Most retailers have addressed these concerns with traditional solutions, with some success. (See Exhibit 2.) This report explores how AI and advanced analytics technologies can help retailers address their most important concerns, instantly boost growth and build resilience. I am emphasizing what is helpful.
ever-increasing cost of goods
Retailer costs, as measured by the Producer Price Index (PPI), will be much higher in 2023 than before the pandemic, growing faster than the increased costs passed on to consumers, squeezing retailer profits. doing. In response to the rising cost of goods, retailers tend to stick to the basics. About 55% of respondents say their organizations are raising consumer prices, and 52% say they are renegotiating with their suppliers.
However, these are short-term stopgap measures that can potentially damage your brand. up to a comprehensive assessment of product interdependencies (e.g. cannibalization), taking into account a wide range of real-time variables. By using AI to develop this next-generation pricing capability, retailers can average their approach to optimize overall profit while making it specific to an individual customer, store, or channel. can do.
Consumers are under intense pressure
Economists in most regions expect private consumption growth to slow in 2023, but to varying degrees. Many retailers are testing multiple approaches to deal with the weaker demand environment. The most common options under consideration are investing in loyalty programs (45%), optimizing product offerings (44%), price promotions (40%), and investing in digital customer experiences (40%). But by and large, retailers are taking his AI lightly. AI is a powerful way to meet rising customer expectations for personalized experiences and overcome the downward trend in consumer spending.
In previous research, BCG found that consumers with highly personalized experiences are about twice as likely to add items to their shopping cart as non-personalized shoppers. Additionally, AI can help retailers build an intelligent, long-term competitive advantage by capturing customer attention and ultimately improving customer loyalty. A customer with a highly personalized retail experience had a 20% higher Net Her Promoter score than a customer with a lower level of personalization.
Supply chain woes continue to grow in complexity
Unsurprisingly, supply chain complexity and ongoing volatility remain top concerns for retailers. Nearly half of survey participants who cited supply chain complexity as their top concern are looking to improve their inventory management tools. However, retailers have a relatively untapped opportunity to incorporate AI into these solutions. By combining the predictive power of AI with more real-time factors across the supply chain, retailers can better understand and address the root causes of volatility from producer to customer. These inputs include current and projected inventory levels, geopolitical turmoil, local competitors, social media trends, customers clicking on her website, and local weather forecasts.
Combined with the ability to simulate and optimize different scenarios, these AI-enabled insights enable retailers to proactively respond to short-term fluctuations in demand and supply, while responding to long-term needs. It helps you prepare more accurately.
Figure out the fastest way to start your journey
AI has tremendous potential to not only address retailers’ pressing concerns about costs, consumer spending and supply chain, but also to unlock strategic and financial value along the entire retail value chain. While these benefits are compelling, the prospects for deploying AI in your business can be daunting. Our report is an AI-focused, business-driven approach that addresses today’s concerns and consists of small steps that start with thinking big and creating sustainable benefits while achieving quick wins. approach to retailers.
Uncertainty will permeate the world, both in the near future and in the more distant future. We believe AI is the key enabler retailers need to create sustainable structural advantages while increasing their resilience.
