Retail companies are drowning, overwhelmed by the abundance of detailed data they collect. Yet the most successful companies in this sector are investing in revolutionary artificial intelligence (AI) technology to analyze, make sense of, and act upon big data to continuously improve the customer experience.
AI simplifies retail by translating vast volumes of big data into rich, actionable insights so companies can make smarter, faster, fact-based decisions. This technology drives operational efficiencies, saving companies time and effort.
Those business benefits help explain why AI has made waves in retail. Here are several ways AI has become pervasive, influencing retail processes, products, and people:
Product discovery:
To make it easier for consumers to find what they’re looking for, AI helps with fast visual search. AI-fueled image recognition technology within mobile retail apps allows consumers to upload a picture, such as a photo of a jacket they saw someone wearing on the subway. The mobile apps can match the image with a similar product. Target and Pinterest’s partnership allows Target shoppers to use the Pinterest Lens visual search tool for Target registry and mobile app shopping. This AI tool detects items on the web or in a Pinterest library and suggests related items.1O’Shea, Dan. Target teams with Pinterest for visual search. Retail Dive. September 26, 2017. Online homeware store Wayfair also embraces AI for easy, image-based search.2 Terrelong, Zen. What the future of retail will look like, according to Google. Real Business. October 5, 2017.
Voice shopping:
AI-driven virtual assistants, like Amazon’s Alexa and Google Assistant, have grown in popularity as they allow conversational commerce using smart speakers, including Amazon Echo and Google Home devices. To compete in this new retail space, Walmart and Home Depot teamed up with Google to allow voice shopping.
In-store tech:
In checkout-free Amazon Go stores (currently open in Seattle and Chicago and coming soon to San Francisco and New York City), AI algorithms analyze video feeds of shoppers to identify exactly which customer picks up a product and exactly which product they pick up. This information allows Amazon to accurately charge customers when they exit the store.3Wells, Jeff. Amazon Go expands its reach to New York City. FoodDive. September 10, 2018.
Experts say consumers shopping in other brick-and-mortar stores will soon use AI-powered mobile apps to pinpoint specific items. For instance, they can ask their smartphones, “What aisle is the syrup in?” and receive an instant response tailored to that particular store’s layout to navigate to their desired product category.4Halzack, Sarah. Listen Up, Retailers: Don’t Ignore Voice Shopping. Bloomberg. November 29, 2017.
E-grocery fulfillment:
British online supermarket Ocado, which partnered with Kroger, uses AI-powered robots in its warehouses to efficiently fulfill online orders. The robots can pick up a 50-item order within minutes, for seamless service that delights consumers with speed and accuracy.5Clarke, Paul. Ocado Is Transforming Online Grocery Shopping with AI, But A Skills Challenge Lies Ahead. Harvard Business Review. May 15, 2018. Kroger is also testing driverless last-mile grocery delivery using sleek, AI-powered autonomous vehicles made by the company’s strategic partner Nuro.6 Marr, Bernard. How U.S. Retail Giant Kroger Is Using AI And Robots To Prepare For The 4th Industrial Revolution. Forbes. July 20, 2018.
Marketing personalization:
AI can analyze an individual consumer’s data from across channels for rich insights and customized marketing. The technology can spot consumer shopping patterns, such as an individual’s tendency to buy for price, availability, or promotional incentives.7 Martino, Victor. The challenger brand challenge has just begun. just-food. January 11, 2018. To personalize products, Coca-Cola is developing AI to allow consumers to order their favorite blend from any vending machine, with the machine mixing the beverages to their individual taste.8Marr, Bernard. The Amazing Ways Coca Cola Uses Artificial Intelligence And Big Data To Drive Success. Forbes. September 18, 2017. Also, The North Face partnered with IBM Watson to create an AI tool that asks shoppers multiple questions about their personal preferences to tailor product recommendations to their individual interests.9Parker, Mariah. How The North Face is using Artificial Intelligence to close the gap between the in-store and online experience. buZZrobot. November 13, 2017.
Assortment strategy:
AI can rapidly scan the e-commerce landscape to spot emerging product trends, perform efficient competitive analysis to pinpoint gaps in the market, and improve the accuracy of volume forecasting for effective assortment planning and inventory management. For a more robust online offering, Walmart.com used AI to expand its online assortment from 700,000 items in 2011 to 60 million items last year, a figure that excludes products from Jet.com, Walmart’s e-commerce acquisition.10Townsend, Tess. How AI helped Walmart go from 700,000 to 60 million items online. VentureBeat. October 23, 2017.
Pricing strategy:
Many forward-thinking retailers and suppliers embrace AI to change their products’ online pricing in real-time to stay competitive among savvy shoppers armed with comparative pricing information. For example, some e-commerce sites apply AI to their online pricing strategies to ensure they always sell specific items for 10 percent less than Amazon’s prices for the same items.
Product recommendations:
Beauty giant Sephora offers an AI-based app to help consumers find specific shades of cosmetics by simply uploading a photo. The technology matches an individual consumer’s skin tone, shade of hair, and eye color to recommend flattering products, so shoppers feel confident buying online, and reducing returns.11Azfar, Rakin. Sephora wields AI for new wave shopping experiences, innovating in personalization. RetailDive. 2018. Meanwhile, Amazon masters the use of AI to make effective suggestions about what consumers should read next, which products to add to their shopping lists, and which movies to watch.12Levy, Steven. Inside Amazon’s Artificial Intelligence Flywheel. WIRED. February 1, 2018.
Product analysis:
SAP’s consumer products expert, Don Gordon, suggests health-conscious consumers could use AI for efficient product analysis with the help of their smartphones. “An app using AI could provide a real-time ranking of snack foods, based on ingredients like sugar, fats, and artificial flavors,” which could enhance sales and loyalty with accurate data insights at the exact moment consumers are shopping in stores or online.13Martino, Victor. The challenger brand challenge has just begun. just-food. January 11, 2018.
Customer service:
AI-driven chatbots make customer service more efficient by allowing retail companies to serve consumers — and gain consumer insights — 24 hours a day. These computer programs simulate human conversations, giving shoppers access to retail companies wherever they are and whenever they want.14 Mérineau, Etienne. How Retailers Can Adapt To Rising Customer Expectations. Forbes. July 20, 2018. That’s why major brands like Sephora and H&M launched bots to help serve shoppers as they browse and buy their products around the clock.
Productivity:
Retail companies are adopting AI to replace menial tasks with meaningful work. AI automates administrative, repetitive, and low-value tasks, such as data entry and number crunching, which frees up associates and managers to spend more time serving customers. Delegating mundane tasks can improve retail companies’ overall productivity, while lowering their costs.
Admittedly, global headlines warn of AI’s threat to retail workers. Yet MIT’s Luis Perez-Breva states, “Computers aren’t good at automatically cleaning data; humans are.”15Goldstein, Phil. What Retailers Must Know to Successfully Launch AI and AR. BizTech. March 22, 2018. While AI will replace certain types of work, it will also fuel demand for retail talent to protect data quality across the supply chain and to connect with shoppers in creative, empathetic ways robots can’t replicate.
AI is the future of retail
Although this list of AI’s retail applications is far from exhaustive, it proves the technology offers versatile applications for retailers and suppliers. AI allows companies to mine data for actionable insights that systematize retail decisions related to processes, products, and people to improve the customer experience. To remain competitive, retail companies need to consider how AI fits into their business strategy, as the technology’s compelling retail benefits and ubiquity suggest AI is just getting started.