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Retailers missing out on $340 billion AI windfall as they neglect operations

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Retailers are missing out on the benefits of using AI in operations, according to a new report.

The Capgemini study, titled ‘Building the Retail Superstar’, found that the proportion of retailers deploying AI had risen rapidly over the last two years, increasing from 4% in 2016 to 28% this year.

However, it found that only 1% of projects had reached multi-site or full-scale deployment. 74% were in the proof-of-concept stage while 24% were in the pilot phase.

Most projects focused on customer-facing AI, with Louis Vuitton making use of chatbots, France’s Auchan using personalised promotions and Zalando using image recognition to present customers with similar products to what they are searching for.

Only 26% of projects focused on operations however, which Capgemini said was a missed opportunity considering that the industry could save a combined $340.2 billion per year by introducing AI in areas such as logistics and returns.

The report highlighted a few examples of companies successfully using AI in operations, with the UK’s Ocado making use of automation in its picking and packing processes. The company’s CEO recently attributed its rising revenues in Q4 to its new customer fulfilment centres.

The authors advised retailers to focus on easy wins, simpler projects which are easy to implement, despite perhaps having lower benefit projections.

Overall, larger retailers were found to be the most active adopters, with 41% of the largest 100 retailers by revenue working with the technology and 28% across the largest 250.

Pure play online retailers were found to be the most advanced in their AI journeys, with 68% already working on AI at any level. The figure was 30% for omnichannel and only 10% for brick and mortar retailers.

The UK and France were found to have the highest penetration of AI projects, with the UK having 39% penetration and France 37%.

The report surveyed 400 executives from retailers across the UK, France, Germany, Italy, Spain, Sweden and the Netherlands as well as China, India and the US in August 2018.

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