Verizon Communications Inc. (VZ) Earnings Call Transcript & Summary

Hello, and welcome to the Operational Efficiency in Retail, a Top Priority for 2023 Webinar today. We appreciate you taking time on your busy schedule to join us. Before we get started, I'd like to mention a couple of things about the BrightTALK platform in the format for our webinar. [Operator Instructions] At the bottom of the screen, there'll be a tab labeled attachments that will include this presentation, so we'll be providing this presentation, and as well as links to the research study that we're going to be talking about and a few other key resources. Okay. Let's get started. This webinar brings together a panel of retail thought leaders to share their insights on the findings of the 2023 connected retail experience study that was published earlier this week. I'm David Naumann, I manage the development and execution of Verizon's retail strategies, messaging and content development. Joining us today are 3 retail industry thought leaders. James Hughes, Retail CTO at Verizon, is a retail strategic thought leader who collaborates with retail clients to bring together innovative technologies from Verizon's -- Verizon and our ecosystem of partners to help accelerate retail transformation. Key areas of focus for James are improving retail operations, enabling supply chain agility and leveraging emerging technologies like Web3, metaverse and NFTs to create immersive customer experiences for our clients. Prashant Kelker is the Chief Strategy Officer and leads digital and technology strategy and sourcing at ISG across the Americas. As a leading adviser to retail sector, Prashant advises clients on their technology transformations and helps guide their sourcing and technology partner strategy. Gaurav Pant, Chief Insights Officer, Incisiv, works with partners like Verizon on new research to help retailers better navigate digital disruption. Gaurav has 2 decades of experience in consumer industries and has led research and consulting programs for some of the largest brands in retail and technology. As I mentioned, we just launched the 2023 connected retail experience study this week. Verizon collaborated with Incisiv on the study that's based on 107 retail executive surveys, and we brought down the findings on a lot of the slides and charts that we'll see today. We segmented them into 2 groups that kind of behaved similarly. One group is specialty and department stores, and the other group is grocery and general merchandise. As noted in the subtitle for the report, operational efficiency is the new imperative. We are seeing an increased focus on improving operational processes and technology for retailers. While the customer is always center of retail, there's been years of deploying new customer experience technology. And there's operational areas that needed attention to maximize the benefit of these applications through digital transformation. This transformation starts by bringing together disconnected systems to create powerful, modular and intelligent solutions that can enable new functionalities, smarter insights and faster decision-makings. The result is what we referred to as enterprise intelligence. All right. Now it's time to dig into the findings. Gaurav, please share your thoughts on these findings on retailer satisfactions with their business performance.

Sure. And thanks a lot for the lead in, there. That was fantastic. I do want to call out a few things. The first is that -- I think David mentioned it, which is we're trying to do this year-over-year because one of our big goals is to figure out how we're looking at transforming retail and specifically store operations and experience. And the interesting nuance here is the fact that there's a bit of a single dependent, we all talked about, of course, the customer, the shopper experience. And while it's still front-and-center, given the current headwinds that we're looking at from a macroeconomic perspective and, obviously, things like inflation, which we've all seen, both in our daily lives and in inflation fronts, we're looking to swing back to efficiency overall. And what we wanted to do with this first chart is really try to figure out what are the elements from a retailer satisfaction perspective that we believe we're doing well and where do we need to improve. So this chart kind of does that. At a very high level, we're looking at about 60% of retailer kind of firms being satisfied with the store experience, but not so much with a digital experience. I want to comment a couple of things here before I kind of lob it over to people who are going to react to. The first is a fairly significant gap between grocers, what they think about their shopping experience versus digital experience. Now if you go back, maybe just a couple of years, there was really no grocery digital experience to speak with. We really had a couple of apps, and that was it. It was -- we were forced into this way of evolving an execution at a pace that was pretty much unprecedented. So that kind of explains that. And it's also shines a notion and 2 things why we don't cover that here is grocery is on the path of rapid acceleration, and they recognize that getting the digital game up, especially with the in-store piece, is critical because the driver of not just obviously growth, but also a fair amount of margin, which digital isn't providing. The second aspect I'm going to talk about here and lob it over to the team is there a couple of places where there's an agreement with both sectors, just pricing and associate productivity, which has split below the 50% mark. We have charts after this, which kind of talk to why that may be with elements around wage, growth and labor challenges. So that's a key aspect of what's kind of stopping progress of getting us to the level [ of satisfaction ] that we want. And finally, and that was actually slightly surprising, is the level of satisfaction with tech overall. It was 60% in department stores, [indiscernible] for grocers, which again gets the notion of, for us, to evolve our shopper experience and efficiency to the level that's required to meet their heightened expectation or execute, that element of tech and getting the store to be in the 21st century across all dimensions is absolutely critical, which is elements of experience, but also at least right now, it's slightly more efficiency. So would love to get perspective from our great panelists here on -- as you look at this chart, what you kind of read from here, what are nuances that obviously I can cover off, but we should.

Gaurav, maybe I can go first. And I fully agree with you. We're hearing this from our clients, too. So as [indiscernible] to structure and source transformations, and part of what we do is greenfield, but most of what we do is brownfield. So we're hearing the exact same thing from our clients. We're hearing terms like what gets us the biggest draw on foot traffic. And a lot of this is going in the direction you spoke about. How do I continue from digital into physical? So they're experimenting things like in-store demos and things like that. But what's holding them back is, as you rightly pointed out, the disappointment on the existing technology.

The only one other thing I want to point out, too, is I think when you think about -- some of these ratings aren't all that high. There's a lot of dissatisfaction in some of their operations and their technology. And I think part of that is there's been a lot of technology deployed in stores over the last few years, and a lot of it was driven by some of the changes in consumer behaviors that they need to do, do a lot more with buy online, pick up in the store or delivery. And I think there's probably been some rush in deploying the technologies, and maybe the operations haven't kept up with it or the technology hasn't been integrated as well with all of their other systems.

I think a great point on the integration. James?

I think -- I am just -- I guess echoing what's been said already that the store digital experience on the kind of grocery side, that's probably because at the moment, the traditional journey in that location isn't too digitally enabled right now, not yet at least, whereas some of the specialty department stores are starting to play with makeup Try-On, different other AR Try-On capabilities, some of the gamification that we see going on. You can see the kind of disparity there and maybe explain some of it. And on the store operations, it's a big grocery, obviously investing heavily there because productivity is so important to them, that efficiency -- they don't obviously make huge margins, unfortunately. So they have to be super slick, and the store operation is obviously a critical part of that. So I can -- that makes perfect sense.

Yes. And actually, what you said in the end is a great segue for the next chart. And I know we briefly talked about this. You had the -- we focus on absolutely the right side of the equation, which is in-store digital engagement is something that's not top of mind. So as you're going to talk about the elements there, and a great point around it, that's why we broke out the data because you're seeing vast differences between where we are from a maturation perspective and focus perspective across formats. If you're a department store, you can have battered brand, you are still leading with experience because that's what differentiates it, that's what gets people to the door, that's what makes the brand come to life versus grocery and other retailers focusing more on the operation piece, where they want to get the margin out, which has obviously been a very difficult year. How do you fight inflation not pass on to the customer and your levers are only so many. So we see that interesting mix here because this chart tells us where are we focusing. And I'll give a simple explanation, which is where all of us are focusing is making sure we have the right understanding of where our product is, where it needs to be, whether it's on the shelf and having visibility through and through. The second element, and David mentioned a couple of times is, are our operations truly integrated between the worlds of the store and the digital. Those are the 2 key elements that are driving it. And then, of course, it's operations. And then the other thing doesn't kind of trail off across what's important for department store, digital engagement and, of course, operations across the board. So that's an interesting mix. The other thing I want to call out here before I'm going to get it in to comment is what we also see is a little bit of a shift in terms of the in-store digital engagement, and we had elements. We test for things like loyalty and all those things. But there seems to be, again, this mix on let's get our margins in place. Let's fix that in place. Why? And that's important to say, the hiring department stores are actually pushing the [ online ] more engagement, which is an interesting divergence in terms of where we're focusing. So we would like to get the team's perspective on looking at this as drivers of growth or drivers of investment, what's interesting here, what are things that kind of call out to you.

It's James. I might go first. I shouldn't say we are going again on this one. I am interested to get your view, actually. I think imagine what these numbers might have been like pre COVID and the acceleration may be certainly on the grocery side where they stepped up. Amazingly, a very difficult time, and I think that accelerated a lot of these numbers into the green. I think the one thing I will say, working with -- we're privileged to work some very, very large grocery -- grocers on both sides of the pond. I think right now, they're getting at the limit of inventory accuracy based on existing technologies, existing infrastructure. It's really where do the improvements come after this? What does this slide look like next year? I think that would be an interesting perspective.

James, I'm glad you took that in that direction because similar to what we are hearing from one of our clients, they started squeezing on especially inventory accuracy and visibility and realize that they've reached a limit. Now we're seeing that program go into 4 directions. It's very interesting what they solve for? They solve for 4 goalposts. The first goalpost they say is stand out. So they want the physical store to stand out. Second goalpost is the ability to connect more with shoppers, and they want to tie that back in to see what happens in inventory accuracy and visibility. Third is employee burn out. It's very interesting that they solve for that, too, because they're starting to see a little bit of that happen. And the last, of course, is the natural one, encourage purchases. So they are following for these 4 goalposts. And with that, they're trying to bring in a little bit of brownfield transformation, very incremental transformation into this topic.

Yes. And just another point for me, just looking at this again in terms of where the -- I mean again, these are very high benchmark numbers. It's very impressive. The checkout speed, for example, is something that I think when you look at Amazon Go and when you look at [indiscernible] venture unit, that kind of contactless friction on a shopping piece, and how does that start to become more mainstream? What are the implications of that from a user journey point of view, and then the supporting infrastructure and process that delivers that. I think it's an interesting place to explore. And then [ weather ] intersects with digital in-store engagement because those 2 need to be linked and joined up to drive some of those improvements going forward. So...

Yes. Interesting there. So we just -- we also did a study around experience loyalty. And the 2 elements that are becoming more and more table stakes to your point, James, is the checkout speed and convenience because that's just an expectation. Like if you're not there, you're really not in the game. You're not there anymore. The interesting thing is that we did a cutoff data focusing on the brands that we think are doing better, and they're spending a disproportionate amount of their spend on things like loyalty, engagement and shopper behavior, specifically because they realized that the first part, which is the margin squeezing, is still a form of defense for the most part. And the other element here is the fact that given the fact that switching to your preferred retailer basically happens at the palm of your hand. You don't have to go to a store. If the cost of churn is so little, you are only paying defensive [indiscernible] that's an interesting thought, which is why this will be the case to your point about benchmarks being hard. If you strip it away and say, who's doing better to Prashant's point about they've squeezed the juice from the rock as much as they can, but this is the place where we get the incremental dollar and spend and by the way, higher loyalty. And that's an interesting nuance to call out. David, I know you've been looking at this. Any thoughts that you have to offer?

Yes. I kind of disagree a little bit about the inventory and what you're saying. I mean I still think there's a lot of room for improvement for a lot of retail companies. I -- just commenting just the other day about out of stocks for grocery is a huge problem. And grocery is one of those industries that doesn't have a real good real-time inventory tracking and monitoring and visibility across the enterprise. And I mean it's expensive, I know, to achieve that, but I think there's more retailers and more grocers that are looking into actually deploying RFID. And I think it's got to come to the point where it's going to be more ubiquitous, but I know it's still a costly endeavor.

Well, it's almost like you've seen the next slide. So -- and we brought this up because we did want to kind of highlight the attention or the focus of what this means, right, what's the size of the price. And David highlighted grocery, and we did a couple of studies in this, and we published kind of pretty much data monthly is, a, digital grew significantly. So you inherited a whole lot of growth, but the problem is that the growth came with decreasing profits. And that for a couple of reasons. The first is the inefficiency that we have from picking perspective. The second is the fact that we either didn't have items available or they weren't the right substitutes for that. So I want to substitute a for b. I don't know where it is or how it may be. And that caused the industry, and this is U.S. specific data, about $28 billion, which is you either closed your card. You said, don't substitute the item or you just didn't go for it. These are all adding up to pretty significant numbers. On the other side is the fact that given the challenges of picking -- and David, just you mentioned RFID and, of course, your elements like automation. Digital is still not profitable for grocery, right? You're losing money revenue on our -- our numbers vary from about $0.5 to like $0.16. Looking at a $300 million fall in a business that's really not very high margin, right? You're not selling -- there are no designer -- peanuts that are being sold for like $100 a pop. And the challenge with that is that, that whole from a margin perspective and inventory is still have to be critical. On the other side, we want to bring up the specialty department store perspective as well. Even for them, they believe that processes need and can be optimized further, but that's more on the front of making sure that the wage increase, the labor availability is kind of driving a decrease in store margins. The element here, and I'm going to thank James for that, that kind of prop up. The other element here is -- we try to do -- we have similar discussions with like luxury and higher-end brand retailers. For them, a huge part of the investment is also in trying to see if they can engage shoppers and associates together, so more like a concierge, which is not covered in this chart per se, but kind of talking of all 3 elements around the efficiency, the engagement in labor. I wanted to kind of throw that out. So I know a huge bunch of things here, but I want to get you guys to comment. Dave, since you did the center in the last page, I will let you start first and say, this prove my point exactly. I'm right. You're wrong. We can deal with that.

I would like to just say I agree with everything you say. These are all strong points here, and it does illustrate the cost or the challenges that are faced with inaccurate inventory or the cost of doing buy online and delivery for grocery is a huge challenge right now.

Yes. I mean is it -- so take -- and again, as you say, there are so many different angles when you look at this. And you mentioned luxury in particular. For many luxury brands, I think at least half of their revenue come from maybe up to 20% of their customers. So growth, in particular, is going to be difficult to wring more out of that 20%, keeping them very loyal, very important clients. It's a highly competitive marketplace. If you're Gucci, then Burberry [indiscernible] your customers. So they have to maintain an amazing customer experience, which why they spend so much money on client telling and understanding about the customer and being able to then offer its value. And I think there's an interesting feature here. When we start looking at digital twins of physical items and how that may be offers a digital package that could come at a slight premium where you unlock certain features through filter's effects, exclusive access, details on provenance, authenticity, that will then start to maybe flip the margins back the other way, I think. And lots of brands are exploring that marketplace. It's not quite there yet, but I think there's -- I think I saw a list of the NFT and digital twin or digital clothing sales last year, and it's a growing number. And a lot of that is very high margin. So there's a new potential revenue stream to offset some of that. And to David's point, and I think we mentioned loyalty on the grocery side or -- if someone is going in to buy a particular product, and it's not available, what are the options around that? What are the substitute products? How can you incentivize maybe to someone not walk out to buy something else that fits around that? I mean it creates an opportunity for grocery owned band stuff for other CPGs and FMCGs to maybe step up when something is available. I don't know. It's more ways to solve that potentially.

So I pick up the pace a little bit. So we talk to the elements here. What kind of 5 -- what are the big growth drivers from a tech perspective, focus perspective. We've talked to this more than a few times, at least referenced it. From a focus and growth perspective, we're still looking at inventory adoption, getting into real-time inventory management, looking to [indiscernible] grow significantly. The other element that we're actually going to see the highest amount of increase, and we did some recent polling as well is the excitement on ChatGPT and [indiscernible] The fact that AI to help drive operations to grow significantly. There is an element of AI to drive customer experience as well. So James, your point around what can you actually do to help to some of those. So I'm curious to -- got to get your guys' perspective on new tech. The left is basically where we get the marginal focus. The right is critical, but also what exactly is it, like when we say AI to drive operations, [indiscernible]. How do you guys get a look at this chart from a focus and growth perspective?

I think maybe I can take the queue on that, Gaurav. If I look at AI in particular, and if you ignore the generative AI part of what's happening at the moment on content generation, most of what we are hearing in AI seems to be in 2 buckets, everything to do with judgment and everything to do with prediction, especially if you're looking at operations. So every single aspect, which can go with into either supply side or buy side or inventory side prediction or judgment, that seems to be the 2 buckets. If you force me to use English terms, those are the 2 buckets we see.

You won't use things like LLM and kind of throw a few more...

Exactly, right? And that's right, right. That's technology looking for a problem to solve. So if you look at the areas, it feels like credit and judgment.

Yes. I mean from my point of view, it's interesting to see these -- the growth ambitions and how are they going to get there and how do you take the data set -- genuine solid data set and have the right AI, looking at it, and then be able to flip that back into a business context to maximize that AI. I think that's going to be a great challenging project for a lot of these retailers to do. And they're going to need help. This is not grocery or retail specialist skill sets. These are skill sets that sit in a technology, an increasingly in emerging technology space, and how are they going to harness the right partners and integrate that into their business and the different stakeholders to align. I mean it's -- there's a lot of opportunity there when they get their hands around -- good point, I think.

Yes, that's a fair point, which is if you don't have the expertise internally, you need to work with partners. And it's also not as simple as let me flip a switch and go. I have AI now. It does not work like that, right? So Dave, anything you want to add here on this page?

I think the only thing I would say is I think some of the aspirations are a little bit aspirational. When you look at what they're planning to do for like real-time inventory management and AI between now and 2025, it's pretty aggressive. But I like the fact that they're thinking about it and it's top of mind, but what percentage of those will actually make it is convenient to them.

Not to be aggressive. When I think, I did the study, I think, on RFID, like I did 15, 20 years back, we had a similar chart. RFID is going to be the rage. And by the way, we'll be at a peak. And I think they're -- I think only it was like with COVID if we get there. So I do get the thing around aspiration. I think we're going to take it around intent and the fact that people believe there is a lot of value there. But to your point, there's a lot to be uncovered, a lot of onions to feature to get that. James, I think you're trying to say something.

I was going to say, I think depending on how -- what you consider to be the success criteria on achieving that metric, I would say there'll be pilots albeit small, I would say they will hit that number and probably more. I think as they understand what does it mean and how they scale it, I agree with David that, that's aspirational -- aspiration, aspirational. But there'll be pockets of this going on. I'd say with ChatGPT and all the press that's going on, there'll be more curiosity about it. And I think that'll fuel a lot of pilots, a lot of tests. So they may achieve that number, but there'll be small projects that will hopefully grow into bigger ones.

That's that. I think that's great. 1,000 [indiscernible] So we get to next 2 pages quickly. And this is the other side. Now we talked about, of course, the impact of AI and the thing that may be. The context behind the next 2 pages has really been -- so we've been trying to understand what impact would tech and automation kind of have as you kind of look at this constrained labor market, higher obviously, wage growth as well as a higher velocity of tasks that are happening from a store perspective. So what we found -- and again, we've been tracking this year-over-year is that the intent for retailers and core sport department and specialty is to actually increase -- significantly increase the automation that they actually have in the store across more stuff that they do, which is both a driver of 2 things. So I do not want this to be taken as only a driver of taking cost out, but also of redeploying labor to things like customer service and better engagement, all of those elements. So I think I look at this -- again, you're looking at kind of doubling the amount of tasks that are automated. We've all been in the stores -- behind the stores, we know the amount of manual task that still exists. So how do you kind of look at this almost like a 2x -- it was like a 2x growth over the next few years. What are you going to make it kind of in this perspective? Do you think it's more about intend? How real do you think this is going to be from a task perspective?

I think probably what's going to happen over the next 2 years, Gaurav, is the boundaries of automation and AI are going to blur into each other. That's probably the first. But both of them fail if there's not enough data. And that's where if things are not connected, there's not enough data. And if there's no data, you can forget out both, AI and automation. And we're in the midst of structuring a program. And what's holding us back in that program is it's a little bit of a chicken and egg, right? So we're not able to do all the AI and automation simply because all things on the -- are connected on the carpeted flow, but they're not connected on the concrete flow. So that [indiscernible] comes in. And that's why -- I'd love to hear what James and Dave see because they must be really in the reality of this.

Right. I mean David, I'll jump in. The lens that I look at this through is resourcing and staffing is a huge challenge for retailers now, both in grocery and specialty, motel, luxury in particular. Post COVID, people realized the gig economy was there. They could switch industries and make a living. And they don't like working weekends anymore. And therefore, the need to drive that automation is actually far greater than it was in the past whilst maintaining the intimate customer relationship to your point about reallocating tasks and people to be more value add, and again, that's the 2x impact on revenue maybe if the basket size goes from x to y because people are now focused on value-added things rather than the boring stuff that doesn't add the value to the customers -- to the customers eyes, clearly important tasks, but not necessarily driving the right level of output.

David, any thoughts here or -- let me queue you for this actually. Maybe you can talk to both of these -- you have the meatiest page to kind of talk to. So our setup was really -- we're looking at almost like a 70% automation of tasks. A lot of them, like we said, are manual, are difficult, are not really great to the one that Prashant made about the workforce and associates also need to feel good about what they're doing. If you're doing something mundane, there's only so much they want to put up with. So in that level of automation, it's not really about just a labor reduction. It's also like a digital assist to help us do better. Now the way we want to split our reduction in effort or task is really to look at reducing staff, redeploying to operations because we have more of it to do it as well as return to customer-facing tasks. The numbers, of course, split between grocery and department store. So Dave kind of connecting the dots between the automation and this. How do you kind of look at this? And what part of do you think is interesting or important or scary?

Yes. I think one thing when I think about like even initiative of doing the automation of tasks, obviously, it's driven -- most retailers don't have enough staff to really function and service their customers the way they need to. So when you think about reducing staff, it's really -- so a lot of that is really about trying to service their customers in the way they need to with the staff they have now, so doing more with less. And then you're right, I think the driver is not necessarily to reduce staff. And if they can, if they have less need or requirements for staff, they can redeploy them. I think -- primarily, I think in a lot of cases its having better customer service is going to be the best benefit to redeploying those associates that don't need to do the menial task that we can automate.

Yes. I think this may change over time as you can look at where are you getting impact, which is if you're getting the 2x basket size with the reallocation of labor there, then reallocation would actually be more beneficial to pump up that 18% number up to like 20%, 25% because it's a much better use of your time kind of off [indiscernible] labor. James, Prashant, any points?

Well, I was just going to say, it depends. I mean like say, in some instances -- I went shopping with my mom at Christmas time. And I won't say the store, but we -- my mom is quite old school. As you can imagine, she wanted to talk to someone to ask where things were, and there was no -- there were no staff around at all. So the ability to be able to move people to front line, where it makes sense, in a different store environment, it may not make sense to do that. I think it's an interesting debate and can be reduced, but maybe should be is another question. That's maybe a bit semantics, but yes.

I think there's also something there, and it's something we've -- so we're doing like shopper studies around when do we want to friction this and when do we actually want to slow things down. And there are different elements in shopping journeys and trips that may constitute that, and that's a function of obviously both intent and demographic and all of those elements. So I think that's the -- this is the key factor around having associates available, making sure able to help them through a digital app or whatever it may be, I think all of those need to be in the mix because I don't think anybody has a customer with the right answer of what this mix needs to be. And as it kind of play around with these numbers and see what task go from a to b, I think it will be an interesting kind of mix in the middle to do it. But at least to me, what's been clear is that there is a clear focus, and it is doing in testing. And I like the idea about the AI piece, which is we launch 1,000 chips and see what happens. I think the ability to run these experiments and try them at scale is going to be a huge difference between who makes it and who doesn't. Because I think it's going to be a pretty tough next couple of years as you kind of think of compression and other things. So Prashant, you're sliding away, so I'm sure you've got something to kind of ...

Yes. I think you're going in the direction that I was going in. And that has -- it is finding and retaining retail workers is one of the top problems at the moment. So how do -- it's not easy. So if you look at automation and AI and all of these things under the banner of augmented employee -- and augmented employee is an empowered employee. And I recall a study saying that engaged workers give you a 21% bump in profitability. So I think we need to start with a goal like that in mind and then work backward because that feeds the ROI of such a program.

Yes. And getting to the last page, and I'll get obviously our experts at Verizon kind of comment on this, which is -- so what this page is basically saying is -- so we've talked to a few elements, right, which is first is the store is always and needs to be in transition to continue to be relevant. The pendulum kind of swings from customer experience to efficiency. It's swinging more towards the efficiency side right now, even though we're seeing [ spots ] focusing on customer experience and things like in fashion departments and all of that. Whichever way it goes, we do understand the amount of tech that's going to be either around the store or in the store is going to increase, an associate, technology installed or whatever it may be. And what that does is that it pushes a significant amount of strain on our store network, which is the slide on the right. The slide on the left is what's pushing our store networks and our infrastructure more than it needs to be. From grocery -- and I was surprised by this, every grocery is saying shoppers want to use their mobile device in store. It's a 100% number. It's not something you usually kind of see in like surveys. So -- and what you're seeing is that with the use of shopper mobile devices, store tech, an application that people want to move to the cloud getting to like a light environment, our networks are being kind of tested to get to the right amount of uptime, managing peak traffic and response time, all of which are almost at a 25% satisfaction level across the board. So how do you guys reconcile the 2? And maybe I'll lead with the folks from Verizon first, looking at all these demand that you have in store network that is acknowledged, that's clear. And then we are saying it's important, but our satisfaction is low. How do we reconcile? Is it an investment gap? Is it an installation gap? Is it -- where is the big gaps do you guys think in -- that's the softest ball I can [indiscernible] to you guys. So you guys pick it up.

Well, I mean on the positive side, this is not new to us. There's a good example of a major global customer that we work with and exactly this. The importance of the network is very high. And in fact, the Verizon service stats are seen green in terms of availability and uptime, and that works. And then we walk around store environments with customers and with the store managers, and there's this perception about they're not satisfied with it. So you start to scratch the surface, and you realize that someone has installed access points upside down or they put the access points in a cupboard where they can't deliver a -- or the staff happens to be on an outdated iOS on an iPhone 8, and the newest infrastructure has been put in that doesn't quite -- isn't quite optimized with those things. There are lots of different reasons why that might be. And I think what we're seeing now, because of the -- because of what's happening on the left, we're seeing more of a collaborative exercise with the customer, with the store managers with their own internal IT teams to actually understand what are the components driving dissatisfaction? Is it an application? Is it the network? Is it -- because there isn't one -- it's not one thing. It's about 4 or 5 different things, and it's trying to put that group together to address all of those, which is where we are right now with a lot of customers improving that red into green.

Just to add to that. I totally agree with you, James. It's -- a lot of times, it can be the way things are installed or they don't -- they're not installed in the right way -- areas of the store. But there's also the element of we're deploying all this technology in stores. And sometimes I don't think we're thinking about what network capabilities or bandwidth are we going to need to support them and make sure that we do that first before we install the technology that's going to require those additional bandwidths or speeds or low response times. So I think it's like making sure we're planning ahead.

Yes. I totally agree. A lot of that is a timing difference between the new application being delivered versus the network readiness for that based on -- and there are lots of reasons of the speed at which the retailers are moving incredibly fast. And the network teams collaborating together to match that agility. And that's why I think you see a lot of companies moving to a newer architecture that can support that dynamic agility as and when they need it, kind of as a service basis, but they're not quite there yet.

Awesome. So with that, David, over to you to kind of help wrap things up.

Sure. We've talked about a lot of things today, and I was trying to think ahead of time like at a high level, what are the key points that we want to make sure that we communicate in this webinar. Obviously, we spent a lot of time talking about store efficiency, and there's no doubt that retailers are really focused on improving their store efficiency. And down below, I just put some action items, things to think about. And from a retail perspective, think about what initiatives and areas that you can improve your operational efficiencies and make plans to do so. Test automation, obviously, that was towards the end of our webinar. And it's a high focus area, dealing with the labor shortages, thinking about what we can do -- what task can we automate, what tasks are driving irritation for our employees or making it a less satisfying job. So that'll help us keep and retain employees. And no doubt, we're always in this phase of increasing and adding technology in our stores and how do we identify which ones are going to make the most impact on our operations and our customer experience. And then finally, as we're adding all that technology, we need to really think about and plan for what bandwidth do we need as we're making plans to add more and more technology that are having more and more bandwidth needs for our store. So those are just some things to think about and hopefully provide some insight on some of the key takeaways from the webinar. Now we'll get into the Q&A portion of the webinar, and I'll bring up some of the questions that we got.

This one is, I think, is a good one for Prashant. What are some of the most common roadblocks that retailers face when implementing new technologies?

I would think it's existing technology, and I think as James was referring to that. It's how do you actually make the business case for this. We can talk technology until we are blue in the phase. We can say LLM. We can say ChatGPT as many times as we want, but how do you actually integrate this with what you already have? And how do you then implement this incrementally? That's where -- I think if we bring in 2 parts, that is the business case and the technology. That's the foundation. Then it's all about the next roadblock, and that is why are we doing this? And we're seeing there are 3 categories, and I was pointing this out a little earlier. Not just a stand out as a retail store, how exactly are we going to stand out as a retail store. How are we exactly going to connect with shoppers? Or are we exactly going to encourage purchases? I think if you aim for these 3 goalposts and solve for that using business and technology, but not forgetting the technical debt, then you start getting over these roadblocks.

Excellent. Here's another one. This might be good for Gaurav and James. You mentioned that retailers are focusing on automating tasks. What are some of the key tasks retailers are planning to automate?

Can I go first? Okay. So I think the range of task is -- covers all of the ones you kind of referenced earlier, which is low value-adding -- difficult, the one that drive even misery in an associates world. We want to do that. And if you get to specificity, right, the biggest opportunity, the one we've talked about a lot has really been, at least on the grocery side, around picking. So what we need to do to make picking more efficient? And all of these things will blend together, things like robotics and AI and automation. So the immediate ones, I think where things will start is going to be inventory audits and reconciliation. I think that's a big one. On the grocery side, I think it's going to be picking. The biggest hype has always been around checkout because if you can automate that, then that's a huge give. I think the jury is out on where exactly it kind of lands at. And the other ones, things like price check, receiving, all the tools out there. The one other use case which has been interesting, which I've actually seen, is using the automation elements to do audits, which is both planogram and lost dimension. So it's a range of tasks, but I think it's going to be a function of both the product type and, obviously, the demographic, which ones will be more [ adopted ], but that's kind of the range...

Yes. I pretty much have said almost the same thing, but not quite as eloquent as you did. But I think a lot of that will also be happening in the distribution center space. I think that's -- we see even more [indiscernible] in that kind of back-office operational side where you've got big distribution centers and supply chains and how do they optimize that and then into the front-end kind of store associate piece. But yes, 100% agree.

Actually curious. Just to get your guys' perspective. So at least on the grocery side, we've heard about these dark stores and completely automated stores and, of course, other examples in the U.S. and the U.K. as well. James, to what you mentioned, do you see those actually is becoming the norm for grocery, but also in the department store with things like fashion and other products? Because -- I'm curious how that adoption has been of those automated either completely or partially to [indiscernible] centers.

Yes. I mean it's a very good question. Interesting one. I mean I think right now, the -- if I take the specialty retail department store piece, I think right now, there's a lot of reinvention going on in that whole part of retail. How do they show up? What type of experiences do they offer? Do you even -- and then at the same time, is that the sustainability view of how efficiently and at what carbon price do I get my sneakers delivered to the store for me to collect or to my home? And I think there's all kinds of things going in the background that brands are thinking about right now. And they're not hesitating, but they're making sure they make the right decision. Because sometimes if you make the wrong decision, you can get hammered on social media, and you get this backlash. And I think trying to get the right balance is really where they're at, in my opinion. But I think it's a good point, being able to return to more efficient if you bring them back to the store, for example, rather than -- so again, I think it's an evolving space.

One thing that I would add to that, too, and I'm surprised it hasn't -- I know some grocery stores are testing it, but digital shelf labels. It seems like it'd be -- I mean it seems like an arduous task for store associates to print off the labels, go to the show floor or sales floor and attach the labels. And we all know there's a lot of mispriced products out on the shelf right now. I mean I know -- recently, my wife, we were grocery shopping, and we went to the checkout, and it was $1 more than it said on the shelf, but it's worth arguing about it. So we just said, screw it, let's just pay it. But I mean there's -- I mean it seems like that's a task that definitely could be automated.

And I think it will be. It's interesting you mentioned that [indiscernible] last week or was -- yes, just last week, and they were very excited because they got electronic shelf into their, first time. So I was kind of eavesdropping between the store manager and see what's going on, being a sneaky research guy, and they were so excited about it because, a, they're going to reduce labor. They are doing it all the stores. They were so excited, they were the first ones to kind of get it. And I think there's something there because those are the tiny things you can chip over -- sorry, James, you're saying something.

I was going to say exactly on that point. And not just from an automation point of view, but from a dynamic pricing point of view. So we've got price based on particular demand or -- sorry, supply in the store. And as that moves up, it becomes a nice sunny day, and you've got [indiscernible]. Does the pricing change dynamically based on the weather and the supply? So an opportunity maybe to improve those margins.

I'm glad you mentioned pin. That's my go to summer break.

It was [indiscernible] for the weather, unfortunately.

I have another question here. And this, I think, is to Prashant. I think you spoke a little bit about it earlier, and that's probably why the question came up. But how can retailers address the challenge of integrating disparate and/or legacy systems and data when undergoing a transformation?

I would say not probably to start with those 2 topics, but be very clear about the outcome, right? So if we need to start with the outcome first. Now all of us know that in-store retail stores are 14% higher than they were prepandemic. So there's a clear return to physical retail stores, but the expectations have changed. So I don't know whether a client -- you need to decide, are your customers looking for samples, fittings, consultations, product demos? You don't know where all of this is going. Our in-store deals, right, but you've got to start backwards from there. You know what the outcomes are. You spoke about the 3 goalposts. But the question is, how do you go continuously towards those outcomes? And how do you incrementally ship and build, right? So it's not enough to design and build, it's called design, build and ship. The more you do this in multidisciplinary teams, the better things get. That's the formula.

Okay. I think we have one last question. Referring to your 13% of store associate roles -- hold on. Just jumped on it. 13% of store associate roles can be reduced due to automation. Your [ stats/slide ] indicates a 56% reduction in staff. Is that 56% of 13%? Wasn't quite sure what's been communicating with these stats.

I can take that. So good color on things. So it's actually -- so the chart shows the redeployment of 13%. 13% is actually an off-page stack. It's in the e-book that you can kind of download and kind of look at. I think it's a miss on our part to maybe lead with that. So 13% is the total amount of workforce that we believe we could reduce, workforce tasks overall. And the page or the donut chart gives a sense of how that 13% would be reallocated. So that's how to kind of they read the chart. It's not 13% of 56% or that indication.

Got it. One I did -- another one just came in. Only 25% of retailers are currently satisfied with their ability to manage peak network traffic. That was like one of the last slides. This seems like a go fix it right now kind of thing. What's happening to correct this deficiency? Maybe that's a good one for James. And I think, James, you may have addressed some of that in some of our comments.

Well, a little bit, a little bit. I mean some of it comes just down to awareness, and we're having the right infrastructure, agreements and the right flexibility in that. And then as -- there shouldn't be a surprise for people of brands or retailers when it comes in. If they're working closely with their business that there's going to be a campaign on -- in a particular area or a particular product line or category that they're able to then flex that bandwidth to support that need. And it works pretty well in some places, in websites. For example, the optimization has been going -- is well established with things like Black Friday and those other key demand kind of rushes. But the -- it really comes down to sitting down internally and working out what are those -- what could it be? And how quick do you need it? And let's work together better to make that happen. And actually, let's automate that because you don't want to be phoning people up to say, this is happening right now. Can you then go and go to Verizon and get me more bandwidth in this location. It's like, yes, sure, I will phone David and James right now. That should be able to happen dynamically and automatically. And again, that's a collaborative effort between IT and the business -- lines of business to make that happen.

Well, looks like that's the last question. We've come to the close of our webinar. I want to thank everyone for joining us today and encourage you to explore the attachments section down below on the tab. And we also encourage you to connect with us on LinkedIn, and here's our LinkedIn addresses, and love to continue the conversation on LinkedIn. Thanks a lot.

Thank you.

Thank you.