Retail reduced: May 2023

In this month's Retail Reduced our experts examine and review emerging trends in the retail industry including how increased footfall boosts high street morale, Adidas and YEEZY, sustainability and Generative AI.

May has been a good month for bank holidays this year, with King Charles II’s coronation paving the way for some extra time off work. This has been seen, in the retail world, as a bonus, with the potential for more footfall and visits to shops in order to boost sales. Watch out for those May results in the near future. In the meantime, looking back to the four-day Easter weekend in April, we saw a 7.2% rise in footfall for that month with some high street stores doing particularly well. These included Card Factory who saw profits triple through store-based sales and Primark, with sales increasing by 19% thanks to more in-store visits during the roll-out of their click-and-collect trial. These and other results are a clear indication that the staying-at-home mentality which was strongly felt in the aftermath of the Covid-19 pandemic is easing off, facilitating somewhat of a resurgence of the high street.

That said, high street brands are by no means sitting idle, when it comes to innovation. Tech and in-store customer experiences have also helped boost footfall and it is clear that brands have their eye on an omni-channel (i.e. both online and offline) approach to maximise sales. Customer experiences range from being able to design one’s own personalised products, attending gigs or workshops in-store or having a go at using virtual reality (“VR”) or augmented reality (“AR”). In fact, it is predicted that VR and AR will be worth a staggering £17.86 billion by 2028. With tech and innovation moving so fast and with so many types of experiences on offer, it is no doubt an interesting area to follow.

Cutting emissions as part of the road to net zero continues to be on retailers’ (and many other businesses’) agendas, with lots of different approaches being seen across the industry. In the supermarket space, initiatives range from greener packaging to more sustainable carrier bags, as well as a shift to the use of electric vehicles (“EVs”) as part of their fleet. The Grocery Gazette recently did a piece on the sustainable changes being made to supermarket fleets across the UK. It identified, amongst other things, Sainsbury’s recently-announced Nine Elms London store which intends to deliver groceries to its customers with a 100% electric fleet and thereby save 57 tonnes of carbon per annum, as well as Tesco introducing (as the first retailer in the UK) their zero-emission electric lorry which cuts out 32 tonnes of CO2 every year.

In mid-May, Sainsbury’s announced the opening of an energy-efficient flagship supermarket in Hook, which will operate on 100% renewable electricity and cut out fossil fuels entirely. This particular store is set to be the standard for future Sainsbury’s stores. Tesco also recently announced that it has removed more than two billion pieces of plastic from its UK business since the launch of its 4Rs – “Remove, Reduce, Re-use, Recycle” – packaging strategy in 2019. These removals ranged from yoghurt lids, snack boxes and nappy packaging.

It is important for supermarkets, and retailers generally, to keep up the momentum in relation to sustainability initiatives, as it is something customers care about. Fashion Week recently reported that “half of UK shoppers would now support a delivery tax for online retailers levied to offset carbon emissions caused by e-commerce fulfilment” and that around 76% of shoppers believe that retailers could do more to be sustainable. Consumers are likely to continue expecting more of retailers and although it may feel like the pressure is on, ultimately, it is for the good of the planet.

Earlier this month, adidas announced it will begin to sell some of its YEEZY inventory products, through it’s CONFIRMED app and through its website, for the first time since adidas terminated its YEEZY partnership in October 2022. The termination proved costly for the German sportswear maker, who previously warned that it could suffer its first annual operating loss in more than three decades this year. Adidas was exploring multiple avenues for the remaining stock; writing it off rather than attempting to sell it would mean forgoing $1.3 billion in revenue this year. YEEZY had been adidas’ material revenue driver; Kanye ‘Ye’ West had been credited with paving the way for major trends in the fashion and sneaker worlds.

adidas CEO Bjørn Gulden said: “After careful consideration, we have decided to begin releasing some of the remaining adidas YEEZY products. Selling and donating was the preferred option among all organizations and stakeholders we spoke to. We believe this is the best solution as it respects the created designs and produced shoes, it works for our people, resolves an inventory problem, and will have a positive impact in our communities. There is no place in sport or society for hate of any kind and we remain committed to fighting against it.”

adidas has announced that it will be partnering with the Philonise & Keeta Floyd Institute for Social Change run by Philonise Floyd, the brother of George Floyd, to drive Community programs through sport and education, to leave a lasting legacy.

adidas has signposted organisations interested in proposing projects aimed at combatting discrimination and hate through sports, to register their interest at: [email protected].

Generative AI, the process of AI algorithms generating or creating an output, such as text, photo, video, code, data, and 3D renderings, from data they are trained on, is now a powerful tool for retailers and marketers.

According to Statista, during an early 2023 survey conducted among senior brand marketers from the United Kingdom, 94% stated they were already using artificial intelligence (AI) within their digital advertising and 87% believed that AI was an important part of their marketing strategy.

Generative AI is now being utilised by Google to tackle product imagery with its latest retail tool, introduced this month, called Product Studio. It uses generative AI to help businesses create and alter images. For example, if there were photos of a chocolate bar taken, the Product Studio could be asked to create an image ‘in the snow with Christmas trees in the background’ for a seasonal change-up.

Google announced earlier this month that it is piloting generative AI in search, which would reshape its e-commerce and advertising functionality. In January, Google announced that Google Cloud had implemented AI-driven technology to let retailers use imagery to track products on store shelves automatically.

Currently it seems Google has the lead here in the race to create a widely used AI marketing tool, however, we expect to see responses from competitors such as Amazon and Apple in the coming months.

AI is one of the fastest moving trends in the tech landscape, stirring buzz in the last few months. Its uses are vast and span across fields in marketing, engineering and immersive experiences. It is an interesting tool for retail and fashion brands who are exploring digital consumer marketing strategies; with brands such as Adidas and Dolce & Gabbana participating in the second Metaverse Fashion Week, hosted earlier this year.

Generative AI has quickly captured the attention of fashion and beauty executives who are excited by its potential to aid in creative efforts and in more practical ways, through building imaginative ad campaigns, improving customer service interactions and streamlining the process of writing product descriptions. An example is Tommy Hilfiger, a brand active in the web3 space, who have experimented with AI to engage customers in co-creation during the Metaverse Fashion Week. This gave consumers creative opportunities to design items in the brand’s style, using generative AI.

Personalized mobile messaging platform Attentive recently announced Attentive AI, a tool allowing brands to create multi-channel campaigns using AI and gain insights on effective content from 1.4 trillion Attentive data points. A major retail brand using the tool in beta is reporting a 148% revenue increase. Further, Roger Roberts, partner at consultancy McKinsey, notes that AI is faster to implement than the metaverse; positive takeaways for retailers investing in AI to deliver novel consumer experiences.

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