GUEST COMMENT The future of retail: tinkered, tailored, moulded… AI

Consumers were (rightly) demanding before the pandemic when it came to retail. Bricks and clicks, try-before-you-buy, next day delivery; the customer wasn’t just always right, they were used to a certain level of experience, and increasingly online. The pandemic pushed all of us to online only – and many digitally laggard retailers had to hasten building their digital storefronts.

The tech that underpinned that switch was, in the main, fairly rudimentary. Apps with easy-to-navigate UX, clear functionality and clever ‘nudge’ dynamics built in were the order of the day. For all the 2019 talk of AI, chatbots and machine learning, the ‘wow’ tech wasn’t quite there yet.

2023, however, is a brave new world for retail. AI and AR (augmented reality) are no longer PR award entries, they’re becoming clear market differentiators. While we aren’t yet living the world of 1982’s iconic Blade Runner – flying cars and superhuman robots – data-driven, tech-empowered commerce is a reality for many retailers. 

But what are the real-world implications of such a shift?

The manner in which data was gleaned, collated and absorbed for most retailers changed drastically, and optimisation and personalisation went from buzzwords to mission-critical musts for even independent retailers. 

Consumers have now flocked back to the high street, but their expectations of the customer experience remains as high in-store as it was digitally. Fortunately, tech businesses and in-store marketing teams weren’t twiddling their thumbs during lockdown, they were making the Blade Runner tech a reality. 

AI and AR have come of age for retailers. Marketing Dive states that 18% of retailers are already using AR as part of their business model, and 32% are either in the process or about to build AR into their day-to-day in 2023. Giants like Macy’s, Adidas and IKEA have led the way, and others are understandably following.

Walmart – while not the first – has been the biggest driver of a trend that is here to stay, ‘try it on’ commerce. Customers can upload a picture of themselves, on both the website or in-app, and see how clothes will look on themselves, wherever they are. The data from what kind of things would-be shoppers are trialling and visualising on themselves can then be used to unlock a previously unimaginable level of personalisation and tailored suggestions or offers. 

Ulta recently integrated a similar AR-powered tool to allow customers to try products in real time before purchasing. Not only did it lead to a boost in sales, but it decreased costly return rates and – crucially – accelerated user engagement by 700%.

The next generation of retail customers, Gen Z, also now expect this level of digital-first experience. A study last year found that nine out of 10 Gen Z shoppers would use AR to see what decorations or furniture would look like in their home before they buy.

From a media perspective, it means that brands can focus on targeting right at the bottom of the funnel – in a manner that customers will intrinsically like.

Higher up the marketing funnel, it means that a meaningful omnichannel approach is suddenly possible. McKinsey’s omnichannel personalisation research shows that there’s a 10 to 15% uplift in revenue from omnichannel personalisation strategies. Retailers – who are using AI and AR properly – can switch from ‘you might like this’ to ‘we know you’ll love this’.

The success of this approach has wider business implications too. Pre-planning for the following season based on qualified interest means that advertising spend and even stock plans can be catered for more accurately. If a sizeable number of users are trying on a blue sandal model in May, it’s clearer what level of stock might be needed in June. 

So what should be a retailer’s priority as they look to invest in AI/AR? Firstly, find the right partners who have demonstrable results to share. Secondly, look at what your competitors are and aren’t doing and explore where the competitor advantage might be had. Finally – ask your customers what they want from you. And then build what they need. 

Ecommerce has long faced difficulties of reach, limited feedback/data, inaccurate or unpredictable search modelling, a lack of trust and connection and the failure to create an authentic brand experience. But retailers investing now in AR and AI will quickly see the benefits. Chatbots, feedback tools, review aggregation and automated product suggestions can already come close to matching the best in-store experiences. 

2023 will be another tricky year for many retailers – but it’s clear what customers want. In a world of hybrid shopping, browsing online then buying in-store, ecommerce has become ‘seecommerce’. While retailers are understandably counting the pennies, tech investment is now something that can justify and return on its investment.

Yara El Saadani is ecommerce precision director at Wavemaker UK