Digital disruption of industries is not a new “term” anymore, but it is still a far-fetched reality for those who are yet to realize its benefits. Technology has spearheaded the much-required change in the business process, bringing seamlessness and better judgment and faster ROI, and better revenue.
When we talk about technological advancements in retail, we cannot leave out the speed, efficiency, and accuracy brought into the retail fold. Advanced predictive analytics is enabling retail business owners to make better data-driven decisions.
These essential insights are available because retail disruptors decided to implement IoT, advanced data analytics, machine learning, and AI (artificial intelligence) into their business mix.
The AI (artificial intelligence) in Retail Market size surpassed USD 2 billion in 2020. It is expected to grow at more than 30% CAGR between 2021 and 2027. This growth is directly attributed to the fact that there is an influx of investments in AI technology intended to improve retail customer experience.
Customer experience is at the center of the investment AI technology is seeing. The retail market has experienced an unprecedented evolution in customer demand coupled with transformative technology innovation for fostering better revenue in the retail industry.
This article will do an in-depth analysis of how artificial intelligence is helping retailers shape their business processes.
Another report from Markets and Markets suggests that the global artificial intelligence in retail market size will grow to USD 5034 million at a compound annual growth rate of 38.3%. They conclude that this rise is credited to
- Increasing necessity for superior surveillance and monitoring in physical stores
- Growing awareness of artificial intelligence amongst industry leaders
- Enhancing the customer experience
- Improving the business productivity
- Need for a higher return on investments
- Streamlining of inventory management
- Optimization of the supply chain
What is AI in retail?
Artificial intelligence is enabling retail systems to work seamlessly by optimizing
- customer experiences
- inventory management
AI technologies like computer vision bring near-real-time intelligence to brick-and-mortar stores. The data analysis of the same information provides retail businesses with helpful and crucial insights.
When retailers decide to adopt these disruptive technologies, they self- enable a wide range of AI capabilities
- intelligent display ads
- smart shelves
- endless aisle kiosks
- enhanced inventory control
- smart self-checkout
What is the scope of AI in retail?
Retail business owners can utilize artificial intelligence for driving faster decision related to
- Product management
- Supply chain
Artificial intelligence, in culmination with machine learning, big data analytics, and advanced business intelligence, will help fast-track the process of insights to action.
Machine learning and deep learning technologies will have a significant influence on how the retail industry operates. Retail businesses can use machine learning and deep learning technology for offering a personalized experience to their end-users both in terms of browsing through the product online or in the store.
As retail businesses start focusing more on streamlining their operations, minimizing their physical efforts, and increasing their overall revenue, AI technology will emerge as their backbone.
So what can a non-technological retail outlet gain from deploying digital transformation? They can fulfill all their goals, such as
- Optimizing their supply chain
- Using their existing data for increasing conversion
- Customizing the shopping experiences with predictive modeling
Artificial intelligence allows retailers to use forecasting tools to make better business decisions by using customized algorithms that support faster ROI, lower operational costs, and increase sales.
AI is slowly taking control of how things happen in online and physical stores. And this is where retail brand owners need to bifurcate their resources. This article will keep the fun facts alive related to AI’s inclusion in your retail business process to provide more ease of operations and management.
Let’s elaborate a bit more on the scope of AI in retail.
1. In-store customer experience enhancements
AI is automating in-store operations, reducing unnecessary retail operation expenses in its wake. With technologies such as smart shelves and digital displays running on AR/VR, AI removes the need for an additional salesperson in the vicinity and assists customers in the store.
AI also reduces the queues near cash counters with self-checkouts, helps replenish stock on shelves in real-time, and digitizes the store display and trial rooms. AI is highly recommended for retailers who want to optimize their resources, enhance their customer service, and provide excellent customer service.
The pioneer in this field is Amazon, having launched Amazon Go and Walk Out shopping technology. The technology responds every time a customer picks up a product from the store shelf. Kroger Edge technology was also able to cut down their in-store operational costs by introducing smart shelf tags, replacing the traditional paper price tags.
2. Chatbots will consistently enhance customer service
With omnichannel retail pushing the walls between in-store and online store experience, artificial intelligence is certainly helping brands interact with customers effortlessly. With more retailers moving closer towards building their interactive chat programs, AI-driven chatbots are an effective way of enhancing customer service.
With disruptions like NLP, data analytics, chatbots are now
- smarter in their replies
- provide better product recommendations
- tactfully address customer grievances
- collect valuable data from retail customers before diverting them to executives, if needed
With self-learning programs written into chatbots, they keep refining and personalizing their interactions with the customers.
H&M developed their chatbot on Kik enabling customers to choose from recommendations, filters, and style preferences. The same technology pushed the fashion brand ahead of its competitors back in 2016.
3. Flexible price adjustments on retail products
It’s a price-sensitive market, and artificial intelligence is here to help retailers tactically plan their product prices. AI-driven applications and systems aid enterprises run price comparisons on various pricing models before deciding the optimal price of their products.
With all the previous data assembled in the system, retailers can use AI insights for adjusting prices by
- seasonal trends
- competitive products
- consumer demand
4. Effectively manage the supply chain and logistics
- Forty-three percent of small businesses in the United States don’t track inventory or use a manual system. – Source
- The average U.S. retail operation has an inventory accuracy of only 63 percent. – Source
- Thirty-four percent of businesses have shipped an order late because they inadvertently sold a product that was not in stock. – Source
- The worldwide inventory distortion cost (including shrinkage, stockouts, and overstock) is an estimated $1.1 Trillion. – Source
As the above statistics show, inefficient inventory planning and management result in various losses for retailers worldwide. With the help of an AI-enabled logistics management system, retailers can predict demands for products by crunching
- Historical sales data
- Geographical location
- Store location
- Footfall and website visit data
- Consumer purchase trends
- Local physical and weather conditions
Every aspect of the retail supply chain is easily manageable in real-time with the help of artificial intelligence. Those aspects are
5. Utilizing customer insights for better personalization
“Brands that create personalized experiences by integrating advanced digital technologies and proprietary data for customers are seeing revenue increase by 6% to 10% — two to three times faster than those who don’t.” – Boston Consulting Group
Customers’ loyalty towards any retail brand depends on how connected they feel to the same. AI solutions help retail businesses offer a personalized shopping experience to the customers. Advanced technologies such as deep face recognition will allow retailers to identify customers who frequent their stores and remember their likes, dislikes, aisle preferences, product preferences, etc.
With this data, retail outlets can create personalized recommendations of products and design promotions accordingly. By using advanced AI algorithms, retailers can get useful insights and decode consumer interest based on
- demographic data
- social media impressions
- digital footprints
6. Supporting intelligent and informed product searches
Simplification of product discovery for the customers is a boon for retailers. You might have seen many brands do this nowadays. I have seen Amazon do it. As a consumer, I might want to look something up that has attracted my attention.
With a modern AI system in place, customers only need to picture the product they like in the real world and use the same picture search if any retailer sells it on the web.
Combined with machine learning algorithms, retail software can easily classify millions of items for consumers in a matter of seconds. Such a system allows retail consumers to experience product catalogue and comparison in a very informed and detailed manner.
7. Help in-store operations streamlining
Store associates have to adorn many hats today because of the multichannel retail trend. Their job requires them to
- Receive and stock products
- Manage inventories
- Provide product information
- Keep track of promotional offers
- Handle merchandising
Retail AI helps streamline this by automating back-office activities and using robotics for performing quality checks in real-time. This way, retail outlets can save more time which can then be effectively utilized for other productive work.
Role of AI in managing the retail supply chain
Retailers can gain much profit with the implementation of AI in the supply chain. There is always room for improvement, which means faster product delivery and streamlined inventory.
Artificial intelligence allows retail business owners to forecast their supply chain, detect any inefficiency and create plans to make it more efficient. Let’s delve a bit deeper into how AI can help retailers transform the supply chain.
1. Centralize various networks in the supply chain
By implementing AI, retail owners can run both external and internal supply chain expense estimation. Retailers can use AI for
- Lowering the freight costs for both third-party partners and their customers.
- Making supplier deliveries quicker, accurate, and secure.
- Improving upstream and downstream planning for raw materials providers, logistics companies, and manufacturers.
- Controlling and lower various risks by better understanding multiple variables.
- Changing the course of action in case of unexpected events.
2. Powerful analytics and better prediction
Retailers can implement predictive and prescriptive analytics for their differentiated retail products and retail store locations. AI can extract crucial insight from the enormous supply chain datasets for supporting a faster and better decision-making process.
By connecting with other retail architecture systems, retail business owners can improve the planning of potential demand and supply and product capacity.
3. Well-researched route optimization
Retailers can automate trucks, ships, delivery robots, etc., and boost their supply chain efficiency with autonomous operation. By linking GPS tracking and artificial intelligence, retailers can optimize their present delivery routes and make future improvements.
Artificial Intelligence in Retail Statistics
By 2021, 73% of retailers plan to introduce AI to optimize their pricing. – Source: Aiiot
AI in retail statistics shows that 3/4 of retailers will use artificial intelligence for determining prices.
75% of companies plan to use AI systems to eliminate fraud. – Source: Aiiot
AI efficiency statistics show that smart algorithms are great in reducing credit card fraud. 3/4th of retailers are planning to adopt AI technologies due to this reason.
The Compound Annual Growth Rate (CAGR) to reach 15.3 billion in 2025. – Source: Meticulous Research
Artificial intelligence will grow at a CAGR of 35.9% by 2025. The increasing awareness regarding the technology in the industry’s multichannel and omnichannel segment improves the end-user experience. Such a trend is pushing retailers to adopt this digital advancement.
With machine learning, Amazon reduced its “click to ship” time to 15 minutes, a 225% decrease. – Source: McKinsey
According to McKinsey’s research into AI statistics, Amazon strategically acquired Kiva, a robotics company that automates the process of picking and packing in the warehouse. After this acquisition, the average click-to-ship time is 15 minutes, a 225% improvement!
Concluding thoughts: Lead the disruption as an early adopter of AI for your retail business
The global artificial intelligence market size was valued at USD 39.9 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 42.2% from 2020 to 2027. – GrandViewResearch
AI is continuously transforming every aspect of retail business. With natural language processing and machine learning, AI is replacing intuition with intelligent insights, giving retailers a future vision to start planning.
Business leaders must take a more pragmatic approach for fusing AI into their business process. They need to see that this is a capital-intensive technology that bears fruits in the long run. So, retail owners must set a long-term AI objective for ensuring hundred percent success.
Yes, AI implementation on a large scale seems overwhelming, but not with the right technology solutions partner like Rapidops. We support and guide our clients through every step of the digital transformation process, even after deployment. We did the same for one of the US retail giants.
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