NRF 2024 Exposes AI’s Customer-Facing Role in Retail Transformation

National Retail Federation’s (NRF) 2024 Big Show underpinned how the integration of cutting-edge technologies is shaping retail transformation. As expected, artificial intelligence (AI) stands at the forefront of this revolution as a powerful force driving transformation across all facets of retail. This tenet was highlighted across thousands of discussions and demonstrations in the Expo Hall and many insightful NRF presentations.

NRF 2024 also unveiled how AI is quickly emerging from the back end to become a front-facing companion in retail. In this post, we explore how AI is transforming the retail experience, from personalized customer interactions to driving promotional effectiveness and streamlining store operations.

NRF 2024 KEY TAKEAWAYS

AI Explodes from the Dark Side to Embrace the Customer

AI Adoption in Retail Needs a Balanced Approach

AI Explodes from the Dark Side to Embrace the Customer

Because the last few years have been so disruptive, many retailers have been in catch-up mode, trying to manage precarious demand patterns and supply chain challenges, as well as getting their foundational systems in order. Many retailers realized their technology stacks and supporting business processes are simply not capable of efficiently supporting customer experience expectations. But at NRF 2024, we saw a renewed importance on putting the customer at the center of retail initiatives across the board, and in large part, this focus includes AI.

Retailers are back to focusing on providing a seamless experience across all channels, personalizing content, offers, promotions, and in-store experiences based on customer preferences. What is different from BAI (‘before AI’) days, is that those capabilities can have a lot more intelligence—and can be enhanced by technological advances deep into the back end of retail operations.

Customer-facing capabilities can have a lot more intelligence—and can be enhanced by technological advances deep into the back end of retail operations.

The Customer Side of AI

On the Expo floor, we saw AI-powered digital humans (holograms) with the potential to transform retail spaces. These AI-driven assistants can offer personalized help and handle transactions, signaling a shift towards enhanced efficiency and unique customer experiences. However, it is vital to note that despite these advancements, no vendor advocated for replacing human interaction entirely, indicating that the human touch remains irreplaceable in retail. Further, some feedback was that these AI-driven interactions—while incredibly impressive—will take considerable time for customers to adopt and trust.
Conversational AI technologies are revolutionizing retail interactions, benefiting customers and frontline workers alike. These systems provide personalized shopping advice and reduce the workload on the retail staff or call center. This technology is poised to transform customer service, freeing up time for those managing large fleets of stores. It is important to note that while AI-powered technologies can provide some support to reduce associate workload, they are limited to what they have been programmed to do or have been frequently asked. At the current level of maturity, it is unlikely they will replace a human who can offer sophisticated substitution options or answer complex fulfillment questions.
Checkout technologies showcased at NRF 2024 are redefining retail’s perennial challenges (such as shrinkage) and enhancing the point-of-sale experience. RFID technology is advancing beyond inventory management—forging inroads to transform the checkout experience by reducing customer frustrations and streamlining transactions on the heels of pioneers like Uniqlo. Furthermore, the ‘grab and go’ model, following Amazon Go’s footsteps, is gaining traction, potentially reshaping retail’s future. Travelers are now seeing this ‘grab and go’ technology in airports across the world. Retailers must find the optimal nexus of customer convenience, labor, shrinkage, and efficiency. While RFID is not AI-dependent, AI technologies can track products throughout the supply chain and potentially through checkout to create alerts, recommend actions, or charge customers in the store. This is not quite all roses and sunshine yet, as self-service can invite customer theft—some studies show one-third of Gen Z shoppers admitted that they shoplift while using self-checkout. Further, the integration of RFID codes across a retailer’s entire assortment creates additional complexities. Retailers must determine how the technology will fit into their overall processes and be consistently employed.
The integration of generative AI with retail media and loyalty programs is catalyzing an era of ultra-personalization. This technological wave propels the retail industry beyond mere customer recognition, diving into deeply tailored experiences and communications. Such personalization mimics the adaptive strategies seen in audio and video streaming services, where user searches instantly influence targeted content, heralding a significant shift in consumer engagement and sales strategies. (Remember Foursquare? Don’t be surprised if you see similar functionality coming back with even more intelligence.)
The introduction of advanced robotic solutions at NRF 2024 was also impressive. These sophisticated machines, empowered by AI, are increasingly adept at handling complex tasks with remarkable autonomy—ranging from providing customer service with a personal touch to meticulous shelf scanning and inventory audits. The robots even have the potential to manage backstock retrieval and keep stores pristine.

AI Adoption in Retail Needs a Balanced Approach

Retailers are confronted with critical decisions of determining the right level of technology adoption while balancing what is pragmatic from both customer value proposition and organizational adoption perspectives.

The allure of cutting-edge technology, while undeniable, requires a balanced approach that considers human and foundational elements:

Human touch with automation

Despite the influx of digital assistants and holograms, the essence of human interaction remains integral in retail. The challenge lies in finding the perfect balance between leveraging technological efficiency and maintaining the irreplaceable human touch in customer service. Indeed, this balance will be different depending on the retail segment and brand value proposition.

Change management in the digital era

As we outlined in our recent blog post, “Empower Your People with Meaningful Business Transformation,” the adoption and adaptation to new technologies are as much about people impacts within an organization as they are about technical upgrades. Effectively managing retail transformation with strategic approaches to both change management and business process design is crucial in ensuring a smooth transition and widespread acceptance of new digital tools.

We hold foundational systems to be self-evident

We have harped on this ‘non-sexy’ side of retail for decades, and we will continue to do so. With the innovations and technology advancements we have seen lately and certainly showcased at NRF 2024, brands are facing challenges with integration, both on the system and business process side. Legacy ERP, core merchandising, and other retail planning systems (yes, in some cases, spreadsheets are still employed) simply cannot support newer technologies without inefficient workarounds.

Data preparedness and governance

Achieving the full potential of AI in retail begins with a crucial step: ensuring that data is cleansed and well-organized across channels, platforms, systems, and functional areas. While this undertaking may seem formidable, data management is fundamentally about governance and reliability. The significance lies in establishing a foundation of consistent and clean data, acting as the bedrock for unified retail enablement. Once data is defined, organized, categorized, and easily accessible, the pathway to leveraging this data for AI and generative AI, becomes a tangible reality.

Data and AI utilization impacts

With an abundance of customer, transactional, inventory, and external data available, the key lies in harnessing this resource effectively to enhance both customer and employee experiences without overwhelming or alienating. AI plays a crucial role in this, offering optimization and decision-making support, but it is equally important to equip teams with the right tools to translate AI insights into meaningful actions.

Contributors

Marty Anderson
Principal

Dustin Wright
Senior Manager

The Parker Avery Group is a leading retail and consumer goods consulting firm that specializes in transforming organizations and optimizing operational execution through the development of competitive strategies, business process design, deep analytics expertise, change management leadership, and implementation of solutions that enable key capabilities.