Artificial intelligence has taken the world by storm in a number of different ways, and it’s no surprise that it’s predicted to rise significantly in the coming years. It’s a growing part of everyday life with smart assistants like Siri to now self-driving cars – we can only imagine what the future holds with AI on our side.
As it stands at present, a lot of time and resources are being invested in artificial intelligence across the world, in a range of various industries, including retail. In this blog, we share how to leverage AI in the present, as well as what we can look forward to in the future, with real-life examples of AI in retail.
Here’s what we’ll cover:
- What is AI in retail?
- What are the benefits of AI in retail?
- How are retail companies using AI?
- How will artificial intelligence affect the future of retailing?
- How is artificial intelligence used in fashion retail?
What is artificial intelligence (AI) in retail?
Artificial intelligence (AI) is the term used for computer science that builds smart machines that are capable of performing tasks that typically require human intelligence. AI is helping to automate, model and even improve the capabilities of the human mind in an effort to boost business efficiency.
AI in retail is leveraged by retail businesses of all sizes, from assisting with day-to-day operations to automating many time-consuming tasks – all of which can enhance a shopper’s experience and ultimately help to boost revenue.
What are the benefits of AI in retail?
The evolution of retail has grown and changed so quickly over the last few decades, with so much technology available to assist retail businesses from many different angles – it’s no wonder the industry is continuously booming.
Aside from the sheer speed and business intelligence that AI can provide, a few other benefits of AI in retail include:
1. Better supply chain management
One of the biggest benefits of utilising artificial intelligence in your retail business is the assistance in routine and time-consuming tasks. For example, AI can assist with logistics, helping drivers find optimal delivery routes.
2. A better shopping experience
AI can help create the best possible customer experience for your retail store, making it easier than ever to exceed customer expectations, customer loyalty and customer satisfaction. AI-powered search engines are able to understand users in real-time and predict search behaviour while AI-powered recommendation platforms adapt to shoppers in real-time to boost conversion and AOV. From reduced shopping time with a seamless shopping experience to more personalised experiences – shoppers love AI.
In addition, AI can also help you reduce friction from out-of-stock.
3. Reduced overhead costs
When you have the right data collected from AI, you can forget all about additional costs with merchandising and marketing – AI can help you target those who are likely to buy from your retail store.
4. Data that helps drive decisions
Goodbye guesswork and hello to optimised data you can use to drive your business forward. Did you know that 44% of executives say the biggest benefit of AI is generating insights they can use to make decisions? For example, AI can help us better analyse data from campaigns, or customers to draw conclusions and make decisions for better future efficiencies.
Whether it’s collecting data from products, campaigns, customers, sales or trends – AI should be a priority because it can help update, manage, and enrich customer databases as well as be processed to drive better decisions.
5. Cookieless personalisation
Although third-party cookies are a popular choice for marketers worldwide, unfortunately, they don’t always come to the party with accurate targeting, often doing more damage to one’s brand reputation than good.
Luckily, with AI on your side, you can collect first-party data instead to hyper-personalise your store and create contextual, real-time experiences that exceed expectations and make a lasting first impression. AI tools such as Shopbox can enhance your customer experience without knowing anything about the visitor. Each and every visitor will get a personal, tailored experience in real time. Brands can keep those visitors coming back without resorting to ‘stalker’ tactics that might make them feel uncomfortable or spammy.
6. Increased profit
The biggest benefit of all? Competitive advantage. According to Gartner, AI price optimisation can help grow revenue from 1% to 5%. Simply put, AI can give businesses a huge competitive advantage over businesses that aren’t using AI – they can do everything a lot better and a lot faster too.
With the help of better efficiencies, better data optimisation, reduced costs, operational efficiencies and improved customer experience, customers are more likely to choose the more efficient business over the other and this results in an increased profit, of course.
How are retail companies using AI?
We know the benefits of using AI but how is AI used in retail exactly? Here are a few examples of ways in which retail companies use AI conversion.
Optimised product location
Using historical data and browsing history, AI algorithms can pick up on consumer preferences, product location, seasonal sales and even weather conditions to suggest the best place to stock products. For this reason, retailers using AI often choose to optimise their products by location.
Not only can retailers find the best location for their products, but customers can also find their products more easily. In some cases, retailers can use data collection from artificial intelligence to identify where customers often find products they’re looking for.
Day-to-day operations like merchandising
Manual merchandising is time-consuming, biased and takes a lot of effort with stock changes every season but with the help of AI, merchandisers and eCommerce managers can automatically optimise product selection, pricing and more. AI-powered smart merchandising can help retailers create effective dynamic experiences by showing real-time contextual recommendations to each shopper while reducing the effort required for stock updates.
Supply chain operations in a magnitude of industries are looking at harnessing the power of AI-based models to help better forecast demand, enhance distribution, manage supply, and streamline delivery. As a result, companies are seeing a reduction in costs and efficiency in many different ways from operations to shipping – all of which result in better customer satisfaction. It’s all thanks to insights from the market, consumers, competitors and AI business intelligence tools that forecast these industry shifts.
Before AI assistance, batch processing this kind of data would take an enormous amount of time, not to mention, was not always accurate. Today, AI forecasts are quick, up-to-date and extremely accurate. This allows businesses to rapidly adjust their strategies based on trends, behaviour, and predicted events, in an effort to ensure inventory levels and operations are optimised as best they can. This is crucial for retail businesses that depend on quick service and customer demand.
Facebook dynamic ads
It is no surprise that Facebook and other social media platforms use AI and machine learning to create better, more efficient advertising.
According to Facebook, “Machine learning is a system that learns as it receives new data, without being explicitly programmed, to carry out complex tasks quickly and efficiently. Facebook uses machine learning to generate the estimated action rate and the ad quality score used in the total value equation.”
The system predicts each person’s likelihood of taking the advertiser’s desired action, such as clicking the link. It does this by using data based on that person's behaviour on and off Facebook, as well as the content quality of the ad, time of day, and interactions between people and ads.
Over time, as more people view an advert, share feedback, or click through to make a purchase, the system gets better at predicting the estimated action rate and ad quality.
Chatbots to the rescue
Talking robots aren’t anything new, in fact, chatbots are one of the biggest uses of AI in online shopping. Since chatbots can answer 80% of standard customer questions, why hire a human when a chatbot can do it all and at a much quicker pace?
According to WP ERP, companies like Pizza Hut, Sephora and Whole Foods are putting a major focus on developing AI chatbots to automate their order-taking process and ensure better customer service.
Here are just a few benefits of using a chatbot:
- 24/7 customer service
- Avoid human error
- Automate sales tasks
- Answer FAQs
- Multi-language support
AI product recommendations
Of course, the best for last. Artificial intelligence can help collect and analyse consumer behaviour to recommend products based on actions, browsing history and previous purchases. All of this data can help predict future behaviour and recommend the right products at the right time to cross-sell and upsell – two methods that will help increase AOV dramatically.
AI shopping can help suggest products that would pair well with their purchase in their cart or suggest similar products based on their unique browsing history and other data. AI product recommendations can help customers build confidence in their purchase decision, with guided discovery, predictive merchandising, automated assistants, or shopping assistants who can help narrow down a selection of products based on the customers’ unique preferences.
The benefits include:
- Reduced cart abandonment
- Increased dwell time
- Reduced bounce rate
- Higher revenue through conversion, AOV and marketing ROI
- Higher customer satisfaction and retention
- Bring the in-store shopping experience online
How will artificial intelligence affect the future of retailing?
The future of AI in retail looks very promising indeed. Of course, there are still a few challenges of AI in retail that still need to be solved. But if we look at how AI has changed the retail industry in a short period of time with its rapid growth, we can only imagine that as technology continues to advance, so will the artificial intelligence space in retail too.
While inventory robots are already restocking shelves and sensors are tracking customer traffic patterns to enhance store layouts, the future of AI in retail presents a unique opportunity to cross-sell in-store and online.
We’ve already seen how the pandemic accelerated AI into retail with a need for contactless shopping, resulting in stores such as Flash 10/10 in Paris by retail giant Carrefour, as well as the Middle East’s first AI-powered store, Carrefour City+, launched in Mall of the Emirates.
But how will AI change the retail industry in the future? Whilst none of us know what the future holds, a few future applications of AI we can look forward to could include autonomous cars/drones for delivery, AI-powered robots in manufacturing, and even Google is working on AI assistance that can place human-like calls for appointments at local businesses. But all of this is only the beginning, only scratching the surface.
Get ready to experience technologies that were once only ever considered science fiction – how exciting!
How is artificial intelligence used in fashion retail?
Specifically, in fashion retail, AI conversion is driving the future, and making it an exciting space to be in.
But why is AI needed for the fashion industry? Well, in a world where fashion is the most competitive industry, it’s an important edge to have over competitors, as well as not to fall behind on what customers expect. But even more importantly, with the help of AI in retail fashion, businesses can gain even deeper insights into consumer behaviour and preferences.
Here are a few common ways in which AI is used in fashion retail.
- Complementary products: Consumer psychology data showcases that people are more likely to buy a product if it is paired with other products that complement it, especially fashion items. But when style is so subjective, these suggestions need to be tailored to every unique shopper’s interests and tastes, not generic “shop-the-look” – and that’s exactly what new generation AI shopping assistants are doing.
- Styling advice: Based on deep data points such as clothing size, pricing preference, body type, and personal preferences built over time, AI-powered fashion assistants can recommend the best items for each individual shopper based on behavioural psychology principles like ‘price anchoring’ and ‘nudging’ – keeping shoppers engaged, reducing returns and boosting customer satisfaction. It’s a ‘virtual’ personal shopper service experience!
- Unique promotions: AI-based promotions are one of the best ways to engage regular customers, offering relevant discounts and coupons that are unique to their shopping needs, as opposed to a catch-all ‘bargain basement’.
- Personalised recommendations: Every shopper appreciates feeling understood. Fashion retailers should utilise hyper-personalised recommendations based on customers’ individual preferences like taste and style to ensure they only see relevant items.
AI in retail is a smart choice
It’s safe to say that in the retail space, AI shopping is quickly becoming essential for most businesses, and early adopters have already reaped the benefits with financial gains over their competitors. Those who are yet to integrate AI tactics into their online and offline stores may find themselves forced to adapt to AI strategies sooner rather than later or risk falling behind industry leaders.