How Retailers Can Leverage Data and AI for the Holiday Season

As major retailers begin rolling out deals to drum up sales during the upcoming holiday shopping season, unique challenges await. In 2023, retailers will have to navigate new realities ranging from heightened geopolitical tensions to supply chain disruptions to budget-conscious consumers.

The good news is that consumers plan to start holiday shopping earlier — and spend more — this year than they did last year. For instance, in the U.S., shoppers are expected to spend $875 on gifts, decorations, food and other seasonal items, according to a survey from the National Retail Federation. That amount is up $42 from 2022.

“Today’s consumers are tech-savvy phygital shoppers, and mobile devices have become their personal shopping companions. Their ability to snap up the best deals from any device, on any channel and at any time is a boon for retailers,” said Kayla Broussard, chief technology officer for the Kyndryl U.S. consumer and travel market. “But that also means it’s easier for consumers to shop multiple retailers, making the competitive landscape more challenging. Since people are shopping across channels, businesses need to offer experiential retail with desired products at great value.”

As a result, retailers can use data and AI-powered analytics to gain a better understanding of their inventory and to deliver exceptional customer experiences. 

“The more data points retailers have, the more accurate their inventory is, which means associates are spending less time in the backroom running reports to figure out what they have and what’s missing,” said Bruce Steadman, consult partner for retail services at Kyndryl. “This frees up associates to spend more time with customers, which ultimately can impact profitability.”

Here, Broussard and Steadman talk about how technology can help retailers be more profitable during the holiday season.

What trends will impact this year’s holiday shopping season?

Broussard: During the pandemic, consumers were threatened by global supply chain disruptions and how that would impact availability and the timing of their deliveries. But this year, the angst and uncertainty surrounding the holiday season is around value and affordability, as people still feel the pressures of inflation. We see every major retailer addressing this challenge in novel ways such as early Black Friday sales plus enticing buy now, pay later options, which will help push holiday merchandise. 

Steadman: In my experience working with the grocery industry, an earlier start to the shopping season presents an opportunity for grocers to encourage repeat purchases of products that might otherwise get picked up only once a year. For example, if your favorite holiday cookies hit supermarket shelves earlier, you might pick up a box now to get yourself into the holiday spirit and then again during the holidays. But it’s important for retailers to calculate accurately — if they miscalculate demand and ramp up supply, they risk being saddled with expensive overstock and excess inventory.

Speaking of inventories, how can technology help retailers better manage supply chains with surges in holiday demand?

Broussard: As the retail world navigates what seems like constant disruption, global supply chains have taken a hit once again. Unlike disruptions caused from manufacturing shutdowns during the pandemic, this time the challenge is in inflationary stresses, geopolitical conflicts and recessionary concerns. Retailers are addressing this problem by building resilience into their supply chains with data driven insights across the enterprise. This means partnering more with the brands and freight forwarders, sharing of data, understanding where the products are to keep the shipments moving. 

Steadman: From a sustainability perspective, intelligent inventory is a game-changer for big warehouse retailers. Improved inventory accuracy reduces waste, which not only helps improve profitability but also works to support sustainability efforts.

How are retailers using data for hyper-personalization during the holiday season?

Broussard: Modern retailers see great value in leveraging technologies like advanced analytics and machine learning. The valuable insights they harness from these technologies even help them forecast popular products during the holiday shopping season. For instance, makers of technology gadgets typically drop specific new products around this time of year because data tells them that demand and price premium for these products will peak during the holiday season.

Hyper-relevant personalization, when done right, is a valuable proposition for retailers — and unified data quality is the key. Along with the huge volumes of data targeted at consumers every day, their buying habits and preferences do change over time, which is why spray and pray tactics are failing since the result is irrelevant, interruptive, unengaging and downright annoying experiences. So, retailers will need to strike a balance between the two and be very intentional about the data they serve up to customers.

Steadman: Data becomes valuable when it is relevant to the right customer at the right time. In the grocery space, personalization is being used to reach diverse generations. The messaging, communication medium and even how the data is collected vary depending on the shopper’s generation. Younger generations are more open to receiving specific offers based on geofencing and location awareness. However, older generations tend to be wary of having too much data collected on them and are less likely to appreciate this type of hyper-personalization.

How else is data helping to attract shoppers?

Steadman: Data, primarily first-party data, is an organization’s most powerful and valuable resource. Simply put, well curated, consistent messaging based on data is a retailer’s best opportunity to gain and maintain a customer’s attention. The emphasis here being on “consistent.” Retailers send targeted messaging to their customers based on known preferences, yet once identified, the offers and promotions need to be congruent throughout the entire customer journey. Regardless of the customer communication channel — email, text or mail — if the offer promotes savings on, say, a particular brand of detergent, the in-store experience must provide the same exact message.

Another big topic is automation. How can retailers prepare employees for an automated future?

Broussard: To fully enable automation, companies need to encourage and enable their frontline workers to learn more technology-based skills. The goal is to empower them to be more productive and efficient by automating mundane tasks so that they can work on higher value tasks and focus on delighting customers. Take generative AI for example, which has attracted the attention of most if not all business and technology leaders. It can be used to automate tedious and repetitive tasks, which is why retailers who invest now in training their employees to work alongside GenAI will have a significant advantage in innovating.

Steadman: From the grocers’ perspective, self-checkout started as an option to tide over the labor shortage and serve customers during the pandemic. Even post-pandemic, as people explore hybrid work models, retail is a difficult sell — most people do not want to be working nights, weekends and over the holidays. So, I see automation and self-service across stores as an enabler that will help to support consistent service needs — not as a total replacement for retail workers.