Using Data and AI to Recession-Proof Your Retail Strategy

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Financial experts continue to warn of a recession coming in late 2023. Businesses, particularly retail, have had a rough few years coming out of the pandemic and strategizing for the latest ‘new normal’ hasn’t been easy. Now, retailers are likely to need to pivot again with shifting consumer behavior around spending. 

When consumers feel uncertain and have less to spend, they will turn to their go-to 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 single biggest game-changer for recession-proof retail businesses. 

Take an Omni-Channel Approach

It’s natural for retailers to immediately look at reducing spending during a recession. However, instead of slashing marketing budgets, retailers can optimize them to perform better. Reactionary, short-term cost-cutting may lead to long-term losses when the market improves and cause brand recall to suffer. Instead, retailers can look at ways to utilize data and AI to maximize the customer experience and recession-proof their business.

As the customer journey is increasingly omni-channel, with shoppers fluidly alternating between online and in-store for researching, considering and purchasing products, the shopping experience needs to evolve to reflect this omni-channel 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 trade areas with high foot traffic and plenty of parking; strategic site selection requires retailers to open stores in locations that reflect their understanding of their customers and their priorities. Data here is critical, as retailers can use data to understand a trade area’s demographics, its traffic patterns, proximity to stores with similar customer bases, competitive locations, and more. Location data can even help retailers discover precisely which parts of a trade area are most desirable to their customers.

For example, in the middle of the Covid-19 pandemic American discount-store chain Dollar General opened a brand new retail chain called pOpshelf. The new chain targeted wealthier shoppers in suburban markets, offering home goods, decor, crafts, and more around a $5 price point. They identified an underserved market that desired a pleasant, fun, in-store shopping experience designed around finding bargains for the home. Shoppers have responded, calling it “fancy,” “cute,” and liken visiting pOpshelf to being on a “treasure hunt,” delighting in discovering quality products at bargain prices. pOpshelf’s success is built on leaning into all the motivations shoppers have in wanting to shop in stores. pOpshelf rotates its merchandise to fit seasonal themes, encouraging shoppers to regularly visit and see and touch the products for themselves. It’s an experience that can’t be replicated online.

This success has led Dollar General to announce that they will open 1,000 new stores by the end of 2025. In their initial roll out and expansion, using data intelligence, they have carefully chosen pOpshelf locations in wealthier suburbs. Their Hendersonville, Tennessee store location, which has a median household income of roughly $75,000, opened in October 2020, and only a year later, pOpshop was already often seeing more footfall and market share in the area than their nearby competitor.

Invest in Tech

Retailers keep pace in improving customer experiences by adopting new technologies, for instance offering customers a chance 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 deterrents to in-store shopping. Its stores have long been known for their well-staged and imaginative showrooms, and even its meatball-serving restaurant. However, sometimes the experience can also be overwhelming and crowded. In recent years, IKEA has been able to evolve and use the benefits of an online store, digital apps, and alternative shopping methods to improve the experience for in-store shoppers.

They created the IKEA Place app so shoppers can visualize a product in their own home. This helps customers narrow down all the possibilities and hone in on the products that match their homes. Going to the store then, becomes more about making the final purchase and ensuring it is the actual product shoppers want, rather than about discovery (and wading through crowds to do so). IKEA’s online store also allows shoppers to see if the product is even in stock ahead of time, while also providing pick-up and delivery options if necessary.

Build Deeper Customer Relationships

During a recession – or leading up to one – retailers should shift focus to their existing customer base rather than aggressively courting new ones. Developing direct relationships with customers has never been more important as consumers have more buying channels than ever 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 afforded by modern technology and also the needs of its customer base. Sephora realized that 80% of their shoppers were using their phones while shopping in stores to supplement their shopping experience, so enhancing the online and in-store experience through a sophisticated app was the next step.

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


Retailers can use both their own first-party data and also third-party data – to understand who their customers are and what they want. This also positions them best for the future, because customer preferences for how they order and where they shop will change and evolve as the world itself continues to change. When retailers combine global shopping trends with local demographic data, they can make smart choices about site selection, technology infrastructure, and customer service that ultimately satisfies their customer base while building a one-of-a-kind experience.

Being proactive and taking measures to understand evolving consumer preferences and behaviors provides an opportunity for retailers to retain their loyal customer base through a recession. 

About the Author

Gladys Kong is the Chief Operating Officer of Near. Gladys was previously CEO of UberMedia, which was acquired by Near in 2021. Gladys oversees Near’s privacy initiatives and privacy policy. At UberMedia, Gladys was responsible for assembling a best-in-class data science team and pivoting it from a social media app developer to a leading mobile data and analytics company. Gladys, an entrepreneur and founder of multiple tech companies, holds numerous patents in the mobile technology space.

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