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Retail Industry Stays Optimistic Despite Challenges, Eyes AI for Growth

COMMERCERetail Industry Stays Optimistic Despite Challenges, Eyes AI for Growth

Although inflation and high operating costs continue to pose significant challenges for retail companies, the industry appears optimistic about the near future. According to the “Global Retail Outlook 2024” report prepared by Deloitte, seven out of ten surveyed expect an increase in margins in the coming months. A key issue from the perspective of companies’ ability to generate value will be the ability to utilize artificial intelligence in daily operations.

At the end of 2023, Deloitte conducted a survey among 200 representatives of the retail sector from Europe, the United States, and Asia-Pacific countries. The survey inquired about sentiments, key challenges, and forecasts for the industry’s near future. The findings were also presented at this year’s edition of the “Poland & CEE Retail Summit.”

Optimism Despite Inflation

According to survey participants, inflation is currently the area presenting the most challenges for the retail sector. Managing rising costs while simultaneously being pressured to lower prices is a priority for 2024 for one-third of the respondents. Participants also plan to focus on enhancing supply chain resilience (23% of responses) and on moving towards sustainable development (22% of responses). An equal percentage of respondents aim to increase their market share. Exactly one-fifth of those surveyed in 2024 intend to focus on maintaining or increasing their operating margin.

Despite many challenges and uncertainties, representatives of the retail sector are optimistic about the near future. When asked about revenue expectations, 90% of respondents anticipated increases in this area. The most commonly expected revenue increase range was from 1 to 4 percent (averaging 67% of responses). Moreover, a significant portion of retail company representatives also anticipate an increase in operating margin—three out of four respondents provided such responses. Depending on the region, from 18 to 26 percent of respondents expect no changes in this area.

After years of operating in high inflation conditions, the retail sector has learned how to effectively function in an environment of rising prices. An example of the industry’s adjustment to external factors is the turn towards e-commerce, as well as the development of segments providing the highest margins. Combined with the forecasted improvement in the economic situation, the sector is optimistic about the near future. However, the industry should remember that, in the long term, the key factor in terms of competitiveness is the ability to create innovations aimed at improving customer shopping experiences.

AI as an Opportunity for the Sector

The role of modern technologies in the development of the retail sector was the focus of one of the presentations by Deloitte experts participating in the latest edition of the “Poland & CEE Retail Summit.” During the opening speech of the event, Irena Cerovina, CE Retail sector leader at Deloitte, discussed generative artificial intelligence and its impact on the future of the industry.

The expert emphasized that AI should now be seen not as an emerging trend but as a factor that currently most significantly determines the competitiveness of retail companies. In her view, the new technology offers a range of opportunities for solving industry-specific problems, such as improving consumer experiences or generating digital content. The impact of new technology on factors such as the productivity of retail companies or content creation capabilities was also highlighted. By emphasizing the role generative AI plays in the automation of processes, the presenter provided numerous examples illustrating the greatest advantage of new technology, which is its significance in the process of creating product innovations.

The perspective of the retail sector as an industry shaped by artificial intelligence is not a matter of the future but a current reality. The opportunities it offers mean that those companies that first focus on developing AI-based tools may soon become actual industry leaders. Retailers should, therefore, not just engage in theoretical considerations about how to use this technology but should also take actual steps in utilizing AI. Only in this way will they be able to join the ranks of leaders in terms of innovation, operational efficiency, or consumer experiences. —says Irena Cerovina.

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