Earlier this year, Foot Locker unveiled a plan to drive long-term growth in the business by investing in new store formats and technology, right-sizing its retail footprint, embracing sneaker culture and deepening its relationship with customers. Dubbed the ‘Lace Up’ plan, the effort comes at a challenging time, not only for Foot Locker – which recently posted a $5 million loss in Q2, down from the $94 million in net income it generated in theprior corresponding period – but for retail more broadly.Despite the “still-tough consumer backdrop”, as CEO Mary Dillon acknowledged in August, Foot Lockerremains focused on its big-picture goal of growing revenue from $8 billion to $10 billion.As part of this, the retailer plans to invest at least 3 percent of its annual sales in technology by 2026, increasing its tech capex by more than 50 percent, to $240 million, over the next four years.Foot Locker recently opened a new high-tech distribution centre in Reno, NV, with a range of features designed to create greater cost efficiencies and cut shipping times across the West Coast by over 50 percent. It also rolled out an AI-powered natural language processing and text analytics system from InMoment to transform its approach to customer feedback. Called Spotlight, the system brings together all of the customer feedback that Foot Locker receives via email, call centers, social media and other relevant channels, providing a clearer overview of what customers are feeling and thinking.Previously, the company\’s customer support and care team received feedback through separate channels and had to manually categorise each customer enquiry – a time-consuming process prone tohuman error that has now been alleviated. A ‘treasure trove’ of data Tyler Saxey, senior director, global voice of customer and omnichannel at Foot Locker, told Inside Retail that this investment in AI technology has provided the brand with a clearer and more comprehensive picture of what customers want. It has also enabled the brand to more efficiently analyse what it is doing well, and not so well.“The insights we receive allow us to move more quickly when it comes to identifying and acting on customer wants and needs,” Saxey said.He added that this has been particularly useful for Foot Locker’s call-center team, since the AI can automatically break down customer feedback by topics, themes and intentions, while also delving into thenuances behind each interaction. This is a major step up from the previous way of operating, where the customer service team could manually categorise that an item was returned, for instance, but not the reasons behind the return.“The call center also tends to catch all friction points in the business, like returns, tracking, in-store experience, and the like – and we can correlate with our other feedback data like surveys, social and chat,all in one place,” Saxey explained. “It’s a treasure trove of previously inaccessible data that gives us dailyopportunities to improve the business.” Foot Locker can also use Spotlight to score staff performance, laying the groundwork for coaching and improved customer interactions. Streamlining processes Retailers are increasingly exploring how AI technology can be used to improve their business operation, from stock and inventory management, to product design and personalised customerexperiences. Coca-Cola chair and CEO James Quincey recently shared that the company feeds all of its internal documents into an AI model. “Now we have a little button that [you can ask], ‘What’s the HR policy on this?’ or ‘How should I approach the technical maintenance of [something]?’, and it’ll spit out the answer,” Quincey said at the Consumer Goods Forum’s global summit in Japan earlier this year. Meanwhile, Google has launched a new virtual try-on tool that uses generative AI to show what clothes look like on a wide range of people and poses.While Foot Locker is in the early stages of using AI technology, Saxey noted that it has already played a major role in breaking down the data silos across the organisation. “We’ve already seen the benefit of streamlining our processes and data management for deeper visibility and knowledge about each customer,” he said. AI systems can already identify regional differences in what customers are seeking, and now Foot Locker is looking to expand its use of AI to predict trends in footwear culture.For instance, future upgrades might have spotted that the recent influx of Californians moving to Arizona led to a spike in complaints about the fact that Nike Cortez shoes – which have deep roots in southernCalifornia in particular – weren’t available in Foot Locker’s Phoenix stores. “We have an incredible array of human talent [who] have their ear to the ground in respective markets to keep abreast of what’s hot and what’s not,” he said. “We’re still dipping our toes in utilising AI for trend-spotting.” Removing pain points Regarding the potential of generative AI in the retail sector, Saxey says it’s a “really exciting time” – especially when it comes to navigating and handling customer feedback. “We’re looking forward to taking advantage of more AI tools in the future as they are tested and become more available in the customer experience space,” he said. While the brand is known for its bricks-and-mortar stores, it aims to generate 25 percent of sales online by 2026, and Saxey thinks AI will play an important role in the brand’s transition to becoming an “omniworld” business.“Taking that bricks-and-mortar experience to the digital and omni level introduces a lot of potential pain points, but we want to retain the same level of white-glove service,” he said. This story first appeared in the September 2023 issue of Inside Retail US magazine.