times and empower customers with self-service options. For instance, with over 900 stores, Screwfix focuses on structured processes and speed of service—their event-driven platforms provide real-time notifications to store colleagues, allowing them to quickly fulfill customer orders. Additionally, Screwfix has taken steps to allow customers to do more themselves, such as linking its app to its order management systems, which made in-store pickups easier to complete.

By combining structured processes, event-driven technology and a focus on convenience and quality, Screwfix has built a loyal customer base. Looking forward, Burton revealed that the company plans to expand its same-day delivery services nationwide (in the UK), begin experimenting with third-party delivery partners, innovate its communication processes and extend its product range, all without compromising quality. For companies looking to following in Screwfix’s steps, Burton recommended obtaining accurate stock data, using modular technology to enable flexibility and deeply understanding the customer and the competitive landscape.

Next-Generation Demand Creation

In the “Shoptalk’s European Retail Zeitgeist” session, Bemhena and Miller explored the evolving media landscape, touching on the opportunities presented by retail media, the disruption created by factory-direct models and the impact of AI—together, these are turning the path to purchase into an “infinite loop,” Miller explained. During the session, Bemhena and Miller presented three top takeaways when it comes to next-generation demand creation:

• The traditional purchase funnel is ancient history—retailers must understand their shoppers’ journey.
• Shoppers are moving from consideration to consumption quickly, meaning retailers need to remove friction and make as many touchpoints as possible shoppable.
• AI and shoppable media are merging search and discovery.

In the “Best-in-Class Digital Commerce Capabilities for FMCGs” session, participants Neil Reynolds, Global Vice President, Digital Commerce, at Mars Wrigley, and Nikki Sale, Global Digital Commerce Director (B2C) at Diageo, also discussed the importance of shoppable touchpoints to create demand, namely digital touchpoints. Both agreed that in order to optimize digital touchpoints and build customer loyalty, brands and retailers need a successful combination of strategic alignment across verticals, data-driven insights and an open, test-and-learn culture.

Sale discussing digital touchpoints
Source: Shoptalk

 

To effectively generate demand, retailers must understand the current retail landscape. According to David Pitron, Vice President, Convenience Value Proposition, at BP, the company is seeing two bifurcated trends in convenience retailing. First, consumers’ tolerance for friction is declining, meaning that companies must focus on removing barriers and saving shoppers time, even when their shopping journeys are five minutes or less. Second, store-based electric vehicle (EV) charging stations are increasing dwell times for some consumers, as average charge times are 25–35 minutes—given that amount of time, consumers want new in-store offerings such as quality coffee or food services. However, as battery technology improves, charge time is likely to come down—and, as a result, dwell time—falling closer to a typical convenience trip, according to Pitron.

Navigating Changing Industry Relationships

R. Alexandra Keith, CEO, Beauty, at Procter & Gamble (P&G), discussed how the company’s massive beauty brands are harnessing their potential to remain relevant and resonate for years to come. According to Keith, the company is also focused on understanding consumers’ needs and desires, and the barriers that keep them purchasing. Once the company understands these needs, the first place P&G looks to meet them is its core brands. However, occasionally, its core brands cannot meet those demands; in those instances, P&G looks to acquire or partner with an existing company. For instance, Keith discussed how the “textured hair” shopper is often underserved and how the company wanted to meet their needs. To this end, in 2022, P&G acquired the Mielle brand, a brand that resonates with Black consumers, according to Keith.

Keith also discussed how P&G finds it important to allow acquired brands to operate independently. While P&G supports these brands and provides them with capabilities that they did not have before, P&G does not want to smother the brands and works to ensure that they remain true to the values and processes that got them started. For example, at Mielle, Monique Rodriguez, the brand’s founder, remains its CEO and the creative drive behind its products.

In today’s retail market, brand and retailer partnerships are “the only way to go” when looking to deliver a satisfying, unified commerce experience, according to Gaurav Goel, Vice President, Global Commercial Strategy and International Ecommerce, at PepsiCo. By partnering with retailers, PepsiCo has been able to execute a successful unified commerce strategy, resulting in a major sales uplift for the company, especially during times surrounding major sporting events.

This belief was also supported by Jie Cheng, Vice President and Global Head, Digital Commerce, at Mondelēz International, who discussed how brands have a strong position when it comes to consumer trend data and product development abilities, but retailers have direct access to shopper data—combining those can be powerful, according to Cheng.

Cheng from Mondelēz International
Source: Shoptalk

 

What We Think

The Coresight Research View on GenAI

AI, more specifically GenAI, dominated that conversation on day two of Shoptalk Europe 2024. The revolutionary capabilities of GenAI lie in its generative aspect—its ability to create new text, images, audio, video and other content, driven by instructions written in natural human language. In addition to the well-publicized applications such as summarizing, drafting and translating text, GenAI will enable enterprises to find new insights in their own data by means of an interactive conversation. The technology will also interface with other business functions, such as data analysis, finding new business opportunities or eliciting data from supply chains.

Continued interest and investment in GenAI technology and specialized startups will drive huge growth—of nearly 240%—in the global GenAI software market (service providers’ estimated revenue) in 2024, we estimate. As evidenced by the second day of this year’s Shoptalk Europe, the potential of GenAI is no longer confined to the likes of technology experts; it is permeating the collective consciousness of businesses and consumers alike.

Other Implications from This Report

• In addition to AI, digital commerce will continue to be a critical growth driver for brands and retailers, necessitating a strong focus on robust digital capabilities.
• On a similar note, Screwfix demonstrated how traditional retailers can transform into agile, customer-centric businesses by harnessing data, modular technology and an unwavering commitment to service. Their approach provides a blueprint for others looking to thrive in the rapidly evolving retail landscape.
• Retailers need to strike a balance between exploring innovative technologies and maintaining focus on their core business. GenAI, sustainability solutions, augmented and virtual reality, as well as other technologies, should all be investigated, but only after obtaining a clear-eyed view of their current limitations.
• When looking to implement new technologies, companies should listen to their customers before deciding what tech to roll out, innovating based on their needs and demands.

Implications for Brands/Retailers

• Major CPG firms highlighted retailer-brand partnerships and unified retail experiences on day two of Shoptalk Europe, showcasing their importance amid the current retail landscape.
• Multiple speakers explained how prioritizing real-time data and personalization can significantly boost customer loyalty and engagement, as well as enhance self-service options.
• Brands and retailers need to prioritize choice and consistency—even over speed—in their service offerings to better meet customer expectations. Additionally, brands and retailers must prioritize personalization to meet evolving customer expectations and enhance the shopping journey.
• Fostering a culture of experimentation and cross-functional collaboration is crucial when attempting to drive successful digital transformations.

Implications for Technology Vendors

• There is a growing market for advanced delivery technologies, including AI-driven customer service tools and autonomous delivery systems, as well as AI-powered data solutions that enable personalized customer experiences.
• Vendors that can facilitate cross-functional collaboration and agile execution may also gain an advantage.

Impacts from AI

• AI can enhance a company’s personalization efforts by predicting customer needs and optimizing communications and offers in real time.
• AI significantly improves customer service processes via personalization and customer review analysis.
• AI-powered inventory management and demand forecasting can help retailers maintain the right stock levels to enable fast fulfillment.
• AI can also increase order accuracy by cutting down on human errors, making it a valuable investment for companies looking to enhance their delivery operations.