The use of artificial intelligence (AI) in the retail sector is nothing new. Retailers have long used AI to analyse previous purchases and online search history and proactively predict future behaviour based on the results of that analysis.
As technology has progressed, AI has allowed for data points to be analysed deeper and faster than ever before, and now, thanks to AI, the most forward-thinking retailers can work out exactly which product a consumer wants at what time. As a result, retailers can respond more effectively and more efficiently to consumers’ buying needs.
The power of AI has the potential to totally transform businesses within the retail sector and beyond with annual worldwide AI revenue expected to increase to $36.8 billion in 2025, up from $643.7 million in 2016. As retailers continue to battle both tough competition and the harsh economic environment that is prevalent across the sector today, AI could be one solution that would enable them to provide the best service and attract customers to their stores.
AI’s capabilities are growing all the time and becoming increasingly critical as a result. AI creates the potential for retailers to gain increasingly informed insights into their customers and prospects buying habits, allowing them to personalise interactions and help them to shape their products and services. Retailers will then be able to reap the rewards that this greater understanding will ultimately bring, such as increased engagement, conversion and revenue.
Looking more closely at the retail sector, it is possible to see AI’s impact across three key aspects: the in-store experience, the online experience and behind the scenes in operations. So, how exactly is AI transforming these areas and how does this translate for both the customer and the retailer?
AI has the power to completely transform the customer experience by making the customer journey much more relevant and tailored to individual customers. While we have traditionally looked to staff on the shop floor for information and advice, AI makes it possible for retailers to implement digital assistants which use past purchases and recent search behaviour to generate personalised recommendations for consumers as soon as they walk in the store.
With external data also fed into the assistant, it is also capable of considering external factors, such as the weather and the season, in order to make truly insightful product suggestions to customers.
For instance, if the customer is looking to purchase a jacket, the digital assistant will be able to take into consideration the customer’s size and personal preference as well as the season, so as to suggest the right type of jacket. These products are then made immediately available to the customer, meaning they don’t have to look around the shop to find them. This level of personalisation makes it easier for consumers to find the products they want, making for a quicker, more successful shopping experience. In turn, this is likely to encourage repeat custom and result in increased revenue.
AI isn’t just changing the way we shop in stores, but also how we shop at home with the idea of personalisation also extending to a retailer’s digital platforms. Thanks to AI, mobile and digital portals are recognising customers and customising the e-retail experience to reflect their current context, previous purchases and shopping behaviour.
This ensures products and content that appears on the retailer’s homepage, for example, is tailored to each individual customer, allowing them to find the items they want faster and directing them to items that the algorithm thinks they will like. Not only does this ensure customers find the right products quickly but it also increases the potential for customers to buy more than one item.
AI is also helping retailers to conquer voice assistants. These smart devices are a common feature of the home with 13% of US and 10% of UK homes owning a smart speaker – of these figures, 36% of US and 16% of UK smart speaker owners regularly use them to make purchases.
These are numbers that will surely rise in the coming years, particularly as Gartner predicts that 20% of all online searches will be done without a screen by 2020. To keep up with this trend, more and more retailers are beginning to use AI to create engaging, intuitive and easy-to-use voice apps, which will result in significant revenue gains. In fact, researchers predict that voice shopping will grow to over $40 billion in 2022, up from $2 billion across the US and UK in 2017.
The way consumers interact with retailers is also being transformed by AI-powered chatbots which respond to customer queries quickly and effectively. These AI-supported conversational assistants use natural language processing to help shoppers effortlessly navigate questions, FAQs or troubleshooting and redirect to a human expert when necessary. This enables retailers to improve customer experience by offering on-demand, always-available support while also streamlining staffing.
Fast-changing consumer preferences and agile competitors require retailers to be lean and enable a predictive, not reactive, approach to retail. Using a consolidated data framework driven by AI-enhanced insights allows retailers to make informed decisions and optimise their operations, resulting in a purposeful and seamless shopping experience.
Behind the scenes, this is being put into practice in a number of ways, but particularly in areas such as planning and forecasting demand. By mining insights from the marketplace, consumer and competitor data, AI business intelligence tools forecast industry shifts and make proactive changes to a company’s marketing, merchandising and business strategies.
Similarly, AI-supported logistics management systems adjust a retailer’s inventory, staffing, distribution and delivery schemes in real-time to create the most efficient supply and fulfilment chains, while meeting customers’ expectations for high-quality, immediate availability and support. Data-driven operations that are powered by AI ensure retailers have the right levels of staff and stock available to make for a pleasant and successful shopping experience.
Ultimately, AI has dramatically changed the way we shop, and the way in which retailers operate. When implemented correctly, AI is increasingly responsible for making the shopping experience more enjoyable and successful, while for retailers it is helping to streamline processes, increase engagement and cut costs through more effective planning. In such a competitive and increasingly challenging sector, retailers can’t afford to stand still, they must begin to embrace the transformative effect of AI if they are to succeed.