Artificial intelligence changing the retail industry
Artificial intelligence is making significant advances. It improves medical diagnoses, handles boring office duties, assists banks in combating fraud, personalized social media adverts, and transforms struggling writers into amazing authors.
You might have anticipated some or all of these AI applications for this rapidly changing technology, but really? Physical retail stores? The integration of AI in the digital upgrade of traditional retail establishments and, as is somewhat logical, online shopping sites?
Indeed, AI is playing a role in the retail sector. Even within the still relevant, yet fiercely competitive, world of physical stores, AI’s influence is being felt. In both types of retail—physical and online—AIpowered solutions are enhancing the customer experience through an increasing variety of applications. The statistics support this trend: the worldwide market for AI in retail is expected to exceed $24 billion by 2028 and surpass $45 billion by 2032.
Multiple advantages of AI
AI in retail essentially relates to predictive analytics and machine learning. This technology can gather and examine data, identifying trends and deciphering vast amounts of information.
The upcoming phase of AI involves enabling sound decisionmaking grounded in data by providing accurate predictions and forecasts. Retailers can utilize AI algorithms that rely on customer data gathered from interactions with the store’s application. The results from this wealth of information can result in enhanced customer satisfaction, reduced costs, and ultimately, increased profits.
Here are several ways AI can benefit retail operations:
- Boost customer interaction, whether instore or online
- Provide instant assistance to customers seeking information through chatbots and instore kiosks
- Improve inventory control
- Guide marketing strategies
- Employ generative AI to develop product descriptions and advertising content
- Target advertising based on individual purchasing behavior and other considerations
- Use computer vision to direct promotions to potential customers
- Assist in optimizing prices
- Enhance instore product displays through sales data analysis, making them more appealing and potentially profitable
- Support loss prevention efforts
- Guarantee a smooth experience for customers across all platforms
Let’s look at a few significant ways that artificial intelligence is changing how retail works and improving how customers engage, allowing companies to base their choices on data and provide creative shopping experiences that draw in potential customers.
AI tools for enhancing retail operations
Retailers can implement AI analysis across their entire operations to gain clear insights regarding their customers, products, online shopping experiences, and physical stores. This insight allows them to enjoy various business advantages such as:
Improved demand prediction
Initially, there were paper spreadsheets, then came online equivalents. Now that AI is in the mix, those earlier methods of predicting customer demand seem outdated. With the help of AI analytics, the precision of demand forecasting has significantly improved. AI not only assists retailers in making confident pricing choices but also in ordering the appropriate amount of inventory (thanks to predictive analytics) and optimizing product arrangement. Consequently, shoppers can quickly find the items they need, exactly when they want them, in the right places.
Supply chain enhancement
McKinsey states that using AI for predicting supply chain needs can help lower mistakes by 20 to 50 percent. This leads to fewer lost sales and product shortages, which could decrease by 65 percent. Consequently, this can lower storage costs by 5 to 10 percent and cut administrative expenses by 25 to 40 percent.
What does this enhancement look like in reality?
- AI can find the quickest routes to collect items on a warehouse floor.
- Smart technology can speed up and make the price reduction process easier, helping to manage excess stock.
- For keeping track of inventory, camera systems and sensors can inform managers about which items need restocking.
- Managers can track which products were bought, which were returned, and where customers go after visiting a specific item.
- Notifications can be sent out when product supplies are running low.
What could happen by introducing these retail improvements? You might see significantly improved profit margins.
Combating theft in stores
Recent reports have pointed out problems with inventory loss caused by shoplifting, organized crime, and other unlawful acts. According to the National Retail Federation, the average rate of theft has increased to 1.6% in FY 2022 from 1. 4% in 2021, causing over $112 billion in losses, making it a serious concern for many retailers.
AI tools can assist in addressing this serious challenge in brick and mortar stores. One approach used during self checkout involves utilizing computer vision along with digital sensors, object recognition, and motion tracking to help deter theft in almost real time. This means shoplifters could be caught while using a secure scanning method.
AI strategies for attracting customers
Another important factor of AI’s effect on retail is its ability to improve the shopping experience.
Enabling customers to virtually try on products
From the perspective of buyers, augmented reality (AR) is an excellent resource. Instead of just estimating if a certain pair of jeans will be the right fit based on the size, shoppers can see how they would look wearing them. Some prominent instances include:
- As of spring 2023, Levi Strauss & Co was testing AI to help customers view clothes on models of different body sizes. A major advantage of augmented reality is lowering the number of returns, which can negatively affect retailers’ earnings.. Reports suggest that online returns in clothing exceed 25%, primarily due to size and fit issues, according to the jeans maker.
- Walmart enables customers to upload selfies and virtually try on clothes to see how they fit.
- Amazon Fashion offers AR for Snapchat users to try on glasses online.
Helping shoppers avoid long lines
As consumers become increasingly tech savvy, retailers need to ensure that all aspects of their shopping experiences function smoothly—almost seamlessly—to meet current consumer expectations and remain ahead with future AI developments.
AI solutions are making a big difference in this area. In physical stores, some buying tasks can be automated, allowing staff to handle more important jobs. For instance, eliminating a checkout counter, like Apple has done in its locations, can make shopping more enjoyable as customers look at items and engage with staff who can easily process their purchases when they are ready.
Some businesses have taken the effort to streamline stores to the next level. A good example is the advanced Amazon Go, where shoppers enter through a gate that scans their account via a smartphone app. They can shop and add products to their carts just like in a regular store. The key difference is that computer vision captures all the items they’ve “picked up. ” Then, they skip the checkout line and simply leave, and their accounts get charged.
Amazon leads the way in this space, but other traditional retailers may start using this cutting edge technology too, making this shopping style more widespread.
Making shopping enjoyable for customers and profitable for sellers
Thanks to AIdriven online shopping tools, retailers now have more chances to make visitors to their online stores even happier than they have been lately due to AI features.
How so? Through personalized experiences powered by AI.
As the saying goes, knowledge is crucial, and this holds true for AIdriven personalization. AI can assist in figuring out what buyers want and change their shopping journey based on that information. By gathering details on what specific customers look at and buy on your site, you can better understand their likes. Analyzing this data helps you organize and design online shopping experiences that fit customer habits and interests.You can turn this customer behavior data into advice for merchandising that managers can use for effective promotions. Or provide product suggestions based on someone’s recent searches and the items they’ve added to their online cart.
The more precise your tailored suggestions are and the better you connect with your customers, the higher the chances you have to gain loyal shoppers, motivate them to stay longer on your website, and boost your sales.
Providing outstanding customer support
With AI, customer satisfaction has improved significantly.
Do you remember the long waits (even winding through stores during sales) just to make a purchase?
Now, imagine the ease of shopping whenever you want and having a helpful robot that understands your needs and is available to chat at 3 a. m. or whenever you want to explore the online aisles of your favorite shop. After you fill your cart with great products, you can check out instantly and head to bed.
How can artificial intelligence help your retail company?
Now you are aware of some methods through which AI can dramatically enhance retail processes and allow you to stay ahead of your competitors. AI has the potential to assist almost any retail company. What about yours? It’s simply a matter of figuring out which AI tools would yield the most benefits for your investment and how significantly your profits might grow.
Are you looking for the perfect tech partner to help you integrate AI into your retail business? We at Algolia are eager to assist you in taking advantage of the latest AI advancements with our top quality search technology. Prepare to unlock the possibilities of your physical store, online shop, or complete omnichannel system and contact us today!.
