New York City played host to “Retail’s Big Show” as industry leaders met at the Jacob Javits Convention Center for NRF 2023. This year’s event was one of heightened anticipation as a shift in consumer behavior from spending to saving has brands searching for the right strategies for an uncertain economy. While retail just realized record spending in the period of gift giving (e.g., Black Friday, Cyber Monday, and the week of Christmas), the other weeks showed less than stellar consumer spending.
In an interview during NRF, Macy’s CEO Jeff Gennette stated that “the consumer is under pressure” after seeing lulls in self purchases, rises in credit balances, and a growing number of delinquencies. Jeff says, “Just looking at the macro influences of what’s going on in the economy…it’s a point to say be cautious, but be ready to pounce when opportunities and signals present themselves.” How are retail brands preparing to pounce on these opportunities?
Here are the six ways retailers are showing agility in the face of uncertainty.
Back to the basics
With conservative spending trending upwards in consumer behavior, brands are trying to win precious conversions by going back to the basics of customer centricity. In his opening remarks at NRF, John Furner, Walmart U.S. president and CEO said, “Loyalty in retail is the absence of something better. If you’re not offering the best customer experience your customers will move on to someone else who is.” John’s words are validated by a report from TechSee on the decline of brand loyalty.
The study found that of the participating consumers:
- 43% stated that they canceled subscriptions or switched to different products primarily because of customer service
- 39% stated that they switched brands after being approached by a competitor
- 59% said that negative experiences led to their decision to churn, and 21% did so after just one event
Hoping to avoid customers jumping to a competitor, Mattel is rethinking its experience. Mattel’s president and CEO, Richard Dickinson, thinks studying the consumer is more about their needs and wants; brands also need to consider the world in which the shopper lives (such as the cultural trends). “We are changing all the time to meet consumer expectations,” Richard continues, ”Today more than ever consumers are voting with their dollars with brands that matter.”
Return to physical stores
The rapid rise of ecommerce during the past few years projected to see the physical shopping experience join the endangered list. However, Lowe’s CEO Marvin Ellisen sees brick and mortar locations as the key to being competitive in the current retail environment. While Marvin’s statement may seem like consumer behavior is trending away from ecommerce, he sees physical stores as a support column for every purchase channel — including digital.
Lowe’s has an estimated 2,200 physical stores nationwide. Essentially, this provides the company with 2,200 distribution centers, each connected to its domestic and global supply chain, according to Marvin.
“Next-day delivery doesn’t sound nearly as good to you at the moment. At that moment, you need same-hour delivery.” Marvin continued, “We can’t do that without our stores because those stores are the essential node that will pick and get that product ready either for the customer to come in and pick it up or for us to do a quick…gig network-type delivery.”
Based on Marvin’s comments, it would seem that physical stores and ecommerce need to work in tandem to optimize the consumer experience. The more physical locations a brand has, the more equipped they are to deliver products and services to its customers at the pace they require. Asked how soon they expect to receive their online purchase, 41% of global shoppers said they hoped to receive it within 24 hours. Meanwhile, 24% of surveyed buyers reported wanting their order delivered in less than two hours. This sort of speed is only possible if brands have a local distribution center — or a physical store nearby.
Entering the holiday season, Paige Thomas, president and CEO of Saks OFF 5TH, realized that the events of the early part of the year created a drop-off in sales and overstocked inventory. “The customer’s wallet was definitely facing some pressure,” said Paige, “so the need to stay focused on the value equation in the market was very real.” Saks OFF 5TH shifted focus towards predicting consumer demand.
“From a digital-first perspective, the consumer gives us an incredible amount of data through search,” says Paige. Using the luggage industry as an example, Saks OFF 5th identified that Zoom meetings replaced business travel and the office commute — so luggage products started collecting dust in warehouses. As quickly as luggage demand dropped, it bounced back with COVID restrictions lifted and travel again being a thriving industry. Using consumer search data, Saks OFF 5TH is able to see what’s trending and make a decision for the next month or next quarter.
Retailers globally are dealing with the struggle of too much inventory because of rapidly changing consumer behavior and declining customer spending. These conditions have brands questioning how to offload inventory without taking a total loss.
Paige remarked at NRF that, “The answer always lies with the customer. One part of it is engagement — customer acquisition. The other is the customer experience, the customer journey. Do everything you can to smooth the path.”
As brands listen and react to their customers, they can adequately stock their inventory instead of reliving the short supply of the pandemic surge in demand or the overstock caused by the post-pandemic shift in trends.
Replatforming for today’s environment
The Fresh Market, a specialty grocer with 159 stores nationwide, detailed how it improves in-store efficiencies and omnichannel capabilities through new technologies. Kevin Miller, CMO of The Fresh Market, said that the brand has three questions that help them evaluate the right tech partnerships.
- Will it boost the reach to our core customers as well as new ones?
- Will it increase our relevance to our target audience?
- Will it increase our revenue?
“If you do one of those, that’s good. If you do [two of those], that’s really good. If you do all three, that’s fantastic,” Kevin said.
The Fresh Market isn’t the only retailer looking to replatform for today’s economy. Privacy laws and tighter consumer budgets have acquisition costs skyrocketing. Meanwhile, many brands are seeing a drop in internal resources, making efficiency more vital than ever.
During her NRF 2023 session, Debjani Deb, CEO of Session AI, spoke about privacy compliance, acquisition costs, and unlocking new revenue opportunities through in-session marketing. In-session marketing is an emerging technology that uses live clickstream data to understand and action for every site visitor — including anonymous.
By using in-the-moment data, brands like The Fresh Marketing can increase its reach for core and new consumers by using real-time incentives (e.g., sign up to our newsletter for X% off, leave a review for free shipping, or share on social to enter a gift card giveaway). Further, in-session marketing helps brands deliver relevant experiences that convert through purchase predictions based on AI and ML models that uncover why the user is there, what the brand should do to help them complete their journey, when offers are needed, and more.
Quantifying artificial intelligence
Artificial intelligence (AI) is maturing in its capabilities for retailers, yet brands still haven’t solved the challenge of quantifying AI’s business benefits. Many brands have no direct method to measure the profitability of AI. For these companies, key performance indicators — like conversion rates, retention rates, and customer lifetime value — can be great sources of data for understanding the technology’s impact.
Through automation, businesses can streamline their processes, identify new revenue streams, and deploy real-time actions. While the word automation makes AI sound simple, implementing the technology into a stack can be difficult for retailers.
Session AI makes it frictionless to get started with AI by providing a robust, proven technology that measures business outcomes — allowing retailers to focus solely on the insights. Further, Session AI uses AI to help brands understand anonymous and known consumers, predict their purchase intent, and increase conversions with data-driven experiences.
“We know shoppers want this sort of personalized experience more than ever,” said Amy Eschliman, managing director of retail solutions at Google Cloud. She added that research commissioned by Google Cloud found that 75% of shoppers prefer brands that personalize interactions and reach out to them, and 86% want a brand that understands their interests and preferences.
In a privacy-first world where personalization is becoming a strategy of the past, AI is becoming a profitable resource for brands that know how to use it.
Suppress product promotions
In a year where consumer spending is projected to decline, each dollar is critical — meaning that brands need to make the most of their offers budget. According to Saks OFF 5TH CEO, Paige Thomas, the 2022 holiday season was the most promotional the brand has had since her time with the company — which she attributed to high inventory. Promotions are usually enough to stand out in a competitive market, however, even traditionally full-priced retailers were forced to offer discounts during the holidays. This meant that even more brands were leaning on promotions, a strategy capable of driving short-term revenue at the cost of overall margin loss.
Rather than increasing promotions budgets to compete, brands are wondering if it’s possible to do fewer offers in 2023 without seeing a drop in conversions. Real-time offers allow brands to realize an incremental revenue lift by suppressing offers to every visitor except those who require incentivization. Session AI’s AI and ML models uncover a visitor’s purchase intent early in the session and place them into one of three categories:
- Likely to buy: a group of motivated buyers who would buy from you regardless of being offered a discount
- Unlikely to buy: this group is not on your site to shop, and they will most likely not buy regardless of whether or not a discount is presented
- On-the-fence: a group of visitors who are considering a purchase, but are not yet convinced
Real-time offers are given to only those who are on-the-fence, saving promotions budget by allowing those likely to buy to complete a full-price purchase and avoiding turning unlikely to buy visitors into bargain hunters.
During our time at NRF 2023, we learned that the focus for retail this year is being agile. The industry and its consumers are continually shifting as inflation increases, budgets decrease, and trends evolve. All this uncertainty requires retailers to have a plan in place to readily adapt if they’re to avoid a downturn in conversions.
See how Session AI helps retailers see the opportunities that drive incremental revenue growth with in-session marketing.