Retailers around the word are leveraging the power of AI to transform their operations and drive profitable growth.
That was the key message delivered by speakers at the recent Xcelerate Symphony Retail Forum in Paris, hosted by Symphony RetailAI.
Delegates at the two-day event heard how leading retailers in Europe and the US are harnessing new digital technologies and specifically AI to improve their demand forecasting, optimise their assortments and space planning, transform their supply chains and delight shoppers with an improved in-store experience.
CINDE: AI-powered personal decision coach
Symphony RetailAI also picked Xcelerate to launch the latest version of its AI platform CINDE (Conversational Insights and Decision Engine). Effectively an “Alexa for retailer”, CINDE analyses billions of transactions coupled with external data such as the weather or CPG delivery performance to provide conversational business intelligence and recommendations.
“CINDE finds nuggets of what’s happening in your business and has the capability a merchandising VP would use,” said Dr Pallab Chatterjee, chairman and CEO at Symphony RetailAI.
A desktop or mobile platform, CINDE can help businesses decide which promotions to run and which not to run, for example. It can determine hot spots in trade areas and mimic a retailer’s working day, continually learning and adding new skills.
“CINDE understands why things are happening, not just what is happening and can provide a forward view,” said Kevin Sterneckert, Symphony RetailAI CMO. “CINDE looks at all data and understands the pieces of information a decision maker needs to make improvements.”
Sterneckert said CINDE was a true AI platform, which coupled with Symphony’s retail insights, provided a seamless, common data repository that could improve a retailer’s buying process and enhance their decision making.
Identify, activate and realise
Opening the Xcelerate event, Dr Chatterjee pinpointed three capabilities that would enable retailers to grow the top line: to identify growth opportunities from patterns of data, to activate against those growth opportunities and then to realise profitable growth.
And he highlighted current challenges including customer connectivity and competition.
“The consumer has more technology in their hand than you have in your stores, most of the time,” he said. “Sixty three per cent of customers say ‘that if you want to connect with me, then connect with me personally’.”
Consumers also trust ratings and reviews from their peer groups versus manufacturer recommendations, he added; but there is still work to be done as shoppers found 34% of the retail offers they received were for items they had recently bought. Further, 33% of offers were irrelevant; while shoppers who were already customers wanted to be treated as such, rather than being lumped in with the masses.
Competitors are increasingly astute, Dr Chatterjee reminded delegates; and he referenced Instacart in the US which offers grocery delivery from local stores and already lists 200 retailer members.
Meanwhile, the big retailers such as Walmart and Kroger are evolving into technology companies with the former becoming a strong force online and the latter making strides in the digital world. Dr Chatterjee also explored key retail trends such as the growth in click and collect, especially in Europe where two hour delivery slots have become the standard, and the service attracts new customers who appreciate its convenience.
Fresh is a key driver with 84% of shoppers stating they are actively trying to improve their diet and with 42% of 18-24 year olds likely to buy healthy food. Local is another theme but is being executed in differing ways; while experiential stores are being targeted but currently only 32% of shoppers says they go to a retail outlet for the experience and three quarters avoid stores altogether.
Summing up, Dr Chatterjee said Symphony RetailAI’s promise to its customers was to deliver revenue and margin growth in year one, be an easy company with which to do business, provide the best quality and service and offer breakthrough AI for customer centric merchandising, marketing and supply chain.
The CEO perspective
Alasdair James, global executive and board director at Symphony RetailAI and former Pier 1 CEO, explored what was occupying the minds of CEOs today and in the future.
“Change is a reality that lives with us constantly,” he said, highlighting the explosion in data and improved computing power, which can deliver an even greater number of insights.
Consumer measures have changed too, James added. Today, retailers are just as keen to capture sentiment and dwell time as they are sales. The number of marketing tools in a retailer’s armoury has expanded significantly too with the rise of new digital channels; while workforce talent has become a driver of current and future performance success, he added.
James explored how numerous stakeholders are impacting on the CEO and retailer agenda including consumers, shareholders, boards, NGOs, landlords, employees and activists.
“Consumers want more of everything,” he advised delegates and suggested customer expectations on delivery of a three-piece suite were the same as for a book coming from Amazon.
Shoppers are also increasingly influenced by customer reviews, he added. “Fifty per cent of purchases online are influenced by ratings and reviews but if the last rating on a product was a bad review, sales go down 30% for that line.”
On competition James said new players such as Amazon with its 5m marketplace sellers have emerged. “They are working with us at the same time as competing with us.”
Shareholders are becoming more vocal in their demands of business, while employees are seeking purpose more than ever before, James said.
Landlords, one of the biggest stakeholders, have the power to positively or negatively impact business; while the number of activists is on the rise. NGOs are exerting more influence and boards are far more engaged than they ever used to be, James summarised.
In this new era, AI and digital transformation provided wonderful opportunities for growth but the norms are changing, James said.
Talent is playing a bigger role and the new disruptors are measured almost exclusively on growth, he said. Further, there is very little correlation between share price and CEO pay, James added.
James shared how his former business had deployed AI to drive online sales conversion by improving emails with wording and emotions to which consumers responded more positively. It drove a 22% increase in conversion. James revealed 50% of CEOs now say they are using AI to find and retain the right people. “Change your people, if you can’t change your people,” he advised.
James recommended companies had simple, clear growth objectives but that sustained sales growth was the most important metric bar none. Technology is outperforming people so colleagues need to spend more time focused on opportunities and partnering with external companies to move at pace. Education and training are also key and empowerment and diversity is critical, James said.
“Invest in growth and then invest some more,” he urged.
Supply chain transformation
Carrefour is transforming its supply chain as part of the retailer’s wider transformation programme, which is designed to help customers eat better every day,
Franck Noel-Fontana, director of replenishment transformation at Carrefour, shared the retailer’s journey at Xcelerate and the results to date.
Carrefour’s supply chain is one of the largest in Europe. The retailer operates 60 warehouses servicing 5,000 stores and sources 25,000 SKUs from 6,000 suppliers.
Transformation was required because the world is changing, said Noel-Fontana. “Before, the customer journey was linear and there was one point of contact with the retailer ie at the store. Now the customer journey is like a loop and can be in any channel – in-store or online,” he said.
That means Carrefour must have the right stock at the right place; avoid waste and overstocks; provide fresh, local products and understand promotional volumes, Noel-Fontana explained. The programme to transform the supply chain spans technology, including AI, and operations.
According to Noel-Fontana, the programme covers the entire value chain and optimises supply by improving the quality of orders and making a link between the sales demand and orders. The aim was to reduce administrative tasks, analyse inventory, plan for an end-to-end vision, collaborate and focus on customer satisfaction, Noel-Fontana said. Suppliers would also win an end to end view of the consumer and Carrefour would have the ability to anticipate events.
Working with Symphony RetailAI, Carrefour has been able to create a mid-term vision of replenishment, an alerting system on future blocking points, the ability to simulate scenarios and use predictive algorithms ie AI to progress further.
Noel-Fontana reported the early indicators were positive with a reduction in inventory, reception and supply costs, improved on-shelf availability and service levels plus less outdated inventory because the orders are now optimised.
Targeting growth in Kazakhstan
Magnum Cash & Carry, the largest retail chain in Kazakhstan, is targeting growth from five key streams including supply chain and IT transformation.
Deputy chairman Artur Topolyan shared how the chain, which operates 60 stores – a mix of hypermarkets and supermarkets – in the world’s largest landlocked country is growing at a rate of 5% year-on-year despite a low population density (18.3m total) and logistics costs that are five times more than the average European country.
Established just 11 years ago, Magnum Cash & Carry is treated as a start up business in a market that is growing fast due to new patterns of consumption, Topolyan said.
The retailer’s leadership is based on depth of assortment (20,000-30,000 SKUs) and price leadership. Pricing (70%) is largely based on 12 shopper missions and prices are below Magnum’s competitors. Topolyan said there was huge potential to grow as a result of population growth and market development. Modern trade currently has a low, 30% share in Kazakhstan. Topolyan said he was confident in the business’s strategy to grow five times in terms of square metres and by 2023 achieve sales revenues of €1,211m with a possible move into convenience retail.
Growth will be driven by supply chain transformation with plans for two new warehouses, taking the total to five and reducing the distance to stores from 500km to 200km, Topolyan told delegates. A new store format is also being introduced with a focus on fresh foods and food-to-go, responding to those changing consumption patterns. Customer service patterns will also be analysed and service enhanced with queue management reports sent to store managers. There will also be an increased emphasis on local products and the establishment of a centralised food factory versus preparation units at each individual store. Further, 45% of space will be reserved for fresh products.
On the IT piece, Magnum Cash & Carry is transforming its assortment and space management, working in conjunction with Symphony RetailAI.
Commercial director Jacob Fishman said the business was moving from assortments based on store size to a more customer centric approach. It is being piloted across several categories, including beer, with Magnum Cash & Carry mapping stores by purchasing power. Stores are now grouped into three clusters: economy, medium and medium plus. With new assortments, sales of imported beer in the medium plus stores have increased from 18% to 36% while sales of local beer have decreased, Fishman said. In a second phase, Magnum Cash & Carry is optimising promotions, which account for 30-35% of sales with the aim to decrease the promotional budget but increase sales. “It’s about understanding the shopper and meeting their needs,” said Fishman.
Benefits of AI
Patrick Buellet, chief strategy office and and Patty McDonald, global product marketing director, Symphony RetailAI, shared how AI can turn data into a demand forecasting advantage.
Buellet highlighted the advantages of AI versus traditional forecasting: it is self cleansing, self aggregating, self learning, automated and has no parameter settings. Regardless of region or customer, AI delivers 15% better forecast accuracy versus traditional forecasting, Buellet said. AI adapts to the profile of the retailer and contextual data can be customer specific eg when measuring the impact of a promotion. Coupling warehouse and store forecasts using AI provides better results for both, Buellet said.
Key retailer benefits of AI demand forecasting include replenishment optimisation with reduced waste, reduced out of stocks and reduced inventory; productivity gain with no manual cleansing, no maintenance of forecast parameters and it provides a solution for smaller players; better planning with capacity optimisation and promotional mechanics to model ‘what if?’ scenarios for price optimisation, for example.
(Part two from Xcelerate will be published next week)