Introduction

Coresight Research is a research partner of Shoptalk 2024, which took 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 covered 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 cover all five themes.)

We present key insights from day four of the event, with highlights covering innovation implementation, shoppable video, the role of the physical store in the future of retail, retail media and more.

Shoptalk 2024 Day Four: Coresight Research Insights

1. Employing AI To Transform Your Business

One of the biggest takeaways from day four was from the session “Driving Innovation in Large Organizations”: panelists advised that companies should not adopt technologies simply based on a desire to innovate or use new solutions such as AI. Instead, they need to start by understanding the problem they are trying to solve and the customers that experience that problem. Ultimately, major innovation may not be necessary. If it is, that innovation needs to be built on great data and a great team, and led by the right leader. This builds on conversations that we heard on day three around managing the risks of AI and taking a considered approach to its implementation.

Rick Watson, Founder and CEO of RMW Commerce Consulting, emphasized in his presentation that companies need to focus on three key factors before selecting any new tech, which we summarize below.

• Initial problem—Identify the customer pain point that needs addressing and understand what customers truly want. Determine if the company is already too focused on other things to effectively target the problem.

This point was reiterated by Neil Reynolds, Global VP Digital Commerce at Mars Snacking, who said that the question of “Should we…?” always needs to come before the question of “How do we…?”. Furthermore, Alexis Hoopes, VP of E-Commerce at Mattel, made it clear that innovation does not need to be attached to a “big idea.” Once an idea is understood, companies may find that they do not need a big, innovative idea to fix it.

• Team—Ensure everyone on the team understands the measurements of success. Choose the right leader for the job. The leader should be curious and have good people skills, the “political capital to convince detractors” and the ability to quickly acquire new knowledge and expertise.

Hoopes dove into how to deal with detractors: first, team members need to understand why detractors are detracting; secondly, it is incredibly important to show early wins to demonstrate that the innovation is on the right track. Reynolds added that most detractors are not detracting to make someone’s job harder; instead, they are detracting because they have real concerns that need to be addressed.

With regards to the team, the hardest challenge when it comes to innovation is coordination, according to Scott Lux, EVP of Technology & Innovation at fashion and homewares brand Esprit. He said that it is critical, when trying to innovate, to get the right people involved from the very beginning, from across the organization. Once the team is assembled, it is important to keep them looped together with frequent updates.

Reynolds agreed: once innovation has started, it is important to keep that team together, intact and communicate, he said. Mars has done this by having people meet in person and not breaking up teams by geography (i.e., the China team does not work in a silo solely on innovations for the China market).

• Budget—Establish if the company can even implement a tech solution internally or if they will need to bring in outside expertise.

However, Lux warned that the challenges don’t end there. Even if a company does have the right team, leader and communication strategy, innovation will not work “if they do not have the right data and utilize it correctly.”

Left to right: Lux, Reynolds, Hoopes, Watson
Source: Shoptalk

 

In the live podcast recording on day four, which saw the Shoptalk team bring together their key takeaways from the full event, GenAI (generative AI) emerged as a central theme. The panel of Shoptalk executives laid out a four-stage model for adopting GenAI:

• Create an inquisitive environment and team.
• Test out some internal use cases.
• Implement guardrails.
• Roll out AI to customers.

The panel agreed that most companies were not as far along this model as they expected them to be ahead of Shoptalk 2024.

By conducting a poll, the panel found that 52% of the audience believe that GenAI has “just the right amount of hype”, while 33% believe it is overhyped” and 15% believe it is “underhyped.” The panel discussed that this is likely because the short-term benefits of GenAI are being overhyped, while the long-term benefits have yet to be seen and are, therefore, underhyped.

The Shoptalk team also explored purposeful investment/pragmatic optimism, which it defined as companies looking to spend money in smart ways that have real impact—in short, “Show me what this will do for my business.” They pointed to how companies are pulling back on self-checkout and are readily investing in technology to free up store associates to do more important tasks (primarily, interacting with customers) that lead to increased sales.

Left to right: Ben Miller, VP Original Content & Strategy, Shoptalk; Joe Laszlo, Head of Content – USA, Shoptalk; Alexa Tietjen, Content Director, Shoptalk; Anne Mezzenga, Co-CEO, Omni Talk (Interviewer); Chris Walton, Co-CEO, Omni Talk (Interviewer)
Source: Shoptalk

 

Coresight Research views generative AI (also known as 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.

Coresight Research estimates that the global GenAI software market (service providers’ estimated revenue) is growing at a CAGR of 90.3% between 2023 and 2027, when it will total $74.8 billion.

• Read all of our coverage of GenAI here.

2. Building Loyalty via Seamless Customer Journeys

In the session “Shoppable Video Offerings That Stand Out,” panelists were understandably positive on the role of video in commerce, but not necessarily because it drives immediate transactions. As stated by Ajay Salpekar, Head of Beauty at TikTok Shop US, “Video is different to a linear shopping journey. It may result in a sale, but it definitely will result in a conversation.” Shoppable video therefore enables retail companies to foster customer engagement, which translates to improved loyalty and an increased likelihood of purchases being made at a later date.

Video content enables retail companies to better convey authenticity, which is particularly important for Gen Z shoppers—and, sometimes, small influencers can have disproportionately large followings. Jill Toscano, VP, Head of Media at Walmart, said that the retailer relies heavily on thousands of creators and micro-influencers to boost authenticity and “make the content compelling enough [for viewers] to want to shop.” The company launched Walmart Creator (a one-stop portal that makes it easy for creators to monetize shoppable products from the retailer) in beta in October 2022 and for a general audience a few months ago.

Toscano explained that shoppable video “shortens distance between inspiration and purchase,” but the “trifecta of marketing plus legal plus corporate communications” should be in tight alignment to execute a successful shoppable-video strategy. Salpekar advised that brands should experiment to find an optimal balance between brand-generated content and creator-generated content; often, the latter outpaces the ability of a brand in terms of quality as creators can evolve quickly. Quantity and quality are both important, he said, adding that brands can engineer better outcomes by testing and learning. Brands should also “leverage their media to amplify the stories that matter,” according to Salpekar.

Chris Lamontagne, President of Fanatics Live, said that the most successful video content is produced when creators ask the audience what they want. “Video is a way to have a two-way conversation,” he said. According to Lamontagne, people who engage in the chat function of a livestream are four times as likely to make a purchase. The Fanatics Live commerce platform launched last summer. Lamontagne explained that the company “looks through the lens of the fan” and tries “to be deliberate and authentic” in the content it provides.

Salpekar believes that brands and retailers will start thinking of creating authentic content at scale as a core competency: “Attention marketing is now table stakes,” he said. Livestreaming enables brands to align storytelling with sales objectives, while providing shopping and entertainment for consumers.

Finally, shoppable video is evolving; it isn’t just livestreaming. Walmart discussed a holiday TV show featuring its products that was distributed in three-minute segments on TikTok, coining the term T-commerce (T as in TV.)

Left to right: Salpekar, Toscano, Salpekar and Amy Lanzi, CEO of Digitas North America (Presenter & Interviewer)
Source: Shoptalk

 

3. Creating Unified Retail Experiences

Store openings outpaced store closures in 2023, indicating optimism around the resilience of brick-and-mortar retail. In one panel focused on physical stores, an informal poll found that the majority of the audience thinks that stores will thrive in 2024.

“Stores are solidifying a significant role in the shopper journey,” said Kelly Pedersen, Partner, US Retail Leader at PwC. Channel switching and multi-channel browsing and purchasing are prevalent; we are witnessing the “phygital journey,” where no experience is singular, Pedersen explained. As the physical and digital worlds become more and more intertwined, it is important that retailers have a frictionless and personalized shopping experience that can be replicated across all channels.

At footwear retailer DSW, anything rolled out online is also rolled out in physical stores, so it’s a frictionless experience, said Melissa Blandford, SVP of Stores & Operations at the company. Becoming more frictionless has also caused DSW to revitalize its assortment to meet customers where they are.

Companies need to think carefully about the role of physical stores and the ways in which the entire store experience can bolster a brand’s image and drive sales. Pedersen gave the example of offering electric vehicle charging stations (pre-shopping portion of the journey), which play a role in dwell time and how customers view the company (sustainability). He added that most consumers are more likely to visit a store that offers personalized experiences, and four in five retailers are planning to transform their stores into experiential environments.

With advances in RFID (radio-frequency identification) and computer-vision technologies, checkout-free stores will be a key area of evolution toward frictionless physical retail, according to Pedersen, who said that that 12,000 checkout-free stores are expected be in operation in the US by the end of 2027.

The footprint of stores and retailer touchpoints is also undergoing change. Rosalind Johnson, SVP and Chief People Officer & Experience Officer at Build-A-Bear, explained that the retailer is planning on shrinking its footprint and is utilizing “concourses” (mall kiosks) to try out new areas or enter malls that do not have store space.

When rethinking its stores in recent years, DSW has elected to put localized areas into stores. These areas feature locally made and themed products to make customers feel like each store is their personal DSW store, Blandford explained. The retailer has launched various initiatives in recent years to bring customers into stores, including the Soles4Souls shoe-donation program and the addition of coffee bars to stores. In the long term, DSW is focusing on how to lean into lifetime events, such as bridal parties using in-store, AI-powered technology to try on dresses and shoes.

Overall, the panelists agreed that while digital channels are clearly important, the physical channel remains the best place to create human experiences that foster loyalty. Ruthie Underwood, Chief Creative Officer at lifestyle brand Shinola, said that this is particularly true when dealing with high-price points. Companies need to focus on building “human connections” in order to build trust and “intimacy,” she explained.

Shinola is working to build out its loyalty program to further nurture relationships, and Underwood reported that over 70% of loyalty program members have been engaged over the past “few months.” In tandem, the retailer is building out its clienteling options, such as offering coffee and drinks to customers when they walk in, as well as monogramming and engraving options. However, Underwood emphasized that not all shoppers want a “long, storytelling shopping journey.” Shinola trains its associates with roleplaying so that they know how to respond to different types of customer. Over the long term, Shinola is looking to move toward booked, one-to-one appointments. “Services will be what nurtures long-term relationships with our guests,” Underwood said.

Left to right: Johnson, Blandford, Underwood and Pedersen
Source: Shoptalk

 

4. Navigating Changing Industry Relationships

Retailers face new opportunities to increase revenues through monetizing their data, selling ads, offering their technology or logistics platforms to other retailers, and by operating retail media networks (RMNs), among others. Retail media offers advertisers a distinctive value proposition, comprising four elements, according to Stephen Mewborn, Partner at Bain & Company: better audience targeting, high contextual relevance, proximity to point of purchase and closed-loop attribution. However, to be successful, Mewborn warned that data are critical: “Nobody wants to buy data from a retailer with poor data.”

Walmart took a unique approach to monetizing its data—called Luminate—treating the business as a startup and intelligently focusing on creating value, rather than just attempting to sell data, explained Mark Hardy, VP of Walmart Data Ventures at Walmart.

European fashion retailer Zalando has built a unique data and fulfillment network across Europe, encompassing multiple languages, currencies and national structures. It ultimately opened up this infrastructure as ZEOS to other retailers. Jan Bartels, SVP of ZEOS at Zalando, said that ZEOS has 50 million active users, twice the amount of the next competitor. He revealed that the company created value through localization, understanding and adapting to complex European market needs. For example, the retailer’s rich set of size and fit data (i.e., the fit of jean styles and sizes in Sweden versus in Spain) helps drive down return rates. Another keys to Zalando’s success are its integration capabilities (such as working with dozens of payment providers), Bartels said.

• Read insights from Zalando’s recent strategy update here.

Home Depot has a complex customer base as a specialty retailer, which consumers only visit (with high frequency) when they are working on a project, and the need for home-improvement goods spans all demographics and income levels; the retailer also has a base of pro customers who visit regularly. Melanie Babcock, VP of Retail Media+ & Monetization at The Home Depot, explained that the retailer puts customers first, recognizing the opportunity to connect suppliers to the customer to provide a better customer experience through data transparency. She stressed that it is difficult to create change in a big organization. Change starts with getting people on the team “from negative to neutral and from neutral to positive,” Babcock said. When people see value for themselves, behavior changes, she added.

Left to right: Babcock, Bartels, Hardy and Mewborn
Source: Shoptalk

 

Ben Miller, VP Original Content & Strategy at Shoptalk, noted that last year, all of the conversations around retail media seemed to center around how retail media can help make e-commerce profitable and add new a revenue stream to a company’s portfolio. However, over the past year, the conversation as changed: companies are now looking at how retail media can be additive to the entire shopping journey, enhancing the customer experience.

Ben Miller, VP Original Content & Strategy at Shoptalk
Source: Shoptalk

 

Another avenue for growth is marketplaces. In the session, “Leveraging Marketplaces To Reach New Customers,” Dan Tedeschi, Managing Director & Partner at L.E.K. Consulting, asserted that marketplaces “can’t be ignored,” with Amazon being a leading launch point for many US consumers. He said that retailers with their own marketplaces have digital audiences approaching the scale of their stores.

A panel discussion on marketplaces necessarily needs to mention on Amazon; however, it was not the whole story. Some retailers sell through multiple marketplaces, including Amazon, each targeting a specific customer persona. Some have accrued benefits from moving their products to Amazon and, interestingly, panelists stressed the benefits of creating relationships with their counterpart staff there, though its data-centric nature creates a need to stay on top of data. Other retailers, such as those with physical stores, take a more merchant-like approach to their marketplaces.

Marketplace strategies must be fit for purpose for each business, Tedeschi stressed. Key considerations are the customer journey, brand positioning and channel priorities.

Left to right: Suze Dowling, Co-Founder & Chief Business Officer, Pattern Brands; Evan Moore, SVP, Commerce Partnerships, NBCUniversal; Juan Arrieta, VP of Ecommerce, Nature’s Way; Bruce Smith, Founder & CEO, Hydrow; Dan Tedeschi, Managing Director & Partner, L.E.K. Consulting (Presenter & Interviewer)
Source: Shoptalk

 

What We Think

As we discussed in our day three report with Walmart’s approach to GenAI, many retail companies are stressing the importance of establishing a clear foundation for the implementation of new technologies—including the problem that needs to be solved and the infrastructure that is in place to adopt and manage a new tech solution—rather than driving innovation for innovation’s sake. We believe that this is positive for the retail industry, particularly as GenAI is in its early stages; the more a company understands about their customers, data, capabilities and requirements, the better they set themselves up for success with new technologies.

Video represents table stakes for brands and retailers, due to the effectiveness of the medium and its resonance among Gen Z. Several retailers have found ways to make video more interactive, even combining it with live and unique experiences, which makes it even more compelling. We are bullish about the combination of entertainment and shopping, including livestreaming and connected TV. We are hearing many retail companies focus on authenticity as the key to driving the future of shoppable video.

Coresight Research believes that 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.

The strategy for launching a data business is very similar to launching other businesses: leaders need to define a strategy for the problem they are trying to solve and understand their unique competitive advantages over their competition. Shoptalk panelists offered sage advice to focus on the customer and the value delivered, rather than focusing on product completion, as market demand varies and products need to evolve over time.

Implications for Brands/Retailers

• Given the current pace of innovation, changes to technologies and platforms are coming faster than ever. In order to win, companies need to get ahead of these changes, experiment, and, perhaps most importantly, learn from their mistakes. Retail companies need to take a considered approach to the implementation of any new technology, selecting a solution based on their individual needs, capabilities and budget.
• Video on smartphones and TV screens is becoming a viable and necessary path to product discovery and shopping.
• Retailers and brands can monetize their data, technology and infrastructure to generate incremental revenue and profits, which can please shareholders or be invested in emerging ventures. However, they must ensure that data are clean and unique—and insights are most valuable (versus raw data).
• Marketplaces can offer incremental revenue and the ability to target different consumer segments. Retailers can also use marketplaces to offer product portfolios beyond what is available in the physical store—the “endless aisle”—under the auspices of their brand.

Implications for Technology Vendors

• There are opportunities for streamers or hardware makers that can improve the TV shopping experience, beyond the inelegant scanning of QR codes with a smartphone to initiate a transaction.
• Retailers with assets can become technology vendors, increasing the level of competition for technology vendors.
• There are opportunities in combining entertainment and shopping—i.e., shoppable video—to help retailers stand out in a competitive market.

Impacts from AI

• AI plays an essential role in optimizing the impact of video and in consumer targeting.
• Data are the fuel that enables AI, and retailers and brands with valuable data will be able to use AI to generate insights that will increase their competitiveness.
• AI is a useful tool in pricing and in analyzing and forecasting demand.