It’s been a difficult year for many retailers and brands. Shifts in consumer behavior and inflation coupled with supply chain issues created a more challenging playing field. But new technologies such as predictive and generative AI are gamechangers — if deployed in the right way.
Here, Michael Ganci, GM of NuORDER by Lightspeed, sheds light on these issues by sharing insights and key findings from the company’s 2024 “Decoding Department Stores: Research & Insights” report. Ganci also discusses the broader challenges and opportunities facing retailers and brands, and the role of technology in optimizing the supply chain, among other themes.
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Fairchild Studio: What were some of the key findings of the Decoding Department Stores: Research & Insights report?
Michael Ganci: Retailers report having three priorities on their mind: improving profitability, enhancing the customer experience, and fixing operational inefficiencies. With 95 percent of retailers prioritizing profitability, many are optimizing their product assortments by cutting underperforming items (69 percent) and diversifying sales channels (56 percent), while also investing in customer loyalty programs.
Improving the shopping experience is a priority, but operational challenges like outdated systems and supply chain issues are getting in the way. Retailers are aware of these issues, but a lack of bandwidth limits their ability to be as agile and customer-focused as they want to be.
Fairchild Studio: What are retailers doing well?
M.G.: Retailers are some of the most prolific creators, consumers, and analyzers of data, and our research underscores this. Sixty-five percent of retailers rely on quantitative data to make decisions. It’s not just for market research and trend forecasting; they use data for buying, merchandise and planning assortments as well. Although 11 percent of retailers are now using AI to predict consumer demand with higher precision, intuition still plays an important role for many – especially when dealing with new expansions or untested products.
Fairchild Studio: What are the top priorities and/or concerns of retailers?
M.G.: Profitability is still ultimately the end goal. But, no surprise, it’s been a long and windy road. Despite making strides in short-term innovations, retailers are still battling ongoing operational issues around supply chain and inventory management compounded by a reliance on heavily manual processes and data standardization issues.
As a result, retailers struggle with inaccuracies in demand forecasting, leading to overstock or stockouts. In fact, 33 percent of retailers say that accurate demand forecasting and inventory management are the biggest factors affecting their success, which shows just how hard it is to get these things right.
Fairchild Studio: Were you surprised by any of the results? If yes, which ones and why?
M.G.: There’s been a lot of back-and-forth about the merits of online versus brick-and-mortar and direct-to-consumer versus wholesale or marketplaces. It can get noisy and confusing. But the data is loud and clear: these channels are not mutually exclusive: online and physical shopping are equally important. Retailers continue to maintain a strong presence in e-commerce (91 percent) and physical stores (80 percent), and their planned expansion is focused primarily on new storefronts (62 percent) and online marketplaces (40 percent).
Retailers’ strength lies in their ability to gather and use customer data, a crucial component often overlooked in discussions of the “retail apocalypse.” While they have the potential to succeed in today’s volatile market, outdated back-end systems pose significant challenges. However, with the integration of advanced technology, particularly AI, we are confident that retailers can overcome these hurdles and achieve long-term profitability.
Fairchild Studio: What are some of the conclusions made? And what recommendations are offered?
M.G.: There is a disconnect between retailers’ focus on enhancing the customer experience and the operational constraints they face. While personalized shopping, convenience, and ensuring product availability to meet customer needs are top priorities, many retailers are hindered by legacy infrastructures that are often retrofitted to ingest millions of disparate data points. In addition to integrating advanced technologies like AI and machine learning to optimize supply vs. demand, retailers would be wise to prioritize infrastructure improvements in their roadmaps so that they can deliver great product mixes that drive profitability in the long run.
Fairchild Studio: How is AI (predictive and generative) changing how retailers, suppliers and brands conduct business?
M.G.: AI is fundamentally transforming how retailers, distributors, showrooms and brands operate, yet only a small percentage of the retail industry has adopted AI solutions. This leaves vast opportunities for growth and competitive advantage. AI enables companies to better analyze data and forecast demand, improving inventory management, reducing waste, and enhancing overall operations. On the front end, AI is reshaping the shopping experience by analyzing consumer behavior and offering personalized recommendations. Generative AI goes further by enabling retailers to engage customers in new ways through automated content creation, dynamic product suggestions, and improved customer service.
While retail will always require human touch and intuition, AI is forging a path towards agile commerce that adapts to the complexities of the modern marketplace.
Fairchild Studio: What should companies do before they consider investing into AI-powered technology?
M.G.: Working in the tech sector myself, I’ll be the first to admit that we’re all constantly being inundated by the latest and greatest buzzwords. It’s important to take a step back and consider what you’re trying to solve and why, because there is not an “off the shelf” solution for every problem. Before diving into AI, companies must first ensure they have a strong, standardized data infrastructure foundation in place, followed by a clear grasp on what outcomes they’re trying to achieve – whether it’s faster merchandising, less overstock, or fewer returns (to name a few).
Clean, consolidated, and accurate data is critical because AI is only as good as the data it’s built on. It’s essential to prioritize use cases where AI can drive the most value leveraging your current investments. Beyond technology, organizational culture and workforce capabilities can’t be forgotten. Change management, leadership buy-in, and a culture of continuous learning are vital for maximizing AI’s adoption and potential.
Fairchild Studio: And where are the opportunities for growth in AI and beyond?
M.G.: From our unique vantage point brokering commerce between wholesalers and retailers, we see that opportunities for growth exist in two areas: The first is embracing digital transformation and data-driven decision-making. Secondly, fostering more collaboration between brands and retailers. Based on our research, retailers aren’t far off from unlocking major improvements. It’s true that AI unlocks advantages, but it only scratches the surface.
There is huge room to improve the product data management. Retailers are all collecting and processing millions of overlapping product data points, which includes everything from the style number to the color, country of origin, classification, enrichment etc. It’s tedious, cumbersome, and slows down order writing and merchandising. What is clear is that AI data standardization and enrichment are key for saving time and increasing sales. Bandwidth is hard to find lately, but if large, multi-brand retailers can devote time to overhauling manual processes, they’d be better primed to take on innovations.
We’re also seeing that the most successful retailers and brands are partnering to achieve joint growth targets. By collaborating more closely (and transparently) with suppliers on identifying needs and leveraging data to predict trends, customize product assortments and analyze sell-through, brands can solidify their strategic value to retailers.
Fairchild Studio: How does the NuORDER platform work? And how would you describe the value propositions for brands and retailers?
M.G.: At NuORDER by Lightspeed we offer solutions that help retailers and brands make intelligent buying and selling decisions at scale. We offer a B2B platform that enables brands to run their entire wholesale business in one place, and an enterprise buying platform that helps major retailers like Nordstrom, The Bay, Macy’s, Bloomingdale’s, David Jones and Saks Fifth Avenue plan smarter buys. This two-sided functionality improves sell-through rates and minimizes costs through standardized, pre-populated data, automations, and integrations.
In 2021, NuORDER was acquired by Lightspeed with the long-term strategic vision to integrate our wholesale commerce platform with their retail point-of-sale solutions to create one connected ecosystem. Our goal is to help consolidate disjointed systems and create a global network of brands and retailers to streamline ordering, merchandising, and inventory management – and we’re well on that path.