What: GDR UK reviews 5 use cases using AI to provide new advantages to customers.

Why it is important: Out of the 5 examples, only 2 are customer-facing, the remaining 3 are operating in the back end and show how AI can help retailers save some productivity points.

AI continues to revolutionise the retail industry in 2023, as evidenced by the case studies of innovative applications of this technology.

The AI-powered search tool 'Ask Instacart' was launched by US grocery delivery company Instacart, which uses natural language processing to assist users with recipe queries, product suggestions, dietary requirements, and personal recommendations based on their shopping history.

Pactum, a start-up operating out of California and Estonia, developed an AI tool that manages buyer-vendor negotiations. The system, which adds value to supplier agreements and is favoured by vendors, is used by clients such as Walmart.

Verneek, a generative AI start-up from New York, has introduced Quin Shopping AI. This tool specialises in answering customer queries relating to consumer products, both online and in-store, with a focus on specificity to avoid the inaccuracies seen in other AI models.

Google is also playing a significant role in transforming e-commerce with its Product Studio. This tool uses generative AI to change how businesses create and modify product imagery, reducing manual intervention and enhancing the consistency of the online shopping experience.

Firework, a video commerce platform, has also introduced its generative AI tool for in-video chat features. This tool allows for instant responses in chats even after the live stream has concluded, transforming any pre-recorded video into an 'always-on livestream' and turning them into points of engagement and purchase. The beta version of this tool has been launched with US supermarket chain The Fresh Market.

The transformative power of AI in the retail industry continues to grow, with these case studies illustrating its potential to streamline operations, improve the customer experience, and drive business growth.

GDR’s top 5 AI Case studies 

What: The online-only department store is creating a new division for premium brands on its website.

Why it is important: The new division will give the retailer an elevated presence as they continue to reposition themselves as a digital department store.

As a marketplace-led and commission-based business, the retailer is focused on building its proposition to the consumer, with the main focus being on fashion, home, and beauty with a combination of everyday brands and premium brands.

The retailer is looking to build the brand back bigger, bolder, and better as the great British digital department store.

Debenhams to launch premium brands division

What: The unsecured creditors of Debenhams will not recover the GBP 1.3 billion owed to them before the retailer’s collapse.

Why it is important: A progress report from a liquidator revealed that Debenhams, which was once one of the leading names in UK department stores, had no funds available for unsecured creditors.

The department store went into liquidation during the pandemic and was acquired by Boohoo Group shortly after it began the liquidation process.

Debenhams’ debt included GBP 323.6 million in relation to its revolving credit facility and GBP 202.5 million in unsecured loans.

Debenhams collapse left unsecured creditors with GBP 1.3 billion losses 

What: The Parisian department store has opened “Maison de Parfums”, a space dedicated to niche perfumery in its beauty department.

Why it is important: The department store is looking to distinguish itself from competitors by creating an offer that will attract tourists and younger consumers.

The new space is located on level -1 in the store’s 3,400 square meter beauty department.

Fourteen new brands have been introduced including Matière Première, Maison Crivelli, Amouage, Miller Harris, Les Eaux Primordiales, and HeadSpace.

The department store’s offer balances big market names to attract tourists with more confidential and cutting-edge players as well as a range of limited edition bottles.

La Samaritaine unveils a space dedicated to niche perfumery

What: US retail sales unexpectedly rose in May, showcasing resilient consumer demand in the face of mounting economic challenges.

Why it is important: The value of retail purchases climbed 0.3 percent after a 0.4 percent gain in April; Commerce Department data showed Thursday. Excluding autos and gasoline, sales were up 0.4 percent. The figures aren’t adjusted for inflation.

The overall figure beat all but one estimate in a Bloomberg survey of economists. Sales at 10 out of 13 retail categories advanced last month, in part reflecting greater spending on cars — which were widely expected to drop.

While the figures came in stronger than expected, they still show moderating consumer demand from the past year. Americans have kept spending even against a backdrop of elevated prices and higher interest rates, supported by a still-vibrant job market and pent-up savings.

US retail sales see unexpected growth 

What: Replicating what has already started in Brazil, Shein is going through a second stage in Mexico.

Why it is important: Shein hopes to boost its production and optimize its logistics business in parallel through small local factories that can be incorporated into its business scheme.

The strategy is to invest in training so that Mexican manufacturing plants reproduce the products it sells on its e-commerce platform, just as it has done in Brazilian territory where it already has 200 partner factories.

Without specifying locations and dates, the president of Shein Latin America announced that this next step will take place soon, probably before 2024.

Mexico is a key piece in Shein’s strategy in Latin America 

What: Frasers invests in its electrical supplies.

Why it is important: While this is not the first time that a department store company purchases a supplier, the move surprised analysts.

Frasers Group, known for its investments in fashion businesses, has acquired a 'strategic stake' in electricals retailer AO World for GBP 75 million. This move marks a shift from Frasers Group's recent focus on fashion-related categories.

The investment follows two years of discussions about a potential strategic partnership. Frasers Group's CEO, Michael Murray, expressed optimism about the partnership, stating that AO's expertise in electricals and two-man delivery will help drive growth in Frasers Group's equipment and homeware ranges. AO's CEO, John Roberts, also welcomed the partnership, citing the potential for strategic opportunities.

Frasers diversifies in electricals retailer AO World 

What: Investors and consumers are becoming nervous about China’s post-pandemic recovery as its economic data is looking shaky.

Why it is important: For the luxury industry to maintain its strong growth, China needs to pick up the slack as the US market slows.

Concerns over the risk of deflation in China's C-shaped recovery have led to caution in the luxury goods market, with a slowdown in the US market and an emerging Covid wave contributing to pessimism.

China's importance to the luxury industry means that, in order to maintain the strong growth of recent years, the US market must be replaced.

Despite the pent-up demand for luxury goods in some quarters, China's recent economic instability, particularly in relation to the property sector, may impact investors' expectations.

Further instability could lead to a decline in the luxury goods market, with European luxury stocks particularly vulnerable.

Companies like LVMH, Hermès and Richemont are well-placed to weather any downturn thanks to their size, investment opportunities, and long-standing reputation, while Kering and Burberry look more vulnerable.

The luxury party is fizzling in China

What: Despite the department store’s net sales falling, the company still plans to invest up to USD 3 billion in technology over the next three years.

Why it is important: The company is continuing to invest in growth and not losing sight of its long-term goals as it looks to rebound from a weak quarter.

Macy's is cutting back on CapEx projections but will continue to invest in growth, particularly in technology.

The company’s CFO and COO has taken responsibility for stores, supply chain, and technology, with the aim of stitching these areas together and modernizing Macy’s technology infrastructure to support its omnichannel goals.

Macy's has invested in data and analytics technology within stores and has redesigned its website and mobile app, strengthening its omnichannel communications.

The company reported a decline of 6.8% in sales in Q1 and also slashed its full-year guidance.

In March, executives laid out a capital spending plan to invest USD 1 billion in 2023 and up to USD 3 billion over the next year, with the primary focus being digital and technology products.

Macy’s remains committed to tech investments after sluggish quarter 

What: Neiman Marcus Group has opened a new corporate hub, strategically located between its two Dallas flagships.

Why it is important: The retailer’s innovative approach aims to enhance collaboration, attract top talent, and reduce real estate costs.

The Dallas Hub is NMG’s remote-first hybrid environment which supports its integrated work philosophy, empowering teams to work wherever, whenever, and however to achieve their best results.

The new space spans 85,000 square feet, occupying three floors of a 42-story building located between the retailer’s Downtown and Northpark Center flagships.

Nemain Marcus Group launched new Ways of Working (WOW) in 2020, its integrated working philosophy which is built on a strong foundation of flexibility and accountability. The philosophy is built on four pillars: work smarter, be present, integrate work and life, and empower each other to achieve results.

WOW, and the group’s network of Hubs has revolutionised associate experience and also enhanced the retailer’s ability to attract top talent. As a result, they continue to see increased productivity, engagement, and efficiency from their teams, with an initial increase of 34% in employee satisfaction.

The three-story space is custom-built for NMG teams and can provide flexible workspace for up to 800 employees. It features iconic references of the retailer’s past and present, with merchandise displays, photographs, and five lounges that include themes from top store locations or pieces from collaboration with brand partners.

Neiman Marcs unveils innovative new Dallas Hub

What: Signa disinvests in a major mixed-use project but keeps on building it upon completion.

Why it is important:  The sale includes some Galeria flagships that will keep on operating under the supervision of the new owner.

Commerz Real, a subsidiary of Commerzbank, has purchased the 134-meter tall, 32-story Mynd tower and the traditional Galeria department store connected to the tower in Berlin from Austrian Karstadt owner, Signa.

The sale, which is the largest real estate transaction in the capital in 2023, occurred two years ahead of schedule. Commerz Real, which previously held a 20% stake in the project, is now the sole owner.

However, Signa will continue to develop the construction project, which has about 100,000 square meters of rental space, until its expected completion in 2025. The purchase price has not been disclosed, but experts estimate it to be close to one billion euros. The deal is still subject to approval by the Federal Cartel Office.

Signa sells the Alexanderplatz real estate to Commerz Real, including a Galeria department store 

What: The article highlights a recent survey conducted by the Kearney Consumer Institute (KCI) in Italy, France and the United States.

Why it is important: The survey reveals a lack of consumer education regarding sustainability in the fashion industry.

The survey found that nearly half of the respondents were uncertain about the superiority of virgin materials over recycled alternatives. Many participants were unaware of the option to recycle or upcycle clothing, leading to a preference for donation or sharing with friends and family, which often results in garments being stored away. The study also highlights the limited progress in the resale market and the failure of clothing manufacturers to prioritize climate goals and responsible disposal practices.

Kearney's "Circular Fashion Index" (CFI) 2023 report further emphasizes the lack of urgency among assessed brands in addressing sustainability issues. The report reveals a heavy reliance on virgin materials, inadequate consumer education on responsible disposal, and a lack of infrastructure for clothing drop-off and collection. Kearney notes that the complex and costly process of sorting used clothes hampers recycling efforts. Despite these challenges, a few brands, including Patagonia, Levi's, and Gucci, are recognized for their sustainable practices.

Kearney anticipates a transformation in the fashion industry due to upcoming regulations like the European Corporate Sustainability Reporting Directive (CRSD), which will require companies to include sustainability reporting as part of their annual reports and undergo third-party auditing. The CRSD aims to drive progress toward environmental accountability and transparency across the business landscape.

The fashion industry is lagging when it comes to circularity 

What: Alibaba Group will make Europe top priority as it focuses on building local businesses and online platforms outside China, the president of the e-commerce giant said on Thursday.

Why it is important: J. Michael Evans shared that the group will focus on building local businesses through a new initiative called TMall, which already exists in China.

Alibaba plans to bring TMall to Europe in which it will serve local brands and local customers in local markets, according to the president.

A pilot project is already underway in Spain, with plans to expand across Europe.

Alibaba president says group will expand local business in Europe 

What: Harrods has become the Florentine fragrance company’s first UK department store partner.

Why it is important: There are very few independent brands that are not in department stores and the partnership demonstrates the opportunity department stores present in increasing brand awareness for independent brands.

Santa Maria Novella operates two stores in London however entering Harrods will reinforce its retail presence in London and increase brand awareness.

Because the department store is a symbol of London, not only will the brand gain exposure to international clients who visit, but it will also reinforce its positioning as customers know they will find the most premium and best brands in Harrods.

The brand will be located on the ground floor in the store’s beauty department and offers more than 600 different products, including skin care, soaps, candles, fragrances, and more.

Santa Maria Novella partners with Harrods on first UK department store expansion

What: The luxury giant is expanding its use of Epic Games’ technology to create new virtual experiences across its brands.

Why it is important: The game is accelerating in luxury and will force department stores to be able to follow up.

LVMH has partnered with Epic Games, the creator of Fortnite and Unreal Engine, to revolutionize its creative process and offer customers new immersive product discovery experiences. This strategic collaboration will enable LVMH and its Maisons to use Epic's powerful 3D creation tools to provide experiences such as virtual fitting rooms, fashion shows, 360 product carousels, augmented reality, and the creation of digital twins.

Epic's tools, including Unreal Engine, Reality Capture, Twinmotion, and MetaHuman technology, will help LVMH unlock significant growth opportunities. LVMH will be able to leverage Epic's expertise to enhance the experiences offered to its customers in virtual worlds, aligning with the group's core strengths in the real world.

Several LVMH Maisons have already successfully adopted solutions from Epic. For instance, Bulgari unveiled a captivating metaverse experience inspired by ancient Rome, dubbed “Virtual Rome”, during Viva Technology in 2022. The project was developed using Epic’s Unreal Engine 5, resulting in stunning realism.

LVMH expands partnership with Epic Games 

What: Shop Pay becomes a component usable independently from Shopify.

Why it is important: The more people use Shop Pay, the more people will do one-click purchases and hence the better conversion Shopify itself will have for merchants.

Shopify, a platform known for aiding high-growth brands, is set to offer its advanced technology to larger brands. The firm already supports prominent names such as Glossier, Alo Yoga, Figs, and Staples. In 2023, it introduced "Commerce Components," giving more enterprise retailers access to Shopify's technology.

The company is now providing the "Shop Pay conversion magic" to the world's largest brands, even those not on Shopify. This move enables the implementation of an accelerated checkout process for enterprise clients, enhancing their customer experience.

The Shop Pay component will be available for enterprises in the US, Canada, UK, Australia, and New Zealand. It reportedly increases conversion by up to 50% compared to guest checkout. Additionally, Shopify is enhancing its integration with Adyen, a global payment platform, to provide more payment options to enterprise retailers.

Shop Pay expands beyond Shopify 

What: Frasers Group has appointed Google Cloud partner and business technology consultancy Sada to develop and implement a new strategic data platform across its retail portfolio.

Why it is important: The new system will help the group scale data visibility and reporting across its portfolio of retailers and is also projected to help the group see nearly two times the value of its investment in the cloud.

The group’s CIO stated that they knew they needed to play catch up in the data space and shifting the cloud from an on-prem environment would be necessary.

Sada assisted the group in migrating its first dataset to Google Cloud’s BigQuery and will now provide it with a Cloud Advisory team to ensure consistency and flexibility toward the group’s long-term goal of building and maintaining a self-service, value-driven data model.

Frasers Group works with tech firm to develop new Google Cloud data platform

What: The chief executive officer of Frasers Group fashion, Greg Pateras, made his departure from the retail conglomerate this week.

Why it is important: During his time at the company, Pateras oversaw Frasers Group’s collection of fashion brands, Missguided and ISawItFirst, the latter of which he was previously CEO of.

He was promoted last August to lead all of the newly acquired brands, helping them to integrate into the group itself, as well as its tech stack and logistics infrastructure.

He was credited with significantly reducing overheads as part of the mergers, as well as repositioning both brands to put them back into a profitable position.

Frasers Group CEO Greg Pateras exits 

What: The luxury retailer issued its first “People Report” and its second annual ESG progress report.

Why it is important: NMG is becoming more diverse, accommodating, and environmentally conscious allowing them to attract and retain talent.

The retailer’s first People Report details its progressive workplace policies, and initiatives on diversity, gender, and career development.

The reports show progress across a variety of areas from pay equity, workforce diversity and representation by women in the executive ranks and on the board, to speedier hiring, increased benefits, workplace flexibility, supporting diverse-owned brands, and reducing emissions.

Three years ago, the group looked at its culture and how to unleash the power of its people as they believe that the right culture drives the right behavior which leads to better performance.

Providing workplace flexibility enables employees to achieve a better balance between their careers and private lives and also makes hiring easier and faster. The group reports that it’s been taking 31% less time to hire people.

Through the development of its people strategy, called Way of Work (WOW), the company was able to outperform the market in terms of hiring and retaining employees, seeing a 34% increase in employee net promoter score from Q4 2021 to Q3 2022.

The group has also taken strides in diversity, reporting that 59 percent of those in vice president or higher positions are women and 57% of the members of its board of directors are women.

Additionally, racial and ethnic diversity in leadership roles starting at the vice president level and going higher increased from 18.2 percent in fiscal 2021, to 19.8 percent in fiscal 2022. 57% of the total workforce is non-white, compared to 53 percent a year ago.

According to group’s ESG report, the company is fur-free and has many goals in regards to ESG such as increasing sales from sustainable and ethical products and raising USD 3 million for charity by 2025 among others.

Neiman Marcus Group gets introspective

What: The pharmacy group sees the medical part of the business growing, but not offsetting losses incurred by the retail division.

Why it is important: The US and UK are already saturated in terms of retail coverage, more adjustments from other chains should be expected in the coming months.

Walgreens Boots Alliance is set to close 300 Boots stores in the UK and 150 Walgreens branches in the US over the next year to optimize its locations.

The announcement came as the pharmacy group cut its annual earnings forecast due to diminished demand for Covid-related products and a more value-driven consumer approach. The company also increased its cost-saving target after it fell short of Q3 profit expectations.

While retail division same-store sales slightly decreased, pharmacy same-store sales increased by 9.8%. Walgreens now predicts adjusted earnings per share of USD 4 to USD 4.05 for 2023. Despite these closures, Boots remains committed to the UK high street and no redundancies have been proposed, with staff being offered work at other stores.

Boots and Walgreens to close 450 branches in the US and UK 

What: Nike has begun quietly re-entering into wholesale deals with retailers like DSW and Macy’s after pivoting to direct-to-consumer sales in 2017.

Why it is important: Nike and other companies have found that relying solely on DTC can lead to unaffordable customer acquisition costs and does not always yield an increase in revenue or profit margin. Besides, growing competition from brands like On and Hoka, which have thrived due to their savvy wholesale distribution strategies, has motivated Nike to reconsider its wholesale approach.

Nike’s new partnerships with Dick’s Sporting Goods and Zalando are more collaborative, allowing the brand access to customer insights. They also recently re-entered into relationships with retailers like Macy's and renewed their partnership with Foot Locker.

In new wholesale deals, Nike has incorporated elements of data sharing, similar to its DTC model. Customers shopping through certain retailers can link their Nike membership programme, offering dual benefits of incentivising loyalty to Nike while granting the retailer access to sales data.

Wholesale has other advantages. The model provides an outlet for easing excess inventory, a problem Nike faced during the pandemic. It also enables Nike to reach consumers wherever they are, including multi-brand retail spaces.

However, it's important to note that while Nike is re-embracing wholesale, it's not completely shifting away from its DTC strategy. Instead, the company aims to find a balance and establish a symbiotic relationship between its wholesale and DTC channels, thus ensuring it remains a dominant player in the market. This diversification strategy, leveraging the advantages of both channels, allows the brand to maintain a broad reach while also enjoying the benefits of a more direct connection with its customers.

Wholesale still accounts for the majority of the brand’s sales, generating USD 25.6 billion in 2022, compared to USD 18.7 billion in direct sales.

Nike’s complex relationship with wholesale

What: Macy’s Inc. sees potential for growth through smaller format stores.

Why it is important:  The smaller format stores offer Bloomingdale's a path to growth with major potential ahead, as they are tailormade for customers who demand more from a shopping experience than just products to buy.

Macy's Inc has found a model to shrink Bloomingdale's to prosperity following the closure of around 80 stores in recent years throughout the company portfolio.

This year, the company plans to open four new Market by Macy’s to add to the existing ten and one new Bloomie’s to the two that are already operating.

Because Bloomingdale’s has a higher-income target market, is better shielded from any potential downturn than the middle-income customer base of Macy's.

This is proving true based on a company report, as Macy's active customers dropped 4% from last year, while Bloomingdale's grew 5%.

The smaller stores give the retailer an opportunity to reach affluent shoppers in emerging luxury hubs in second-tier cities and suburban locations.

Bloomingdale’s SVP and director stores described the Bloomie’s stores as sharper, specifically in terms of the productivity of its resources.

By opening one store per year, the retailer is able to digest learnings from each store and apply them more broadly. While each store is individually designed for its specific location, the retailer has been able to use its learnings to pivot and meet customers’ expectations.

The smaller format stores will also help deliver the meaningful shopping experiences younger generations expect as they want more than just products to buy, which is also important to the lifecycle of the company’s business.

Because of the smaller format, Bloomie’s is poised for a successful future as they are able to slide into street-side and outdoor mall locations through a three-pronged strategy: In-fill, where the retailer can open a Bloomie’s in an area with an established flagship store, Replacement, where a Bloomie’s replaces a flagship store, and New Market, where a Bloomie’s opens in a new area.

Bloomie’s is how Bloomingdale’s can shrink itself to growth 

What: Fashion’s CEOs are acknowledging a more cautious consumer in the US as they report first quarter results.

Why it is important: CEOs are shifting their tone as they notice American shoppers pulling back.

As first quarter results come in, CEOs are standing by their plans while also noting a shift in consumer behavior.

Capri Holdings saw success in Asia as well as the Middle East, Europe, and Africa however reported a decline in North America. The group’s CEO stated that they first saw the decline in North American department stores with Michael Kors but also the luxury side of the business. The group is feeling the pulling back in the beginning of the year from consumers who were previously feeling positive about their financial situation in 2022.

At Victoria Secret, numbers decreased by high single digits across the board. While the retailer doesn’t have a single answer for the sharp decline in the category, they are focusing on getting traffic into stores within the difficult environment.

Macy’s saw demand trends worsen starting mid-March with an even further decline in April. They attribute the decline to cooler temperatures and headlines regarding layoffs and the banking crisis. The retailer saw the US consumer pull back even more than anticipated as customers reallocated their spending towards food, essentials, and services. As a result, they have readjusted their outlook for they year, expecting macro headwinds to continue and potentially worsen.

Nordstrom continues to see customer demand under pressure and has seen an impact since June of last year with its top-line results being impacted at both the Rack and its full-line stores. In 2022, the retailer benefitted from a strong pent-up demand for a return to occasions, making year-over-year sales comparisons for Q1 difficult. However the retailer expects these comparisons to get progressively easier as the year continues.

PVH Corp. beat first quarter earnings projections but is proceeding cautiously as they recognize the current macroeconomic environment and have decided to reaffirm their annual guidance.

Macy’s and other fashion CEOs offer scarier take on the US consumer

What: eBay announced that it is now authenticating streetwear brands under its Authenticity Guarantee where eligible items are verified by experts with brand and category knowledge.

Why it is important: Authentication is becoming an increasingly available feature that department stores interested in second-hand and second-hand marketplaces should take notice of.

New or pre-owned items from nine streetwear brands sold for more USD 200 are eligible for authentication.

EBay covers all costs of the authentication process and authenticators will re-inspect an item if it’s returned before sending it back to the seller.

From April 2022 to April 2023, searches for “streetwear” on eBay were up approximately 100%. Customers expressed that they want to be able to sell and buy apparel in the same seamless way they can sneakers. EBay took notice of this and delivered with the launch of Authenticity Guarantee for streetwear.

Each verified item receives an authentication tag with a QR code where customers can access the item’s credentials; the same code can be used to relist the item in the future.

This makes the sixth category that eBay authenticates, along with streetwear sneakers, watches, jewellery, handbags, and trading cards.

The marketplace has been heavily focusing on authentication in recent months. In May it acquired Certilogo, an AI-powered authentication company and in April it introduced its “Certified by Brand” luxury resale program. It also bought 3PM Shield, an AI fraud detection company, in February to help in finding suspicious merchants.

EBay expands Authenticity Guarantee to streetwear