Put mildly, it has been a challenging few years for retailers. A historic pandemic with a double-whammy of supply chain and staffing issues as well as persistently high levels of inflation have up-ended a lot of industry norms and pushed consumers to increasing their scrutiny on where and how much they spend. Interestingly, coming off a summer spending spree, when credit card balances spiked in the third quarter to a $1.08 trillion record, we also just saw record-breaking spend online on Black Friday and Cyber Monday 2023.
However, a notable sales slump between summer and holiday spending shows one thing: while they are resilient to macroeconomic concerns, U.S. consumers are increasingly looking for deals and overall experience when shopping. Retailers cannot take this resilience for granted.
Even further, recent survey data from FIS’ Global Innovation Report found that 83% of U.S. executives across industries say they have either already been impacted by financial risk or expect to be within the next 12 months. To address these compounding problems, retailers need to re-evaluate their operating priorities by focusing on cost-cutting measures that also enhance customer experiences, such as through automation, AI or other tech. As consumer buying power continues to wane and become selective, there are three key tactics businesses should employ right now to overcome uncertainty, enhance competitiveness and build loyalty with consumers.
Hire the Right Talent to Drive Innovation
While data suggests budgetary constraints are a leading hurdle impacting business leaders’ ability to bring in new tech like AI, the reality is that internal roadblocks, such as a lack of technology and data infrastructures, a change-resistant culture and a talent gap, are just as much a factor..
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The first tactic is to address how retailers find, acquire and nurture talented individuals who will help them on this innovation journey. Where should they start? For retailers, they must start at the top, working to identify leaders capable of driving innovation and attracting top-tier talent. Establishing a tech-driven culture at all levels of leadership fosters a shared commitment to leveraging data, analytics and automation for operational enhancement and superior customer experiences.
Partner with Tech Innovators
Having the right innovation-oriented leadership and culture in place, however, doesn’t necessarily mean retailers must keep reinventing the wheel themselves. Instead, these companies should understand the landscape of services providers for cutting-edge technologies like AI and seek out strategic partnerships. Finding the right tech partners will bring immediate new capabilities to a business while they focus on other, more proprietary needs, such as fine-tuning digital user experiences or leveling up brand strategy to build loyalty with consumers.
Be Agile in Innovation
The key to doing this well is keeping the end goal in mind. Retailers must know what they are trying to achieve when seeking out new capabilities, experiences or offerings. Successful innovators in the retail space are also prepared to fail fast — by testing several different strategies simultaneously and moving quickly, organizations can sandbox a lot of ideas to find the right one. Creating an agile infrastructure allows for rapid testing and implementation, facilitating the evaluation of technology’s effectiveness within specific store locations or sections before scaling up.
The Strategic Imperative of Innovation
Innovation permeates every facet of retail operations, from order management to inventory control and even pricing. However, not all retailers possess innate technological prowess, necessitating a careful rollout of innovation to ensure seamless internal adoption and minimizing operational risks. The decision between in-house capabilities and outsourcing requires deliberate consideration and assembling a skilled team to support the chosen strategy.
Because there’s so much choice from a technology standpoint, as retailers look at what their priorities are and what they want to build in-house versus with partners, they need to understand how to roll out innovation in a way that’s achievable, figure out what the KPIs are and decide quickly if the innovation works and is something worth doing long-term.
Weathering the Storm to Come Out Ahead
Adopting these three key tactics to 1) bridge the talent gap through innovation-forward leadership, 2) partner with key innovators for core capabilities, and 3) innovate in a way that is agile to find the right strategies faster, wil, help any retailer thrive through these uncertain times.
As economic headwinds steer consumer spending toward essential items and a more selective palate, retailers must adapt to evolving consumer preferences and technological proliferation. Embracing AI, enhancing data access and integrating technology across operations are pivotal. By driving efficiency and enriching customer experiences, retailers can bolster margins and effectively navigate the uncertainties ahead. Failure to embrace these changes may leave businesses lagging in an increasingly competitive retail landscape.
Jason Pavona serves as the Division Executive of the North America Payments group. Since joining FIS through the acquisition of Worldpay, he has spent the last three years building products, partnerships and services for our enterprise global customers. Prior to FIS, Pavona was an executive and entrepreneur with 25 years of corporate leadership and award-winning product creation. He was most recently the CEO and Co-founder of Pazien (acquired by Worldpay), the payment strategy solution that automatically gathers all of a merchant’s payment data in one place for the worlds most recognized brands. Prior to that he was part of the leadership at Litle & Co (acquired by Vantiv). While at Lycos (now Telefonica) and Domania (now IAC), he created online and mobile consumer products with 20 million+ active daily users.
