AI and beyond: Retail trends to watch in 2024

Episode transcript, edited for clarity.

Bill Thorne: Welcome to Retail Gets Real, where we hear from retail’s most fascinating leaders about the industry that impacts everyone.  I’m Bill Thorne from the National Retail Federation, and on today’s episode we’re talking to NRF’s Susan Reda about her retail predictions for 2024. From AI to AR and everything in between, we’ll chat with Susan about what retail trends will take off this year.

Susan Reda, happy New Year and welcome back to Retail Gets Real.

Reda: Thanks, Bill. It’s always great to join. This is a fun episode to do. I’m really happy to be here and I wish everybody happy New Year. Here’s to 2024 being a good one.

Thorne: Yes, it’s already starting out well. We think we’re going to have a really, really, really good time in New York at NRF’s big show, and we’re going to talk a little bit about that, but we just published your annual retail predictions column on NRF.com, and it’s always one of the most popular posts of the year.

Now we’re coming out of the holiday season and we’re heading into the Big Show, and we’re going have tens of thousands of retailers and attendees convening to talk about what’s new and what’s next. I don’t think anybody knows that better than Susan Reda. So, set the scene for us. What are you considering as you put together your predictions for this year?

Reda: You know, I am forever immersed in research. As everybody in communications and research is — I am constantly reading, constantly looking at every newsletter I can find, but you know, then there’s the ‘just get out there and see what’s going on,’ and walk the mall, and talk to retailers. Just keep talking to them. So, I mean, that’s where the genesis for this begins.

But we start planning Big Show more than a year in advance, so we’ve already started talking about themes for 2025. So, the themes for 2024 are really embedded for me, and of course, we’ve really flipped the switch from all things metaverse a year ago to all things AI this year. And AI is just hype, hype, hype — but often with good reasons. So, I think that’ll be a huge trend for us as we move into 2024.

Thorne: You know, AI. I will tell you, I mean, I’m kind of a troglodyte and I will have to say, the whole idea behind artificial intelligence, I thought, had very limited implications for how we do business, how we live our lives. Some of it good, some of it bad.

What I’ve come to understand in a very short period of time is that AI is very consequential and no matter what you’re doing, what business you’re in, and particularly for retail — what does AI mean for retail?

Reda: I think that retailers are using it for just about every aspect of their business. We started hearing about AI as it applied to kind of like computer vision. We talked about AI as it related to ChatGPT. I think that’s when really it started to bubble up because everybody wanted to know what ChatGPT was, and I could ask it a question, and it was going to give me feedback.

But when you start thinking about that from a retail perspective and when they can say, ‘This is the data I have about my inventory. Now help me make projections about where to go with it.’  I think that becomes a game changer.

I think when you can apply that sort of ‘ask questions, do some problem solving as it applies to supply chain,’ then, all of a sudden, you’re seeing things that weren’t easily accessible to you before without doing a huge dive into data.

So, it’s taking all of this data that retailers have had for years and years, and helping them to make better sense of it, and make better decisions because of it. It’s productivity and it’s creativity coming out of the use of AI, and I think that’s really where we’re going to see the biggest change in our industry. Do I think it’s the holy grail? Probably not. And like you, I’ve had so many years of, ‘Oh my God, it’s the latest, greatest thing ever.’ And I do think AI has the potential to be the game changer that people refer to it as. But it’s always going to be in the context of — what humans know and what humans bring to the table.

I see it applied to some segments of retail with greater success than others. I had listened to a conversation, between two retailers who are grounded in luxury fashion, and as much as it can tell you about what’s happening right now and what happened in the past, it really doesn’t do a good job of forecasting trends. You still need somebody to really be thinking about what’s next when it comes to luxury fashion, and then once luxury embraces it and then it trickles down, well then, yes, it becomes more predictive. But deciding for a luxury retailer what’s going to be on the shelf in six months? That’s all human interaction and knowledge.

Thorne: Oh, for sure. When you think about AI and its application to the way that our members, retailers do their business, I mean I can see the efficacy in the C-suite, marketing, merchandising, even communications, PR. What is — if any — what is the application at the store level? I mean, for the associates? Is there a way that AI is developing that actually makes their jobs easier, better, smarter? How does that work?

Reda: I think that could come down in part to some task management, to information that they would get if they’re using a device. But also think about AI being used at point of sale, and think about it as you’re making purchases in the grocery store. Remember, remember when we used to go to the grocery store, and we would line up? And back in the day, and then the register would spit out some coupons, and did you ever have that feeling where you looked at the coupons and went like, ‘Why would you give me this? I’ve never purchased this.’

Well, AI is going to make that better, and it has already begun to make that better, so that if you’re getting coupons, they are more in sync with what you’ve purchased. Or you will receive offers through other channels that the retailer has come to know you, that are more personalized and more in sync with what you’ve purchased. So finally, they’ll get the brand right.

Thorne: Well, that makes sense. There’s a particular store that I shop and have shopped for a number of years that used to print out like a mile-long receipt that was all coupons. And I would look at it. It just, it actually was kind of just fun to look at, to see what they think that I would want to buy. And there were products there that was like, ‘Not yet, nope, nope. Wrong vendor.’

Reda: Right. They must think I really need that.

Thorne: So, you know, it’s the deep fakes that you also wrote about. Tell us why that needs to be something that retailers need to look out for.

Reda: Well, you know, like any technology, there’s always going to be the good and the bad. And deep fakes fall under that heading of bad. In fact, very bad. I think the problem with deep fakes is that they’re so damn good. And AI is getting more and more precise, and it’s becoming more difficult for the average person, and even the above-average person, to decipher what’s real and what isn’t.

And so, a colleague of ours tells a story about the first time they tried to expose this to the folks at the company and they had the CEO make a presentation. But it wasn’t his actual words. They had built it using other speeches. And so, he kind of derailed and undermined the competition and left everybody in the room going like, ‘Ah, he would never say that.’ Well, he didn’t. But it became a great example for what could AI do in terms of speech recognition.

I just think we have to be really, really careful here in terms of images, in terms of voice. It’s almost that point where you have to say, ‘Do I believe this? Do I trust this?’ And that’s a scary place to be.

Thorne: You know, it was really interesting. We, I took the team to a retail home office and we had the opportunity to interact with somebody that is no longer with us, where we went and saw the hologram of the founder. It was unreal.

Reda: Disney-like.

Thorne: Yeah, it was very Disney-like. So, you could ask questions and they would respond, in their own voice. I asked the people that actually put it together, and they said that it was really interesting — they had years and years and years and years of speeches that this particular person did, and they were able to kind of really draw off that.

But what they ask you to do is to ask questions in different ways and that the AI capabilities would then build on what they basically put in as the foundation and, and it would continue to grow.

Reda: The very famous one is former President Obama talking smack about former President Trump. It’s disturbing and you know it’s not real, because, oh my God, no one would say that. But there is a segment of our population that may not know about AI and may be swayed by what they’re trying to do by manipulating words. It makes me very uncomfortable.

And, to think that, you know, on the communications and public relations media side of it, we just experienced — what, about a month ago — a  very prominent publication that used ChatGPT and used AI to produce articles. And, you know, I dare say that their brand is forever tarnished. It, it just, once it happens, it calls into doubt a whole lot of things.

Thorne: For sure. Absolutely. People are going to really have to be very, very careful how they use it and how they present it. I mean, to some degree, they’re just going to have to be honest about it. You know, ‘We’re using AI technology to give you a different perspective.’ OK. I agree with that. But don’t present it as, ‘This is our perspective.’ You know what I mean?

Reda: Well, you know, in the loss prevention side (I don’t want to belabor this), but there are ways to manipulate your manager, the store manager’s voice — or even higher — the CEO’s voice, and they give you a call and say, ‘Do X.’ So in the case of a convenience store, if you think that your manager says, ‘There’s somebody who’s going to come in and they’re going to ask you for these gift cards, and please make them $100 denominations.’ You think that you’ve been given the right to do this, and then you later find out that — in fact, that was all made up. 

Thorne: Oh, I never even … they’re getting so smart.

Reda: Mm-hmm.

Thorne: You know, you can never stay ahead of the fraudsters. They’re always going to figure something out. So, the store experience in 2024: How is that going to be different from what we know today?

Reda: We always talk about the stores, and you and I are both store stalwarts. But I think that the challenge for stores as we look to 2024 is to keep innovating, keep the experience high, keep the customer delighted when they walk through, and find a way to bring in the technology in a way that’s going to invite them to experience your product.

So, in the piece I just submitted, I talked about the Crate & Barrel. Crate & Barrel has just opened a new flagship in New York. [If] you have the chance to pop in while you’re at Big Show, please do so. It’s amazing.

Anyway, if you are not able to visit the store, take the opportunity to go online, and you’ll see that you can actually visit the store from your computer, and it’s using technology from Obsess. You can actually steer through and there is more ways to see the product up close to purchase the product. It is absolutely rethinking how ecommerce and the physical channel come together to create a dynamic shopping experience.

I just think that there, as new stores open, what we’re seeing more and more — it’s less about jamming a whole lot of merchandise into the store, and more about telling stories, and engaging the customer, and allowing them that hands-on [experience] with your product. I just see a lot more of it.

At the new Reformation store, there are not a lot of products hanging on the rack. But once you choose something you like, they’ll get it for you in your size, and it goes into the fitting room by a magic closet. And if size 12 is not the size I need, then I can put it back in the closet and tell them using a device what size I do need. That takes that experience of try-on and, you know, who wants to hang their head out and go, ‘Excuse me, excuse me. I need ….’ It just makes it such a wonderful experience, and so that’s using technology — less product, more hands-on, it’s all of the above. It comes together in a shopping environment that makes you want to stay and explore.

Think about the new … oh my goodness … Wegmans. It’s hard not to … I’m… you know, I don’t live in Manhattan, so I wouldn’t shop for groceries in Manhattan. But boy, when I visited that store, I was like, ‘But I think I really need … I shouldn’t put this in my cart, but I’m going to, and I’m going to figure out how to take it home on the Long Island Railroad.’ Because it was that inviting. You just wanted to purchase, and I think that’s the challenge for retailers now to keep making those store environments emotional, engaging and very hands-on.

Thorne: I love that fitting room concept. I mean, it’s always such a pain in the rear when you try something on, and because you know, they say that the sizes are all the same, but they’re not. I mean, in one store it could be this, and another store it could be that. Another line could be this, and another line could be that. So that’s, that’s pretty awesome. I love that. It’s advancement.

Reda: It truly is.

Thorne: Well, as you know, I’m not a shopper, I’m a buyer, so anything that gets me in and out faster is just like candy to me. I’ve very excited about it, so more magic closets, please, as we move forward.

So, you know, Gen Alpha. I was just, I saved an article — and now I wish I had read it — about Gen Alpha the other day. How is this younger generation so different? I can’t believe we’re talking about another gen.

Reda: But Gen Alpha, to be specific, is really young right now. They still don’t have purchasing power. They’re in their teens, so I’m, going to say it’s from eight or nine through the teen years. But this is a generation that does not know life without mom and dad having a cell phone. So, they don’t play with keys when they’re infants. They play with cell phones.  

Thorne: I see a lot of it.

Reda: They are … you know, we talked about the Gen Z being digital natives, but these people, they’re, they’re beyond. They just absolutely know nothing else, and they also are a generation that grew up with Alexa. So, they’re used to just, you know, saying things out loud in the room and getting a response. So, this is, this is very different. But what is interesting about this group is — in terms of retail is — the influence that they have. And they have a lot of influence, and their tech-savvy approach to everything. They’re really, really good at using technology, which will make them great shoppers when they’re ready, but it also means that because technology has always been in, sort of bred in them, they’re more interested in seeing a store. They do like to touch things, so while they — I probably would be overstating to say, ‘Oh, they love the store experience,’ they still want to get out there. They do want to be in stores because they’re tired of being online all the time, and that is what they are. They’re on, they’re online all the time.

So, what they saw in the TikTok, they want to hold in their hands. Will they actually purchase it in the store? Maybe they will, maybe they won’t. But they’re also the ones who are most likely to embrace digital goods. So, they’re going to purchase the digital book, the digital software, the digital clothes for their avatar. They are the ones who are leading that trend and that will shape retail in the future.

Right now, it feels like, ‘Oh, okay, they’re over there.’ But before you know it, they will have purchasing power, and it matters.

Thorne: You know, you brought it up at the beginning and I want to go to it because we were really, really, really immersed in the metaverse last year. What’s going to happen in 2024?

Reda: I don’t think that the hype will return, but I don’t think metaverse is dead, which is what the headlines were, and the reason I don’t think metaverse is not dead is because our good friends, the Gen Alphas, who live on Roblox, and who are learning about the world on Roblox, and because they’re learning through gaming.

So, I mean, if we look at our number one retailer — our good friends at Walmart are paying a lot of attention to Roblox, and they’re paying a lot of attention to this demographic. And so, I’m, I’m going to lose exactly the names of the two programs they have — one is a home program, ‘A House Fix’ or something — but you can go in there and you can purchase home goods from there.

So again, at that age, what are they going to buy? Maybe, ‘Mom, can I have this duvet cover with whatever character on it?’ But they’re starting to get that sense for how to make a purchase in the metaverse. It also is happening with apparel — you can purchase The Scoop fashion apparel in Roblox in a Walmart setting. (I know I’m butchering that), but at the same time, I do believe that because the metaverse and gaming are for a particular demographic, and that as that demographic ages, and becomes … and we become more willing to take chances with retail in metaverse, I think that we’ll continue to see growth. It will be slow and steady. I mean, who am I to quote Mark Zuckerberg, but he did say metaverse was five to 10 years out. Well, guess what? It is still five to 10 years out, but it’s happening.

And later this month (presumably) Apple will introduce Vision Pro, which is a, a headset kind of thing, but it takes you into the metaverse, and it changes augmented reality. All of this is technology building one layer on top of another to immerse you in a more real setting, and then, with that happening, it will change how you purchase.

Thorne: I agree that the metaverse is growing. It’s not going away. What we’ve experienced, I think in the last couple of years, is just the very beginning. It’s just the tip of what the potential is as they continue to build it out, grow it, make it more user-friendly, make it more practical. It’s not going away.

Reda: Agreed.

Thorne: All right. So Big Show 2024 next week. Unreal.

Reda: Be there or be square.

Thorne: Amen. So, what are you most looking forward to? I mean, this is only your, like your 50th …

Reda: Yeah. Well, honestly,

Thorne: You went as a baby …

Reda: I went as a baby. I think I attended the … my first Big Show in ‘85. So, yeah, it’s a while ago. This year we have an incredible lineup of folks on the keynote stage. Celebrities like Martha Stewart and Shay Mitchell, and Drew Barrymore and Magic Johnson. And so, like, wow, oh my gosh.

As you know, part of my role here at NRF is to program content and speakers for our feature stages. And our feature stages are just a deep dive into many of the topics that we’ve talked about today. We will have harnessing AI to power your business, and that’s led by Forrester expert Brendan Witcher. And we’ve got a one-on-one with Diana Marshall from Sam’s Club. 

I think there’s so much to see. It’s worthy of the plane ride, train ride, whatever it is. Just dive into our agenda, and save a bunch of stuff, and be sure you get to hear from the latest and greatest because we’ve done our best to bring luminaries to the stage and they truly are.

Thorne: It’s just an extraordinary lineup. I can say that every year, and then the next year we raise the bar a little higher, and then the next year we raise the bar a little higher. So, it’s not an exaggeration to say that this is probably one of the best groups that we’ve had to speak to the attendees, to help provide the content that is going to lead the thought leadership. It’s very exciting. So, congratulations to you and the team for your tremendous success.

Reda: Oh, thank you. We work hard, but I agree with you. This just … if we keep shooting higher, like, ‘who can we get, who can we get,’ and then when we land folks with really big names, it’s super exciting for us as well. These people have a great point of view about retail and that thought leadership that’s so important. So yeah, if you haven’t already registered, make sure you do. It’s not to be missed.

Thorne: NRF.com. It’s right there. Susan, it’s always a pleasure talking with you and thank you, thank you, thank you for joining us once again on Retail Gets Real,

Reda: Thanks, Bill.

Thorne: And thank you all for listening to another episode of Retail Gets Real. You can find more information about this episode at RetailGetsReal.com. And we look forward to seeing you next week at Retail’s Big Show, January 14th through the 16th in New York City at the Javits Center. I’m Bill Thorne. This is Retail Gets Real. Thanks for listening