AI in action: Transforming retail operations with composable architecture

At NRF 2024, Jen Jones, Chief Marketing Officer at commercetools, sat down with two commercetools customers, Smita Katawar, Senior Vice President of  Data and Technology at Wegmans, and Paul Johnson, Vice President of Engineering at Five Below, to explore how AI is changing the way their organizations do business and the impact it’s having on their commerce success. 

 Jen kicked off the session entitled "Composable commerce is unleashing the full potential of artificial intelligence," with a powerful statement, “Just think about what generative AI has done in just a year — it created a seismic shift across our industry that is really changing the very fabric of how we do business online.”

“Both of our panelists are at the forefront of taking advantage of this groundbreaking technology, and I'm very excited to have them here to explain their understanding of the pivotal role that generative AI is playing in commerce,” said Jen. And with that, she began to ask questions to uncover the innovative approaches they’re taking, the challenges they’ve faced, and how having a composable tech stack is enabling them to fully take advantage of AI’s potential.

Smita explained that for Wegman’s, a New York-based grocery store chain, AI represents a range of capabilities. She said the organization is, “Looking at AI at the speed of excellence,” but that they are approaching it responsibly, leaning on their partners to co-create experiences from the discovery, inspiration, selection and fulfillment of the shopping journey. 

Paul stressed the importance of turning to vendors to support AI projects. He pointed out that since Five Below is a discount retailer selling products for $5 or less, they have to be very strategic in their investment choices. “I’m not a Walmart or a Target, I don’t have $50 million to spend on AI.”

Paul feels it’s important for retailers to learn as much as possible about AI, and bring others along for the journey. He said since the technology is so new,  everyone is experiencing a similar learning curve, but that there is information and research that’s freely available. “Find a podcast that you like, find articles and talk to the folks at commercetools.” 

He said Five Below is freeing up time to allow their engineers to figure out ways to do more for customers with AI. He explained that it can be something really simple like using RPAs, (robotic process automation) to automate tasks to eliminate someone having to go into a spreadsheet every day. While some might see it as taking away part of their job, he said they’ll realize it’s actually freeing them up to do more for customers and  the company. In his opinion, one of the things that makes AI so powerful is that it can do some of the mundane tasks — and do them better. “I'm super excited about it — it's been awesome.”

“I think our approach to innovation is always customer inspired and enabled by empowered employees,” said Smita, emphasizing that the organization puts equal empathy on the customer experience and the employee experience. ”If your employees don’t have modern technology, they cannot be very effective in delivering incredible service.” 

Some of the innovations Wegman’s is implementing in their stores include making it easier to fulfill customer orders, however they want. She shared that employees are equipped with best-in-class mobile devices and apps so their everyday work is simpler. “ When they're not juggling through their day-to-day operational work, it frees them up to learn about the products and be available in a very engaging and helpful manner with customers. So again, it's about the customer, and technology is the enablement — that's our approach to innovation.”

“We opened nearly 300 stores last year and we’re looking to do the same thing this year,” said Paul. The in-store experience is at the core of the company’s success. “It's all about letting go and having fun. Kids and parents coming into the stores and trying out new toys, whether it's a basketball or looking at the latest Hello Kitty thing or buying Christmas stocking stuffers.” 

He explained that the store has done quite a bit in the last few years. They brought in BOPIS and Instacart delivery, and customers responded really well. Now, they’ve added in-store digital experiences, such as touch screens in their party product areas. Customers scroll the screen to select a party theme, scan a QR code and receive a list of products that fit the theme along with details of where to find them, enabling customers to discover products within the stores.

With the incredibly large assortment, it can be a bit daunting for customers to find the items they’re looking for. He pointed out this is something AI can help solve and they are looking at different ways to accomplish that.

“There’s now the ability to, as folks come in, to use cameras to see where customers are spending time, how that matches our planning, our planogram, how the stores are laid out, where the inventory is… There's some pretty incredible stuff out on the floor where vendors are actually able to track that more accurately now. And that also leads to things like, for example, ‘Can you track shrink or see where you might need more of  a vending machine model?’”

Smita was quick to share that there were two primary drivers behind the decision to choose composable architecture. The first was flexibility. “Customer preferences are dynamically changing and we need flexible architecture so we can respond and anticipate quickly. Composable architecture by nature is modular so you can create different sub-journeys and journeys while connecting your utility boxes.”  

At the same time, composability frees up their developer's time. Instead of focusing on whether your cart is working or not, and if customers can complete checkout, they can create journeys. “That's flexibility,” said Smita.

The second driver was optionality. “ It gives us the option of creating various customer interfaces utilizing the same commerce engine. And those two are primary, with the secondary benefit that comes with composable architecture — enabling your AI.”

Paul said that for Five Below, the driver was the simple fact that they have limited resources. “I don't want to pay an engineer to design a shopping cart, right? You shouldn't have to design some of that stuff that's just off the shelf, commodity table stakes. That should just come with a product.”

He pointed out that now that the brand is running on commercetools, they can focus on building things that are more important to the customers that love the brand — and that's what's more important. In addition, they can explore things like AI,  using their own data to get better product descriptions, promotions, better suggestions, dynamic pricing and link it back to their stores. 

Paul mentioned that he had looked at commercetools multiple times when he worked at other companies and has explored many different platforms.

By the end of the discussion, it was clear to the audience that, although generative AI is in early stages of maturity, it’s on track to become a transformative technology, helping retailers better understand their customers and powering the hyper-personalization that is driving new commerce experiences all the while improving operational efficiency, reducing costs and boosting revenue. For retailers to take full advantage of generative AI — as well as any other emerging technology or channel — the testimonials of Wegman’s and Five Below prove — the flexibility and agility of composable architecture will provide a competitive advantage.

If you’re a retailer eager to unleash the power of generative AI and omnichannel, learn more about how composable commerce can help you achieve this and more by downloading the white paper “Why composable commerce will change the way you run your business.”