The next era of retail will be filled with artificial intelligence, robots and even some holograms, at least if NRF was any indication.

The National Retail Federation’s gargantuan annual conference again took over New York’s Javits Center this week, drawing vendors and guests from around the world. As in years past, it included an Innovation Lab dedicated to new technologies NRF says show what retail can be now and in the future.

The ideas spanned everything from the latest in warehouse robotics to augmented-reality mirrors that let shoppers virtually try on products, in case they don’t want to make the trip to the fitting room or an item isn’t in stock. Two different companies had hologram displays. But the tech that dominated all others was undoubtedly AI.

Of the 50 or so companies that were present, around 20 included some form of AI in their pitches to retailers and attendees. There was AI for analysing which foot traffic in stores actually yields conversions, for personalising product recommendations according to a shopper’s psychographic profile, for predicting consumer demand and more.

Generative AI, the newest widely hyped technology, took its share of the spotlight. Companies were selling services that could give shoppers styling tips, create text and image content for marketing campaigns and e-commerce sites, produce blog posts to boost a brand in Google search, generate backgrounds for product photos and power chatbots to help online shoppers, among other applications.

None of the ideas on their own seemed ready to revolutionise retail. But together they painted a picture of an industry that’s growing more efficient, data-driven and optimised for even the smallest tasks.

A perennial objective for retailers is to get better at targeting the right shopper with the right product at the right time in order to turn them into paying customers. It’s one area where AI can potentially help since it’s able to process large amounts of data to make predictions.

Onebeat, for instance, which was among the companies in the Innovation Lab, uses AI to help retailers better manage and allocate inventory so they have the correct products in their stores based on what customers are likely to buy. Another company, Psykhe, uses AI to help retailers recommend products based on the shopper’s psychological profile. Founder and chief executive Anabel Maldonado, who also spoke at BoF’s 2023 technology summit, gave the example of big-box retailer CostCo knowing that the female customer buying La Mer body cream is the same shopper who also tends to buy Calm magnesium powder.

A number of the generative-AI tools on offer, meanwhile, aimed at making normally time-consuming tasks faster and easier. Typeface.ai, which specialises in what it called personalised content for retailers, lets users quickly generate text or imagery on demand for different purposes, including email marketing campaigns, SEO-optimised blog posts, e-commerce landing pages or Google display ads. (Google Ventures is one of its investors.) Booth.ai, on the other hand, is more narrowly focused on photography. It can take a product photo and render it on a model with the background of your choosing.

“Where AI plays a role is that it makes entrepreneurship way more accessible,” said Harley Finkelstein, president of Shopify, which had a booth at NRF this year.

Shopify has its own suite of AI features, Shopify Magic, including one that enables users to generate product descriptions. Finkelstein said the result might not be quite as good just yet as the copy drafted by Alo Yoga — a Shopify customer he said puts a great deal of thought and care into its product descriptions — but for the person setting up an online storefront from their kitchen table, without Alo’s resources, it’s more than enough to get them started. And for big companies, he added, it can allow staff to spend less time on copywriting and more on creative thinking or other tasks.

It’s too early to predict just how much of an impact these innovations will have. In a new report on AI this month, the Luxury Institute noted that the promises of technology companies don’t always match the results seen by business, pointing to CRM in the 1980s, e-commerce in the 1990s and programmatic advertising in the 2010s. “Tech vendors are not fiduciaries; they serve their own interests,” it said.

Then again, few in fashion today would write off e-commerce, even if it took some time to get moving.

Retail leaders are certainly paying attention to generative AI. A recent EY survey of more than 250 executives in retail and CPG found that 99.6 percent — basically all of them — said they were experimenting with the technology in some form.

AI isn’t the only new tech that could exert an influence on retail in the years ahead. The Innovation Lab also included a couple blockchain-centric companies, such as Arianee, which is busy creating digital product passports for brands such as Mugler. Others provided software to help companies organise their marketing, whether retail media placements or sales via influencers in the case of Replika, which was also part of LVMH’s start-up accelerator.

Still, the message at NRF was clear: As 2024 gets underway, all eyes in retail are on AI.

US retail sales increased more than expected in December as consumers stepped up purchases of motor vehicles and retailers offered discounts, keeping the economy on solid ground heading into the new year.

Retail sales rose 0.6 percent last month, the Commerce Department’s Census Bureau said on Wednesday. Data for November was unrevised to show sales rising 0.3 percent as previously reported. Economists polled by Reuters had forecast retail sales gaining 0.4 percent. Retail sales are mostly goods and are not adjusted for inflation.

Households have maintained a healthy pace of spending, thanks to a relatively strong labour market. Though spending has cooled from the third quarter’s brisk rate, it has been enough to keep a much-feared recession at bay.

With the Federal Reserve expected to start cutting interest rates this year, most economists are confident that the economy will avoid a downturn. The US central bank has hiked its policy rate by 525 basis points to the current 5.25 - 5.50 percent range since March 2022.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.8 percent last month. The so-called core retail sales measure corresponds most closely with the consumer spending component of GDP. November core sales were revised higher to show them rising 0.5 percent instead of 0.4 percent as previously reported.

Before the report, economists believed that consumer spending, which accounts for more than two-thirds of US economic activity, topped a 2.0 percent annualised rate in the fourth quarter. Growth estimates for the overall economy are currently as high as a 2.2 percent rate. The economy grew at a 4.9 percent pace in the third quarter.

The government is scheduled to publish its first estimate of GDP growth for the October-December quarter next Thursday.

Some of the anticipated slowdown in GDP growth will likely reflect smaller inventory accumulation relative to the third quarter’s size.

By Lucia Mutikani; Editing by Chizu Nomiyama

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Luxury stock investors are facing the risk of more bad news as the likes of Burberry Group Plc and Hugo Boss AG fell short of already reined-in expectations and economic data from China dents chances of a near-term rebound.

Richemont SA will offer fresh insight on how luxury companies are coping with a sector-wide growth slump when it reports third-quarter sales on Thursday. The Cartier-owner suffered a rating cut by Investec Plc this week, following at least six downgrades for industry leader LVMH in the second-half of last year.

Concerns about demand for luxury goods were amplified on Wednesday with lacklustre economic growth figures from China, whose shoppers account for about a quarter of the estimated €362 billion ($394 billion) global market, prompting an across-the-board drop in the European sector.

Bargain hunters are also less keen to buy these battered stocks: Though valuations have fallen more than 20 percent since last year’s peak, investors were rushing to sell European luxury goods stocks after Burberry and Hugo Boss warnings. It indicates that the forward price-to-earnings ratio for the group hasn’t priced in the full extent of the industry’s woes.

“Sentiment remains jittery around where future downgrades will come from,” said Swetha Ramachandran, a fund manager at Artemis Investment Management.

Most brokers have scaled down their earnings expectations by over 5 percent since September, with the sector’s fortunes remaining unclear and hinging on a still-fragile global economic recovery.

Investors expect this year’s start to compare particularly unfavourably with 2023′s initial optimism, when China’s reopening fueled a splurge in high-end watches and pricey coats, briefly pushing LVMH’s valuation above $500 billion.

“We see few catalysts for the luxury sector before April/May 2024,” HSBC analysts led by Aurelie Husson-Dumoutier said in a note. What’s more, price increases are becoming more of an issue for aspirational consumers, with luxury demand weakening over the holiday season, the analysts said.

Even so, a sector that’s going through a difficult period still has room for winners.

Hermes, especially, has shown less of the weakness of peers as demand remains high for its coveted handbags that can sell for anywhere from over €8,000 into the tens of thousands of euros.

“There will probably be big differences between stocks,” said Bruno Vacossin, a senior portfolio manager at Palatine Asset Management. “I expect a big performance gap between top players like Hermes and LVMH and the industry’s laggards.”

LVMH reports annual results on Jan. 25 and Hermes on Feb. 9.

Many are keeping their long term bets on a sector that is known for its ability to generate superior growth due to pricing power that typically beats inflation and protects profit margins. A large majority of analysts tracked by Bloomberg still recommend buying LVMH and Richemont, while the rest are neutral.

A rebound in earnings is likely six months away as economic growth accelerates and travelling from China picks up, said Artemis Investment Management’s Ramachandran.

The sector is currently on low valuation multiples and waiting for good macroeconomic news such as lower interest rates and rising real wages for entry-level fashion and aspirational brands, said Bloomberg Intelligence analyst Deborah Aitken.

Until then, more risk remain, especially for players at the bottom-end of the pyramid, according to Ariane Hayate, a fund manager at Edmond de Rothschild Asset Management.

“For sure, we don’t expect to get a lot of bullish messages,” she said.

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