Research & Insights


Latest Blog Posts

Popular Posts

If the basics of retail are elementary, then it should be no surprise that a technology named Watson is leading what may be one of the biggest trends in 2017.

Watson is the name of an artificial intelligence technology (AI) by IBM; many may remember Watson for its $1 million winning streak on “Jeopardy.” Today, several major retailers — from Macy’s to 1-800-Flowers.Com — are using or testing the supercomputer’s cognitive computing capabilities to more acutely predict (and serve) customer wishes.

Most recently, Staples announced plans to implement Watson technology to bring to life its Easy Button. Infused with the technology, the button can now take Staples orders by voice, text, email, messaging app or mobile app.

The marvels of AI capabilities are wide-reaching, as is evidenced by the Amazon Echo and Google Home smart speakers. It’s no wonder retail is a great fit. The technology can understand and interpret customer preferences to make more accurate product suggestions, manage inventory based on predictive modeling and even identify ideal store locations. The industry, valued at $126 billion in 2015, is expected to reach $3 trillion by 2024.

Well-Timed Intelligence

Many merchants have adopted some form of AI in the past year. But are they in jeopardy of being too late?

I suspect online merchants are better equipped to get up to speed; they cut their teeth on clickstreams and piles of customer interaction data. But what about brick-and-mortar players?

They do collect data, often via loyalty programs, but putting those insights to action can be a complex endeavor with so many store-related distractions at hand. And in many cases, their data hierarchy and retention capabilities need significant work.

Enter a host of new AI applications, which are now more targeted to suit specific retail needs and therefore more approachable. In this context, perhaps late is better than never.

The key to faster adoption is the ability to see tangible results, said Emily Bezzant, head analyst at Edited, a retail analytics company with offices in New York, London and Melbourne. Brands are expanding the amount of data they have outside their core businesses, she said.

“All retailers have data within their business; the question is how can they best get actionable insights from it,” said Bezzant, who predicts AI will be a major retail trend in 2017. “AI and machine learning aren’t a fad; they’re a new technological innovation that means huge sets of data can be leveraged into decisions that could formerly only be made by people.”

Many of those decisions are now being made by a technology with a human name: Watson.

Watson’s Many Partners

I singled out Watson because so many merchants are testing and using it, and not all are online-exclusive. In addition to Staples, the following merchants have partnered with IBM:

  • Macy’s: Though it’s a traditional brick-and-mortar retailer, Macy’s has invested heavily in online and omni-channel merchandising. This includes the Macy’s On Call app, which combines Watson’s cognitive computing with location-based software to answer shoppers’ in-store questions, such as where a specific clothing brand is located. The program was tested in 10 stores through fall 2016.
  • Under Armour: The maker of high-tech activity apparel recently partnered with Watson to create an app that helps customers track their health and fitness activities, including sleep and nutrition. It in turn provides the users with coaching based on their data, as well as the results of other people who have similar health/fitness profiles. It also pulls from nutritional databases, physiological and behavioral data.
  • 1-800-Flowers.Com: The digital florist and gift company tapped into Watson to create GWYN, a virtual gift concierge. GWYN “intuitively guides customers through their shopping experience to help them select the perfect gift,” according to a company press release. GWYN can interpret questions such as “I am looking for a gift for my wife” and then ask related questions about the occasion and sentiment to make reliable suggestions.
  • The North Face: The outdoor-gear chain launched a Watson-powered digital shopping tool that presents online coat-shoppers with a series of questions, such as “Where and when will you be using this jacket?” The answers are used to generate relevant coat suggestions. Shoppers who use the tool are more likely to buy than those who do not, The North Face told Adweek. The retailer is exploring different ways to use the technology.
  • Sears: The 124-year-old department store chain is using Watson to boost one of its tried-and-true categories — tires. The AI-enabled app, called Digital Tire Journey, prompts the shopper with questions and matches the most appropriate tires with driver preferences. The app identifies the shopper as a Comfort Warrior, Value Seeker, Off-Roader, High Performer, Safety Seeker or Winter Warrior and presents several purchase options (buy online, schedule an appointment or reach a call-center employee).

Embrace the Algorithms 

Based on these examples, it’s evident that brick-and-mortar merchants certainly have the ability to adopt AI technology. The trick is having the required data and the ability to blend it with the in-store experience.

They certainly can take a lead from online merchants. Bezzant points out that many retailers are already using big data analytics to track the competition and hone their retail strategies.

“However, it’s the savviest and most forward-thinking brands that are looking more deeply at machine learning, analytics and AI across all aspects of their businesses,” she said. “Embracing self-learning algorithms gives retailers the ability to sell more products with less discounting, understand competitors’ pricing, have correct product assortments and minimize gaps, spot key trends early and capitalize on them with maximum efficiency.”

Indeed, retail’s AI adoption is not all happening online. Nor is it all relying on the power of IBM’s Watson. The robots being tested at Lowe’s, called LowBots, come to mind. They can process natural language to respond to customer questions, and can even tell the difference between people and objects.

That may seem elementary to you and me, but in retail it represents a graduation of sorts. Where do the humans fit in? That’s a topic for another article.

In the age of mobile, loyalty is reborn

With 75% of internet use and 50% of digital commerce set to be mobile-based this year, it's clear that the breakneck pace and near universal adoption of mobile technology and smartphones around the globe is leading to a scale of change in commerce we've never seen before. Your customers are now connected to each other, their favorite brands and a wealth of information all the time – profoundly upping expectations about the quality, speed and nature of their interactions.

And, with over half of millennials calling retailers that don't communicate through mobile channels "outdated", expectation is definitely the name of the game.

In short, mobile is here, mobile is huge and there are few if any aspects of retail that can ignore it any longer. Loyalty is no exception.

Integration is key

Mobile wallets like Apple Pay, Android Pay and Samsung Pay are quickly become standard on new phones, so leading retailers understand they can't just adopt POS systems that accept mobile payments – they need to make sure their loyalty programs can be fully integrated as well.

But the challenges for loyalty aren't just about integration or even streamlining the customer experience. Digital loyalty programs have always been an effective way to say thank you and reward, retain and grow customers. Mobile doesn't change that. What it has the potential to do – and is in fact already doing – is to move the relationship away from being strictly transactional.  Instead, mobile is helping match what shoppers are saying through the data to drive better decision-making on what products to carry, how to price and what to promote, delivering better personalized relevance and value for customers, and increase sales for the retailer.

Third parties offer a new approach

A variety of mobile-based loyalty start-ups – like Snap, Drop and Kiip – are also rounding out the picture with third-party apps that reward customers based on purchases, behaviors and brand interactions, offering white label solutions for large retailers that don't have the time or wherewithal to build their own programs in-house. 

In the coming months and years, retailers will up the ante even further, with mobile loyalty experiences that will feature better integration of loyalty cards, promotions and rewards to customers' loyalty and retail apps. Retailers' experience will improve too, as they learn how to better marry shoppers' mobile data and loyalty to experiment with store layouts, product positioning, allocation of store staff and relevant offers direct to smartphones.

For more about growing loyalty in the age of mobile and other trends to watch in 2017, please download the LoyaltyOne 2017 Trendspotter.

Personalization. It’s the new industry buzzword, variously touted as the solution for a host of branding and marketing, and recently, even merchandising, problems. But it seems to mean different things to different people, and as hard as it is to define, it’s even more challenging to execute. But with challenge comes opportunity. By looking to some of today’s leading retailers, we can see that delivering truly targeted communications can be the key to sustaining and growing a loyal customer base.

We know that customers want personalization – 69% of consumers say they prefer to receive personalized communications based on their shopping history. This demand for personalization grew 11% from 2015 to 2016. Yet despite growing promises of relevance by technology vendors, consumers say many companies are still missing the mark.

In today’s world of digital communication, it’s become very easy to send blanket emails to an entire database of customers for virtually nothing. It’s pretty incredible how cheaply we can now reach everyone. But we have to resist the urge. In the 2015 Precima Customer Centricity survey, 50% of respondents said they didn’t feel they were benefitting from the collection of their personal data. As customer expectations of personalization increase, the bar for what constitutes true customer focus continues to rise.

The PC Plus program by Loblaw is one leading retailer doing a great job of meeting the high expectations of consumers. It is the first “digital-only” program that rewards customers the more it knows them. All offers are targeted and personal – rewards improve as the customer’s data gets richer, and the better the customer, the better the rewards. That’s personalization – and the new future of loyalty.

With a willingness to invest the time and money required to do it right, today’s organizations can use personalization to build strong, loyal customer relationships. The data shows that customers want this. As most customers report that personalization increases their trust in a brand trust and loyalty, it’s a clear win for retailers, too.