• AI
  • 11 min read
  • May 2021

11 Ways AI in Retail Industry Reshapes Business Processes

While talking about technological advancements in retail, we cannot leave out the speed, efficiency, and accuracy AI in retail has brought to the mix. Advanced predictive analytics is enabling retail owners to make better data-driven business decisions.

Digital disruption of industries is not a new "term" anymore, but it is still a far-fetched reality for those who have yet to realize its benefits. Technology has spearheaded the much-required change in the business process, bringing seamlessness and better judgment faster ROI, and revenue.

When merged together, IoT, advanced data analytics, machine learning, and AI (artificial intelligence) can create data that can then be used to create better business forecasts. This gives retailers who are trying to capitalize on the market by being digital disruptors an advantage.

The AI 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.

global market insight

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Check our infographic to know how AI is revolutionizing the retail industry!

Why should you read this article?

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 overall retail experience for customers
  • Improving the business productivity 
  • Need for a higher return on investments 
  • Streamlining of inventory management 
  • Supply chain management

What is AI in retail? 

AI in retail

Artificial intelligence is enabling retail systems to work seamlessly by optimizing

  • customer experiences 
  • forecasting 
  • 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. 

Once retailers adopt these disruptive technologies, they self-enable a wide range of AI capabilities, like

  • intelligent display ads 
  • smart shelves 
  • endless aisle kiosks
  • enhanced inventory control 
  • smart self-checkout 

Learn how our solutions help retailers stay ahead of the curve on our retail industry page.

What is the scope of AI in retail?

Retail business owners can utilize artificial intelligence to drive faster decisions related to

  • marketing 
  • product management 
  • supply chain management
  • inventory 

Artificial intelligence, combined with machine learning, big data analytics, and advanced business intelligence, will help fast-track the process of turning insights into action.

Machine learning and deep learning technologies will significantly influence how the retail industry operates. Retail businesses can use machine learning and deep learning technology to offer a personalized retail experience to their end-users when browsing through products online or in the store.

As retail businesses focus 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 logistics 
  • Using their existing data for increasing conversion 
  • Customizing the shopping experiences with predictive modeling 
  • Micro-targeting 
  • Pricing 

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 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

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 queues near cash counters with self-checkouts, helps replenish stock on shelves in real time, and digitizes the store display and trial rooms. It is highly recommended for retailers who want to optimize their resources, enhance their customer service, and provide excellent customer service.

Amazon is the pioneer in this field, 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 also reduced in-store operational costs by introducing smart shelf tags, replacing traditional paper price tags.

2. Chatbots will consistently enhance customer service

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. More retailers are moving closer to building their interactive chat programs, and 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 customer interactions. 

H&M developed a chatbot on Kik that enabled customers to choose from recommendations, filters, and style preferences. The same technology pushed the fashion brand ahead of its competitors in 2016.

3. Flexible price adjustments on retail products 

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 in running 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 to adjust prices by 

  • seasonal trends 
  • competitive products 
  • consumer demand 

4. Effectively manage the supply chain and logistics 

manage 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 retail supply chain management is easily achievable in real time with the help of artificial intelligence. Those aspects are 

  • inventory 
  • staffing 
  • distribution 
  • delivery 

5. Utilizing customer insights for better personalization

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 to any retail brand depends on how connected they feel to it. AI solutions help retail businesses offer a personalized shopping experience to 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 for 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 

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 seconds. Such a system allows retail consumers to experience product catalogues and comparisons in a very informed and detailed manner.

7. Help in-store operations streamlining

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 to perform quality checks in real-time. This way, retail outlets can save more time, which can then be effectively utilized for other productive work.

AI in retail is managing the supply chain 

Implementing AI in the supply chain can benefit retailers. 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, more accurate, and more 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 their planning of potential demand, 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.

AI 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 at reducing credit card fraud. Because of this, three-quarters of retailers are planning to adopt AI technologies.

The Compound Annual Growth Rate (CAGR) is 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 segments 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 in retail 

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 in retail is continuously transforming every aspect of the already booming industry. With natural language processing and machine learning, AI is replacing intuition with intelligent insights, giving retailers a solid headstart for efficient scalability.

Business leaders must take a more pragmatic approach to fusing AI in the retail process. They need to see that this is a capital-intensive technology that pays off in the long run. So, retail owners must set a long-term AI objective to ensure 100 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

If you want to carve out the details of changing your retail business with an award-winning digital product development company, then reach out to us


Saptarshi Das

9+ years of expertise in content marketing, SEO, and SERP research. Creates informative, engaging content to achieve marketing goals. Empathetic approach and deep understanding of target audience needs. Expert in SEO optimization for maximum visibility. Your ideal content marketing strategist.

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