In the face of global headwinds, retailers should embrace AI solutions, report recommends

Another year, a whole new set of problems. A global survey of retailers has shown that this year’s biggest concerns are rising costs, declining consumer spending and supply chain volatility.

The research was conducted by the Boston Consulting Group (BCG) and the World Retail Congress. It revealed that although the global economy was starting to stabilise, the current state of affairs was not only unsettling, but it was even more difficult than before Covid, as input costs were at record highs, operational uncertainty was incessant and the geopolitical crises appeared to be ceaseless.

More than 550 senior leaders from 12 retail sectors were surveyed for the report, titled Amid Uncertainty, AI Gives Retailers a Path to Resilience, which explores retailers’ outlook for 2023 and how artificial intelligence (AI) can provide solutions for their most pressing business concerns.

About 13% of retail leaders said their organisations were investing in longer-term strategies such as AI-powered solutions to tackle these difficulties, with most focused on short-term fixes such as increasing prices and running marketing campaigns.

Chris Briggs, managing director and global head of retail at BCG, says the headwinds of the past few years may be easing, but the world is far from calm.

“Although the first signs of… optimism are evident throughout the industry, retailers know that they must achieve greater resilience if they are to cope with looming uncertainty and gaps in their capabilities.”

He said issues such as consumer confidence, rising costs and supply chain volatility were top of mind regardless of the retail sector, size or geography, but some long-term challenges such as labour availability had become less acute.

Not only are retailers across all sectors and geography having to grapple with industry and technological change, but blanketing these issues is a series of geopolitical, economic and social factors, adds Ian McGarrigle, chair of the World Retail Congress. The highest inflation levels in 40 years, supply chain challenges and a cost-of-living crisis, plus the threat of recession in many economies, had completely changed the operating conditions for retailers.

There are signs of optimism, though: globally, 45% of retailers expect the economy to grow slowly in 2023, 20% of retailers think it will grow rapidly and only 11% believe it will decline either slowly or significantly. But despite the relatively hopeful outlook, there are significant challenges, as costs for retailers (as measured by the producer price index, or PPI) are much higher in 2023 than they were before the pandemic.

PPI increases have also outpaced cost increases for consumers and created continued operational challenges. Freight rates have remained quite high. As of 30 March, despite declining significantly over the previous few months, shipping container freight rates this year were still 21% above the average in 2019.

Dramatic spending slowdown