Retail is a fast-moving sector, and success in the industry means keeping up with technologies. Artificial intelligence (AI) is one of them, and evidence shows it’s the future of retail. Here are four reasons why:
1. AI Offers Diverse Usage Possibilities
Retailers often feel understandably reluctant to give emerging technologies a try unless they feel extremely confident in the eventual payoff. Capgemini Research Institute took an in-depth look at AI’s impact on retail, and the comprehensive study revealed numerous exciting things. For starters, there’s a growing number of retailers implementing AI in their organizations. And they focus on customer-facing applications in nearly three-fourths of cases. Furthermore, the study also showed that if retailers branched out and deployed AI across their operations, they could save more than $340 billion by 2022.
As an example of where those savings might originate, the paper’s authors gave an example of Otto, a German e-commerce brand that uses AI to predict consumer purchasing patterns. Otto cuts down on returns by more than 2 million items annually by making more accurate suggestions to shoppers.
Other companies use AI to prepare packages within warehouses or distribution centers by implementing the technology into item picker assistants that workers use while restocking shelves or getting items ready to ship. Due to the assortment of options offered and the certainty of more on the horizon, retailers have no shortage of ways to work with the technology. That helps ensure AI’s staying power.
2. Customers Want the Personalization AI Can Give
The brief mention above of using AI to slash return rates is only one example of how the technology can help personalize the shopping experience. Research from Epsilon showed 80 percent of respondents said they were more likely to do business with companies that offer personalization, and 90 percent indicated they found personalization appealing.
That’s not surprising when retail professionals take a moment to recall past trends that led to this point. For example, subscription boxes were a top trend of 2017, and many of them that are still popular today use personalization to some extent.
Birchbox is a well-known beauty product subscription box that lets people make a choice for at least one of the items in their monthly box or pick from an assortment of free samples when buying something from the Birchbox store. Customers can also indicate a preference toward all-natural items or items for curly hair, for example.
Going back to AI, it promotes personalization in various ways, especially through improved marketing. A person might see different versions of a retail website based on past interactions with the brand, or receive coupons with their product receipts that align with the items they purchase most often.
Moving forward, consumers will likely be on board with AI-based personalization for the foreseeable future as long as it doesn’t invade privacy. A lack of customization often leads to irrelevance, which could make shopping less fulfilling.
3. AI Can Promote Better Decision Making
Analysts believe 2019 is the year when AI and machine learning — a subset of AI — will become critical for retail’s decision makers. Those technologies can help brands figure out which items people want most and which ones won’t likely sell as swiftly. Then, they can use this data to meet customer demands and avoid waste.
Carrefour, the French multinational retailer, recently began using an AI-driven analytics platform for demand forecasting. While running an 18-month pilot, the brand will gather data related to its stores, online orders and warehouses, then use the information to create customized algorithms that keep items stocked, but not to excess.
No matter what they sell or how many customers they serve, retailers will always strive to make well-informed decisions. AI helps them do that by analyzing data better than humans could alone.
4. AI Minimizes Theft
Most retail stores have cameras, door alarms and on-site loss prevention specialists to deter shoplifters. Those preventive measures still have value, but AI is a useful supplement.
According to the National Retail Federation, inventory losses — also called “shrink” — result in substantial expenses for retailers. The NRF’s study on retail security showed shrink had a $46.8 billion impact on the retail economy in 2017.
AI could make that number less substantial. There’s AI technology called StopLift, which helps detect the things people do to fool self-checkout kiosks and walk off with unpaid-for merchandise. Also, a Japanese-made AI security camera even detects suspicious poses that could signal someone’s trying to steal items.
Retail theft is a problem that’s not going away. Even the people overseeing the first stores in existence likely had trouble keeping theft at bay. Thankfully, today’s stores are much less primitive, and AI can give retailers worthwhile strategies to pursue.
AI Helps Retailers Get Equipped to Thrive
Some aspects of the retail industry, such as shopping malls and brick-and-mortar chain stores, experienced severe downturns recently. And there will inevitably be other hard times ahead. AI isn’t an all-encompassing solution to secure retail’s future, but the things highlighted here emphasize why it could cause meaningful gains when used to overcome business obstacles and cater to customers.
Date: May 16, 2019