Over the last few decades, a vast array of technologies have come and gone. Many remain as essential, ever-evolving assets for the modern business world. This can be seen every day with the use of computers, software, and specialised devices for specific tasks. But what about AI?
Artificial intelligence technically was born in the 1950s. Thanks to the incredible advances in technology, AI has transformed from a novel concept to technology being adopted by many industries. However, retail is among the sectors with the lowest AI adoption rates (11.5%), which seems strange when considering the vital benefits it can offer — such as using behavioural data and customer intelligence to enhance customer experiences at all touchpoints.
So, let’s discuss artificial intelligence in retail and its role in reshaping the industry.
How important is AI in retail?
AI and machine learning are becoming benchmarks for many modern business practises. Meaning retail companies have a remarkable opportunity to leverage data and enhance customer experiences in new, exciting and more meaningful ways.
In a fiercely competitive industry, retailers must interact with and benefits customers like never before while minimising inefficiencies. Data can help them to achieve this. Digital evolution in retail offers businesses the opportunity and technology to convert data into insights, which directly informs actions and drives more effective strategies.
AI in retail is the key to producing these insights. It leads to engaging and targeted customer experiences, opportunities for brand growth, consistent innovation and more intelligent operations, all of which separate companies from the crowd and turn the heads of modern consumers.
Additionally, it’s worth noting that around 15% of all businesses have adopted at least one AI technology. So, if AI is indeed the future of business, an industry that fails to keep up with the times could run into many problems. If you look beyond consumers, a lack of innovation may motivate investors and stakeholders to look to greener pastures — meaning industries that continue to adopt new technology and evolve.
How artificial intelligence already benefits retail
Although the adoption rate of AI technology in retail is low compared to most sectors, that’s not to say that artificial intelligence hasn’t already demonstrated great potential. For example, companies like IKEA have embraced AI with their ‘IKEA Place‘ app, combining AI and AR (augmented reality) technology to provide customers with personalised, curated shopping experiences.
Of course, every industry is different and will utilise AI technology in its own ways. But for retail, there are two crucial areas in which it could reshape the entire landscape — using AI to offer personalised shopping experiences and AI for enhanced inventory management.
Personalised shopping experiences
AI and machine learning have proved to be nothing short of a phenomenon for gathering and using first-party data to learn more about consumers and their needs. By using AI, retailers have the tools to continually adapt their websites to offer customised experiences based on previous shopping behaviours and habits. A fantastic example is deep learning AI, capable of analysing hundreds of variables to identify the best items to present to browsing customers.
Think of the factors that contribute to whether or not you purchase. Does it suit your needs, match your interests or preferences, and is the shopping experience convenient? AI and its ability to capture and implement data provide you with a clearer idea about what your customers want.
And in this instance, “customers” isn’t a blanket statement for your entire customer base. AI offers a unique insight for each customer to maximise sales potential, brand recognition and customer retention.
Enhanced inventory management
Inventory management is becoming increasingly complex because it requires access to information on a global level. To manage costs and buyer needs effectively, organisations must efficiently track supply and demand for both physical and eCommerce sales to ensure their inventory is in sync. AI and the insight it provides allow users to optimise their inventory management while removing unnecessary manual processes.
Again, IKEA is a great example. They use AI for smart demand forecasting, providing the data and insight to predict how much the company will sell in the future — with 98% accuracy.
AI can be used to optimise inventory management in the following ways:
Inventory replenishment: By implementing AI, inventory management solutions can improve retailer inventory levels by analysing consumer fulfilment choices and shopping behaviours. Therefore establishing a customer-behaviour model that considers not just where, but also when and how consumers want to receive goods.
Estimated arrival time: Communicating the estimated time a product will arrive is increasingly valuable and crucial in this highly competitive era. Knowing the quantity and location of available inventory is critical for businesses to meet and exceed customer expectations. AI is already being used to increase the accuracy of product ETAs while predicting and mitigating risks to supply chains. Doing so helps ensure customer fulfilment and supports business priorities, be it costs or anything else.
Safety stock management: Businesses typically set a minimum inventory reserved for walk-in sales, which isn’t included in e-commerce or other channels. However, with ever-evolving and growing customer expectations, generalised inventory information simply isn’t good enough. AI offers the means to ensure safety stock management is accurate, up-to-date and supports personalised experiences.
Why the lack of AI adoption in retail?
Some would assume low adoption rates for AI in retail are due to a fear of it endangering jobs or negatively impacting how retail businesses operate. Unfortunately, when people hear “artificial intelligence”, it’s not uncommon for the image of a robot to pop into their head. No, we’re not talking about robots scanning and bagging your shopping.
One of the critical factors in this regard is the reluctance of businesses to adopt new technologies, essentially the “if it ain’t broke, don’t fix it” approach. Although this would be understandable if they were the guinea pig sector for AI, many businesses successfully implement AI and benefit from it significantly. Artificial intelligence comes in many different forms, from intelligent data capturing to more complex programs designed to suit specific requirements. All of which have the potential to reshape and massively improve organisations within retail.
Another aspect to consider is the lack of skilled workers hindering the market growth of AI. There’s no doubt that most people today are comfortable and adept with technology, but this is on a basic level. If retail hopes to evolve and adopt new technologies, AI usage as a whole needs to grow with it.
To achieve this, there simply must be more investment in upskilling current workforces with a technological approach. With such a wealth of information online, computer training courses and much more — there’s no reason why AI market growth should be hindered, and with it, the opportunity it has to improve pretty much every industry.
