As a result of the COVID-19 pandemic and the safety measures put in place around the globe, more people are shopping online than ever before. This has led to a change in consumer priorities. Now, customers expect an accelerated, personalized service to be available to them twenty-four seven.
Artificial intelligence solutions are emerging as a way to help retailers meet the demands of their customers. According to Tractica, this slice of the market alone will be worth more than $38.6bn in the year 2025.
In this article, we are going to highlight some of the benefits of using AI optimization in the retail sector and explore how some of the world’s biggest retailers are using AI technology to improve their internal processes and revolutionize the customer experience.
What are the benefits of AI optimization in the retail sector?
- AI optimization makes routine operations run more smoothly. AI algorithms can be used to reduce human error in the supply chain. By using robotics, retailers can also save on staff costs and pick and pack big orders with greater ease. Plus, the rate of product returns is reduced due to more comprehensive consumer data analysis.
- AI helps increase customer satisfaction. There are various ways in which AI can help improve the customer experience. Algorithms can collect and analyze consumer data, allowing companies to send personalized offers to their customers. AI technology can also be used to create an automated checkout service, reducing wait times and leading to a more positive in-store experience.
- Algorithms can be used to improve store layouts and drive sales. By analyzing everything from consumer preferences and weather conditions to expiry dates, these algorithms can create floor and shelf layouts which place products exactly where customers expect to find them.
- AI technology provides more effective data security. Machines can identify anomalies in security systems much faster than human personnel. By utilizing AI technology, companies can store all their customer data much more securely.
Now let’s take a closer look at how AI is transforming the retail industry, using real-world case studies as examples.
Seven ways AI is transforming the retail industry
1. Enhances in-store experiences
AI can be used to automate and elevate in-store practices. For this reason, Forbes Magazine recommends AI solutions to retailers who are looking to save time and improve their customer service. AI can take the place of human shop assistants, directing customers around the store and answering their queries. They reduce queues at checkouts and replenish shelves more efficiently using real-time stock monitoring capabilities.
Amazon has introduced cashier-less stores in 29 locations using their Go and Just Walk Out Shopping technology, which registers when customers pick things up and put them back on the shelves.
2. Use of chatbots in customer service
In today’s increasingly digital marketplace, it’s crucial to deliver good customer service online as well as in store. In addition to receiving helpful responses from retailers, most shoppers also value speed when it comes to interacting with brands online. Indeed, according to HubSpot, 90% of consumers rate an immediate response as important or very important when they have a customer service question.
Using an AI powered chatbot is an efficient way of meeting your customers’ needs. Chatbots can be programmed to answer FAQs, recommend products and to resolve complaints. Fashion retailer H&M have used a chatbot to help their customers navigate their catalog since 2016, with high-end brands like Tommy Hilfiger and Burberry recently following suit.
Over the next few years, it is anticipated that 80% of brands will adopt this method of online customer service. To remain competitive, think about how you could integrate an AI chatbot into your customer service policy.
AI can be used to predict price fluctuations based on changes in demand, seasonal trends, new product releases, etc. By collecting and analyzing data regarding similar products, competitor promotions, and sales figures, it can also help retailers predict the outcomes of various pricing strategies, allowing them to implement the model that’s most likely to increase their profits.
Retail giants eBay and Kroger are already using AI technology to optimize their prices and inform the promotions they offer.
4. Streamlines supply chain
Inefficient supply chain management adds up to an average annual loss of $1.1 trillion dollars for retail companies around the globe. But by implementing AI solutions, supply chain managers can keep track of all the different functions under their command – inventory, staffing, distribution, and delivery.
AI technology is particularly useful for controlling stock levels. By analyzing sales history, location, weather, trends, and promotions, retailers can use it to calculate the demand for specific products and ensure they have the right amount in stock. Thanks to AI, excess and out-of-stock scenarios could be eliminated, saving the industry trillions of dollars.
In partnership with BlueYonder, UK supermarket chain Morrison’s trialed the use of AI for stock forecasting and replenishment in 491 of its stores. It reported a 30% decrease in gaps on its shelves.
5. Provides customer insights
According to a study carried out by the Boston Consulting Group, “Brands that create personalized experiences by integrating advanced digital technologies and proprietary data for customers are seeing revenue increase by 6% to 10% – two to three times faster than those who don’t.” So, for retailers who are looking to increase their profits, AI solutions are the smart choice.
Facial recognition technology can identify returning customers and remember their shopping preferences. Advanced AI algorithms can identify consumer interests from demographics, engagement on social media and past search history. By using tools such as these, brands can provide a more personalized service to their customers.
6. Improves product searches
AI technology has the power to make product discovery much easier for customers thanks to machine learning. Machine learning software can classify millions of items from across the web in seconds, enabling customers to search for products online using pictures they take in store. Love the Sales’ website uses machine learning in this way to help customers find the products they are looking for at the best prices from online retailers.
7. Automates back-office tasks
In order to keep up with in-store and online sales, the roles of sales assistants and store associates have evolved to incorporate additional responsibilities, such as looking up product information and promoting special offers, as well as receiving and stocking goods and managing inventories.
In a warehouse environment, AI systems can help retail managers by automating back-office functions and carrying out quality checks, saving personnel time and helping the distribution team run more efficiently.