Survey: AI, Automation and Remapping the Supply Chain are Top of Mind
Mid-size brands and retailers are solidifying their priorities for 2024.
Carl Marks Advisors, an investment bank headquartered in New York City, surveyed leaders working in organizations throughout the United States to glean insights on artificial intelligence-related interests, strategy for brick-and-mortar locations and changes to supply chains over the next 12 months.
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Garnering responses from 250 executives at companies with revenues between $25 million and $300 million, the survey showed a few clear patterns. Companies want to streamline their marketing efforts with AI, fashion and apparel retailers want to bring their suppliers and manufacturers closer to the U.S., and retailers could be closing as many stores as they open in 2024.
AI investment priorities
The survey asked respondents to indicate up to three areas they’d be focusing on when it comes to investing in artificial intelligence this year. Among fashion and apparel retailers, 61 percent said marketing would be a focus, 56 percent said financial forecasting would be a primary use case and 40 percent said they would be investing in AI-based customer service and user experience.
Howard Meitiner, managing director of the New York-based investment bank, said it remains to be seen whether retailers will put much energy into adopting the technologies this year. “Whether they actually execute in the coming year against that is something else,” he said. “If you’re not looking at the use of some of these generative AI-type tools… they’re so far advanced from what people have used in the past. Why wouldn’t you?”
Fashion firms’ top three stated priorities align with the categories that industry-agnostic leaders showed interest in using AI for in 2024.
Bringing supply chains closer to the consumer
Though investing in AI to revolutionize supply chains didn’t crack the top-three list of priorities for fashion and apparel retailers, one-third of respondents in that bucket said their organizations would be doing so.
It seems these retailers have other interests in making progress where supply chain is concerned; 53 percent of surveyed leaders in fashion and apparel said they would diversify their supply chains in 2024, while 50 percent said they would up their budgets for supply chain technology. Nearly half of those surveyed (48 percent) indicated interest in increasing their onshoring efforts and 46 percent said they would increase their automation investment.
Meitiner said onshoring could be an interesting answer to the Amazon effect.
“What Amazon has told us is you can go on the Amazon site, you can buy what you need and it’s at your door two days later. And this is how companies have to pivot and change as more and more companies are going to be able to do that—get stuff to you in three days,” he told Sourcing Journal. “If you’re one of these long-lead-time, old-fashioned [companies], you’re not going to survive because consumers are going to gravitate towards things that are more efficient and simple,” he added. “By doing it all on shore, they reduce their lead time so maybe they don’t have as low a price as they would have out of China, but their net margins are going to be much higher.”
The survey did not directly address another phenomenon popular among brands and retailers right now: nearshoring. New data shows many brands have already begun the quest to bring production closer to the U.S.—relocating sourcing to Mexico and other South American countries could be on the rise. In 2023, China saw its largest drop in exports to the U.S. since at least 1995. Per new numbers from the U.S. Commerce Department, Mexico’s exports to the U.S. outpaced China’s.
Nearshoring and onshoring allow quicker turnaround, and thus, more convenient customer experiences, Meitiner said. But for truly great customer experiences, brands and retailers have to consider other factors involved with meeting consumers where they want to be.
Changes to stores
For many companies, getting consumer experience right involves striking the right balance between online transactions and brick-and-mortar locations.
The Carl Marks Advisors survey showed that 97 percent of fashion and apparel retailers have plans to open additional stores in 2024. Twenty-three percent of respondents said their companies would open between 10 and 12 new stores, and an additional 21 percent of companies have their sights set on opening 13 to 15 stores. Nearly one-quarter of companies indicated they had plans to open 16 to 18 new locations in 2024.
Even as retailers open additional storefronts, they could be closing doors on others. A majority of fashion and apparel respondents (over 90 percent) said they would be shuttering brick-and-mortar locations in 2024. About 45 percent of these respondents indicated that they would be closing between 10 and 15 brick-and-mortar locations this year. An additional 25 percent of fashion and apparel respondents indicated that their companies would be closing between 16 and 18 locations.
Meitiner said the ebb-and-flow of storefronts could be related to geographical considerations. “There could be situations where a company is closing stores in urban centers, but opening stores in suburban areas,” he explained. “Even in those situations, it’s not like they’re having an identity crisis. They’ve made a strategic decision: ‘We’re going to close these types of stores, but we’re going to open these types of stores.’”
Meitiner also highlighted that some brands and retailers might have an interest in decreasing square footage allotments in favor of creating small format, technology-enabled stores. Macy’s has made that move with its off-mall Market by Macy’s stores, as has Nike with its small-format, localized stores.
Meitiner said smaller-format stores, with less inventory but more customer interaction touchpoints, could increase consumer interest in omnichannel shopping with brick-and-mortar stores as the first contact point.
“We’re seeing more and more modifying of the amount of square footage people are using, which is so smart,” Meitiner said. “The store is becoming in some ways, I think, a little bit like going to a website.”
He said retailers using AI to cut costs elsewhere should consider reinvesting that capital into hiring more associates to bolster customer experience. “With the money that you’re saving on the payroll that you are replacing with AI-related tools, you can afford to invest more on real people interacting with real customers, whether it’s [in stores or] on the phone,” he added.
