In recent years, artificial intelligence (AI) technology has deeply penetrated various aspects of daily life, driving transformation and upgrades across numerous industries. The retail sector, intimately connected with consumers' everyday experiences, has been particularly impacted by the advancements in AI, heralding unprecedented changes in its operations and customer interactions.

Retail giants are increasingly adopting diverse AI applications. For instance, Walmart has deployed generative AI to launch voice shopping capabilities, offering product recommendations and interactive customer support. Similarly, Starbucks employs AI algorithms to analyze customer purchasing habits and preferences, enhancing product recommendations and inventory management. These industry leaders are strategically investing in AI technologies to gain a competitive edge amidst fierce market rivalry.

However, as Philippe Brochard, former CEO of the French retail chain Auchan, noted in a recent interview, consumers are becoming more aware of the environmental impact of their purchases. Price remains a paramount criterion for choosing brands, presenting a formidable challenge for retailers. They must ensure competitive pricing, maintain employee welfare, keep a low cost structure, and finance their transitions while grappling with modest growth and heightened competition. In this context, Brochard emphasizes that technology has become a crucial lever for retailers in both Europe and China, aiding them in navigating transformational challenges spanning commercial, economic, social, organizational, and environmental domains.

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Amidst fluctuations in the macroeconomic landscape, igniting vitality in retail consumption through emerging technologies has become a pressing issue. What new trends and characteristics are shaping current retail consumption? How should traditional retailers pivot to adapt? Given AI's prominence, its influence on the retail landscape warrants examination. To unravel these complexities, we sought insights from multiple industry experts.

Emerging Trends in Retail

Philippe Brochard's extensive observations of the retail industry in China and Europe reveal an interesting contrast—speed. He is notably impressed by how swiftly Chinese retailers adapt to technological and consumer trends, capitalizing on opportunities almost instantaneously. This agility allows them to test and validate ideas at early stages, showcasing a robust learning ability.

As the global retail landscape faces transformational pressures, China stands as one of the world's largest consumer markets, exemplifying both immense potential and inherent challenges.

Hanshuo Technology, a high-tech enterprise focusing on digitalizing global retail stores, counts major international retailers like Auchan, Aldi, and Woolworths among its clients. According to Tong Liang, the head of the company's retail research institute, today's retailers are grappling with multiple pressures including declining transaction volumes, reduced purchasing frequency, and tightening consumer budgets. A pronounced emphasis on cost-performance ratio from consumers necessitates that retailers offer high-value products that align with market demands to attract buyers. Additionally, the rising intensity of online competition compounds the pressure on traditional retailers, pushing them towards superior online-offline integration capabilities. The volatility of global supply chains also complicates inventory management, as rapidly shifting consumer preferences demand retailers respond with agility. To sustain competitiveness, investing in new technologies to enhance operational efficiency and customer experience is imperative.

Tong notes that offline retail, which faced significant foot traffic loss due to the rise of e-commerce, is actively exploring new breakthrough strategies. One approach involves innovating business formats, such as specific category retailing or low-priced discount stores. Another emerging trend is a shift in consumer behavior from passive recommendations to proactive information acquisition across multiple channels, raising challenges for retailers in re-engaging with these consumers.

Yang Dehong, an expert in information technology and internet use within the Chinese distribution sector, affirmed this shift in consumer demand. He pointed out that although discussions around consumption fatigue are prevalent, certain brands like Sam's Club and JD's discount outlets continue to experience rapid growth, credited to their ability to resonate with specific consumer segments through compelling pricing or branding.

He further advocates for the retail sector to deliver emotional and societal value, transcending mere ROI considerations. Yang stressed that the ongoing digital transformation transcends the mere development of applications or digital systems. It requires a holistic reconstruction of retail interaction models. Incorporating innovations like electronic shelf labels, smart marketing screens, and intelligent shopping carts can deepen the connection between stores and consumers, expanding the dimensions and depth of communication to achieve more accurate, efficient, and emotionally engaging interactions.

Both experts pointed to the "hard discount" retail format represented by Aldi and Lidl, acknowledging its growing presence. Yet, according to Tong, the Chinese market faces substantial challenges in adopting this model. Specifically, he highlighted the issue of scale: currently, the largest offline retailers in China command a relatively small share of the market. In contrast, Europe sees its top three retailers often accounting for over half of total sales in their respective countries. This concentration fosters significant supply chain advantages—crucial for succeeding in hard discount retailing. Unfortunately, many Chinese retailers struggle to achieve the scale necessary to create price or category advantages.

Implementation of AI Technology

Given the evolving consumer needs—especially for cost performance and personalization—how should traditional retailers respond?

When posed with this question, an AI model's initial response echoed the sentiment of digital transformation. This theme was recurrent during a recent retail conference I attended, where "digitalization" resonated throughout discussions.

Yang advocated for leveraging data and technology to gain profound insights into customers and products within retail environments, establishing connections among people, goods, and venues. As AI continues to evolve, it is poised to usher in a new era of smarter, more personalized retail experiences. Leading retail enterprises are already ramping up their engagement with AI technologies.

During my visit to the Hanshuo Technology exhibition, I had the opportunity to experience a demonstration of AI's application in retail. The showcased smart shopping cart solution features an indoor navigation map. It allows users to search for products, automatically planning an intended route to the corresponding shelves. The cart integrates with electronic price tags, enabling pinpoint product localization while seamlessly connecting with the retailer's backend systems for personalized recommendations and enhanced consumer shopping experiences.

Yang emphasized the irreplaceable nature of this enriched in-store shopping experience. Present-day consumer expectations have become incredibly diverse. For example, while buying food, consumers may closely evaluate factors like calories, origin, protein content, and ingredients. Utilizing technology to foster better communication with consumers enhances their shopping journeys—an exceptionally advanced endeavor.

However, achieving these outcomes fundamentally hinges on retailers completing essential digital upgrades to enable potential AI applications.

Philippe Brochard reminds us that digitalization represents only one facet of the retail transformation narrative. He emphasizes that the overarching question lies in how technology influences retail dynamics. He posits that to adapt to these new paradigms, retailers must enhance global supply chain efficiencies and organizational capabilities. This includes delivering the right products at optimal times, locations, and prices, thereby facilitating increasingly fragmented purchasing experiences in a seamless omnichannel environment. He notes that the rapid pace of technological innovation often now outstrips the rate of changes in consumer trends, compelling retailers to recalibrate their strategies to maximize returns on minimal investment.

He underscores the idea that "everything begins with data." Brochard asserts the significance of leveraging data as a critical instrument for enhancing interoperability among different information systems within retail. It transforms isolated departments into interconnected teams, paving the way for innovative functionalities and novel shopping experiences that hinge on robust data frameworks.

Finally, Brochard underlines that data serves as the springboard for generating new revenue streams from both online and offline retail media. Leveraging data can enable hyper-targeted personalization, optimize content production, cultivate more creative ad formats, and refine advertising campaigns—ultimately driving ROI and maximizing incremental revenue.