The retail industry is experiencing a major upheaval as the technological era changes and more customers are turning to e-commerce, particularly since it’s cheaper and easier than ever. One of the most prevalent solutions retailers are using in response to these trends is artificial intelligence (AI).
What Is Artificial Intelligence In Retail Industry
Artificial intelligence is the concept of machines that act in ways that emulate human-like intelligence. The main goal of AI is to create machines that can adapt and perform tasks as well as or better than humans.
In order to reach $19.9 billion by 2027, the artificial intelligence in retail market is anticipated to expand at a CAGR of 34.4% from 2020. AI has been used in retail for more than a decade to enhance the customer experience, but in the past two years it has become a more important part of an integrated system for retailers.
Artificial intelligence helps retailers gain valuable insights into who their shoppers are, what they want and why they’re buying from them.
Today’s retail industry is one of the most data-driven verticals you can imagine, and AI is expected to make more significant changes within the industry. As more people use smartphones over basic phones, retailers are seeing a shift in how they engage with customers, and now they need to use technology to do so.
For example, a retailer might let customers order from their website and then deliver it to their home or store. The retailer can then track the items shipped, who delivered them and when they were delivered through an integrated system that tracks what shoppers put into the system using their mobile device.
Importance Of Artificial Intelligence In Retail Industry
Artificial intelligence play a vital role in retail industry by ensuring the productivity of individual employees, performance of multiple employees and overall efficiency of supply chain. To avoid catastrophic failure due to siloed systems and failure to adapt to new demands automation and AI are the key to success.
Additionally, 20% of U.S. firms intend to implement enterprise-wide artificial intelligence solutions for service personalisation and enhancing consumer comfort, according to a PwC survey.
By using AI technologies and providing swift access to data, retailers can gain insights that can be used in numerous ways. This will help marketers plan future campaigns, provide personalized recommendations and increase operational efficiency by gathering data from all channels and customers.
For retailers, AI also benefits from better customer service via voice-activated chatbots that offer real-time guidance for items as well as in-store staff (e.g. number of visitors, time spent).
Benefits Of Artificial Intelligence In Retail Industry
Using machine learning to analyze valuable customer data can help retail businesses improve customer loyalty and the efficiency of their retail supply chain. By understanding what customers want and need, retailers can make better decisions about inventory, pricing, and promotions.
Based on product type, the chatbots sector of the artificial intelligence in retail solutions market is anticipated to hold the highest share in 2020.
Business leaders are looking to integrating advanced digital technologies, such as supply chain management and machine learning retail software, to help with demand forecasting. This move will help them keep up with the competition and maintain a high level of customer service.
1. Improved Customer Engagement
AI can help reduce the time it takes for a customer service representative to respond to a customer inquiry and give the customer a more personalized experience. And, in areas where physical face-to-face interactions are impossible, AI is the next best thing.
For example, some retailers are working toward implementing self-checkout kiosks that can interact with shoppers, determine what they’re purchasing and recommend new items based on previous purchases.
Self-checkout kiosks have already been used in retail locations as part of an integrated system with other devices like AI cashier systems and automated shelving units. The automated kiosks help retailers get people through the transaction process faster, while they’re still interacting with the retailer and experiencing personalized products.
2. Personalized Services
Perhaps one of the most significant benefits of AI used in retail is that it can help a retailer predict what customers want to buy based on their previous purchases and other actions.
Retailers can use this information when deciding what items to keep in stock, since they have a better idea of which products will sell well, how quickly they’ll sell and how to price them.
That way, retailers are more likely to have enough inventory for customers who want those items and less likely to waste space on products that don’t sell well or at all.
3. Improved Inventory Management
By integrating AI with a retailer’s inventory management system, the retailer may be able to save money on unnecessary inventory by knowing exactly when to order more of an item and when to cut back on orders that are still sitting in stockrooms.
They also can now instantly determine which items should be stocked in different locations around a city or region, so they can focus their efforts where they have the most demand. They’ll also have a better idea of what is selling quickly so they can reorder items before they run out at certain stores or locations.
4. Reduced Employee Turnover And Improved Employee Productivity
A CAGR of 15.2% is predicted for the big data analytics market in the retail sector, providing a significant growth opportunity for AI platforms and solutions over the ensuing years. In many retail settings, employees are spread thin, which is why one of the biggest challenges for retailers is improving employee productivity.
Smart retail solutions that use AI can help with these productivity challenges by identifying what employees like and dislike about their jobs and then using those insights to improve both their working environment and the company as a whole.
For example, AI solutions can monitor employee satisfaction to help with scheduling conflicts or provide training opportunities to encourage further engagement from that employee.
5. Better Warehouse Management
AI has also been used in warehouse management systems to analyze shipping trends, track inventory and determine which products will sell faster than others so they can be sent out first.
This way, retailers can use their system to prioritize inventory based on several factors, such as the popularity of an item, the time it will take to deliver to a customer and how quickly they expect it to sell.
By doing so, they’ll save money on unnecessary delivery and storage costs because they know what products customers want and how best to respond to demand in order to make sure they don’t run out of stock.
6. Improving Productivity With Warehouse Systems And Mobile Analytics
With improved warehouse systems that integrate AI, retailers can start using mobile analytics for optimization purposes that involve employees picking items off the shelf themselves. The other dimension of the mobile analytics space is for customers who want to take advantage of the benefits that AI helps with.
Mobile retailing is expected to be a $1.5 trillion industry, so retailers will be looking for ways to make their transactions as easy as possible and offer things like free shipping or free returns.
7. Increased Safety
Many retailers use sensors in their stores to help them combat shoplifting, theft and even employee theft. These sensors can often identify what’s happening inside a store and relay this information to security personnel through an integrated system, allowing them to put appropriate measures in place without causing undue alarm and risk.
For example, a sensor could identify whether someone is stealing items from a store, which would trigger an alarm that would help the retailer track where that person goes and what he or she does.
8. Product Creation And Design
AI can also be used to help with product creation and design in retail settings, particularly when it comes to the consumer experience. With AI, consumers can get more personalized shopping experiences based on their past purchase history, their current location and even the weather outside and within their homes.
Risks Of Artificial Intelligence In Retail Industry
E-commerce sales are anticipated to reach $7.3 trillion by 2025, which will increase the value of the AI in retail market from an estimated $1,714.3 million in 2021 to $36,462.5 million by 2030. In order to improve customer service, many retail stores are turning to advanced digital technologies.
By doing so, they are able to provide a better overall experience for their customers. In turn, this can lead to increased sales and repeat business. By investing in the latest retail technologies, businesses can stay ahead of the competition and provide their customers with the best possible experience.
1. Increased Costs And Efficiency Issues
One of the greatest challenges for retailers is optimizing their work force to drive operational improvement. As mentioned earlier, AI can help in this area by helping retailers understand what workers like and don’t like about their jobs and then providing training opportunities and other organizational interventions to help them feel more engaged while they’re at work.
In addition, AI can also reduce costs and improve efficiency by measuring productivity so managers know whether they need to adjust staffing levels or the staff’s schedule.
2. Privacy Issues
When it comes to privacy, there are a number of concerns with AI, particularly around how companies are going to use this information. For example, retailers may need to provide sensitive information about a customer in order to use AI tools, whether it’s the customer’s family structure or other details that could be used for future marketing.
3. Reduced Potential For AI Fraud
According to an article by Forbes, one of the biggest risks of AI fraud is harmed consumers and businesses. For example, it could take someone who is a simple thief five minutes to open an account with a service that uses AI before they start stealing money from their accounts or adding items to their shopping cart that they don’t actually want.
As AI systems become more sophisticated and can process data at a higher rate, it’s possible for this fraud to rise. This is why retailers will want to ensure the AI they use is properly vetted and has been tested and approved to help ensure compliance with data security standards.
4. Increased Consumer Confidence
The top 13 online shopping platforms will see a rise in sales of more than 20% in 2020, according to the UN. While most of the concerns seen above are focused on the potential for fraud, there is also an increased risk of consumer confidence issues with AI.
For example, retailers may not be able to manage AI systems if they get hacked or their network is sabotaged by a malicious actor. It’s important for retailers to be transparent with consumers so they understand how AI works.
5. Increased Risks With AI Misuse
Another concern tied to consumer confidence is the concern that AI can be misused in numerous ways. For example, retailers could use information they collect to market products differently and inappropriately to customers based on their demographics, income or other factors. It’s important for retailers to consider what risks exist if they mismanage customer data in this way.
6. Potential For AI-Mediated Discrimination
AI can also be used in a way that discriminates against consumers based on certain factors, such as gender or race. Retailers may want to consider the fact that AI could discriminate against customers based on information they have about them.
For example, retailers could use this data to decide where to place new products and services or focus their marketing efforts—for example, by showing products aimed at women in the women’s section of the store but not in the men’s section.
While some of the concerns are tied to consumer confidence, other issues may come up if people believe they’re being discriminated against because of their gender or race.
7. Increased Compliance Costs
As with any new technology that is considered “disruptive,” AI is also poised to create compliance risk for retailers. To address this issue, it’s important for companies to make sure they have the right policies and procedures in place early on.
Retailers may also want to consider implementing internal compliance measures that help them focus on how they can use AI in a way that adheres to certain standards and best practices. It’s also important to ensure these measures are updated as needed as well.
8. Increased Risk Of Data Loss And Collusion
Finally, AI introduces a number of security concerns that retailers will need to address as they move forward. One concern is data loss or theft. Another risk is collusion between different AI tools that retailers use.
For example, if a retailer uses several different tools to analyze customer data, it’s possible for malicious actors to get access to this information through other avenues.
AI has already had a huge impact on the retail industry. Thanks to advances in technology, consumers are able to use AI-powered tools like chatbots and self-service kiosks at convenience stores and grocery markets alike.
However, it’s possible that the future of AI in retail will impact these experiences in a number of ways. In the near future, shoppers may be able to use these tools while they shop in-store, allowing them to make adjustments to their shopping carts or make purchases from their mobile devices without ever going up to a cashier or kiosk.
For example, a shopper might notice that there is one product missing from her shopping cart and ask for it instead of going through the store again. Improvements in AI can also help retailers get a better idea of how customers want to interact with these systems in the future.