AI trends 2024: Ramping up innovation, productivity, and CX
AI trends for 2024 include more personalized customer experiences and increased productivity as businesses incorporate generative AI into their processes.
Coming after three years of massive, pandemic-driven growth that shattered records, 2023 wasn’t expected to be a great year for US retail.
US retail sales grew 7.7% in 2020, 13.6% in 2021, and 8% in 2022. In 2023, retail sales growth were expected to slow, with the National Retail Federation forecasting a growth rate of 4% to 6%. Before the pandemic, US retail sales grew an average of 3.6% every year.
Advance estimates of retail sales in the US in 2023 — including food services — show that total sales grew 3.2% from 2022, according to the US Census Bureau.
For many retailers, profits were down in 2023, with the lowest gross margins for retail soft goods in the past 15 years. This economic stress created a great divide, with high-performing retailers winning new share while other retailers were forced to cut costs, close stores, and in several cases declare bankruptcy.
Against this economic backdrop, retailers kicked off 2024 as they have for the past 113 years, at NRF’s Big Show in New York City.
Four clear US retail trends emerged from NRF 2024, indicating where the industry is headed:
- AI: It’s everywhere, from boosting CX and SEO to auto-repleneshment.
- Rise of Chinese retailers: Social selling and agility are driving customer expectations
- Margins + profitability: Streamlining processes will be key
- Hybrid digital + physical experiences: Digital tools like VR are melding physical and online retail
1. In 2024, AI is the hottest US retail trend
Artificial intelligence (AI) was a dominant theme at the NRF Big Show. Retailers are increasingly leveraging AI to enhance customer experiences, optimize search engines, and implement auto-replenishment systems.
AI isn’t just a tool for improving operational efficiency, but is the foundation for creating personalized shopping experiences. Expect AI to play an even more significant role in product recommendations, inventory management, order fulfillment, and customer service interactions.
While retailers are eager to cut costs, they also see 2024 as a critical year to invest in transformative new capabilities of AI.
“AI will be embedded in everything we do. AI will change how everyone in retail does their jobs,” Karen Etzkom, CIO at Qurate Retail Group (QVC and HSN Parent), said on stage at NRF.
Qurate’s initial plans for AI include boosting online product search and responding to customer queries.
2. The rise of Chinese retailers in Western markets
The swift expansion of Chinese businesses, such as Shein and Temu, is influencing consumer expectations in the US and across Western markets.
These companies have shown remarkable agility in responding to market trends, emphasizing the need for Western retailers to be more adaptive and responsive to changing consumer preferences. Their success underlines the importance of a global perspective in retail strategy.
A key element of these companies’ success is their use of social media such as TikTok and Instagram as platforms for product discovery. Every retailer now needs to face the reality that new products are less likely to be discovered in a store, and more likely to be discovered in a social media feed – making social commerce critical for retailers who haven’t yet integrated it with their commerce platforms.
At SAP’s Show Floor Meets Top Floor event, Michael Fichtner, CIO of Bayern Munich, explained how FC Bayern Munich uses SAP to aggregate data from thousands of Bayern fan clubs. This expands Bayern’s reach from known 8.6M Bayern fans, to 1 billion unknown fans.
With this insight, Bayern can personalize every touchpoint from online and physical stores to club memberships, stadiums, apps, and magazines. This allows FC Bayern to improve fan experiences and reach them in real-time, no matter where they are in the world.
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3. Focus on retail margins and profitability
As a result of the economic challenges of 2023, retailers are pivoting towards strategies that enhance margins and profitability.
This trend involves a keen focus on reducing operational costs, streamlining supply chains, and employing AI for more efficient business processes.
For example, retailers are exploring innovative approaches to demand, planning, inventory management, and customer engagement to drive profitability. They’re also looking at alternative revenue streams such as retail media networks and data syndication.
At NRF 2024, Eileen Mahoney, the retiring CIO of global retailer PVH, talked about PVH+ plan, a multi-year strategic plan to drive brand, digital and direct to consumer (DTC)-led growth to accelerate financial performance.
As the retail industry moves to streamline operations, retail merchandising software like predictive planning and inventory orchestration will become more critical to brands.
4. Retail trend: Blending digital and physical
The integration of digital and physical retail is creating a more cohesive and seamless shopping experience in the US and around the world.
Retailers are using digital tools within brick-and-mortar stores to enrich customer interactions and improve operational efficiency. The adoption of in-store digital is accelerated by brands’ desire to bring retail media networks into the store.
This trend is a testament to the enduring importance of physical retail spaces, even in an increasingly digital world.
Retailers are using technology like VR to create immersive, in-store experiences. For example, TOMS — known for its shoe donation program — provided shoppers with VR headsets so they experience a TOMS Giving Trip in Peru.
And Canada Goose, a retailer specializing in outwear, invites customers at its Toronto store to travel through a virtual snowstorm and walk on a floor that simulates breaking ice.
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Data powers the future of retail
NRF 2024 provided a window into the future of retail. As we navigate these emerging trends, the key will be to remain adaptable, customer-focused, and innovative.
What do all four of these retail trends have in common? They’re all powered by data. They require retailers to aggregate all their data from disparate systems in real-time across the entire supply chain. They demand modern cloud-based technology stacks that have generative AI capabilities natively integrated.
Retailers who embrace these challenges and integrate new capabilities into their strategies will be well-positioned to thrive in the dynamic retail landscape of 2024 and beyond.
