Retail Unwrapped from The Robin Report

Intelligent Retail: Mastering Agentic AI

Sarah Holbrook — Mon, 02 Feb 2026 05:01:00 +0000

Agentic AI is an amorphous catchall that is tricky to define but managed to eclipse any other discourse at the recent 2026 NRF Big Show. Brands including LVMH, Home Depot, Warby Parker, Target, and others discussed their understanding of an Agentic AI future. They were joined by executives from Microsoft and OpenAI. Google’s CEO, Sundar Pichai and new CEO John Furner discussed AI integration with Walmart. Additionally, Pichai announced Google’s Universal Commerce Protocol (a set of global standards to facilitate Agentic AI retail activity worldwide).

There was an abundance of chatter, but retailers and brands seemed unable to deliver a concise, consistent definition of Agentic AI and how to use it. Admittedly, Agentic will change the AI conversation dramatically, and as with any introduction of the next best AI tool, its applications and implications are generally misunderstood.

Will Agentic AI dramatically change the course of retail? And the answer is: If retailers learn what Agentic is and how it really works, it’s a direct path to efficiencies and customer delight.

Chasing Agentic Windmills

With retailers seduced by the lustrous orb of Agentic AI, we thought it would be useful to clear the air with a broad definition of the concept and describe how brands apply (or are building applications for) the technologies. At best, Agentic AI is a system’s ultimate thinking tool and takes on the aptitudes of LLM-powered AI in retail.

Customer behavior
Inventory flows
Supply chain rhythms
Pricing strategy
Store operations
Security oversight
Digital interactions
Loyalty patterns
Customer support
Weather activity impacts

Agentic AI Accelerates Retail Operations

Agentic AI upgrades its AI ancestors as it performs tasks autonomously within the retail funnel. New models blend with CRM and POS systems from discovery and checkout to post-purchase support. Agentic AI is still evolving and always improving as it operates at a higher level tackling these complicated tasks.

Influencing discovery
Optimizing inventory
Mitigating supply chain disruptions
Applying dynamic pricing
Facilitating customer purchase activity capture, checkout, and attribution
Leveraging chatbots built from large language models to interpret user input and generate adaptive responses
Coordinating staff scheduling
Identifying and mitigating dark pattern activity and crime
Identifying points of failure
Customizing loyalty incentives
Resolving support issues
Generating catalog, marketing, and advertising content
Adapting based on outcomes
Mitigating weather disruption costs

Omnichannel Evolution

The omnichannel customer experience stitched together stores, ecommerce, mobile, social, marketplaces, and call centers, but the customer moved among these channels as discrete silos. With Agentic AI, the promise is that the channels will dissolve. This near-future experience is emerging as a novel retail ecosystem that will treat every touchpoint as part of a unified system.

The customer journey is continuous and customized
Context follows the customer everywhere
The brand behaves like a single, coordinated organism, not a set of channels (your call is never transferred to another representative)
Data, identity, inventory, and personalization function across devices, whether online, in-store, or both simultaneously
A website can be a living store with the thrill of discovery, and a store can be a living website that directs you to what you are searching for
The experience adapts to the customer, not the other way around

Metachannel retail (no connection to the Big 7 tech company) is an apt reengineering of omnichannel. Metachannel reflects a quasi-scientific interpretation of systemic metapsychology, which applies concepts of self-examination (of a company, not a personality), interdependence (within the organization and between trusted partners), systems-level behavior, and self-repair or mitigation. It is a retail channel that learns from itself, tests and evaluates alternatives, executes decisions, and automatically improves.

Operations and Aspirations

While the pace and intensity of adoption may vary, an AI transformation is underway across the retail industry. Granted, Agentic AI is the latest hot topic, and there is evidence of early stages of early adoption. Plans and aspirations outweigh practical applications in retail. However, there are a few pioneers.

LVMH executives Gonzague de Pirey and Soumia Hadjali have announced an initiative called AI for All, which spans the company’s portfolio of Maisons. The aim of the program is to elevate the user experience across all touchpoints in the system, associates, management, clients, artisans, and operations, through AI. De Pirey emphasizes the importance of an AI that is aligned with the brand’s culture as the company implements what it calls “quiet AI.” He stresses, “The technology should be everywhere, and invisible.” Each Maison at LVMH develops unique AI activations, but the company shares best practices and technology to scale the implementation across the organization. An AI activation at Dior will look very different than one at Sephora, but many of the systems interconnect.
At Louis Vuitton, Soumia Hadjali, Global Vice President, Client Development & Digital, applies AI to leverage LV’s many cultural initiatives. “Our digital concierge is both deeply personal and context aware. It will know how our clients shop; not just what they buy, but who they are, and where they live.” She continues, “Louis Vuitton has cafés, restaurants, and exhibitions. We can organize a private table at our restaurant when it is hard to get a table. We can book tickets for an exhibition. We can become part of our client’s life.”
Target is on an accelerated trajectory. CIO Prat Vemana describes the retailer’s partnership with OpenAI. He is clear about the retailer’s AI ambitions: “Target has moved from using AI to running on AI.” The new OpenAI integration includes many Agentic AI functions aimed at efficiency both online and in-store. Customer service centers and associates have gained two Agentic AI superpowers via the Agent Assist and Store Companion devices developed with OpenAI. The devices allow price matching and can start returns on the spot in-store. Vemana adds, “Target is not a marketplace; it is a curated retailer. The process of vetting vendors used to take thousands of hours; now we get it done in minutes.”
Albertsons’ Agentic AI shopping assistant (which doesn’t seem to have a very catchy name) is jockeying for relevance as grocery options multiply. In a field test AI was challenged with a complicated prompt that required analysis from diverse streams of data and information. It delivered a menu designed to satisfy a group comprising a vegan, lactose-intolerant, peanut-sensitive, and gluten-free group of guests. The bot produced a list of recipes from which to choose and eventually filled the virtual shopping cart with the necessary ingredients, including a few private-label items.
Ralph Lauren’s Ask Ralph chatbot is a more primitive version of Agentic AI that shares sophisticated fashion advice from a virtual facsimile of the fashion icon himself. Chief Branding and Innovation Officer, David Lauren, was an early adopter of OpenAI’s ChatGPT through the brand’s tech integration with Microsoft Azure. Understandably, Lauren is an advocate of the shoppable, conversational version of his Dad steering potential clients toward a sale.

Eyes Wide Shut

AI’s stealth infusion into everything has been stunning. User adoption, exploration, and exploitation are fully turbocharged. Both business and society (including consumers) have had little time to consider the implications of these emerging technological shifts as the world races to retool and keep up with the pace of change. The shiny object that is AI, and the even shinier possibilities promised by Agentic, are alluring, but there are vexing implications that can’t be ignored.

Agentic AI reflects engineering advancements that continue to encroach on unique human capabilities. In a capitalist economy, public corporations beholden to shareholders will choose efficiency over the workforce. These will not be layoffs; It is unlikely that jobs lost to AI will ever return. The economic impact of job losses writ large will impact society, culture, governance, and naturally slam into the retail industry.

The computing power needed to support the massive data centers that power AI currently, compounded by the exponentially increasing energy demands of the more complex Agentic AI, will strain aging energy grids in the U.S. and elsewhere. High power demands drive up electricity costs, particularly in the U.S., as renewables stall. Obviously, higher electricity costs reduce discretionary spending for consumers across many income segments.

Agentic AI requires deep, personal data sharing with service providers. For a consumer-facing Agentic agent to be effective, trust is critical. Consumers will be required to share personal and financial information, including personal characteristics (age, weight and size), location data, biometric information for identity verification, routines, habits, pricing sensitivity and logic, and more. In other words, Agentic AI needs to understand who you are, what you want, how you behave, your constraints, and which actions you are comfortable authorizing the agent to perform. It goes without saying that undisclosed data sharing, selling, leaks, and security breaches will shatter the trust between the customer and the brand.

AI Axiom

As retail’s AI transformation marches forward, it should be approached thoughtfully. Brands and retailers need to anchor every AI decision in their culture, identity, and strategic intent. Ask Ralph, LVMH’s AI for All, and other luxury AI applications should deepen the bespoke, high-touch relationship between client and brand; anything that feels like a generic chatbot breaks the spell. For Target, where speed, scale, and efficiency fulfill the brand’s AI intent, intelligent automation that delivers faster, more personalized service is exactly on‑brand. And when operational AI unlocks cost savings, passing those savings on to shoppers reinforces Target’s value-driven identity. The rule is simple: Innovation only works when it authentically amplifies the brand and delivers meaningful benefit to the one stakeholder who matters most, the customer.

AGOA and the Butterfly Effect

Sarah Holbrook — Tue, 04 Nov 2025 05:01:00 +0000

When I try to explain the implications and unintended consequences of policy decisions, the metaphor of the butterfly effect is a good illustration. It refers to the idea that small, seemingly insignificant actions can trigger large, unpredictable consequences over time. A single flutter of a butterfly’s wings might not seem like much, but it can set off a chain reaction that leads to a storm halfway around the world.

Right now, the United States is poised to let the African Growth and Opportunity Act (AGOA) quietly expire. You might shrug and think, “That’s unfortunate, but supply chains are shifting anyway. It won’t make much of a difference.” But think about it. This small change will have a large ripple effect.

AGOA has supported manufacturing jobs and economic development in countries like Kenya, Ghana, and Lesotho. Its expiration won’t just impact workers and global migration; it will affect the brands you may have in your drawers and closets. I looked around and found Lands’ End athletic pants, Levi’s jeans, and a turtleneck from The Gap that were all made in AGOA-supported countries.

AGOA was never about charity; it was about growth through trade. Establishing new manufacturing agreements is a major undertaking for any U.S. brand. It requires time, capital, and compliance with safety and labor standards. Brands enter these partnerships with the belief that U.S. government initiatives are stable and enduring.

Letting AGOA expire is a quiet move. No direct action is being taken, and that is the point. It is demolition by neglect. It’s a signal that undermines trust, disrupts long-term planning, and weakens soft power.

And like the butterfly effect, this seemingly minor decision could cascade into strategic consequences far beyond what we will see in the short term. The storm may not arrive tomorrow, but the wings are already fluttering.

Blueberry Surprise

Sarah Holbrook — Tue, 07 Oct 2025 04:01:00 +0000

Are you enjoying your blueberries? I have a husband who doesn’t eat a lot of fruit. Honestly, he prefers fruit loops, but around 18 months ago, I spotted amazing looking blueberries in lots of grocery stores, and he was suddenly a fruit guy. The blueberries were large and crisp. They almost popped in your mouth and tasted like a tart little miracle. They were all imported from either Chile, Columbia, or Peru. I’ve learned that the blueberries, asparagus, and other produce imported from South America was part of a long-term effort by USAID to fight the war on drugs, setting up incentives to turn coca fields into produce for export to the U.S. It was a huge success as importers here ramped up sales of this beautiful fruit on a wide-scale basis over the past two years.

Then came the tariffs, and the miracle blueberries disappeared from the shelves. At least that’s what I’ve noticed. I recently bought the blueberries I could find on the shelves, but they are a soggy, sorry version of what I’ve become used to. Those South American berries have been replaced by locally grown, tariff-free inferiors. And my husband is back to fruit loops.

The intended consequences of the war on drugs initiative were a big success for blueberry fans. Let’s hope that the unintended consequences of the tariffs do not force farmers to turn back to their previous crops.

I miss the miracle blueberries!

Contingency Planning for Tariffs

Sarah Holbrook — Mon, 15 Sep 2025 04:01:00 +0000

Editor’s note: This report is part of TRR’s series of explorations and analysis of the unintended consequences of what is taking place geopolitically and socio-economically that will shape the future of retail. Our Foresight expert, Sarah Holbrook, uses a sophisticated systems mapping tool to reveal how current events influence retail. We recommend it as insight into how to anticipate the future and proactively plan. It’s complex and complicated, but has deep implications and impacts on the American consumer and retailing writ large.

The August 19 Congressional Budget Office (CBO) report spawned a series of eye-popping headlines: “Tariffs Will Lower Deficits by $4 Trillion Over a Decade.” But when you read past the headline, you will find a striking caveat; the projected savings only materialize “if the higher tariffs persist for the 2025‒2035 period.” Wait a minute! The tariffs have fluctuated capriciously since April and are anything but persistent, not to mention that 2035 is a decade away.

Complicating the matter is our American democracy system, where power tends to shift in two-, four-, or eight-year intervals, and policies move accordingly. One might reflexively dismiss this report as political theater, assuming the current tariffs are short-lived. Yet a plausible alternative is that they stick around, possibly for the decade. Then what? There are unintended consequences for the retail industry. Here’s how.

The question is no longer if the economic uncertainty spurred by recent government initiatives will dampen retail activity; the real questions are: by how much, and for how long?

Tariff Takedown

While most of the tariffs are under legal scrutiny, our working assumption is that barring decisive action against them in the Supreme Court, the current tariff structure persists for the remainder of the Trump Administration, and potentially beyond. These broad-based tariffs are a powerful economic stressor, but they are one among a range of destabilizing initiatives that will likely suppress discretionary spending across economic ranks. Additional pressure points include the immigration crackdown, a weakening social safety net (including Medicare and Medicaid cuts), high housing, energy, and private insurance costs, healthcare cost increases, a frozen job market for many, an aging population, and rising numbers of working parents exiting the labor force, whether voluntarily or due to government layoffs and dismissals. The question is no longer if the economic uncertainty spurred by recent government initiatives will dampen retail activity; the real questions are: by how much, and for how long?

The Unintended Consequences Model

To explore the economic turbulence, we built a visual model of the recent initiatives, searching for the unintended consequences and plausible impacts of the government actions on discretionary spending in retail. Our horizon is medium- to long-term. We don’t consider current stock market activity, which has been unstable although generally positive in 2025, but decidedly short-term. Our map is complex and can be difficult to decipher, as befits the circumstances. But stick with us!

We simplified our findings by interpreting the map conservatively. It is obvious that all arrows point to a contraction in discretionary spending for the years 2025 (beginning Q-4) through 2030 for most U.S. consumers. This is a serious red flag for retailers since consumer spending is the lifeblood that powers this economy, accounting for nearly 70 percent of annual GDP.

Breaking the Map Down

Systems thinking is a required tool for foresight, and we are looking at the current economic turbulence through a systems lens. Our mapping follows three steps.

We begin by exploring the macro-forces and government interventions that are driving change and map the intersections.
We observe the singular and combined effects of the forces and interventions, then consider the first, second, and third-order impacts or implications.
We connect these events and implications to retailing and apply commentary to advise readers’ strategy.

The process behind this exercise is designed to help with scenario planning for contingencies. This is not simply an intellectual exercise; it can reveal areas of both vulnerabilities and opportunities.

Macro Events and Government Interventions

Taken in total, the drivers of change (the events and interventions listed) are not isolated; they intersect and collide, setting off a cascade of implications.

Macro Events
- Climate Change
- Artificial Intelligence
- Energy Shortfalls
- High Housing Costs
- Long-Lived Elders

Government Interventions
- Immigration Deportation Policies
- Tariffs
- Social Safety Net Decline
- Push for Deficit Reduction

Interconnected Context

Now we connect the macro events and government actions to reveal the unintended consequences of their causes and effects.

Global climate change intersects with the deportation policies in the United States. In California, crops are rotting on trees, vines, and in fields as ICE enforcement and deportations create a labor crisis, food shortages, hunger, and rising produce prices.
Rising prices intersect with the shrinking social safety net as SNAP benefits are curtailed along with other measures designed to offset the expense of the latest round of tax cuts.
Shrinking yields due to both droughts and floods spur rising commodity costs, stressing retail margins and driving inflation
Strained energy supplies, already under pressure from the soaring demand for artificial intelligence services, struggle as demand for cold storage rises to protect harvested produce from spoilage. Energy prices spike.
While many grocers, restaurants, and suppliers have been slow to increase prices due to tariffs, that is changing.
The Peterson Institute reports that as of June 2025, the funds raised by the tariffs amounted to nearly $94 billion. As the sums continue to rise, the calls for deficit reduction will increase. It will be tempting for Congress to legislate a tariff program into law.
Extreme climate events aggravate already high housing prices as insurance and repair costs skyrocket.
As the population ages, benefit outlays further strain the social safety net. Additionally, the costs of long-term care will be impacted by immigration deportation policies, which are already causing a shortage of health aids. This service worker shortage is likely to push up wages for the available labor pool.
Rising costs increase debt for both elders and their offspring while reducing generational wealth transfers.

Cascading Results

When we explore further implications of the drivers, we begin to understand the impacts on the pocketbooks of most consumers:

Sluggish hiring continued in August as the U.S. added only 22,000 jobs, according to the Bureau of Labor Statistics. While the decline may increase the odds of a cut in borrowing rates, the anemic hiring figures reflect a climate of economic uncertainty. NYT reports, “Underscoring the report’s weakness, the job search platform Indeed flagged that employment growth over the year to date is the lowest it’s been since 2010.
The share of parents with young children in the workplace has fallen by more than three percentage points in the first half of 2025, according to recent reporting from the Bureau of Labor Statistics. The Washington Post’s Economics Correspondent Abha Bhattari comments on this decline: “A leading factor in women leaving the workforce is the end of pandemic era flexibility, which lured many women back into the workforce with policies that allowed for daycare drop-offs and doctor’s appointments. Since January, there has been a push for strict return-to-office policies by both private companies and the government. Women with children five and under often need the most flexibility. Additionally, the sweeping Federal workforce cuts have disproportionally impacted women, and particularly black women.”
While the Medicare and Medicaid cuts legislated as spending offsets in the recent tax legislation won’t be imposed until 2027, they will present a significant drag on discretionary spending toward the end of the decade.
Other factors that influence sluggish hiring include the steady integration of AI into the workplace, and high housing costs. High housing costs limit worker mobility, deterring candidates from seeking employment in high-income, high-cost cities that could offer better candidates to the employer and greater opportunity for the candidate.

Charting Retail’s Future

Other nodes in our map reveal a cascade of complex outcomes, each contributing to a significant contraction in discretionary spending. Inflation hovered tantalizingly close to the Federal Reserve’s 2 percent target when the current tariff regime took hold. Now, it’s climbing again, amplified by initiatives that have ushered in a period of destabilizing uncertainty. The plausible outcome? Many consumers will feel poorer; many more will be forced to spend less.

The immediate questions are clear: By how much, and for how long? But the more strategic questions involve preparation; how to confront these challenges and uncover opportunities for your business. Scenario analyses tailored to your organization, built on the drivers outlined here, are a critical starting point. While markets may reflect short-term sentiment, consumers are already bracing for long-term impact. Do the hard foresight work now to keep your business airborne and to help sustain the economic circulatory system that our industry depends on.

Companion AI Is Your Direct Line to Gen Alpha

Sarah Holbrook — Tue, 29 Jul 2025 04:01:00 +0000

Retail needs a new language: Gen Alpha is already fluent in AI. We are previewing a future of how AI companions will change how retailers remain relevant with next gen customers. All techno-socio-cultural changes swirling around us eventually show up in retail. Could we soon see an AI companion bot named “Lululemon Bestie” chatting with teens about lifestyle, fitness, apparel, and their deepest thoughts?

Who else is thinking about AI companionship and its potentially powerful role in consumers’ lives? Mark Zuckerberg who spoke with PC Magazine in April, “Over time, we’ll find the vocabulary as a society to articulate why they (AI companion bots) are valuable, and why the people (teens and early adaptors) who are doing (using) them are rational for doing it, and how it is actually adding value to their lives.” The question is: What value will AI companions deliver for retailers?

AI Girlfriend Scout, a paid subscription service, claims, “Whether you're looking for emotional support, entertaining conversation, or a judgment-free space to be yourself, this in-depth comparison will help you choose the right AI girlfriend for your specific needs.”

Talk to Me

We are living in the early stages of conversational computing. My texts have transformed from error-plagued hieroglyphs to perfectly punctuated expressions, but more importantly, we are moving away from the keyboard toward a different level of engagement with our devices.

I remember sitting at a South by Southwest (SXSW) talk in 2014 on Amazon’s Alexa integration into the home. That was the year the company introduced the Echo as a standalone tabletop assistant. “Hey Alexa, turn on Pandora,” echoed from coast to coast soon after. In that dark room at SXSW, I was thinking about the kids. The toddlers of 2014 would be asking Alexa lots of questions, and some of them might drift off to sleep as Alexa reads them “The Giving Tree.” This cohort of kids has grown up alongside intelligent machines. They are called Gen Alpha, and for them, talking to a bot is hardly novel; it’s normal.

AI at the Lunchroom Table

We recently wrote about Gen Z’s utilitarian, yet skeptical, relationship with technology and AI. Hard data reporting on Gen Alpha is sparse due to their age and ethical considerations surrounding minors, but behavioral trends on the cohort’s relationship to tech and AI have begun taking shape. Gen Alpha doesn’t appear skeptical about AI; instead, it is welcoming AI to its inner circle.

At Sequioa Capital’s AI Ascent Event, OpenAI CEO Sam Altman commented on younger teens and Gen Alpha. He noted that they are “increasingly treating ChatGPT as a life advisor, using it for decisions or emotional support.” A Common Sense Media Report finds that 72 percent of U.S. teens say that they now use AI for companionship, with more than half of them doing so every day. The MIT Technology Review explores research from Google DeepMind and the Oxford Internet Institute that contrasts AI companionship with social media. “In the social media we’re used to, as the researchers point out, technologies are mostly the mediators and facilitators of human connection. They supercharge our dopamine circuits, sure, but they do so by making us crave approval and attention from real people, delivered via algorithms. With AI companions, we are moving toward a world where people perceive AI as a social actor with its own voice. The result will be like the attention economy on steroids.”

Conversational Computing

That voice ties back to conversational computing and is a contributing factor in the rise of AI companions. A pair of studies conducted jointly by the MIT Media Lab and OpenAI were published in March. Researchers analyzed millions of chatbot interactions, exploring the impact of AI companions on user behavior. The studies compared text-based engagement with voice applications. The teams tested engaging and neutral voices against standard text-based chats. The research concludes that voice chats, despite being computer-generated, have a stronger connection to user behavior than text. The findings report, “Using a more engaging voice model, as opposed to a neutral voice, significantly increased the aﬀective cues from the model.” The impact of the connection was inconclusive in the study, but signals that voice and the style of voice influenced the users.

Uncomfortable Yet Undeniable

To say AI companionship is controversial is an understatement, but what can’t be underestimated is its rise in engagement. Harvard Business Review reports, “Gen AI tools are becoming embedded in daily routines, especially among younger cohorts. Gen Alpha is likely to adopt AI companions for self-reflection, advice, and emotional regulation.” Platforms including character.ai (explicitly marketed to children as young as age thirteen), Nomi, CHAI, and Replika are extremely popular with teens. According to Media Matters, of the 72 percent of teens who have reportedly used the platforms, 53 percent are regular users, and 13 percent engage daily. To reach Gen Alpha with its digital-first upbringing, we should be studying these tools and the norms of how and where to responsibly apply this technology, despite any personal misgivings.

Replika and character.ai: A Primer

As older generations warm to TikTok, Instagram, and other entertainment/social platforms of the past decade, emerging generations have leapt ahead. Along with Zuckerberg, we are social anthropologists at TRR dedicated to understanding why trends matter. In our quest, we discovered an AI companion review site called AI Girlfriend Scout, a paid subscription service, that claims, “Whether you’re looking for emotional support, entertaining conversation, or a judgment-free space to be yourself, this in-depth comparison will help you choose the right AI girlfriend for your specific needs.” This is not a dating site; it is a Rotten Tomatoes equivalent for AI companionship site evaluation. AI Girlfriend gives Replika three out of five stars, while character.ai earns 3.4 stars.

In research detailed in a recent MIT Schwartzman School of Computing podcast, Eugenia Kuyda, Replika CEO, explained the appeal at the heart of the company’s product. “If you create something that is always there for you, that never criticizes you, that always understands you and understands you for who you are, how can you not fall in love with that?” We reiterate, this is not a dating site; Replika is a relationship platform that encourages connections between people and chatbots. It is particularly appealing to Gen Alpha, AKA the Alexa generation.

Listen for the Future

To bring this back to retail and commerce, we should look to Zuckerberg. He is known for playing the long game, willingly taking risks when outcomes are uncertain. His unrealized (to date) investments in the metaverse are a potent example, but the metaverse play was top-down, believing that if big tech builds it, customers will come. This one is different. Zuckerberg is scanning the future landscape for openings to capitalize on the company’s investments and hiring spree connected to Meta’s Llama AI project.

In companion AI, Zuckerberg senses a business opportunity. It has taken Zuckerberg months to find his talking points on companion AI. His comments to the podcaster Dwarkesh Patel on a universal human need for 13 friends, but only having three (suggesting the remaining ten might be AI friends), was a stumble. In this recent conversation with the payment platform Stripe’s Cofounder and President John Collison, he found his voice on both AI and companion AI (we’ve synopsized his comments for clarity). “I think this is going to transform every category. I think people are like, ‘Oh, is it going to be primarily a consumer thing, or is it going to be primarily an enterprise thing?’ It’s going to be everything…there are going to be a lot of opportunities. We’re also, on the consumer side, very focused on, like, personal AI. It’s going to be probably more conversational, probably index a little bit more towards voice, and be more personalized. I think people are going to want a system that gets to know them well and that kind of understands them in the way that their feed algorithms do.”

If you don’t remember anything else from this piece, remember this quote. It may be early to plan an AI companionship retail strategy, but it is not too soon to start thinking about it. If you encourage your team to join you, by the time that the solid retail potential is obvious, anticipatory-focused companies will have gained fluency in the language to articulate why AI companion bots are valuable for our industry.

Beyond the Influencer: Why Gen Z Loves AI

Sarah Holbrook — Tue, 15 Jul 2025 04:01:00 +0000

The word disruption contains multitudes of interpretations. It can represent a dynamic burst of business or technical innovation; and it also describes upheaval, shifting norms, and instability. We’ve noticed a signal that foretells a macro disruption: Retail, identity, trust, generative AI, and Gen Z are intersecting. This disruption could prove to be an opportunity or a problem; retailers can explore it, ignore it, or capitalize on it.

As Gen Z disrupts the latest disruption (AI), they have adapted GPT models, rewriting the rules to perform off-label tasks and are shaping a new communications stream. The tech platforms have noticed, recognized the potential, and are following their lead.

Life Out of Balance

For Gen Z, disruption is a fact of life. This cohort crossed into adulthood under duress. While many hope to put Covid in the rearview mirror, experiencing the shock of either of missing your high school or college graduation, losing a loved one, starting college online, going back to school wearing masks, feeling straitjacketed and distanced when you are poised to break free, or a combination of all the above has shaped this generation. Living through such events in a critical phase of young adulthood development has consequences. We shouldn’t be surprised when Gen Z begins to rewrite all the rules and forges a different path.

Algorithmic Aesthetics

These Gen Z consumers are different. They engage with technology as digital natives. As such, they have understood and adapted quickly to the possibilities within emerging AI models. For this generation, the growing menu of GPT services from Anthropic’s Claude, Open AI’s ChatGPT, Meta’s Llama, Google’s Gemini, to name just a few, is not taken at face value. Instead, Gen Z consumers think, “Huh…how can I hack these awesome tools to make them work for me?”

They are stretching GenAI’s capabilities beyond writing job applications and emails to optimize weddings, wardrobes, job interviews, skincare, and shopping. As Gen Z disrupts the latest disruption (AI), they have adapted GPT models, rewriting the rules to perform off-label tasks and are shaping a new communications stream. The tech platforms have noticed, recognized the potential, and are following their lead.

LLM Hacks

As curious young users poked around in various GPT engines, queries into product advice started cascading. The first to react to the spike was ChatGPT, which quickly recognized the commercial potential, while promising not to exploit it (yet). In April, ChatGPT opened a discovery platform marketed to brands. Initially, the product recommendations were limited to commoditized hard goods, office chairs, coffee makers, etc.

Soon, the ChatGPT LLM (large language model) recognized growing search clusters as Gen Z fashionistas asked for outfit advice. ChatGPT quickly transformed itself into a personal stylist. Fast Company described the UX as “Enhancing the shopping experience with personalized product recommendations and direct purchase links.” Vogue Business spoke with ChatGPT Product Team Lead Saguna Goel who explained, “What’s really exciting is that this movement is being led by shoppers themselves. Gen Z are definitely out front.” Vogue explained that generative AI was the initial tool, but users then took their GPT journeys social, sharing the process on TikTok as they asked the engine to“ build capsule wardrobes” or ” suggest seasonal color palettes.”

My Personal AI Stylist

At the recent CommerceNext conference, we heard personal perspectives directly from Gen Z consumers. The panel shared their experience with generative AI tools as not only a personalized stylist but increasingly as a shopping tool. The next gens use AI to deliver the right look (based on their photos uploaded into the chat) and a shopping list of where to buy all the essentials. It’s customized search on steroids.

ChatGPT’s style hack is not the only tool the cohort is exploiting; Gio AI is serving as a stylist for digital living. If you search for Gio AI in Apple’s App Store, an AI headshot retouching tool pops up. It adds some generated magic to an uploaded photo for embellishing a LinkedIn profile or dating app picture. To discover the hack, we had to search Reddit, where users explained that Gio AI also has a virtual outfit generator. Gio AI not only beautifies faces it also rocks a virtual look.

Branded Bots

AI is increasingly infused into both retail and fashion marketing, but chat-based and visual generative AI efforts are still in experimental mode. Walmart and Adore Me are among the brands experimenting with generative AI primarily for search, personalization, co-creation, and social media engagement. Daydream.ing is a newly-released, venture capital-fueled fashion discovery that is a GPT chat-powered AI interface designed by technologists to drive sales. Daydream.ing is launching with a roster of promoted brands including Net-a-Porter, Alo Yoga, LoveShackFancy, Mytheresa, Uniqlo, and others. It is currently in beta and not yet widely distributed and Daydream.ing is not a Gen Z user-generated fashion hack. We will be watching to see if this audience responds to well-funded, commerce-driven GPT apps with their wallets, or with ingenuity by shapeshifting them for another bespoke purpose through their own hacks.

Synergistic Styling

We are still unpacking another issue mentioned at the CommerceNext panel. This generation holds a healthy level of skepticism toward brand influencers. Gen Z is less interested in influencer posts, especially if they are paid by brands, than in user comments. While the cohort tends to prefer micro-influencers to the mega variety, according to EMarketer research, Gen Z prefers a “digital third space” to any influencer. In the research, a digital third place is described as “an ecosystem where Gen Z can communicate, influence, and engage with the current culture. Think: the relationships people can build through comment sections in Reddit communities or virtual spaces like Roblox.” This generation is inclined search out or discover trusted sources which track its singular pursuit of style inspiration. This cohort candidly embraces incredulity, creating a conundrum for brands hoping to sway them.

Skepticism and Trust

A lot of this comes down to trust, an issue with which Gen Z has a complicated relationship. They have matured in the era of “alternate facts,” rampant misinformation, and now, deepfakes. Morning Consult Polling finds a connection between this inherent skepticism and brand trust.

“The trust issues appear in part because of more general skepticism towards corporate America and broader consumer preferences, a reality most brands will have to confront as the young consumers grow in purchasing power. Gen Z also displays lower trust scores for a vast majority of brands, including established and emerging ones, when compared to older adults.”

Ironically, despite a deep skepticism of brands, corporations, and corporate influencers, many in Gen Z place extraordinary trust in large technology companies. The cohort generously shares personal information, desires, and self-expressions with generative AI models built by Google, Microsoft, OpenAI, and Meta. They then turn around and broadcast these digital revelations across TikTok, Instagram, and Roblox. While the audience includes members of a trusted community, brands and corporations, hungry for precisely this type of data are also watching.

Disruption Updating

Somewhere in this convoluted mix of privacy and self-expression, brands may uncover a possible opening: a “third space” to connect. While brands strive toward an elusive strategy to either exploit this opportunity or solve the problem, depending on their perspective, they should remain nimble. Gen Alpha is already creating another new set of rules. They are digital, AI, and gaming fluent, communicating in an ephemeral slang that confounds even the fastest LLM. Disruption isn’t arriving. It’s already updating itself. And get ready, Gen Beta is on the way.

Tariff Shockwaves

Sarah Holbrook — Mon, 09 Jun 2025 04:01:00 +0000

When President Trump stood next to his super-sized tariffs chart on April 2nd, he looked wholly satisfied as he actualized his very own shock and awe moment. The world was expecting tariffs, but not a worldwide economic cataclysm. Now, the globe is in the throes of motion sickness as the tariff yo-yo continues to wind and unwind, following an all too predictable pattern.

The time to start drawing the roadmap for the coming 24 months and beyond is now. Just make sure to add elevations and alternate routes to that roadmap, it is going to be a steep climb full of twists and turns.

Blindsided

Narrowing the focus to retail, the industry can’t be blamed this time for being caught flat-footed. Many retailers anticipated a moderate increase to the already existing tariffs on China. We searched for any analysis or warning signs that tariffs might be imposed on goods from Vietnam, India, Bangladesh, Germany, and well…everywhere except Russia and North Korea. No one expected the destructive (and self-destructive) scope and scale of the scheme; neither short sellers nor Cassandra got this one right.

Now two months into the madness, while we may feel ill, we are no longer shocked or awed. Wall Street has developed the TACO investment strategy, aiming to profit from the tariff gyrations, but collective consensus concludes that neither a plan nor fact-based roadmap exists. The OECD (Organization for Economic Co-operation and Development) surmises that the U.S. will bear the heaviest brunt of Trump’s tariffs. Quartz covered the OECD report on tariffs in a piece titled, “America is the biggest loser in Trump’s trade war, OECD says.” The Quartz article concludes, “The result isn’t always an immediate shock. More often, it’s a slower burn, where uncertainty and higher costs quietly erode economic momentum quarter by quarter.”

As the slow burn commences, the retail industry is shifting from paralysis to stumbling through, paying increased freight fees while rushing to land merchandise before the next possible tariff cliffs in July and on August 15. This is no way to run a railroad, nor IKEA U.S., Printemps U.S., or NIKE.

Tune Out the Short-Term Noise

TRR is not a news publication; we mete out strategy. As these words spill onto the page, a federal court has found many of Trump’s tariffs illegal, the administration appealed, and then the administration won a stay. The opposite may be true when you read this piece. Rather than react to the drama du jour, we have been thinking about the bellwethers that are signaling the medium and long-term effects of this disruptive circumstance, and how it may compound and complicate pre-existing and ever-present concerns.

If Trump wakes up tomorrow and decides to tactically unwind the tariffs on every country, spinning it as part of his plan all along, things will not magically snap back to where they were. This tactic will have a long tail. Beyond the complexities of shattered trust, other obstacles loom. Logistics have been splintered, ships are not where they should be, and their crews displaced or furloughed. Global consumer sentiment has likely changed leaving international consumers with a diminished appetite for importing U.S. brands (think New Balance, Jack Daniels, Ralph Lauren). Retailers placed aggressive, uninformed bets, accelerating inventory purchases with more urgency than planning. Further complicating strategy is the hard truth that the tariff issue does not exist in a vacuum. The system has been damaged. No matter what unfolds in the coming weeks, Q3 will bring empty shelves, higher prices, and declining demand. The White House does not control the basic laws of economics, nor can it escape the axiom, you break it, you own it. The time to start drawing the roadmap for the coming 24 months and beyond is now. Just make sure to add elevations and alternate routes to that roadmap, it is going to be a steep climb full of twists and turns.

Bellwethers

While considering your next steps, these are five disruptive signals to watch for:

Slowing consumer spending
Rising unemployment rates
Rising consumer bankruptcies
Rising avian to human bird flu transmissions
Eroding U.S. China relations

Slowing Consumer Spending

While the signals are weak, the May 30 estimates from the Bureau of Economic Analysis show that consumer discretionary spending dropped in April. April’s expenditure estimates on apparel and footwear dipped 3.4 percent, and other non-durable goods purchases dropped 5.9 percent. The impact of April’s decline will be reflected in the second quarter reporting, but PepsiCo joined Proctor & Gamble, Chipotle, and others in reducing the 2025 full-year profit guidance. The consumer goods giants and burrito stalwart blamed slowing sales on reduced consumer spending according to reporting in the New York Times. PepsiCo cut its 2025 profit outlook from the mid-single digits to even with the company’s 2024 results, while reporting a 1.8 percent decline in Q-1 2025 revenue during the company’s recent investors’ call. The Times quotes Jamie Caufield, PepsiCo’s C.F.O., “Relative to where we were three months ago, we probably aren’t feeling as good about the consumer now.”

Rising Unemployment Rates

Unemployment rates remained steady in April at 4.2 percent while many government employees and contractors scattered throughout the United States are currently on paid leave. While this cohort is technically employed, the future employment status of many government workers is uncertain.

While Walmart is showing no signs of “eating” the tariffs, the company was the first major retailer to announce staff cuts. It announced 1500 layoffs in the company’s Global Technology Team. Walmart may be the first but watch this space. There are already murmurs from Costco, Best Buy, Target, TJX, Macy’s and Urban Outfitters, according to The Wall Street Journal.

Rising Consumer Bankruptcies

The New York Fed recently released a mix of good and bad news in its Q1 household debt and credit. Total household debt increased by $167 billion and stood at $18.20 trillion by the last count. The agency reported, “Credit card balances fell by $29 billion from the previous quarter to stand at $1.18 trillion; auto loan balances declined by $13 billion to $1.64 trillion, marking only the second time balances have fallen from a prior quarter since 2011.” However, the awakening burden of student loan debt paused since 2020, and grew by $16 billion to reach $1.63 trillion. Gen X borrowers nearing retirement age owe a portion of the debt.

Buy-Now-Pay-Later platforms are showing signs of stress. Public Media’s MARKETPLACE reported on BNPL debt balances. “Affirm users have an average outstanding balance of $736, and the 30-day delinquency rate stood at 2.4 percent for the first three months of this year, according to company reports.” In the broadcast, Senior Litigation and Policy Council for the Center for Responsible Lending Nadine Chabrier suggested that BNPL consumers tend to be “financially vulnerable.”

In January, shortly before major staff and service reductions, the Consumer Financial Bureau released findings. The Bureau discovered that more than one-fifth of consumers using BNPL loans in 2022 had subprime or deep subprime credit scores. The CFPB research also revealed that “More than three-fifths of BNPL borrowers held multiple simultaneous BNPL loans at some point during the year, and one-third had loans from multiple providers.” New York State is looking into regulating the lenders.

After reading these statistics, it should come as no surprise that Americans are increasingly bankruptcy curious. Consumer Affairs consulted data gathered by Legal-Shield, a legal service provider. “Americans making legal inquiries for declaring bankruptcy reached their highest levels in the first quarter of 2025 since 2020,” said Matt Layton, LegalShield senior vice president of consumer analytics. Layton continued, “Consumer bankruptcy concerns are rising not because of short-term volatility, but due to sustained financial pressure on household budgets.”

Rising Animal-to-Human Bird Flu

While only one animal-to-human death has been reported and the risk to the general population is low, the CDC reports the risk to humans exposed to infected animals is moderate to high. Had Covid never happened, one might read this report with a shrug, but it did, and no one should. Rather than simply shrugging, Health and Human Services Secretary Robert Kennedy Jr. seemingly discounted any concerns as his department canceled a $766 million government contract with Moderna to develop a bird flu vaccine. We know and understand the risks, should this grow out of control, to our industry, the economy, and humanity. Again, watch this space.

Eroding U.S.- China Ties

This area is heavily covered in general news. We will simply highlight areas of specific concern to our industry.

Rising Risk of Conflict in the Taiwan Strait
An invasion or hot war involving Taiwan would disrupt global access to advanced semiconductors. Taiwan produces over 90 percent of the world’s most sophisticated chips, which are foundational to everything from AI-driven retail personalization to mobile commerce, smart logistics, and cloud infrastructure. A disruption here is not theoretical—it would be catastrophic for both operational continuity and innovation roadmaps.
S. China Semiconductor and Tech Escalations
The ongoing U.S. semiconductor ban, and China’s countermeasures, including the suspension of exports related to aircraft and high-end chipmaking materials, signal that we are entering a phase of prolonged economic warfare. This affects not only chip availability but also global price volatility and supplier unpredictability for tech-enabled retail. While government incentives like the U.S. CHIPS Act are signals of a pivot toward onshoring, timelines are long, and capacity short-term is limited.
Rare Earth Minerals & Magnetic Leverage
China’s tightening of exports of rare earth minerals, used in electric motors, batteries, and high-efficiency manufacturing, reinforces the uncomfortable truth: The U.S. does not control all strategic levers in the tariff race. As tariffs rise and supply lines shrink, retail infrastructure, especially in logistics and automation, may become costlier and slower to upgrade.
Targeting Chinese Students and the Erosion of Soft Power
S. visa restrictions for Chinese students raise questions about whether the U.S. is playing offense, defense, or committing an own goal.
Global Realignment of Alliances and Trade Agreements
Watch for emerging regional alliances (such as ASEAN-led trade blocs or BRICS currency moves) that may signal a shift away from Western-dominated global trade norms. This can impact sourcing decisions, shipping routes, and even the relative importance of current markets.

Eyes Open

This is a complicated time to lead a retail organization or brand. Long-term strategies are easy to advise but challenging to develop. A deeper challenge is nurturing a nimble, anticipatory culture, particularly in times of stress. We encourage you to start by keeping your eyes open for the non-obvious signals that will impact our industry and lay the foundation for future success by having the courage to think about the unthinkable and prepare for the climb out of this mess.

Unintended Consequences of the Tariffs

Sarah Holbrook — Mon, 28 Apr 2025 04:01:00 +0000

Doing business in Spring 2025 is not for the faint of heart. The recent economic (and other) shockwaves serve as a reminder that the future does not proceed from the past along a neat and projectable trajectory. Until we learn to anticipate disruption and be prepared, we will continue to face new dilemmas that look a lot like today’s as we await the thwack of the descending sledgehammer that is the ever-evolving U.S. tariff gambit. As with the pandemic, the retail industry finds itself stunned by events, sitting ducks exposed to today’s shapeshifting economic caprices while relying on words like “unimaginable” to conceal its unpreparedness.

Could an iconic global retailer like IKEA begin to close stores in the U.S. due to tariff impacts? Might a U.S. company (Wayfair, Walmart, Restoration Hardware) try to create a domestic version of IKEA, or would the domestic tariff advantage be blunted by parts and input tariffs on the manufacturing of goods?

Stunned Paralysis

The tariff churn persists, and some strategists seem paralyzed by its unpredictability. However, our team at The Robin Report has covered the 2025 tariff imbroglio with ongoing reports from different perspectives offering thought leadership, APAC reporting with a keen eye on China, and the U.S. retail perspective, all with insightful analysis.

This report takes a different tack. We are not presenting an action plan or strategic solutions. Instead, we present a systemic analysis of the unintended consequences of the tariffs: what has happened, what may happen next and a range of plausible implications that are worth considering. This is intended to help you think differently about a macro issue (like the tariffs) that may have a dramatic, lasting effect on our economy at large and the retail industry specifically.

Mapping Consequences

Our map is complicated which is why this report presents it in a simplified format, but it is a systems perspective on how unintended consequences can derail a business and an economy. If you think of the tariffs as an interconnected case of causes and effects, you may become as alarmed as we are.

Breaking It Down

Systems thinking is a required tool for foresight and we are looking at the current economic upheaval through a systems lens. Our mapping is based on three steps.

Our process starts with today’s macro events
We then connect these events to retailing and the economy
Then we drill down to uncover plausible outcomes and what-if questions that may change life in the U.S. as we know it

The process behind this exercise is to help with scenario planning for contingencies. This is not simply an intellectual exercise; it can reveal areas of both vulnerabilities and opportunities. Additionally, if you get in the habit of working through plausible but surprising events, words like unimaginable become erroneous.

Macro Events

We started with the key driver behind the discord roiling retail: the uncertainty caused by the international tariff rollout by President Trump with the three global tariff models:

Retaliatory tariffs on U.S. exports
Sustained, stepped-up tariffs on goods both finished, and component parts imported from China
Varied, shifting, “tailored” tariffs

Next, we looked at the immediate impacts demonstrated in the model and asked what-if questions to reveal their implications:

Worrying shifts in the U.S. bond market as the 10-year U.S. treasury yield increases indicate anomalous U.S. Treasury sales.

What if foreign governments are dumping U.S. treasuries because they fear financial instability, or are they retaliating for U.S. tariffs?
What if institutional and individual investors are dumping U.S. treasuries because they fear financial instability?
How will the increase in 10-year treasury yields impact the U.S. deficit in 10 years and what might that mean then for the U.S. economy in 2035?
What if this yield increase triggers interest rate hikes which then increase borrowing costs (think mortgages, auto loans, credit card rates) and inflation and how will that impact retail?

The strength of the U.S. dollar declines.

We know this makes imports more expensive for U.S. consumers. What does that mean for retail?
We know this makes exports less expensive for foreign consumers. How might this impact retail?
Since a declining dollar + the tariffs make parts that are essential in domestic manufacturing more expensive, what does that mean for U.S. retailers who want to sell U.S.-made goods (think Walmart)?

Direct foreign investment in the U.S. slows.

Could an iconic global retailer like IKEA begin to close stores in the U.S. due to tariff impacts? Since we are speculating, might a U.S. company (Wayfair, Walmart, Restoration Hardware) try to create a domestic version of IKEA, or would the domestic tariff advantage be blunted by parts and input tariffs on the manufacturing of goods?

How Macro Events Will Impact the Retail Industry

What will it mean for retail if the economic trust the U.S. has earned over decades is questioned and the U.S. dollar’s position as the global reserve currency is challenged by the E.U. or China?

Since the U.S. has broken or altered existing trade agreements such as the USMCA and AGOA (the tariff-free trade agreement with many African nations), will other nations trust any future agreements? If not, how will that affect retail?
What is the impact of imports from other countries if the 10 percent tariff rate lasts for the entire Trump Term?
Tariff advertising slump: Should a brand launch an ad campaign for a car that costs $4000.00 more than it did a year ago? Should a brand or retailer plan a Christmas ad campaign for a new toy that will cost up to triple its current price?
Inbound international tourism drops: What if tourists boycott U.S. travel despite attractive exchange rates?
Will outlet malls suffer from tariffed goods price increases and decreased tourist footfall?
Since travel agents specializing in Disney World vacations have reportedly seen a dramatic drop in bookings from Canadian visitors, will that have a ripple effect on retail beyond Disney?

Imports from China begin to vanish as tariff rates create a de facto trade embargo.

Will Americans begin buying products directly from Chinese factories in an attempt to avoid tariffs?
Since 5 Below has already stopped importing goods from China, will U.S.-produced goods stock the empty shelves? Or will the tariffs nullify the store’s pricing strategy and thus eliminate its competitive advantage?
Bloomberg and WSJ report that Amazon is starting to cancel orders from Chinese suppliers; does that mean many essential items will be unavailable to U.S. consumers? How will consumers respond?

Businesses slow or halt investments in the U.S. due to tariff uncertainty.

Microsoft halts a planned $1 billion investment in an AI data center in Ohio after tariffs are announced. This means many planned jobs will never materialize. Is this a sign of a coming recession?
Stellantis lays off workers in the U.S. and halts production in Mexico and Canada. What is the impact on retail in the affected communities? What is the impact on car sales in the U.S.?
Walmart issues a rare mid-quarter warning on tariff losses. What if Walmart starts laying off workers? Will they begin using more automation in stores? Will customers care if Walmart continues to offer good value?
BNPL firm Klarna puts planned IPO in the U.S. on hold. Is this another sign of an impending recession?

Consequences for Retail and the Economy

Next, we moved to informed speculation and looked for plausible, potential consequences of the global tariffs. We broke those into two buckets, recession and inflation. Within the two buckets, we broke recession into consumer impacts and retail industry impacts and dug in from there.

Recession and Unemployment

Student debt defaults. As the pause in student debt repayments ends, what are the longtail consequences of damaged credit ratings for large numbers of millennials and Gen Z. consumers who can’t make the payments as unemployment rises? Will enrollment in higher education decline? Will we have enough educated leaders for the future?
Loss of health insurance. Since our health insurance system is tied to employment, what if medical debt and personal bankruptcies cause sustained financial hardship and long-term decreased spending?
Credit card defaults. What if there are large numbers of personal bankruptcies and how could that impact retail?
BNPL defaults. What if the lending platforms collapse under the weight of unpaid debt?
401K and IRA and investment portfolios shrink. What if the declines shatter the “Wealth Effect” psychology? Will wealthier consumers cut back on discretionary spending?
Food and housing insecurity. How will local crime accelerate? How will society become more polarized between the haves and have-nots?
Drop in new housing construction. Drop in demand for durable goods. What would this mean for Best Buy, Home Depot or Restoration Hardware?
Retail closures, consolidations, bankruptcies. Profitability declines, layoffs and retail real estate glut with the rise of mall vacancies. Can malls reinvent themselves again?
Shareholder pressure forces new platforms for resale and barter.
What if in-store crime increases? Will shoppers reject in-person shopping again? What will this mean for local retail?

Inflation

Retirees and fixed-income consumers are pinched and discretionary spending declines.
Inflation expectations can cause hoarding of essential items (think toilet paper) which generally drives prices higher.
Shoppers substitute brands for value and price solutions.
Lower income groups struggle to meet basic needs.
Interest rates increase if the Federal Reserve moves to slow spending. What is the longtail impact if a generation of potential homeowners become permanent renters because they are unable to build real estate equity?
Declines in retail profitability.
Countries could stop exporting their foods and beverages to the U.S. This could lead to an SKU reduction at the grocery store. What if customers can’t get their Kerrygold butter or aged Parmigiano Reggiano cheese? Will consumers shift to domestic substitutions or take the tariff hit through specialty retailers?
Pressure to increase employee compensation. What are the consequences if this leads to fewer employees and more automation?
Retailers are squeezed between the higher costs of goods and shrinking consumer spending.
Small-footprint ethnic grocery and gourmet stores may be forced to shutter due to the lack of availability and inability to negotiate with distributors or importers.
Stockouts and shortages occur due to increased inflation expectations and hoarding.
Potential interest rate rise hampers growth.
Freight shippers cancel or delay transit as volume drops.
Importers scramble to find new suppliers as factories close.
Ports back up because U.S. Customs is not fully prepared for new tariff processing.
Ports back up as importers can’t pay fluctuating tariffs on already shipped goods.
As fewer ships arrive in ports, trucking companies and distribution centers could face impending crises, forcing staff cuts, increased reliance on automation, consolidation with competitors, or failure.
High costs may drive innovative solutions: AI inventory and on-demand manufacturing technology may increase efficiencies and reduce waste.
Shoppers find discounted alternatives to grocery stores as online subscription services for imported staples like coffee pop up.

Working Through

We encourage you to construct your own unintended consequences scenario planning to identify the hidden dangers and long-term impacts of today’s events. As the churn continues, the risk of stunned paralysis remains at code red unless you build a permission structure that empowers your teams to imagine the unintended consequences of change. Use findings as a foundation for analysis and in the process, you may discover insights previously blocked by common assumptions and groupthink. If you shift your culture to anticipating the future, you may avoid those unintended consequences.

Retail AI Trends Outlook for 2025

Sarah Holbrook — Thu, 23 Jan 2025 05:01:00 +0000

The acres of AI-infused technology displayed on the expo floor won’t result in any significant breakthroughs when deployed in a vacuum. The value will be realized when AI applications adapt and evolve to work together as a holistic connected system.

There is a game show that rises from the ashes every decade or so, the Supermarket Challenge. In the game, there is a frenzied race where contestants fly through grocery aisles for one or two minutes tossing as many of the priciest items they can find into a shopping cart. The winner is the one with the most valuable cart and takes home the groceries and other prizes. If you are a retailer, strategist, or analyst hoping that attendance at the NRF Big Show 2025 would reward you with some clarity in a moment of AI disruption, it is unlikely that you took home the prize you hoped for. You ran around and tossed lots of Retail AI trends-related thoughts into your head, but likely left with an empty shopping cart, more confused than when you arrived.

Finding Clarity

We are applying our best sensemaking practices to unpack the clutter that often accompanies such a huge retail tech show and deconstruct the emerging future of a technology and increasingly AI-powered retail industry. But first, we’ll cut to the chase. We are witnessing Retail’s AI’s evolution, not Retail’s AI’s revolution. We believe that retail has entered the AI-augmented era.

Want proof? Nvidia, known as the industry leader in developing advanced AI chips and software, had a large presence at NRF (while not participating as a sponsor). The Vice-President and General Manager of Retail and CPG, Azita Martin was on the stage alongside Walmart’s CEO John Furner, and we counted at least 34 Nvidia employees at the show, many of whom spoke on panels. The large footprint of a software developer which is neither a retailer nor a paying sponsor says something significant. It confirms our thesis, we have entered the AI Era of Retail.

That said, the acres of AI-infused technology displayed on the expo floor won’t result in any significant breakthroughs when deployed in a vacuum. The value will be realized when AI applications adapt and evolve to work together as a holistic connected system.

Our observation is that the over 1000 one-off solutions at the show confuse more than provide clarity on how to integrate so many systems and solutions into an integrated whole. The AI hype was unavoidable, but the how-to was convoluted at best. And there is still a group of innovators with solutions looking for a problem. We see a lot of activity, but much of it is not relevant to today’s problems. To be fair, with any systemic change, you must zoom out to see the delta between what was, what is, and what may come next to develop a successful strategy. But woe to the smaller retailer looking for an AI strategy on the expo floor.

Clearly, the behemoths with deep pockets — Amazon, Walmart, Alibaba, and other large retailers — are working on unified systems that exploit the promise of artificial intelligence. But the long tail of retail is literally a very long tail. We caution them to avoid rushing to fill their proverbial shopping carts with over-hyped solutions to compete. In an era of rapid change, we suggest that they look for a holistic approach that blends novel technology with existing systems and to avoid a one-size-fits-all solution that is only targeted at the issues of today. The better approach is to find tech partners who are smart and adaptable enough to anticipate and solve for the future of retail.

Asking the Right Questions

Our consequential takeaway is to ask retailers if they are asking the right questions about their tech future. To put it simply, how is AI making a quantifiable difference in:

Sourcing, supply chains, and operational efficiencies
Forecasting and inventory management
Security, cybertheft, and crime
Physical and ecommerce integration
Customer service and experience
Saving the company money
Playing a role in sustainability and circularity efforts
Enhancing the human factor

Finding the Right Answers

We found most of the answers to these questions hidden in plain sight at the show. Let’s touch on each one from a macro perspective.

Sourcing, supply chains, and operational efficiencies

The AI advantage lies in combining established, lower-priced technologies that are super-charged by AI. Existing solutions to digital product passport and textile label transparency legislation served as a catalyst for industry transformation. We now have widespread adoption of RFID chips and Bluetooth technology documenting place of origin, product attributes, and environmental impact, among other data, The data collected and transmitted through RFID are now training intelligent models to optimize supply chains, forecasts, logistics, and respond to weather and shipping disruptions. Intelligent tracking also facilitates accurate pre-selling of products and restocked items.

Another example of AI layered over existing technology can be found in AI-3D digital twin assets. We wrote about Walmart’s deployment of digital twin technology in 2023. When fused with AI, the existing systems use the digital twins to anticipate and identify problematic patterns, anomalies, and errors to obviate failures before they occur.

Forecasting and inventory management

The changes in demand forecasting and inventory management software are iterative. Pioneers like Celect, purchased by NIKE in 2019, blazed trails in product distribution, inventory visibility, logistics, and demand prediction efficiency. As the technology continues to mature, the bar is raised higher. Invent.AI founder and CEO, Professor Gurhan Kok, explained why demand forecasting is only getting “better, smarter, and more accurate.”

As large language models train on more varied data, weather, local events, social trends, economic factors, etc. the information that can be applied to forecasting models is increasingly granular. According to Kok, forecasting technology has advanced enough to inform buying decisions “a year out.” A point he stressed more than once is that AI is now paying for itself with increased efficacy.

Security, cyber theft, and crime

AI is on watch 24/7. It patrols the internal platforms of leading retailers and brands searching for unusual patterns in gift card activity, sales behavior, privacy breaches, and inventory. Diane Brown, VP of IT Risk Management at Ulta Beauty described a preemptive defense enacted by the company after Ulta’s security partner Cequence Security identified a threatening inventory breach of physical store data in the United States. An unauthorized user was searching for the exact number of Dyson hairdryers available in each store. Before stores opened the next day, managers secured the inventory in stores and the company averted a targeted attack. Additionally, Brown explained that at the first sign of a breach, Ulta locks all accounts and sends an automated password reset to all registered users.

Chris Lanzilotta, Chief Information and Security Officer for Home Depot mentioned that Home Depot is using AI to search for deepfakes of executives and fake marketing initiatives. The AI is constantly on guard protecting the company against deceptive technology in the hands of threat actors. It is also deployed against identity violations ensuring that the company knows who is on the other end of each transaction.

Physical and ecommerce integration

As with supply chains, AI is combining with RFID technology increasingly for in-store data collection and computer vision as customers shop in retail spaces. Mapping the holistic customer journey is now attainable as retailers leverage online and in-store data to bridge the gaps. Ellen Svanström, Chief Digital Officer at H&M explained, “We are connecting the physical elements with the digital ambient technology. RFID now connects with smarter AI applications. In a physical-digital retail world, it can connect the dots. We are leveraging low-cost technology with AI…this is a game-changer for us.”

Bryce Boothby, Global Director of Product at McDonald’s Corp. discussed the impact of computer vision fused with AI to influence store design and customer flow. Trang To, VP, Omni, at Tapestry mentioned, “Computer vision merged with machine learning can tell us who is coming in, who is engaging, and how. This impacts store design, merchandising, and associate training.”

Customer service and experience

Enter agentic AI into the conversation. Agentic AI at its core is a genuinely smart assistant that can make decisions, solve problems, and perform tasks on its own, without needing constant human guidance. In a retail context, agentic AI often takes the form of a chatbot. At the recent Consumer Electronics show, Nvidia CEO Jensen Hwang demonstrated (among other things) a suite of agentic AI “containers” as he called them. Each container deploys a tailored collection of AI capabilities suited for different tasks. The customer service container integrates into a retailer’s existing CRM system to analyze inventory, product details, customer data, and service scripts. They then generate real-time solutions within prescribed parameters and human-like chat responses.

Another Nvidia “container” is oriented toward product awareness and consideration. This container can be integrated into a retailer’s Product Management System to create product catalogs, write product descriptions, optimize for SEO, identify market gaps, and generate marketing materials while customizing many of the elements to improve the shopping experience for individual consumers. It was no accident Nvidia was on-site at NRF.

Saving the company money

This answer is ambiguous: It depends. AI applications are varied and complicated. They include:

Automated Code Generation: AI can generate code, speeding up ecommerce and internal development
Inventory Management: Scanning for redundancies and missed signals while examining historical sales data, price, weather patterns, and increasingly granular data to distribute the right product, to the right store, and at the right price reducing markdowns and increasing profitability.
Supply Chain Optimization: Combining low-cost technologies such as RFID and AI to increase transparency, search for anomalies, and refine forecasts.
Personalized Marketing: AI-powered analysis supports hyper-personalization at scale as focused targeting supplants segmentation. Marketing costs decrease as AI-generated content is tailored to individual customers.
Energy Management: Schneider Electric, a Fortune 500 multinational company had a presence at NRF promoting AI-optimized energy efficiency systems for stores and warehouses to reduce climate impacts and reduce utility costs.
Price Optimization: AI can analyze market trends and competitor pricing to optimize pricing strategies.
AI Negotiation: AI can be trained on negotiation parameters and legal structures automating dealmaking between retailers, their suppliers, and customers.
Weather Impact Prediction: AI’s superior weather predictions are deployed to anticipate weather’s impact on sales, profitability, merchandising, and demand to harness hidden opportunities in increasingly frequent extreme weather events.

Playing a role in sustainability and circularity efforts

AI isn’t making a dent, yet. Any sustainability gains achieved by increased inventory efficiency and reduced garment waste are dwarfed by the increased energy demands that power artificial intelligence. As cleaner energy sources come online, the benefits of AI efficiency will outweigh the costs, but currently, AI’s impact on the environment is a net negative.

The human factor

Apparently, tech innovators have forgotten the human factor – the people that retail relies on to thrive. There are plenty of workforce efficiency tools, but nothing that fundamentally transforms the quality of the workforce’s lives.

Distilling Results

After cutting through the clutter, our best conclusion is the state of retail’s AI evolution is that it’s a work in progress. The number of tech solutions at NRF reflects the fact that

there are too many solutions hoping to gain traction, the majority competing among themselves. Too much energy is wasted on disjointed AI implementations; retailers need guidance on how the right systems fit into an integrated whole. There is too much emphasis on retailer optimization versus attracting and pleasing consumers; the tech community seems to be in love with its engineering innovations losing sight of the ultimate arbiter, the customer.

There is little apparent concern for elevating the experience of the people who work in retail. They are the brand ambassadors and can make or break customer loyalty. What happened to AI augmenting the workforce as a partner? There needs to be a more robust conversation about reskilling and how AI, particularly GenAI, is going to transform human work. Yes, there are innovators working on workforce efficiencies, but there are few discussions about strategies to integrate AI agents into a human workforce. It’s a missed opportunity; retail is a business that serves people based on relationship and trust and that may be lost to the forces of optimization.

As we adapt to Retail’s AI’s evolution, we need to pause and recalibrate. While there are transformative opportunities to reshape retail for the better, we should never forget the very human appetite for surprise, whimsey, and awe, qualities that machine learning is not yet capable of appreciating or stimulating. Remember Newton’s Third Law of Motion Physics, “For every action, there is an equal and opposite reaction.” As C-Suite attention shifts to AI, don’t be surprised if our key constituent, the customer, has other ideas choosing to spend dollars with retailers who offer a human perspective on the retail experience; one that is holistic, empathetic, engenders trust and is relatable. All the genius of AI tech needs to balance science with art, as clichéd as that may sound. Our advice? Don’t forget who’s paying your bills.

Beyond the Titans: Shopify Steps It Up

Sarah Holbrook — Thu, 27 Jun 2024 10:00:00 +0000

Walmart persists in its unrelenting cycle of innovation as retail’s battle royale between the mega-retailer and its rival Amazon continues. Yes, but it begs the question that if this duopoly at the top continues, what does this mean for the future of retail? Will tomorrow’s shopper be presented with a consumer landscape dominated by two commercial titans and a few trailing wannabes? Will retail whimsey, kismet, and joy fall only to AI-infused efficiency and algorithmically optimized recommendations? While it is fascinating for industry watchers to observe from the sidelines as one retail Goliath takes on another, it seems that Shopify, which initially relished its status as a possible Amazon slayer, is in stealth mode methodically building an alternative future retail landscape, all while tangentially integrating with both of the retail giants.

Shopify now powers over 10 percent of all ecommerce. It’s not in direct competition with either Walmart or Amazon, but the company is steadily building a robust commerce infrastructure supporting not only small and medium retailers but also leading brands looking to tool up for long-term independence in a future retail landscape.

Table Stakes

The ever-expanding tech stack that fuels today’s adaptive retail era is staggering. Amazon and Walmart are optimizing warehouse robotics, digital twins, retail media networks, generative AI search and personalization, supply chain efficiency, and last-mile delivery — be that by drone, gig delivery driver, or cargo bike. It seems that both consumers and investors are rewarding these efforts as the competitors have seen their sales and stock prices continue to tick up. Walmart is the largest retailer globally and gaining share in ecommerce while Amazon maintains a huge lead in ecommerce sales.

In another corner of the retail ecosystem sits Shopify which now powers over 10 percent of all ecommerce. It’s not in direct competition with either Walmart or Amazon, but the company is steadily building a robust commerce infrastructure supporting not only small and medium retailers but also leading brands looking to tool up for long-term independence in a future retail landscape.

Arming the Rebels

In a famed 2019 Tweet, Shopify co-founder CEO Tobi Lütke shared the company’s unofficial mission statement “Amazon is building an Empire, and Shopify is arming the rebels.” At the time, the statement appeared to support the little guy– small and medium ecommerce brands — but perhaps Lütke had an epic battle on a grander scale in mind.

Recent changes at the company support this theory. Shopify added Bret Taylor, the former President, COO, and ultimately co-CEO of Salesforce to the board of directors in June 2023. The company also reportedly added nearly 40 enterprise software sales specialists from Salesforce to its staff. In an interview, Michael Morton, Senior Research Analyst at MoffetNathanson, discussed these changes and commented on Shopify’s enterprise efforts. “What is a game changer is that Shopify removed the bottlenecks, the things that prevented them from being a solution to, for example, branded apparel companies…They had a variant limit, which sounds immaterial but if you just want to think about men’s pants from size 28 waist to whatever, in a couple of different colors, you quickly blow past the 100-product variant limit.” According to Morton, the company’s efforts to woo enterprise clients appear to be paying off. Shopify’s Gross Merchandise Volume rose to $235.9 billion in 2023, but now half of that business has come from the Shopify Plus enterprise product, which is for larger merchants.

Enterprise Appeal

Beyond loosening limits and revising systems to serve larger clients, Shopify rolled out an enterprise suite in 2023 with key elements:

A revamped end-to-end, cross-border commerce platform, Shopify Markets Pro, that better supports international ecommerce transactions for enterprise-level sellers. The platform is a holistic solution serving as a cross-border merchant of record while facilitating international sales processes.
The ShopPay point-of-sale system is internationally functional and available both online, and in-store through a countertop payment portal. ShopPay continues to outclass its competitors in the U.S. and globally. Stastia published 2024 data gathered by Dadanyze showing that ShopPay follows third only PayPal and Stripe as the most used payment processing technology worldwide. As a point of comparison, Apple Pay is ranked sixteenth.

Shopify’s efforts in increasing the presence of enterprise-level retail on the platform are making a dent. Research by EMARKETER projects that by 2025, Shopify’s projected enterprise-level ecommerce sales will increase from 5.5 percent in 2022 to 14.4 percent of revenue. During the same period, the percentage of sales from small and medium businesses on the platform dropped from 17.8 to 3 percent in 2023. EMARKETER anticipates only a slight rise to 4.2 percent of overall sales by 2025.

Prosperous Partners

The list of enterprise-level sites powered by Shopify includes digitally native brands, the Kardashian-related brands Skims and Kylie Cosmetics, Tesla, and Allbirds. It also hosts physical natives Mattel, Sephora, Steve Madden, Tapestry-owned Coach Outlets, Taylor Swift’s merchandise catalog, and even Heinz. For many of the omnichannel brands, Shopify’s software and payments platform cross the digital-physical divide, serving all retail touchpoints by offering in-store shoppers the same payment flexibility that is available online.

Shopify’s initial enterprise offering was an all-you-can-eat buffet; one price, all the features, no customization. The platform has evolved as internal Shopify teams have broadened from a technology-first team to one balancing merchant services. Shopify’s new Commerce Components program allows sellers to order à la carte with all or most of the services, or only ShopPay. Morton weighs in on the strategy, “I guess you could use the Trojan horse analogy. It’s going to get their foot into the door…They are going to be looking at Shop Pay and maybe one or two of the other commerce components solutions, and they’re going to ask their team, ‘Why are we trying to do all these other things by ourselves? Look how good the stuff is that we’re using from Shopify,’ so it’s a great idea.”

The Alternative

For enterprise-level sellers, the exposure available on both the Amazon and Walmart platforms is irrefutable; still, Shopify persists. As retail stakeholders, we are aware that many sellers consider selling on Amazon to be a Faustian bargain with expansive exposure and goodwill, but costly. Walmart’s terms are less onerous, but weighing the costs and benefits for sellers is complicated. Depending on the terms, many sellers lose pricing control, and are subject to advertising costs and high referral fees. Shopify has come up with a Solomonic alternative, striking integration deals with both Walmart and Amazon marketplaces and fulfillment networks. While we are not privy to the specific terms, the impression is that integrated Shopify sellers operate with more autonomy than most first or third-party sellers who deal directly with Amazon or Walmart. Sellers maintain their brand image, pricing control, and some of their data privacy. The Amazon integration processes all Shopify site sales through ShopPay, allowing vendors to retain proprietary sales data. Walmart insists on ringing its own registers.

Retail’s Future?

What makes this triad interesting is the role they play in the current retail innovation cycle and how that might play out in the future. Within that sphere, Shopify is arming not only the rebels but also consumers. This brings us back, in a circuitous way, to where we started as we pondered a future retail duopoly. Perhaps Shopify is building an alternative, independent future retail landscape that is more blessed with whimsey, kismet, and joy. We hope so.