SoundCommerce Co-Founder and CEO Eric Best said retail winners will increasingly be determined by how they leverage data and artificial intelligence to drive customer lifetime value.

Best, along with CTO Jared Stiff started the company to help brands deliver better shopper experiences with data. SoundCommerce, founded in 2018, has raised more than $33 million in funding. The company platform is designed to take retail data infrastructure and make it composable and no code so retailers can better model experiences on the fly.

Retailers will need to leverage data to thrive amid margin compression, pricing arbitrage, higher cost of capital and fierce competition. On DisrupTV, Constellation Research's Ray Wang and Holger Mueller caught up with Best. Here are some of the key takeaways. 

Two megatrends impacting retail. Best said there are two obvious megatrends that are reshaping retail. The first is the return to shopping in person and retail as a community activity. The second is that the cost of capital has increased dramatically. Both are impacting direct-to-consumer retailers.

Best said of direct-to-consumer retail:

"There are high variable costs on the front end to acquire a customer through some combination of Facebook, Tik Tok, Instagram and Google and on the other end, there are very high costs associated with doorstep delivery. We often joke internally that there are a thousand things that must go right to be successful in digital retail. And you fail if any one of them goes wrong."

Best of times, worst of times. Best said it is easier than ever to start a retail business because of platforms like Shopify and marketplace providers like Amazon and Walmart. "Getting started is very easy. Anyone can throw up a shingle," said Best. "Scaling the business is hard and profitable growth is exceedingly difficult."

Because of this difficulty you see direct-to-consumer brands like Casper, Warby Parker and Dollar Shave Club to back to omnichannel, wholesale and physical stores. "The market is proving that these are difficult businesses to operate," said Best.

Who owns the customer? Best added that there are trade-offs between following a direct-to-consumer model vs standing up for business in a marketplace. For instance, if you're an Amazon seller much of the complexity of the business model is removed once you figure out how to promote your products.

The trade-off happens when the marketplace owns the customer and experience as well as the data, which is "a really important asset to the enterprise value of consumer brands," said Best. "It is rare to see companies that are able to rely on a marketplace," he added.

Feedback loops. Data is critical because digital commerce requires a lot of data, analytics and insights to power the next best actions and feedback loops. Best said he expects data platforms to become more important to retail. "We have a proliferation of brand-new companies building data capabilities on the backs of Snowflake or Google Cloud or DataBricks," said Best.

Best said Amazon is a great example of retail as data feedback loop. AWS was created as a proprietary infrastructure for predictions, modeling inventory and logistics based on demand signals. "The use cases we see emerging wit generative AI began with proprietary algorithms that were developed by Amazon or Walmart," said Best.

The SoundCommerce bet. Best said SoundCommerce is scaling on two core constructs. First, every retail business decision has the potential to be a generative AI prediction that can be tactical as well as strategic. And then there's the data capabilities that can be game changers. "We think data capability enables customer lifetime value. There's a connection of individual tactical decisions that can be tied together to drive long-term customer relationships," said Best.

Data management will be mission critical for retailers since the biggest barrier to AI adoption isn't the algorithm, but having the data cleaned and properly structured for AI consumption. SoundCommerce has a set of models for omnichannel, acquisition and retention marketing, products and promotions and fulfillment. "The challenge we see across industries is readiness and the heavy lifting to get the data ready in the first place," said Best.