Using data and AI to recession-proof your retail strategy - insideBIGDATA

Using data and AI to recession-proof your retail strategy – insideBIGDATA

Financial experts continue to warn of a recession coming in late 2023. Businesses, especially retail, have had a tough few years weathering the pandemic, and strategizing for the latest new normal hasn’t been easy. Now, retailers are likely to have to change again as consumer spending behavior changes.

When consumers feel uncertain and have less to spend, they turn to their flagship brands with whom they feel they already have a relationship. And relationships are built on mutual understanding. Getting to know your customers better and faster using data and AI can be the biggest game-changer for recession-proof retail businesses.

Take an omnichannel approach

It’s natural for retailers to immediately look at reducing spending during a recession. However, instead of drastically cutting marketing budgets, retailers can optimize them for better performance. Short-term reactionary cost cutting can lead to long-term losses when the market improves and cause damage to brand recall. Instead, retailers may be looking for ways to use data and AI to maximize customer experience and make their business recession-proof.

As the customer journey becomes increasingly omnichannel, with shoppers seamlessly alternating between online and in-store to research, evaluate and purchase products, the shopping experience must evolve to reflect this omnichannel reality. Shoppers are motivated to shop online and in-store for specific reasons and at different points in their journey. Ideally, the online and in-store shopping experiences should complement each other to maximize the overall customer experience.

Invest in data

One of the most important components of the shopping experience is the location of the physical store itself. This goes beyond simply choosing popular shopping areas with high foot traffic and plenty of parking; strategic site selection requires retailers to set up shop in locations that reflect their understanding of their customers and their priorities. Data is key here, as retailers can use data to understand a retail area’s demographics, its traffic patterns, proximity to stores with similar customer bases, competitive locations, and more. Location data can even help retailers find out precisely which parts of a shopping area are most desirable to their customers.

For example, in the midst of the Covid-19 pandemic, US discount chain Dollar General opened a brand new retail chain called pOpshelf. The new chain targeted more affluent shoppers in suburban markets, offering housewares, decor, crafts and more priced around $5. They identified an underserved market that wanted an enjoyable and enjoyable in-store shopping experience designed around finding bargains for the home. Buyers responded, calling it elegant, cute and comparing a visit to pOpshelf to a treasure hunt, delighting in discovering quality products at bargain prices. The success of pOpshelf is based on leaning on all the motivations that shoppers have for wanting to shop in stores. pOpshelf rotates its merchandise to fit seasonal themes, encouraging shoppers to visit regularly and see and touch the products first-hand. It’s an experience that cannot be replicated online.

This success has led Dollar General to announce the opening of 1,000 new stores by the end of 2025. In their initial launch and expansion, using data intelligence, they have carefully chosen pOpshelf locations in affluent suburbs. Their store in Hendersonville, Tennessee, which has a median household income of about $75,000, opened in October 2020 and just a year later, pOpshop was already seeing more frequent visitors and market share in the area than their closest competitor.

Invest in technology

Retailers are keeping up with improving customer experiences by adopting new technologies, such as giving customers the ability to try the product before buying through augmented reality (AR). Having an innovative app experience can attract more customers as more consumers choose to shop online.

For example, IKEA has found innovative and creative ways to use technology and digital platforms to not only expand the shopping experience but also alleviate some of the common in-store shopping deterrents. His stores have long been known for their well-appointed and imaginative showrooms, and even his restaurant that serves meatballs. However, the experience can also be overwhelming and crowded at times. Over the past few years, IKEA has been able to evolve and use the benefits of an online store, digital apps, and alternative shopping methods to enhance the in-store shopper experience.

They created the IKEA Place app so shoppers can view a product in their own homes. This helps customers narrow down all the possibilities and hone in on products that match their homes. Going to the store then, is more about making the final purchase and making sure it’s the actual product shoppers want, rather than finding out (and wading through crowds to do so). IKEA’s online store also allows shoppers to see if the product is even available in advance, while also providing pick-up and delivery options if needed.

Build deeper customer relationships

During a recession, or before a recession, retailers should shift focus to their existing customer base rather than aggressively courting new ones. Developing direct customer relationships has never been more important as consumers have more shopping channels than ever before and are constantly bombarded with advertisements and promotions from share-of-wallet competitors.

For example, cosmetics store Sephora started its loyalty program more than a decade ago and continues to update it to reflect the opportunities offered by modern technology as well as the needs of its customer base. Sephora realized that 80% of their shoppers were using their phone while shopping in stores to complement their shopping experience, so enhancing the online and in-store experience through a sophisticated app was the next step.

The Sephoras program has many dimensions, including free and annual purchase amount-based tiers, birthday gifts, exclusive access to events, and more. A program update in 2020 allowed customers to also redeem loyalty points for discounts or even donate the points to charities. Sephoras’ loyalty program also allows them to build an exclusive community. According to studies, emotional benefits drive three-quarters of customer engagement. The loyalty program drives clear ROI members to drive 80% of sales while providing strong and organic advertising to the brand.


Retailers can use both their own and third-party data to understand who their customers are and what they want. This also positions them best for the future, because customers’ preferences for how they order and where they buy will change and evolve as the world itself continues to change. When retailers combine global buying trends with local demographics, they can make smart choices regarding site selection, technology infrastructure, and customer service that ultimately satisfy their customer base while creating a unique experience.

Being proactive and taking steps to understand evolving consumer preferences and behaviors gives retailers an opportunity to maintain their loyal customer base during a recession.

About the author

Gladys Kong is Near’s chief operating officer. Gladys was previously the CEO of UberMedia, which was acquired by Near in 2021. She Gladys She oversees Near’s privacy initiatives and privacy policy. At UberMedia, Gladys was responsible for assembling a world-class data science team and transitioning it from a social media app developer to a leading mobile data and analytics company. Gladys, an entrepreneur and founder of several technology companies, holds numerous patents in the mobile technology space.

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