As tariff fluctuations hamper business projections, retailers must think carefully about where they place their digital bets
When businesses go through a tough patch, or are buffeted, as
today, by enormous uncertainty, digital innovation can sometimes
seem a cure for every ill. With new artificial intelligence (AI)
solutions landing by the week, it's easy to be carried away by
the hype. But not every solution in the digital toolbox will
deliver the desired results. This is particularly true in
consumer-facing industries, where getting tech wrong risks pushing
customers away. To drive efficiencies and engage customers,
it's vital to have the right tech, in the right place, at the
right time.
Our latest Global Consumer Outlook offers insights into which digital tools consumers like to use when shopping and which are a turn-off. The good news is that across consumer goods sectors, business leaders are right to feel optimistic about the potential of digital innovation. One out of every five consumers say digital tools and AI are more important than ever in deciding where they shop. Unsurprisingly, digital natives, those aged between 18 and 35, are the fastest adopters of digital shopping technology. They are worth paying attention to, as they are the only age group in our survey who said they planned to spend more in 2025 than last year.
What works and what doesn't
Consumers today are familiar with and expect retailers to provide home delivery (61%), digital payments (61%) and self-scanning registers in stores (52%).
When it comes to self-scanning registers, however, it's important to note that too much of a good thing can become a bad thing. Unmanned stores were by far the least popular digital innovation, with 33.4% of consumers saying they had no interest in entering such a store. So, while consumers want the freedom to self-scan on checkout, they still expect staff to be on hand to answer questions or otherwise assist.
It's the same story with chatbots, which were only slightly less unpopular than unmanned stores in our survey. More than 28% of respondents said they refuse to engage with them. This is a cautionary tale for retailers chasing cost efficiencies with technology that replaces staff. Shoppers still crave human interaction.
Another thing shoppers crave is consistency. If they see something they like online, they want to be able to check it out in a physical store. If the item is not in stock, 66% of consumers told us that they would shop at a different retailer, according to our Consumer Sentiment Index. Another major irritant is any discrepancy between online and in-store prices. While there are many valid reasons for pursuing dynamic pricing, consumers don't like it. It undermines their trust in the brand. In the consumer sentiment survey, nearly 85% of respondents said they wanted to see consistent pricing in-store and online.
Driving engagement
Our surveys show that consumers rarely consider digital tools and personal service as trade-offs. They want both. Ultimately, this means businesses need to make strategic, level-headed investments in digital tools that drive customer engagement without allowing in-person experiences to languish.
Indeed, our Global Consumer Outlook found that consumers are eager for more interactive forms of digital shopping, even when they're in a physical store. At present, for example, only 11% of shoppers use virtual testers, such as testing make-up using a selfie, or virtually placing furniture in a room before buying it, but one-third of respondents said they were eager to try out tese tools.
Virtual testing technology could also significantly reduce the rate of return of unwanted goods. In the United States, retailers estimate that 17% of their sales are returned each year – equivalent to $890 billion in 2024. With its potential to engage customers and achieve cost savings, virtual testing apps could well be the technology "sweet spot" that retailers are searching for.
In fashion, social selling on TikTok and Instagram, and apps that transform shopping into a social activity by allowing customers to interact with friends and comment on clothes, are fast catching on with under-35-year-olds and demonstrate how technological evolution can drive engagement and sales in innovative ways.
Invisible tools
When looking for tech that drives both customer engagement and margins, retailers should also consider digital tools that are "invisible" to the customer, but which improve their shopping experience. Radio-frequency identification (RFID) technology, for example, allows retailers to keep track of inventory in real time. Some stores are now pairing this technology with visual sensors to locate items faster for customers. By keeping customers happy and driving sales, this technology should also meet retailers' investment criteria.
Another invisible tool that is fast becoming essential for brand survival is the use of advanced predictive analytics models in relation to consumer demand. Of course, this has become even more important following tariff announcements, helping businesses model the complex impact of pricing, costs, and this demand on overall profitability. In the U.S., AlixPartners has helped a fashion retailer build an AI model that melds years of anonymized customer transaction histories with the retailer's proprietary financial data and external variables to build more accurate business scenarios and aid decision-making. These advanced AI tools may take several weeks to build due to the customization required, but they could well deliver the competitive edge that retailers need in turbulent times.
A delicate balance
Customers today want two things at once – a seamless experience when they shop online and personal service when they visit stores. Retail tech must similarly play a dual role: engage and delight customers while driving sales and delivering cost efficiencies for the retailer. Like all sweet spots in business, it's a delicate balance to strike.
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