U.S. consumers have proven themselves a resilient bunch. In the face of persistently high interest rates and continued inflationary stress, they’ve maintained spending.
But as a retailer, you cannot afford to take this for granted. In fact, we’re starting to see the first signs that the American consumer might be about to buckle under the sustained pressure. To continue to grow without pushing prices out of reach, retailers must look to emerging technologies.
Augmented reality (AR), artificial intelligence (AI) and smart devices can all pry open new revenue streams for retailers. Executives need to double their investment in these systems now so that they get ahead in the retail arms race of the future. Those that don’t will find themselves outgunned as their customers move elsewhere.
The Department of Commerce released its Monthly Retail Report last month, detailing how the value of retail purchases fell 0.8 percent in January — the biggest drop in 10 months (Bloomberg).
Retailers expect drops in spending at the beginning of the year as consumers put the brakes on after the holiday season, and cold snaps throughout the U.S. didn’t help footfall either. However, executives must still recognize that these figures are worse than expected.
It’s clear that if retailers raise prices any further to make up for this slump then they’ll take a hit on volume as consumers seek value and trade down. Some pre-emptive action is required to maintain growth throughout 2024.
AR will refresh and revitalize the in-store shopping experience. Retailers know that customers prefer shopping in-store. However, working from home has reduced inner-city footfall, and expanding footprint out into the suburbs is costly. Browsing a virtual store provides the physicality that customers want, without the costs. For retailers, this drives engagement with the products and, as customers can virtually see and feel the products, it also reduces costly returns.
Increasingly granular levels of personalization make a retailer’s offering more relevant and efficient for the consumer. AI drives this process, powering behavioral analysis based on customer preferences and histories. AI-enabled bespoke product ranges make the shopping experience more relevant and efficient, maximizing spend-per-visit for retailers.
AR and AI are obviously on the more advanced and resource-intensive end of the tech spectrum. But the proliferation of smart devices into peoples’ homes gives retailers with less capital the opportunity to cash in. Internet-enabled fridges, for example, can monitor home inventory in real time and send automatic orders when stock runs low. For the customer, grocery shopping is made as convenient as possible, and for the retailer, seamless reordering drives revenue. And all they need to do is connect to the smart device via an app.
Together, these technologies can be deployed to reinvent the customer experience, keeping consumers engaged and increasing their spending, without raising prices and pushing them away.
The American consumer is ready for tech-enabled shopping, but U.S. retailers have largely failed to tap into this potentially rich seam. A PwC report reveals the section of consumers who embrace emerging tech are high-earning big spenders as well as brand loyal.
The retailers that stake their claim to this territory will reap the rewards of their initial investments. However, it will take some brave decision making from the C-suite.
Prices have hit their ceiling but executives still need to drive growth. My advice: They must double their expenditure on these emerging technologies as soon as possible to ensure they get there ahead of competitors. The first to roll out these systems will be the first to cash in. Those that don’t invest now will be left behind.
Ed Bradley is founder and CEO of Virtualstock, a global drop-shipping and marketplace SaaS platform.
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