As the world is moving towards a digital age, traditional retailers face existential threats from the likes of Amazon and Walmart. To level the playing field, offline retailers are also turning to artificial intelligence as shoppers take a multichannel approach to making purchases. From helping customers find the items through visual search to personalizing their entertainment experience through chatbots, AI is revolutionizing the retail industry in a number of ways. Major retailers like Starbucks and Lowe’s use AI to improve customer experience.
Companies are investing hefty amounts on AI to stay on top of the game. In fact, the global annual spending on AI by the retailers will reach 7.3 billion by 2022. The most popular use of this technology in the retail industry is for search, recommendation engines for content, and data science. Companies like PayPal are using AI to spot fraudulent charges. To do so, it uses a homegrown artificial intelligence engine built with open-source tools. And there’s a lot more that can be accomplished with the help of AI.
Why AI in the retail sector?
According to a survey of 400 retail executives by Capgemini, AI could help retailers save USD 340 billion annually by the year 2022 by enabling efficiency in several processes and operations. Here are a few reasons why retailers are turning to AI:
- Artificial Intelligence is becoming the go-to for retailers because of the efficiency it brings to the operations by replacing humans. Humans are prone to errors, but this technology helps in eliminating the inefficiencies that humans bring into operations. Repetitive tasks can be easily performed by automation with better performance. A recent report by Forrester believes that Artificial Intelligence will replace 7% of jobs in the U.S. by 2025.
- The increased efficiency in the operations means increased profits for the company. From reducing production and shipping costs to providing a more personalized customer experience, retailers can benefit a lot from AI. According to Tractica, Artificial Intelligence and automation can help increase global revenues from USD 643.7 million in 2016 to USD 36.8 billion by 2025.
- With the help of AI, workers can focus on doing high-priority tasks that require human attention. No more wasting time on doing unproductive tasks.
How exactly is AI revolutionizing the retail industry?
According to an IBM report, which surveyed 1900 retail and consumer product companies across 23 countries, 85 percent of the retail companies plan to implement intelligent automation for supply chain planning by the year 2021, and retailers believe that the introduction of AI will result in 10 percent annual growth. Let’s see how AI will transform the retail industry.
Better Customer Service
AI has the ability to revolutionize the retail industry by making webshops a possibility that helps companies in marketing their items based on the consumer’s past purchases and search habits. Retailers realize that excellent customer service is critical to running a successful business. Therefore, it is important to have the an effective customer service solution and AI does exactly that making customer service better.
Offline stores can also benefit from AI in a number of ways. The next time you visit a store you may come across a friendly robot instead of a salesman. Consumers can freely ask as many questions as they want from the bot which they normally hesitate asking from an actual salesman. Let's say you're looking for a moisturizer. You can ask for product recommendations from the robot based on your skin type. Thus, the overall experience becomes interactive. Such machines and robots can also save a lot of time.
Minimum Advertised Price (MAP) is the lowest price that a retailer can advertise the product for sale. Products sold at a price lower than their MAP price can badly affect the business for retailers. It also dissolves a brand in the eyes of the customers. Therefore, it is important to track the sellers who violate MAP pricing. Retail analytics firm, Intelligence Node, uses AI to help the brands selling online to prevent the violation of their MAP pricing. It tracks the products in real-time and monitors them. If MAP violation is observed, brands will receive a report about the reseller, and they can take actions against them.
Better Data accumulation
Artificial Intelligence can help retail companies in better accumulation and organization of the massive customer data. Using this data, AI can draw conclusions and create a more personalized shopping experience for the users. When you have the user data, you know what they like. It helps in creating a more engaging experience for the users based on their interests and likes. Also, retailers can predict how well a product will perform in the market by learning from the past. This helps them make better strategic decisions.
Targeted Marketing Campaigns
Using AI algorithms, retailers can run targeted marketing campaigns. By creating customer specific ads based upon their region, preferences, and purchase habits, the conversion rates can skyrocket. Businesses can increase their conversion rate from 2 to 3 percent by creating ads based on users’ interests. Targeted marketing improves customer loyalty and customer retention. It is very important to retain customers as 80 percent of future profit comes from 20 percent of existing customers.
Virtual Trial Rooms
Virtual Trial Rooms can be a reality with AI. Trying out different dresses can be quite overwhelming and time-consuming at the same time. Also, it is not possible to try out every option you have. Virtual trial rooms are equipped with digital mirrors that make it possible for shoppers to try different dresses without having to wear them. Shoppers can experiment with their outfit using a touch-based interface. Cosmetic companies can also benefit a lot because customers can see how a product would look on them without actually applying the product.
Lowe’s LoweBot is a great example of how robots are improving in-store customer service. The bot helps the customers find an item they are searching for and provide other product information. Lowe’s introduced the bot back in 2016 at its San Francisco stores. Customers can ask for the products they need to locate through speech or via touch panels. It is also capable of performing real-time inventory tracking.
These are some of the ways AI is changing the face of the retail industry. Artificial represents the future of modern business. For retailers to stay in the competition, it’s time to put AI to good use.
Recommended Read: How Retailers Like Starbucks Use AI to Improve the Customer Experience