AI technology is redefining the retail industry – from curated tailored promotions and deals to direct product purchase reminders and more. But what’s even more urgent is the impact AI has on productivity and competitiveness.
EY recently released its latest Future Consumer Index (FCI), which takes a deep dive into consumers’ evolving behavior amid today’s economic uncertainty. This iteration took a close look at AI technology and how it is shaping the industry in big ways. Overall, findings reveal that AI is becoming more pervasive in the sector – even when uncertainty and trust remain top of mind.
I caught up with EY’s Americas Consumer Industry Leader, Kathy Gramling, to discuss how AI technology is redefining the future consumer – and more specifically, how companies that implement AI to help consumers save money and time are primed to come out ahead.
Gary Drenik: EY recently launched latest its Future Consumer Index (which takes a deep dive into consumers’ evolving behavior amid today’s economic uncertainty). Can you share a high-level view of the findings? Was any data particularly surprising?
Kathy Gramling: Despite ongoing economic uncertainty, consumers remain optimistic about their financial future. There’s a bit of a grin, bear it and this too shall pass mentality. For example, our FCI survey revealed 94% of consumers remain concerned about the rising cost of living and the economy but 84% expect their financial position to be the same or better off one year from now. Often, we see a notable gap between feelings and actions.
With that, we still aren’t having that “recessionary conversation,” even on the backdrop of three major bank failures. Consumers are still “spending their way out of the recession”, with sales across the board (apparel, handbags, shoes) going strong. While some big-box retailers are shuttering, that could be an indicator of flawed business models vs the economy at large.
However, perhaps most surprising is just how ubiquitous AI is becoming in the retail sector. Consumers are becoming increasingly reliable on digital technology, as it provides them with ways to make life easier, save money, save time, and reduce their environmental impact. Our study found that while only 22% have a good understanding of the technology, 50% are comfortable using AI to improve purchase experiences.
Drenik: Given the current landscape, how are retailers leveraging emerging technologies to connect with consumers?
Gramling: Retailers are looking to emerging technologies to reach consumers in new and unique ways. For example, FCI showed that 61% of consumers trust AI to offer tailored promotions and deals, and 58% trust the technology to provide purchase reminders.
However, uncertainty and trust when it comes to consumers’ data remains top of mind. For example, according to a recent Prosper Insights & Analytics survey only 14% of consumers are very likely to give out personal information, such as phone number or email, when shopping in store …86% are not.
Drenik: As AI becomes more pervasive in the sector, what are the implications for consumer trust and loyalty? How should retailers navigate this?
Gramling: Trust is no longer human to human; it’s human to technology – and it continues to surface as a top pain point for consumers – whether e-commerce, independent or chain retailers. For example, according to FCI, almost all consumers have minimal to moderate trust in online retailers (92%), chain retailers (91%) and independent retailers (91%).
While long conditioned to share data with brands in exchange for personalized deals and insights, we’re seeing that consumers are questioning their value exchange. Further, we expect consumers to share less and less moving forward. Only 18% are willing to share publicly attributable personal data to drive tailored advertisements and only 21% are willing to share publicly attributable data to drive pre-populated shopping carts based on passed purchase history. As such, retailers will need to rethink how they provide value beyond product availability and price.
Drenik: Why are retailers and brands that invest in and implement AI primed to come out ahead? How will this help them differentiate?
Gramling: Changes in big tech will define the future consumer and how companies serve them. Retailers that are prioritizing AI investment now are ahead of the game, and one step closer to redefining loyalty. For example, more and more clients are coming to us with questions around Generative AI and its implications for the sector. The very first area retailers should consider is how can they leverage Gen AI to drive productivity in stores – for example, with pricing and labor management. With an increase in productivity, retailers will have the ability to invest in real innovation.
For the brands that get it quickly (and get it right), their business models could change overnight. That’s why retailers and brands who are thinking through AI in a smarter way are primed to come out ahead.
Drenik: What impact do you think AI will have on the retail sector in the next year? Next five years?
Gramling: As FCI pointed to, consumers think things will bounce back in about a year. And when asked about 3 years from now, the long-term picture is still hyper-focused on value. 67% of consumers expect to be more aware and cautious of spending in 3 years’ time and 64% will be more focused on value for the money.
For retailers, this means redefining value in the shopping experience. For brands, it means solving for a ubiquitous, seamless brand experience across all channels. The key takeaway…we believe prioritizing in AI investment now is the key to future-proofing profits and coming out ahead as an industry leader.
Drenik: Thanks for chatting, Kathy. Super interesting insights to think about when it comes to the future of retail.
Read the full article here