In 2023, retailers are facing challenges on multiple fronts. Consumers are increasingly fragmented by generation, spending power, life stage, and attitude, and the impact of inflation and other economic pressures have increased the importance of value. Competitively, there is a continued blurring of lines between retailers and brands, online and offline, and in the boundaries that used to divide one type of retailer from another. Retailers can also face cost pressures in both raw materials and internal operations, continued supply chain disruptions and – perhaps most significantly – intensifying pressure to become more sustainable.

Consumer wallet share can be won by driving a personalized, seamless shopping experience; addressing consumers’ purpose and value drivers; increasing overall supply chain effectiveness to match supply with demand; building a sustainability strategy into their business; and modernizing the enterprise with hybrid cloud and AI technologies playing a critical role.

Creating a personalized hybrid retail experience

Consumers’ shopping journeys have drastically changed over the last few years to a new “hybrid shopping” model splintered across multiple digital, physical, and mobile touchpoints. Equally, we’ve seen the re-emergence of “micro moments” – describing how consumers shop whenever and wherever the mood strikes them, often while doing other tasks. What is clear is that consumers are wanting retailers to meet them where they are on their shopping journey.

Increased fragmentation means that consumers can no longer be classified into broad demographic or geographic groups. To compete for consumer wallet share means retailers need to reimagine customer experience that enables people to build their own shopping journey based on preferences related to their age, values, the product category, and more. According to new findings from IBM, commissioned by Morning Consult, at a base level shoppers want brands that offer convenience, high quality customer service, and a sense of control and security in their (online) purchases.

Over the last three years, hybrid shopping – combining physical and digital in the same journey – has become the norm for most consumers. There is now an opportunity to further extend that hybrid shopping experience, incorporating more digital elements into the store, enabling store and contact center associates to sell and serve customers, and exploring new digital touchpoints such as social and/or the metaverse.  Digitally enabling stores and associates is a good starting point and the metaverse offers retailers and brands many opportunities beyond new customer experiences, from product innovation to operations, manufacturing to commerce, and employee training and support. For more on the opportunities in the Enterprise Metaverse, check out this recent Expert Insight from the IBM Institute for Business Value (IBV).

Manage supply risks and costs with an intelligent supply chain

In 2023, we expect global supply chain leaders in the retail industry to continue facing challenges like external supply shocks, sustainability concerns, inflation, and complex supplier networks that are contributing to high operational risk and costs and can jeopardize consumer trust. Consumers have reacted to this by becoming more diverse in their purchasing choices, how far they drive to buy, and costs of goods related to transport – for example, buying local produce could be less expensive due to transportation costs.

Chief Supply Chain Officers (CSCOs) surveyed in the recent IBM Institute for Business Value (IBV) CSCO report say that they view issues related to supply chain disruptions, technology infrastructure, sustainability, and market shifts are their greatest challenges over the next few years. And now, more than two years into the pandemic, more retailers are rethinking their strategies and exploring how a regionalized supply chain network might help them meet their customers’ needs better.

In this case, AI and automation can power intelligent workflows across supply chains, delivering 360-degree insights and impact analysis that provide interconnectivity and help make more accurate predictions. For example, AI can help forecast supply and demand so retailers can more effectively determine sourcing and regionalization of their supply chain strategy. Retailers can also use AI for workforce support and customer facing chatbots to better serve their customers in a data-led future.

Winning the purpose-driven, value conscious shopper with sustainable operations

As more consumers align their purchases with their values, retailers and brands that can provide more environmentally friendly options could potentially earn a greater share of consumer spend. Recent data has illustrated the importance of combining sustainability and value. For example, data from the IBM IBV 2020 consumer survey showed that while over 70% of surveyed consumers would pay a premium for sustainable brands; new 2023 data from IBM shows only 52% of surveyed consumers would pay a premium. While consumer demand for sustainability, health, and wellness continues to be high on consumer agenda, it is now competing with value in a way that it was not during the COVID-19 pandemic.

Retailers can seek to demonstrate sustainability in their stores, products, logistics, packaging, and waste to win and retain the growing market of green shoppers. Achieving this, however, may require stitching together data across the value chain, extrapolating ESG impact, embedding it into a sustainability strategy that is aligned to business outcomes, and operationalizing that strategy with an end-to-end set of technology solutions.

Scaling innovation rapidly with hybrid cloud and an open ecosystem

In the year ahead and beyond, retailers and their partners should drive better efficiency and costs by scaling innovation across their businesses. Much of our work with retail clients is in this area: scaling transformational innovation in customer experience, operations and supply chain, and enterprise modernization, with technologies such AI/ML, data fabric, and hybrid cloud.  

A hybrid cloud architecture offers the flexibility retailers need to take advantage of data, AI, and automation to meet consumers where they are, transform their business models and drive sustained growth. Retailers can also collaborate with technology partners like IBM to work with ecosystem partners to help them modernize applications and migrate mission critical workloads to the cloud.  

Come join us at NRF 2023 from January 15-17, 2023 in New York City Booth #5139 on level 3 of the Javits Center and subscribe to our newsletter to learn more about how IBM industry experts from across our Consulting and Technology businesses guide leading retail clients’ transformation journeys from ideation, to build, and then scale their innovation based on hybrid cloud.