The future of AI in consumer experience

Episode transcript, edited for clarity

Bill Thorne: Welcome to Retail Gets Real, where we hear from retail's most fascinating leaders about the industry that impacts everyone, everywhere, every day. I'm Bill Thorne from the National Retail Federation, and on today's episode we're talking to Jane Cheung, global research leader, consumer industry at the IBM Institute for Business Value.

We're going to talk to Jane about IBM's 2024 Consumer Study, how she got into consumer research, and how artificial intelligence, better known as AI, can help improve the experience for both 
customers and retailers. Welcome to Retail Gets Real. 

Jane Cheung: Thank you, Bill. I’m very happy to be here talking about a topic that is very interesting for me, myself, and also our industry. As you know, in retail, we are always changing, right? There's new technology, there's new ways to shop, new ways to engage with brands. So, I think this is a very exciting time, lots of opportunities for retailers and for brands as well as a consumer, you know?

Thorne: I think, you know, we always talk about the fact that there's only one constant in retail, and that's change. I mean, you’ve always got to innovate. You've got to stay on top of technology, and you've got to make sure that you're doing exactly what the consumer wants and expects you to do. 
So, let's start first though, at your career background and how you got into consumer research.

Cheung: Yeah, so gosh, it’s a long time ago. I started in retail almost by accident. I graduated from business school and I stumbled on an opportunity with Macy’s.

Thorne: Oh yeah. 

Cheung: Yes. Yeah. So, I applied actually for an analyst position. But at the time, I guess, you know, people like me, like my personality, they have an urgent need in merchandising and planning. It was like all day. It was a nine o'clock meeting and then I stayed there all day because I move around. So I went into finance, that's where I wanted to work. And then I went into merchandising. I went into pricing, I went into planning, and that's where I started with retail. I learned a lot about retail, the whole thing about retail, which is a separate conversation. Learning about in-season, pre-season planning, ladder plan, merchandising buying, margin planning. So, it was quite an experience because you didn't learn that from school. 
Then I had an opportunity. I moved to Oregon to work for Nike. It's just one of the things that, you know, Nike, I don't know anybody in Oregon, but it's Nike.

Thorne: You don't have to tell anybody what Nike is. I mean, if you say you work for Nike, everybody knows who you're talking about.

Cheung: Yeah, and I was there for a few years and that was also a very good experience because I learned about the vertical retailer, right? Because the [unintelligible] brand, and that was the year Nike switched to their logo. It's a brand that doesn't need a name. So, I learned a lot about brand value, you know, what a brand means, and also the manufacturing side of the business. 

Then I came back, worked for the Disney Store because it gets a little bit lonely in Oregon with all the [unintelligible]. After about, after about four years, I came back, and I worked for Disney. And from Disney I started consulting. So, I was on the road. It was … Bill, I tell you, is an incredible occupation, you know, to be in consulting, to learn, and I continue to learn, spend my knowledge with retail and with consumer goods because you work with different clients, right? 

Thorne: Sure.

Cheung: I have a good foundation, but I'm always out there to learn. And then, like you said, the technology changes, and you know, how retailers are reacting to them. But about five years ago, I got off the road. My mom's aging, and she was in and out of the hospital. I wanted to spend more time and you can’t not travel when you are …

Thorne: Right.

Cheung: As a consultant, you know, I, you know, and IBM is a global company, so I had to travel all over the U.S. and sometimes outside of the U.S. So, starting about five years ago, I joined the research team of IBM, and been there since then. And I'm telling you, it is a lot of learning, keeping up with technology, and still very much stay in the industry that I, I love and, and familiar with, and comfortable with.

Thorne: It's really … I had the opportunity to work for Walmart out of Bentonville, Arkansas, for a number of years. And the wonderful thing about taking the opportunity with the National Retail Federation, which brought me back to Washington, D.C., which is where I started, was the opportunity to learn from other retailers. But to your point, I was on the road 80% of the time. And, you know, learning the business, meeting with people, it was absolutely fantastic. 

Let's talk about what you are doing specifically in the area of helping retailers understand their customers, and their wants and needs, and how that is evolving today. How that shopping experience is evolving.

Cheung: Sure, sure. So, it's difficult to talk about this without talking about a little bit about technology. Right? You look like … I don't mean it in a bad way. But you remember the time when everybody needs to open a web store? You know, the ecomm, kind of like the ecomm boom, right? And I remember I was, I was helping retailers to build web stores. At the time there seemed to be a rush of, you know, everybody got to get up like a store, but without knowing what that means. The implication of, you know … the inventory, how do you manage it? Do you share inventory? Do you not? Do you price things the same way? Do you not? 

So that was an interesting phase. But it is something that … you know, retailers are doing to accommodate customers because just around the same time, you know, iPhone comes into to the world, right? So, this whole mobile world, and then it's the mobile commerce. At that time, retail was constantly accommodating the consumer with technology to make it easier, to make it frictionless, to make it useful, right? Because that's where, that's where you can differentiate yourself and differentiate your brand. You just want to make it easy. It’s … you know, people call it retail therapy. It’s supposed to be pleasant, right?

Thorne: Yep. Yep. Yeah, for sure.

Cheung: It’s not supposed to stress you out. The way I see this is: You know, of course retailers — and both retailers and brands — have to change. Not just for the sales transaction, but what does your brand stand for, for your consumer. Because consumers are switching brands and then the whole startups come in, right? So, we have a lot of niche brands that target very specific consumers. They grow really fast.

So then, you know, I started at Macy's when I was in … my early career. So, it's a department store. The department store concepts been challenged, and technology has enabled consumers to do a lot more, to be more convenient, right? So, I have 13 nephews and I have three nieces. They're millennials and Gen Z.  And you know, I see them … when you are young parents, you are on the phone all the time. You are checking your prices. You are ordering your groceries. So, a lot of what retailers and brands have to do is to evolve with consumers. 

Now, I think we are at a very, very interesting point in time because of GenAI. If you think about GenAI, and I only need to look at my family, it is … I think in some ways consumers may be more advanced in using the technology. In my latest study, for example, we did a survey of 20,000 people around the world from 18 to 75 [years old]. You know, if you look at Gen Z, that's pretty much the youngest Gen Zs between 18 to 28 years old, and then the Millennials is about 29 to early 40s — they’re starting their family. And what we saw is: you know, coming out of COVID, everybody now is … . You know, they use their digital tools. They use their phone and even older generations, you know, the technology has boomed in [the] consumer's life. 

But with GenAI, what it’s doing is the younger generation are using it not just for shopping, but especially the Gen Z group of people, they use it for side hustles. They use it to help with their work, right? I mean, my nephew takes pictures as a side hustle, and he works for Costco. But he uses this technology to help him enhance his photos, so he makes more money. And then his friend is, you know, making music, so they have music clips to sell so he can make money. So, Gen Z is driving this because of their use of technology.

So, we did an analysis on, you know, so who's doing what? What’s the population, you know? So about 25% of consumers we found are tech enthusiasts, so these are highly penetrated with younger generations. Busy young parents. Younger people trying to do … they're doing side hustles, they're using it for school. And then they are 50% (about 45% of them) are experimenting. That means they are using this technology for various different kinds of things. 

What's interesting is not everybody is using it for shopping and to engage with the brand. But more than 80% wanted to use this technology to do research, to look for recommendation, to get help, to get answers  and to resolve issues. That's pretty consistent percentages across all generations. 
So, what that means for brands and retailers is you got to keep up. I mean, this is not a technology that you figure out and you push it out. This is the technology that is … today, it is in the hand of the consumer, and they come back to you and say, “You can do better.”

So, in our research, less than 10% of consumers are satisfied with their in-store experience. What that means is, “I'm very happy. Nothing to change.” Just, you know, no improvement needed, right? They actually tell us that. And then another, about 15% said that about online experience, so it's a pretty low number. But if you think about it, the question that we ask is, “What can help improve your in-store experience? What can help improve your online experience?” And we just got all kind of … and this whole, you know, “I want to use technology to help me resolve issues. I want to use new technology to help me research products. I want to use it … .” We collected a lot of information how brands and retailers can leverage technology to, to do better. And seriously, one in 10 people say, “Oh. The experience is fine. I'm really happy where I am.”

So, it tells you that, you know, consumers and customers — whether they're engaging with brands, looking for information or whether they're shopping with the brands or retailers — they have experiences that they know you can do better.

Thorne: Right, right, right, right. For sure. It's interesting to me, I mean, on the generational side of things. I believe that coming out of COVID and the pandemic, that generationally there's been this kind of a closing of the gap to some degree where people, you know, older generation, Boomers, whatever whereas before they might have been resistant, they were kind of forced to use it. And having used it, they now recognized, “Wow, that's great. That saved time, saved effort.” How is the retailer responding to that?

Cheung: You are right, the gap has closed. So, when we look at people's experience in using different technology — like digital products, like virtual assistant, like AR, VR, like GenAI and AI — if we ask [about] individual technology, the gap is closing. Maybe 50% of people have used it and they wanted to use it. Another 20% said they're open to it. They know about it. Less than 1% across all generations said they never heard about it, or they don’t know anything about it, right? So, from the knowledge standpoint, I believe the gap is closing. 

From a usage standpoint, I think there's a big difference where I think the younger generation may be more enthusiastic about it. But let's, you know, we have a tendency to say, “Okay, Gen Z and Millennials, they're digital natives, they use it, which is true, and that continued to be true. So, if you look at the tech enthusiasts — the 25% of our analysis — they are heavily penetrated with the younger generation. But if you look at the 5%, almost half of them? They're pretty even. You know, I'm Gen X, so I'm like right smack in the middle, experimenting [with] it. Because, let's take virtual assistants, for example. If you look at that percentage — 90% of everybody have used it because you, you can't avoid. If you need, if you need to make a ticket, if you want to buy something, if you want to check prices, you want … Everybody has experience with the virtual assistant, right? So, but in the past, before GenAI, it’s very short-tail questions. Meaning, you know, you ask a very short question, it gives you a short answer. But you probably, if you know this is, you know, because of GenAI, it can read and it can interpret, so it becomes more and more efficient about it, right? 

So, for brands and retailers is to leverage this capability to improve employee experience, to improve customer experience, and even their own, within their own company. So, for example, IBM — because I can talk about IBM. In our consulting services, we use GenAI to help us with market research, with looking for trends. We have asked HR to get quick answer to, you know, to some question that's HR-related. So, brands and retailers can really leverage this technology to help their employees, so that they can remove some of the more boring tasks so that they can be able to help customers on the ground to enhance experience, to build trust, to build brand loyalty.

At the same time, leverage this technology in the customer service, in the call center, right? So, we, we have a client that's already doing that. You know, since COVID, you need to handle a lot of inquiries. And we have seen significant improvement in the efficiency and the customer satisfaction when you leverage this technology. And that's just one use case. There are just there, there are so many more.

Thorne: So, I look at somebody that's younger and they, you know, their ability to kind of flip and go and … you know, they get to where they need to go. Somebody a little bit older (I’m not using me as an example, but I’ll use me as an example), it’s a little harder for me. I’ve, you know, “Where do I go? Exactly how does that work? Can I get to that?” You know, the kids know. The adults not so much. How does a retailer bridge that gap? I would assume that they would have to create experiences that kind of make it easy from both sides.

Cheung: Yes, yes, that’s a good question too, because, you know, when we think about the different generation, we definitely use technology in a different way. So, the way you engage with Gen Z, with Millennials, maybe one way because they pull information from you, right? They're there.  

For the generation that are less savvy, maybe using technology is about convenience, right? For example, in Korea, they've rolled out these Little Dolls. It's like a pretty big-sized doll. You know, if you go to YouTube and you say “Little Doll in Korea” — because their population is aging, and exactly to your point, they have a phone, but they may not be actively using it. So, what this Little Doll [does] is it can serve as a reminder. You know, “Good morning. Time to take your medicine.” It will be, you know, monitoring, right? So, it actually detects … . You know, it is like, “Time for exercise.” And then, you know, you can have a conversation with it because of the technology. 

So, we're not there yet with retail and with brands, but you can easily embed your brand in that conversation to make it kind of like Alexa. You can place orders. And my mom and her friends, they use Uber, because they don't want to bother their children to take them from one place to the other. And when they play Mahjong, they use Uber Eats. So, I think, for brands and for retailers, the usage of technology is different. It’s really about making it more convenience and embedding [it] into the daily life of different age groups.

You know, for one generation, you might need to push it. You have to be really good in personalizing it because otherwise you lose credibility, right? And that's another way that GenAI can help you, is to be more accurate and when you do personalization that you really understand. It’s like marketing to one. Not [unintelligible] anymore. 

But for the older generation it is about convenience. So how do you make, use this technology to make it more convenient, and maybe it's about, you know, working with your ecosystem to embed your brand and commerce into, like the doll in Korea. It’s really quite good. You know, it, it combats loneliness. It helps monitor you. It's kind of like a health assistant for you.

Thorne: I think it's fantastic. And I, my mother's 93 and I just spent several days with her just recently for … actually, we were celebrating her 93rd birthday. And every once in a while, I'd ask a question, I'd be like, “Well, what's the weather supposed to be like tomorrow?” And she'd yell out, “Alexa. Weather tomorrow.” Where did this come from? Her use of that has really amazed me.  

So, a couple of other things before we finish up, because this is fascinating. I think we could actually do a chapter two to this discussion. 

Cheung: I’d love to!

Thorne: It's absolutely fantastic. How do you personally … now you talked about your nieces and nephews and you've got quite a few. I don't know how you keep up with birthdays and everything else that's going on, but how do you use AI personally in your life as a tool?

Cheung: So, I work at IBM. And we have … 

Thorne: So, you do it a lot. 

Cheung: I do it a lot and, and to be honest, I'm quite proud to say that, you know, within our company we are leveraging this tool internally, and we are getting our own training. So, we have something called the Consultant Advantage or Consultant Assistance, and it's basically building on a model that is our internal — so it's protected data. It is not open. But we can upload, like, all the reports that I've done, right? I can, I can upload all the documents and then I can get inspiration of what's next.

Thorne: Oh wow.

Cheung: Yeah. So, it's very powerful. Now, I can't just copy and paste. But it gives me ideas, right? So, because IBM, we don't just produce consumer research. We have the CEO Study, we have Cloud and AI Study, we have the Quantum Study. So, a lot of time it really helped me from a knowledge standpoint to absorb all the information, and to be able to see what's relevant for my industry and what's relevant for my research. Now that's the heavy reading and the knowledge part of it. The more fun part of it that I'm getting my hands on is working with Adobe to create graphics …

Thorne: Yep.

Cheung: … to use it in my communication, in my presentation. You know, if you spend any time in consulting, you know, sometimes we can't have conversation without a deck. You want to look, right? So, in my personal, in my personal career, I've used it mostly for my work.

Now, outside of work, I'm a foodie. So, I'm constantly trying new recipes. I'm also getting older, so, but I like tasty food. Who doesn't like chocolate? Right? 

Thorne: Correct. 

Cheung: Or bacon.

Thorne: Bacon. Yeah. Well, chocolate and bacon actually, you can do both. You don't have to do one or the other. 

Cheung: So, I do look for recipes a lot. So, I have, like, a whole wall full of recipes. So instead of going through paper now, I can just, you know, talk to AI and say, “Hey, this is what I have in the fridge. What can I make that is healthy, that will give it the flavor, but it's still nutritious,” right?

Thorne: It's amazing. It really, really is. I've, I've heard of that before, where you can literally take a picture or of everything that, and it will come back with a recipe of something that you can do with it. It’s just astounding. I am old. 

So, Jane, what is the best career advice that you've ever gotten? You've done a lot in a short period of time. And you've come in contact, I'm sure, with a lot of people. But what's the one thing that's kind of stuck with you?

Cheung: I would say, not just one thing, but as I progress through my career, I have the good opportunity to have very strong leaders that are good coaches. So, I would say in my young career, when I was first started, be passionate. Be passionate about what you do, because that's where you are interested in something, that's when you really don't care how many hours you work because you are interested. 

But then once you start building your career, you need to be authentic. You need to be yourself because then you really will enjoy your job more. And then, and then and after like 10, 20 years, be brave. Be brave to have an opinion. Be brave to speak up. Because I think that's where we can innovate. That's where we can — if everybody agrees with everybody else, there's never going to be a good idea or a new idea. There's always a new angle, there's always a new perspective. And I think with GenAI, because it's moving so fast, we are all having a different experience, so we collaborate and we share our experience and we can innovate together and be better.

Thorne: It's a great time to be in this business. It's a great time to watch what's happening around us. And even better yet, it's a great time to participate in it. And so, as opposed to being afraid of it, as opposed to kind of pushing away, like, “I don't get it. I don't need it,” actually learning about it and applying it to your life, to your work. It's kind of fun. It really is at the end of the day.  

Jane Cheung, has been such a pleasure talking with you. Thank you so much for joining us on Retail Gets Real.  

Cheung: Thank you. 

Thorne: And thank you all for listening to another episode of Retail Gets Real. You can find more information about the show at retail gets real dot com. I'm Bill Thorne. This is Retail Gets Real. Thanks again for listening. Until next time.