Retailers now know more about us than ever before thanks to AI, but experts insist it 'can improve lives'
Artificial intelligence is becoming more advanced than ever, and retail experts say it will become increasingly essential in making stores more efficient and convenient for shoppers. The artificial intelligence market in retail is expected to surpass $8 billion by 2024, according to the business management company Global Market Insights. "The speed at which AI can work through issues and create solutions — and just the sheer volume of data that it can collect, but more importantly, analyze in a really intelligent way — can improve lives," Chelsea Grayson, former CEO of American Apparel and True Religion, told Business Insider. Visit Business Insider's homepage for more stories.
While the term "artificial intelligence" may summon futuristic images of robots and machines, in the retail industry it has become a catchall term for everything from customer service chatbots to virtual reality apps. Artificial intelligence services have become big business in retail: The sector is expected to surpass $8 billion by 2024, according to business management company Global Market Insights. As e-commerce continues to reign supreme, AI continues to flourish out of business necessity, according to Emil Alon, CEO and founder of augmented reality company Resonai. "Retailers can finally map and understand the full shopper journey across both digital and physical sales channels to achieve an omnichannel picture," Alon said. "It allows retailers to gather a more detailed understanding of their customer segments to refine their product portfolios and better connect brands with target customers." Today, nearly everything a shopper does is being mined and tracked for data. While this may sound scary on its face, retail experts say AI will become essential in making stores more efficient and convenient for shoppers. "Everything that a consumer does online, and an increasing fraction of what they do offline, generates data which is associated with them," Andrew Konya, CEO and cofounder of the AI startup Remesh, told Business Insider. "This data is sewn together across devices, people, companies, and transactions. It is leveraged by increasingly advanced algorithms which are continually getting better. How AI is improving inventory management
According to Chelsea Grayson, former CEO of American Apparel and True Religion, AI has been most beneficial to retail by improving the way companies track and manage inventory. "No retailer I have ever worked with has this down to a perfect science," she told Business Insider. "In fact, the predominant majority of retailers I work with are terrible at inventory management and demand forecasting." Inventory challenges have been a major thorn in the side of retailers struggling against the retail apocalypse, specifically those that continue to over-index on apparel that goes unsold before being pushed to clearance racks at significant discounts. Such sales are dangerous because they can weaken the brand by establishing a "promotional culture," she said. However, growing AI technologies like RFID tracking are helping brands streamline the inventory process by tracking it online. Today everyone from Nike to Outdoor Voices uses this system, which Grayson said is especially helpful in tailoring product based on geographic region. "[Retailers struggle with] having a particular item or set of SKUs in the right place at the right time," she said. "They often have the same item in every single one of their locations, for example, without figuring out that in a particular geography, a floral skirt might work, while elsewhere they're going to need a big puffer because it's cold." On the consumer side, Grayson said augmented reality technology like Sephora's Color IQ program has already proven beneficial to helping shoppers pick out products. In addition to allowing shoppers to "virtually" try on makeup, it saves information on favorite hues, a move that can help drive consumer loyalty and prevent "the graveyard of makeup."
How AI can improve shopping With so much data at their disposal, retailers are still identifying the best ways to use this information to bolster sales and engage with consumers in a way that doesn't feel invasive. This is easier said than done — while brands like Gucci have implemented intelligent customer service chatbots, a New York Times report found that the company powering the bot could see what shoppers were typing before they sent it, and used this intel for future targeting. "It is one thing to think, 'O.K., somehow my clicks are being recorded somewhere,'" Christine Bannan, a consumer protection lawyer at the Electronic Privacy Information Center, told the Times. "But to think of an individual sales rep watching all of your clicks, I think it will resonate with people that this sort of tracking is so prevalent and what it really means." Grayson said that despite concerns over the technology, the pros of retailers tracking consumer habits through artificial intelligence ultimately outweigh the cons. "The speed at which AI can work through issues and create solutions — and just the sheer volume of data that it can collect, but more importantly, analyze in a really intelligent way — can improve lives," she said. "AI is going benefit humanity far more than it hurts any individual."
Read more in our Revolutionizing Retail series: The retail apocalypse has forced stores to abandon the mall and transform into a destination where shoppers can take a 'vacation from reality' These 17 companies are revolutionizing the retail industry This startup wants to help retailers like Toys R Us, Macy's, and Lowe's revamp their store experience — and it's raised $88.5 million to do it From robotic shop assistants to AR, these 10 pieces of tech could change shopping forever SEE ALSO: How AI is changing everything Join the conversation about this story » NOW WATCH: Gold can cost $1,500 per ounce — here's why it's so expensive
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Anchor stores like JCPenney and Macy's once drew crowds to suburban malls. Now their struggles could push hundreds of malls into extinction.
The novel coronavirus is crippling department stores, leading to a rash of bankruptcies and store closings. ...The novel coronavirus is crippling department stores, leading to a rash of bankruptcies and store closings. Malls will struggle to find replacement tenants for the large, multi-story buildings — known as anchor stores — that department stores occupy, at a time when most businesses are halting store growth. "We expect to see a lot of the space that goes vacant remain vacant for extended periods of time," said Kevin Cody, senior consultant for the commercial real estate firm CoStar Group. The loss of anchor stores can trigger co-tenancy clauses, which allow other mall tenants to break their leases or pay lower rent. Visit Business Insider's homepage for more stories. Hundreds of department stores are expected to close in the next 18 months, leaving a glut of empty real estate at shopping malls across the US that could be nearly impossible to re-occupy. Malls will struggle to find new tenants for space occupied by department stores, as businesses pull back sharply on spending and expansion amid the pandemic. "We expect to see a lot of the space that goes vacant remain vacant for extended periods of time," said Kevin Cody, senior consultant for the commercial real estate firm CoStar Group. This means many malls will be stuck with empty anchors. Anchors are the giant, multi-story buildings at mall entrances that have historically been responsible for a large portion of mall sales and foot traffic. The real estate research firm Green Street Advisors expects more than half of mall-based department stores to close by the end of 2021, leading to "excessive dark mall anchor space." "Widespread department store closures will accelerate the demise of many malls," the firm said in a recent report. "Many malls will be faced with multiple anchor vacancies, a tough place to come back from." Neiman Marcus, JCPenney, and department-store operator Stage Stores have all filed for bankruptcy in the last few weeks. Macy's said this week that its first-quarter sales fell by as much as 45% and that it expects to report a roughly $1 billion operating loss when it reports earnings in July. Nordstrom, another department store chain, has said it will close 19 locations, including 16 full-line department stores. Other mall-based stores are struggling, as well. J. Crew Group and the shoe chain Aldo filed for bankruptcy this month. L Brands said sales fell 37% in the most recent quarter and it plans to close 251 Victoria's Secret stores and 50 Bath & Body Works stores. Experts and analysts say this is just the beginning of a giant wave of closings and bankruptcies expected to sweep the retail industry. UBS recently estimated that about one in five clothing and accessories stores — or roughly 24,000 locations — will close in the next five years and pandemic hammers retailers. Department store losses can push malls into a downward spiral When anchors close, malls are put in the challenging position of finding new tenants for their biggest stores or facing sharp declines in business. Finding new tenants for stores that have multiple floors and take up more than 100,000 square feet will be particularly difficult at a time when most mall-based retailers are halting store growth following weeks of forced store closures. Even the highest-quality malls — referred to as "A" malls — will have a hard time finding replacement tenants for empty anchors, according to some experts. "If Neiman's rejects a lease, I don't know who's going to pick up that space," said Paul Steven Singerman, co-chair of the Florida-based bankruptcy and restructuring practice Berger Singerman. "That's a big bite in terms of space and a highly stylized interior that might not work for other 'A' retail-anchor types." The threat of a second wave of infections in the fall will prevent even many stronger retailers from making investments in expansion, he said. "I don't see a whole lot of retail sellers of goods reloading and making major capital investitures to open new stores now, not knowing when the social distancing and regulations limiting numbers of people in stores are going to be relaxed and whether we are going to make it through the autumn without a recurrence," he said. "I think it would be a pretty aggressive play [to open new stores]. Every retailer that we've talked to is trying to conserve cash." Malls have been battling the loss of anchors for years, as struggling department stores close or downsize locations. In best-case scenarios, malls have redeveloped anchor spaces and found tenants able to pay even higher rents, like restaurants or apartment complexes. But in the midst of a pandemic, it will be hard to find businesses willing to make major investments in redevelopment or expansion — especially for businesses with high exposure to e-commerce. "Department stores on the brink of bankruptcy, inline tenants struggling to make ends meet, and potential changes in consumer behavior (e.g., fear of public gathering places, accelerated e-commerce adoption) all point to long-term value impairment for malls," Green Street Advisors said. Other mall tenants can break their leases when anchors close With anchors standing empty for months or years on end, hundreds of malls could face a downward spiral in sales and rental revenues that may eventually put them out of business. Cowen analyst Oliver Chen has predicted that as many as 400 malls could close as retailers shut more stores permanently in response to the pandemic. "We expect stores may close in 10% or more of shopping centers, and the number of malls may eventually decrease to 800 or less from 1,200," Chen said in a recent note. He said retailers should expect in-store revenue to drop by 20% to 50% "for the foreseeable future." The loss of an anchor tenant can be particularly painful for malls because it often triggers co-tenancy clauses that allow other mall tenants to terminate their leases or renegotiate the terms, typically with a period of lower rents, until a new tenant moves into the anchor space. "When an anchor tenant moves out, many inline tenants could have in their contract that if that space is vacant, then they have the right to break their lease and just move out," Cody said. These clauses also may stipulate what type of retailers can re-occupy an anchor space, and prohibit mall owners from allowing retailers that are weathering the pandemic better than others — such as grocers or big-box stores — from taking over the empty space. The pandemic is accelerating the demise of weaker retailers In many ways, the pandemic is accelerating the trends that have been upending the retail industry for years. Department stores and apparel companies have for more than a decade battled weak demand stemming largely from the 2008 recession, evolving shopper habits, and the rise of e-commerce. This triggered a period known as the retail apocalypse for its high level of retail bankruptcies and mass store closures. The pandemic is now speeding up the shift to e-commerce and further weakening retailers that were already struggling pre-coronavirus. Manny Chirico, the CEO of PVH Corp., the owner of brands including Calvin Klein and Tommy Hilfiger, told CNBC last month that he expects 20% to 25% of all US stores to close in the next two to three years. Before the pandemic, he said he was expecting that level of closures to take place over six years. For many retail stores and shopping malls, this period will only hasten the inevitable — a large-scale decline in physical locations and in some cases, total extinction. SEE ALSO: Coronavirus could trigger a second coming of the retail apocalypse, with a new wave of bankruptcies and store closings expected to sweep the nation Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid
Workers at chains like Kroger, Costco, and Waffle House are on the front lines of an increasingly violent war between mask supporters and opponents
Retail workers at chains, including Kroger, Waffle House, and Costco ,are increasingly caught in the crossfire...Retail workers at chains, including Kroger, Waffle House, and Costco ,are increasingly caught in the crossfire when it comes to enforcing store or state policies on personal protective equipment. Some shoppers refuse to wear masks or face coverings for political reasons. In some cases, confrontations between store workers and customers have resulted in deadly violence. Visit Business Insider's homepage for more stories. Kristine Holtham, a Kroger employee from Lansing, Michigan, recalled the last time she requested that a customer follow store rules and don a mask or face covering. The man refused to comply. Instead, he looked right at Holtham and said, "I don't give a damn about your health." The Kroger meat department employee described the incident to reporters during a United Food and Commercial Workers International press call, adding that she and her Kroger colleagues have increasingly begun to run up against shoppers who simply refuse to wear masks or face coverings for ideological reasons. "Kroger ended our 'hero pay,' but the crisis is not over," Holtham said. "I face each day with anxiety and it gets worse when I see customers refuse to wear masks. I am a mother and my children need me to stay healthy."Kroger recently decided to stop its $2-an-hour pay bump, instead providing a $400 bonus. Kroger did not immediately respond to Business Insider's request for comment. "The employees are downright afraid to ask people to put on masks," Holtham told reporters on Wednesday. "Believe me, if you ask someone to put on a mask, it's like asking them to throw their gun away." As stores, states, and local governments encourage people to wear mask in public, retail workers are bearing the brunt of the backlash. And with such clashes on the rise, there have been a number of violent incidents endangering the lives of workers. Family Dollar security guard Calvin Munerlyn was shot and killed in early May at one of the retailer's Michigan stores, after telling a shopper that she needed to wear a mask to shop at the store. The shopper's father shot Munerlyn in the back of the head later that day. Last week, a Waffle House customer opened fire, shooting an employee at the Aurora, Colorado location, after being turned away by a cook for not wearing a mask. Neither Waffle House nor Family Dollar have policies on if customers have to wear masks. Workers were attempting to follow state orders in Colorado and Michigan that require or encourage people to wear masks when they leave their homes. Workers are stuck in the middle of a culture war Retail workers have also faced backlash over other safety policies that companies have rolled out to keep customers and employees safe during the coronavirus pandemic. A woman in Oklahoma City shot three McDonald's employees after she was told the fast-food chain had closed dining rooms due to the pandemic. And, earlier in May, a crowd outside a Costco in New Rochelle, New York, became aggressive when the warehouse opened 30 minutes later than expected, resulting in the police being called. "In 30-plus years of studying retail and crisis situations, we have never seen a situation of customers being so rude to hourly employees," Larry Barton, a professor of crisis management and public safety at the University of Central Florida, told Business Insider's Mary Hanbury. "It's demoralizing and, as we saw with the shooting of the security guard, a sometimes deadly environment," he added. But UFCW International President Marc Perrone said that many retailers are failing to fully back or protect frontline employees on the issue of enforcing mask policies. He said that businesses "don't want to drive off their customers" by taking stricter measures. Perrone advocates for retailers to hire security guards to enforce PPE policies. "We have been pushing for that for quite some time now, and the reason being is that these workers are not management, the consumer does not look at them as management," he said. Masks have become a political symbol Masks have become increasingly politicized during the coronavirus pandemic. Experts say that everyone wearing a mask in a store is one of the best ways to make shopping safer for everyone involved, allowing businesses to reopen. However, "anti-maskers" have said that policies requiring people to wear masks infringe on their freedom. Costco faced boycott threats when it became one of the first retailers to require all customers to wear masks in stores. Others rallied around Costco, voicing support for the new safety policy. A Whole Foods store worker told Business Insider's Hayley Peterson that customers were shouting at them on a daily basis. The employee, and others in this article, were granted anonymity in order to speak frankly about the situation without fear of retribution. "I have had people yell at me for not wearing a face mask, and had people yell at me for wearing a face mask," the Whole Foods worker said. A worker at the Gap told Business Insider that customers refusing to wear masks puts her and other employees in a stressful and uncomfortable position. Gap is encouraging shoppers to wear masks, but not requiring it — something some shoppers see as permission to go mask-free in the store. "I just keep in mind that, [if I] get sick, I might be good to go, but my parents will not bounce back the same way," the Gap employee said. "I don't want to be a health hazard to them."SEE ALSO: A Family Dollar security guard was killed after he refused to let a customer into the store because they weren't wearing a mask. Experts say acts of aggression are a terrifying trend on the rise in the retail sector. Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid
'Periods don't stop for pandemics': Feminine care startups like Thinx and Top see big opportunities in barren drugstore shelves
Feminine care direct-to-consumer companies like Thinx, Top, and The Honey Pot are experiencing massive growth as...Feminine care direct-to-consumer companies like Thinx, Top, and The Honey Pot are experiencing massive growth as consumers seek out alternatives to drugstore favorites like Tampax and Kotex that have disappeared off shelves. Thinx CEO Maria Molland said sales have increased by 40% compared to the same time last year, while purchases on Top's Amazon store have tripled. "We've had a huge increase in sales," Beatrice Dixon, founder of The Honey Pot told Business Insider. "When you go in the aisle at the store, all of the feminine care stuff is gone. Nobody has anything on the shelves right now, it's crazy." Visit Business Insider's homepage for more stories. As runs on essential items continue to leave shelves barren of everything from toilet paper to tampons, direct-to-consumer feminine hygiene companies are experiencing massive spikes in sales. The leaders of Thinx, Top, and The Honey Pot — three DTC brands that specialize in menstrual products — told Business Insider that business is booming for their respective companies as shoppers seek alternatives to drug store favorites like Tampax and Kotex that are disappearing off shelves. These brands, along with peers like Divacup and Lola, have already been part of the recent crop of buzzy newcomers inciting a revolution in menstruation products. Now, amid a global pandemic, they're finding themselves busier and more essential than ever. "Periods don't stop for pandemics," Maria Molland, CEO of Thinx, told Business Insider. Tripled Amazon sales and overwhelming online demand According to Molland, sales at Thinx — best known for its menstrual underwear and evocative advertisements — are 40% higher than the same time last year. She said business has continued to grow week-over-week since shelter-in-place orders started going into effect around the nation. "We are very lucky. Unlike a lot of businesses, the Thinx brands are essential products — people with periods and incontinence still need solutions — and we are a convenient solution," she said. A Thinx spokesperson said that "a majority" of its customers in the past month have been new to the brand, and currently, new customers make up a larger portion of overall customers than is typical for the brand. Molland said the growth has been aided by a nationwide push to limit public outings to places like grocery stores and pharmacies, which in turn has prompted some consumers to rethink their feminine products. Unlike most of its competitors, Thinx is a reusable product that can be washed and re-worn monthly, an increasingly appealing option for homebound Americans. "[Thinx are] delivered to your door so you can stay home and not risk a run to the store," she said. "You don't have to worry about finding disposable products as stores are running low." DTC companies shilling disposable products are seeing a boom, too. Denielle Finkelstein — co-founder and president of Top, which sells organic, eco-friendly pads and tampons both online and in select retail locations — said sales on Amazon tripled in the early weeks of the outbreak. Further, customers of Top's monthly subscription program have increased by 100%, according to a spokesperson. The spike proved serendipitous, as it came on the heels of an indefinite delay of Top's debut at retail partners as a result of the coronavirus. While Top products will likely appear in the stores down the road, Finkelstein said the delay prompted the company to shift its marketing budget exclusively to e-commerce, which ultimately proved fruitful. "The first two weeks there was this hysteria like, 'Oh my God, will I be able to get my feminine care products?' and with this bump online we pushed our marketing dollars there," she said. "We wanted to be where our customers are." While historically a majority of menstruating consumers purchase feminine care items in brick-and-mortar establishments, Top co-founder and CEO Thyme Sullivan said she foresees the pandemic will create long-term changes in the way shoppers buy feminine care products. "Delivery and online is here to stay, and will be a much bigger piece moving forward," she said. "In-store sales will still be the lion share, but we need to build our business model to adopt to the new e-commerce and home-based shopper." 'Nobody has anything on the shelves anymore' A rapid increase in demand doesn't come without its host of challenges, said Beatrice Dixon, CEO and founder of The Honey Pot Co. Delays in manufacturing and production are becoming standard not just in personal care, but also across the retail industry at large, as factories operate at lower outputs to account for illness and to accommodate social distancing protocols. In March, Amazon fully sold out of major brands of tampons like Tampax, prompting anxious consumers to take to Twitter to share concerns about lack of access to feminine care. While these products were later part of a policy implemented by Amazon to prioritize essential items to increase availability, even now, some listings have limited supplies or are out of stock. "We are maximizing production and distribution capacity where possible to ensure we can get products to as many consumers as quickly as possible," a spokesperson for Procter & Gamble, the maker of Tampax, told Business Insider's Julie Bort in March. Though scarcity of Tampax and Kotex products have ultimately led shoppers to lesser-known brands like The Honey Pot, Dixon said increased demand has also contributed to longer lead times for her products. "We've had a huge increase in sales," Dixon said. "When you go in the aisle at the store, all of the feminine care stuff is gone. Nobody has anything on the shelves right now, it's crazy." Still, businesses is booming and Dixon is grateful for that. "Honestly, things are going pretty well for us, everything is moving in the right direction," she said. "It's extremely busy, and everybody on the team has got an enormous workload. We're working to manage that and keep ourselves happy and focused and sane and calm in the process." Dixon, along with the leaders of Thinx and Top, has also been lucky to avoid having to resort to furloughs and layoffs that are ravaging other buzzy DTC brands like Away and Casper. Still, at Top, both Finkelstein and Sullivan — who described themselves as a "lean and mean team that do 90% of the work" — said they took salary cuts to keep business running smoothly. The unprecedented experience of running a business during a pandemic is also shifting the way some of these companies think about work. Molland said the transition of employees working remotely full-time has prompted Thinx to reconsider office policies, including implementing a formal work-from-home offering. "As with many other brands, we have learned that we can fully operate from home as a company," she said. "Prior to the pandemic, we didn't have a work-from-home policy for employees, but I've watched our team come together and bring out some of their best and most creative work. I expect we will have more work-from-home opportunities for the team." SEE ALSO: Amazon and other sellers have run out of tampons as coronavirus fears sell out online stores Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid