The IDC Retail Insights Team joined attendees from technology and retail companies at Javits Convention Center in New York City for NRF 2024: Retail’s Big Show. The event, which took place from January 14 through January 16, saw 40,000+ attendees, topping the over 30,000 visitors of last year’s edition.
At the show, we engaged in 200+ meetings with technology vendors to learn more about their offerings and discuss the latest trends in retail technology. The theme of operational efficiency and the focus on use cases and technologies that generate return on investment (ROI) permeated the discussions we had with delegates.
Some of the key points gathered during our conversations include:
- “Sensible” approach to Generative AI applications: We were expecting a lot of conversations around Generative AI (Gen AI) this year. We weren’t disappointed. But the approach taken by tech vendors and retailers focused on use cases that generate ROIs and provide value to customers, rather than on the application of the technology per se.
For example, leveraging Gen AI to build content for coding, to create and enrich product descriptions, for content supply chain, for product reviews, etc., came out regularly in our conversations with vendors when asked what retailers are looking at in terms of Gen AI applications.
- AI-driven organizational changes: Challenges related to the implementation of Gen AI were also touched. One vendor said that this year is going to be the year of the proliferation of Gen AI models, and retailers will need guidance from vendors. Managing and cleaning data that feeds into Gen AI is also another challenge retailers face.
Also, change management is to become key in organizations expanding Gen AI applications. The technology is likely to augment, rather than replace, employees, but require a cultural change within organizations.
- AI-driven changes in consumer dynamics: Related to AI, discussions around generative search and contextual buying were fascinating. This approach brings a systemic change in the way shoppers search for products online, moving away from searching by single products to searching by context.
For example, instead of looking for specific grocery items, shoppers will be able to ask the search engine to come up with a list of items they can buy if they want to put together a healthy meal for the family based on the available budget. AI also brings increased customer experience personalization, such as in pricing and promotions, enabling brands and retailers to offer bespoke discounts and product recommendations to shoppers based on their personal preferences and the status of the customer journey.
- Values-driven customer data and loyalty: In today’s cookiesless era, data is the golden reserve of every brand and retailer. For this reason, retaining and increasing loyalty and loyal customers is a critical priority of customer experience.
Loyalty is intrinsically driven by trust and contextual personalization and results in customer lifetime value and customer satisfaction. Thus, retailers and brands are offering to customers multi-loyalty programs, and as we predict, this is expected to involve 40% of retailers globally over the next two years.
By launching multi-loyalty programs, retailers can offer multi-level/membership to customers, who can improve their status to “VIP/exclusive” stages, accessing personalized experiences. At the same time, retailers can be a partner ecosystem enabler of loyalty, where customers can accrue and redeem reward points across sectors (from hotels and shopping malls to grocery stores and fuel stations).
- The evolution of the physical store: Far from being anything new, but the physical store remains central in Retail. According to our research, more than 60% of retail revenues are generated via the physical store in 2023. The focus at NRF was on how to augment the role of the physical store, enhancing a frictionless shopping experience, increasing its efficiencies, and integrating with the digital shopping journey.
Unsurprisingly, AI was front and centre in the conversations related to the store, with applications including computer vision for faster and more efficient item recognition and pricing at self-checkouts, and for shrinkage prevention and traffic and customer behaviour analytics.
But a less expected, big comeback this year was the RFID technology, as its application has become economically viable in subsegments including apparel and fashion retail, enabling seamless scanning and payment for items at self-checkout or through cashierless scan-and-go, easier in-store returns and more effective loss and shrinkage prevention.
- Commerce platforms become unified: the theme of composability was unsurprisingly front and centre of our conversations on commerce platforms with technology vendors. Some 77% of retailers describe their commerce architecture as composable, according to our research.
Composability offers key advantages including greater flexibility, customization, and scalability, making it the preferred choice for many brands and retailers that need the ability to continuously respond to today’s fast-evolving market. Platform providers stress the importance of composable platforms to enable integration with partners’ services.
One recurring theme this year was the expansion of channel-less capabilities of digital commerce platforms, as many vendors highlighted their plans to expand capabilities including mobile POS apps or facilitate integrations with partners that provide POS. This signals how the persistent importance of the physical store noted above is also shaping the modernization and consolidation of applications and solutions into a unique platform, conceived to serve the rapid growth of digital commerce in recent years.
- Alternative approaches to returns: Many of our conversations with attendees revolved around the issue of returns. One of the greatest challenges in today’s omnichannel retail is to effectively manage the last mile, both for order fulfilment and returns.
The approach that we saw emerging in the conversation with technology vendors revolved around the need for retailers to limit the need for returns, on top of making those that occur the most efficient and frictionless as possible. For example, leveraging Gen AI to enhance product description reduces the likelihood of shoppers returning items as they receive something that doesn’t match their expectations.
Another approach we saw was the “weaponization” of returns, that is the use of returns as an occasion to create better engagement with shoppers and upsell, for instance by enabling shoppers to trade in unwanted items for credits to buy something else, facilitating a seamless re-commerce cycle.
Another approach to ease the impact of returns on retail operations is the personalization of returns, that is offering better return terms to valuable shoppers. For example, brands and retailers—particularly in segments selling high-value items such as luxury goods—partner with rapid delivery services to offer rapid returns to high-value customers.
- Expansion of the marketplace: The marketplace model is gaining momentum. Over 23% of retailers’ revenue was generated by digital channels including marketplaces in 2023. But the trend is not limited to retail.
In a few conversations at NRF, it was interesting to see the growth of marketplaces outside retail B2C to offer one-stop-shop experiences to customers in finance, travel, B2B, etc., as more companies outside retail turn to technology providers and consultants to expand their offering through the channel, and to gather intelligence on what items and services, including those offered by partners, sell best.
NRF 2024 was a great opportunity to engage with technology vendors and learn about the latest trends in retail technology. The key message emerging from the event is that retailers need to continuously embrace change to stay ahead of the competition, but they need to do so by ensuring that efficiency and profitability are safeguarded and enhanced.
What we highlighted above, including the focus on Gen AI that generates ROIs, AI-driven changes in organizations and consumer dynamics, the creative approaches to returns, and the developments in physical and digital commerce, are just a few of the many trends that are shaping the future of retail. Brands and retailers should take note of these trends and consider how they can leverage them to improve their businesses, start exploring these trends, and experiment with different use cases and technologies to stay ahead of the curve.
If you want to know more, please reach us out at fbattaini@idc.com or ourso@idc.com.