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The retail renaissance: Leading brands use data and AI to win

Deloitte research shows that evolution of artificial intelligence (AI) and machine learning will generate opportunities for brands to personalize experiences and transform operations.

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Deloitte research on the consumer experience found that we are not in the midst of a retail apocalypse, but a retail . The report, which was based on a survey of more than 500 traditional retail, play, consumer goods, and branded manufacturing leaders around the globe, showed that brand leaders are rethinking the consumer experience by investing in new emerging technologies like AI, mixed reality AR/VR, and engagement platforms to revenues and new customers.

Read also: How Wayfair used big data and omnichannel retail to transform shopping

are some examples that the retail apocalypse is exaggerated:

  • Retail spend has outperformed GDP and every year since 2009.
  • In 2017, 44 percent of consumers reported spending more on retail than 2016. Only 14 percent said they spent less.
  • and mortar is predicted to grow by $36 by 2022, and is predicted to grow by $50 billion in the same period.
  • Deloitte notes that brands must understand that four key disruption behind the retail renaissance:
    1. Consumer disruption - Thanks to the proliferation of and connectivity, consumer expectations for speed and convenience have reached new heights.
    2. Technology disruption - No facet of retail has gone untouched by technological revolution, from awareness to purchase and from brick-and-mortar to ecommerce. Thirty-four percent of shoppers say they've researched a product using a mobile device while in a physical store, and innovations such as AI allow brands to personalize across every consumer touch-point.
    3. Competitive disruption - Today, brands against literally thousands of competitors, including behemoth marketplaces, pure plays, and new business models like subscription -- including and .
    4. Economic disruption - Income and expense pressures have driven a bifurcation in consumer behavior, where growth has occurred primarily with price-based and brands.

    There's to optimistic. However, brands must understand the four key disruptions behind the renaissance before they can address them. Brands also need to place a stronger emphasis on the consumer experience as a significant part of their value proposition.

    customer-value-proposition-spectrum.png

    Figure 1: The Customer Value Proposition Spectrum.

    Here are some of the key takeaways from the Deloitte survey:

    1. many brands on their value proposition on their products consumer experience -- nearly 60 percent of brand leaders said their company's value proposition is based on their product quality and uniqueness. Product differentiation is not enough for retailers to compete and win new business. Only 1 in 10 surveyed rate values and emotional connection as their unique value proposition. In a digital , the consumer experience is the product.

    brands-value-propostion-by-leaders.png

    Figure 2: Brand's Unique Value Proposition by Leaders.

    2. Consumer experience is especially disconnected at the top of the funnel - Brands rated the challenge as engagement and discovery (32 percent), followed by awareness and acquisition (24 percent). These two top-of funnel areas collectively represent more than half of the areas that need the most improvement. of the reasons that retailers cannot improve the consumer experience is that data is scattered throughout the enterprise -- brands are not able to analyze product and customer data in a meaningful or actionable way.

    investment-and-improvement-areas.png

    Figure 3: Top consumer experience improvement and investment areas.

    3. Brand leaders are not sure who should own the consumer experience - There is no common on consumer experience ownership. When the C-level executives are asked about ownership, 72 percent say the CEO owns the consumer experience, strategy, and execution. When and VPs are asked, only 21 percent point to the CEO as the owner. I believe the CEO must be the biggest advocate for the stakeholder experience -- employees, partners, customers, and community. That said, I also believe the winning the consumer experience game is a team sport. Every single employee should be trained, empowered and rewarded for delighting their customers. The consumer experience battleground is won with the alignment of , talent, processes and technology, all aimed at anticipating and proactively delivering products and services that meet and/or the consumer expectations.

    ownership-of-consumer-experience.png

    Figure 4: Ownership of consumer experience within the organization.

    4. Digital investments take the - Over half of brand leaders estimate that their organization's digital business is more than 25 percent of total retail or direct-to-consumer revenue ( Figure 5). According to Deloitte: "Industry data reflects this shift to digital. During the 2017 winter holidays, ecommerce sales grew by 18 percent (Salesforce), compared to 5.5 percent for retail overall in the same period (NRF). Online revenue is largely propelled by mobile devices, with mobile orders growing by 45 percent in Q3 2017 compared to Q3 2016 (Salesforce). Similarly, mobile traffic to e-commerce sites now firmly outpaces traffic, with 60 percent of traffic coming from mobile versus 33 percent from (Salesforce)."

    digital-as-percentage-of-revenue.png

    Figure 5: Digital as percentage of total revenue.

    5. Elite brands win by focusing on cultivating a data-driven culture - Brand leaders -- who reported a revenue increase of at least 10 percent in the past fiscal year -- focus on data at nearly higher rates than under-performers across all areas, on average. The top three areas of data deficiencies for under performing retailers are:

    1. Governance: 68 percent don't have clearly roles and governance for managing consumer data.
    2. : 63 percent don't respond to consumer demands and insights in an manner.
    3. Security: 54 percent don't have rigorous compliance and security to monitor and protect consumer data.
    execution-of-consumer-data.png

    Figure 6: Execution of consumer data strategies by performance level.

    6. The biggest AI bets are pricing, promotions, and search - On average, just over one-third of brand leaders have adopted any given AI use case, with more popular applications in tailored pricing and promotions and relevant search results. Brands are also investing in people that can help greater adoption of AI. According to the survey, brands plan to employ 50 percent more data scientists over the next three years. A 36- degree view of your customers is no longer enough. For retailers to compete and win, they must deliver value in real-time to their customers.

    ai-to-improve-the-consumer-experience.png

    Figure 7: How brands use AI to improve the consumer experience.

    7. If AI is the ship, data is the rocket fuel - 65 percent of branded manufacturers can access none to a moderate amount of consumer data via indirect channels.

    "To compete in this new world, where competition is fragmented among thousands of options that consumers can find at the tap of a phone, brands should focus on accessing first-, second-, and third-party data -- the more granular the better to find relevant opportunities for action. This requires the right technology, as well as the right people and ." - Deloitte

    Leading brands will ensure that marketing, sales, commerce, and service teams to deliver a complete and unified consumer experience. Brands cannot achieve a unified consumer experience unless they invest in AI-powered (machine learning) customer relationship () platforms.

    access-to-consumer-data-from-indirect-channels.png

    Figure 8: Access to consumer data from indirect channels.

    8. Platforms expand from unified commerce to unified engagement - Leading brands will use technology across the entire -- before, during, and after a purchase of products and services. Brand leaders today maintain an average of 39 disparate front-end systems to manage consumer engagement (point-of-sales, mobile, , e-commerce, email marketing, social, etc). That's not only impractical but devastating for companies that truly care about speed, scale, and security.

    Read also: Data, AI, IoT--The future of retail (ZDNet special report) | Download the report as a PDF (TechRepublic)

    9. Two-thirds of brands have an active and funded unified engagement initiative in play - According to Deloitte: "These investments signal an understanding of the need to include commerce, marketing, and service together in a system of engagement in brands' unified platform strategies." Fifty-two percent of C-level executives say they plan to replace existing systems of record with a single platform immediately. I believe the use of AI, machine learning, and advanced analytics must be boardroom discussion in order for brands to survive in the age of the connected, intelligent consumer.

    unified-consumer-engagement-platfrom-investments.png

    Figure 9: Unified consumer engagement platform investments.

    10. The elite brand 's roadmap is a approach: data, intelligence, engagement.

    "The report defines elite performers as brands whose revenue increased more than 10 percent in the past fiscal year. High performers are those whose revenue increased 1 percent to 10 percent in the past fiscal year, while under-performers' total revenue has stayed the same or decreased during the same period." - Deloitte
    three-phase-consumer-experience.png

    Figure 10: Three-phase approach of using consumer data and engagement platforms to reinvent the retail experience.

    In , Deloitte's survey results point to the data as the currency and building for brands and retailers that will compete and win in the age of the connected and intelligent customer. Data combined with AI powered engagement platforms will be the currencies for the of consumer experience initiatives. Leading brands will recognize that the people on the outside of your business will hear, see and what is of your business.

    Read also: For retailers in the age of Amazon, user experience is a question of survival

    In a connected, knowledge-sharing economy, powered by digital technologies, your culture is your brand. What is your brand promise? And you have the right talent, processes and technology to support your brand promise? Remember this, the customer experience is the product.

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