For those privileged to attend the National Retail Federation 2024 Big Show, it was clear that there is a renewed sense of optimism and hope with both a positive 2024 global economic outlook and one of the largest gatherings at the NRF. Despite the macroeconomic and geopolitical headwinds throughout 2023, the US market avoided a recession and has grown steadily. Unemployment remains low, and most significantly, the inflation rate is falling globally.
The retail industry remains as resilient as ever, with a slowdown in inflation, which will support retail volume growth by 6.7% in USD and a 2% increase in sales volume in 2024. The acceleration of digital commerce will be one of the biggest drivers, with a forecasted 10% growth, yet the physical stores reign supreme, where almost 85% of sales occurred during Q4 2023.
If you are looking for a barometer of the retail industry outlook, then look no further than the attendance at the 2024 NRF, with well over 40,000 people and a broad representation of retailers spanning the globe. It was like 2019 and a triumphant return to the pre-pandemic participation at trade shows. Additionally, the energy and enthusiasm at the event demonstrate that retailers and their tech partners are far more optimistic about their prospects and are prepared to make the necessary investments in technology capabilities to enhance their capabilities, empower their corporate and store associates to be more strategic, reduce operational costs, and help drive their business growth. According to Wakefield Research, this optimism translates to a forecasted 10% increase in technology investments in 2024.
The Winner of the NRF Was Artificial Intelligence
Some central themes emerged during this year’s version of the NRF, and the most prominent one continues to be artificial intelligence. While there is some validity to the fact that we are unable to spell retail without “AI,” artificial intelligence has finally matured from the hype cycle to a capability that is leveraged to help reduce costs, unlock business value, and, most importantly, empower the frontline retail workers in an increasingly dynamic industry.
AI capabilities are now seamlessly embedded within many retail solutions, quickly becoming intuitive and the industry standard to keep up with rapidly changing consumer behaviors. Additionally, a study commissioned by Microsoft and conducted by IDC shared that retailers average a return on investment of $3.45 for every $1 they invest in AI capabilities.
Purpose value-driven AI and GenAI capabilities are everywhere and scaling, including:
- Empowering the store associate
- Accelerating intelligent checkout experiences
- Optimizing supply chains, merchandising, and product development cycles
Empowering the store associate
With the emergence of the connected customer, the frontline retail workers have had to play catchup from a technology and capabilities perspective to support an outstanding in-store experience. There are challenges that solution providers, including Microsoft, are partnering with retailers, leveraging GenAI capabilities to mitigate the digital divide between store associates and consumers. Microsoft’s Work Trend Index uncovered that 60% of retail store associates are excited about the new opportunities that digital capabilities provide.
Microsoft solutions are putting generative AI capabilities directly in the hands of store associates and managers, unlocking their potential and contributing to productivity, job satisfaction, and, most importantly, helping to enhance the customer shopping experience. The Microsoft Cloud Retail team developed a copilot template built on Azure OpenAI Service, helping transform the store associate role from an operational focus to a brand ambassador-like role. AI capabilities enable store associates to interact and engage with consumers while providing a great experience. These solutions include:
- Creating memorable and personalized customer experiences
- Accelerating the product discovery process by providing access to all the digital experiences and keeping the focus on the customer
- Enabling immediate access to product information and inventory across all channels
- Providing real-time store communication and collaboration tools
- Automating retail managerial tasks and processes
Accelerating intelligent checkout experiences
Retailers have been dealing with the challenges and friction of the checkout process for decades. The new operating models supported by autonomous capabilities provide a compelling value proposition. Autonomous stores help to significantly reduce operational costs, with increased access to consumer data across channels. Additionally, as demonstrated at the NRF, autonomous stores drive efficiencies, enable personalized experiences, minimize theft, empower dynamic pricing capabilities, and seamlessly integrate with unified commerce strategies, including the following capabilities:
- Automated Checkout: Leveraging advanced computer vision
- AI – Providing personalized product suggestions
- RFID & Smart Shelf IoT Sensors: Tracking product inventory and movement
- Real-Time Inventory Management: Monitoring product levels with seamless integration with order management systems
- Mobile Apps, QR Codes, and Digital Interfaces: Providing access to store layouts and enabling personalized offers
Autonomous stores extend beyond retail operations. The list includes grocery, fashion, electronics, convenience stores, and QSRs, which are keeping pace with the digital-first customer, seamlessly navigating across digital, physical, and social platforms, quickly shifting from discovery to purchase. According to Business Insider Intelligence, the number of global stores with autonomous capabilities will increase from only 350 in 2018 to 10,000 stores in 2024, with revenues forecasted to rise significantly from $70 million to over $20 billion.
Optimizing supply chains, merchandising, and product development
Throughout the NRF, solution providers demonstrated advanced supply chain, sourcing, and product development capabilities enhanced with GenAI technologies. It’s an encouraging development, as retailers struggled to keep their inventory levels up due to the headwinds from the pandemic and the subsequent global supply chain disruptions. Retailers can be far more strategic and prescriptive by integrating AI capabilities within the merchandising, supply chain, sourcing, and product development functions. This will help build the resiliency to keep ahead of fluctuating consumer demand.
FedEx CEO and President Raj Subramaniam shared some thought-provoking insights regarding smart supply chains and data-led innovation required to sustain digital retail sales forecasts of $8 trillion by 2026. FedEx will now be able to seamlessly connect the entire customer journey by offering end-to-end e-commerce capabilities for retailers with their fdx digital platform. Optimizing the end-to-end supply chain is crucial to delivering an improved and seamless commerce experience for the estimated 4 billion customers. By combining the power of AI and machine learning with the fulfillment capabilities of physical retail stores, smarter supply chains will be a key business driver.
AI capabilities are transforming, evolving, and accelerating the merchandising and product development processes. Merchant and product development executives can leverage generative capabilities with real-time customer behavior insights to optimize every aspect of the merchandising and planning cycle. Chandhu Nair, SVP of Data and AI, Customer and Marketing Technology at Lowe’s, shared that investing in AI capabilities, digital twins, and innovation for merchandising and product development processes is a game changer.
Considering that Lowe’s sells such a diverse and vast assortment of products, ranging from appliances to lumber to paint, the Merchants are benefiting from these AI and digital twins by:
- Leveraging GenAI to mitigate the laborious manual process and data quality issues with the product onboarding process
- Onboarding SKU or Vendors is now a fully integrated experience, eliminating legacy tools and redundancies
- Solving these challenges with GenAI has resulted in a 60% reduction in the amount of manual labor required for the initial product and vendor descriptions
The human touch and relationships matter more than ever
The consensus was that the NRF was a spectacular event full of optimism and hope for a prosperous and resilient 2024. Following a strong holiday season, where retail sales grew 3.8% over 2022 to a record $964.4 billion, this NRF made a strong statement. There were trepidations and concerns that AI and GenAI were still in the hype cycle. However, it’s clear that across the entire retail value chain, artificial intelligence is now more seamlessly integrated within essential retail processes across the store operations, supply chain, merchandising, product development, ecommerce, loyalty, and marketing functions, helping to unlock business value, reduce costs, and drive outstanding customer experiences.
It’s important to consider that commerce is not restricted to physical, digital, or social selling boundaries. Customers want to shop and engage with retailers and brands on their terms. However, retailers must empower and enable frontline workers to have the technology capabilities to meet the needs of an evolving industry. It’s impressive to see all the capabilities and solutions Microsoft and other vendor partners provide to enable and support this rapidly shifting operating model and provide what retail professionals need to keep up with digital-first customers and the dynamic global economy.