How is Artificial Intelligence defining the Retail industry?
Whilst AI is still mainly being used in supply chain functions, retail companies are focusing more on using it in-store and through ecommerce functions.
‘Retail is one sector undergoing an AI-driven revolution, with predictions of application and services in the market reaching $27 billion by 2025, up from $713 million in 2016’ Source.
Amazon is leading the way with AI. ‘More than a third of Amazon’s sales are driven by its machine-learning-powered recommendation algorithm’ Source.
How are retailers using AI?
Retailers with more of a focus on online operations are growing at twice the rate of high street retailers. High street stores need to innovate to stay in competition with larger online brands and AI is the most important tool to do that.
AI is affecting the retail industry in 4 ways:
AI can improve the communication between a consumer and a brand. The purchasing process can be improved through the use of chatbots, conversational robots and voice shopping. A personalised experience online can be driven though AI helping retailer’s present content that is relevant to each consumer and, so, make the best use of screen real estate on mobile devices. Many retailers are already personalising homepages, emails and apps in order to help shoppers navigate the huge range of products available online.
2. Optimisation of pricing
Larger companies that use AI as a part of their pricing strategy can quickly change the price of all their products to match demand or compete with other retailers. Traditional Retailers without AI can quickly find themselves being over priced, driving consumers to their large competitors.
3. Rationalisation of inventory
In the retail industry it’s so important to have the right amount of stock to meet demand. Many retailers often get this wrong and carry too much or don’t have enough. The use of AI can solve these problems by forecasting demand and enabling automatic replenishment.
4. Experiential retail
Due to the increase of online shopping, high street retailers need to offer better in-store experiences to compete. Simplifying the shopping process, increasing engagement with their customers and reducing the information gap between ecommerce and physical stores will improve the overall consumer experience.
Why are they using it?
AI allows companies to make informed decisions that can vastly improve business growth. Insights generated through AI systems drive automation, decision-making and improve the bottom line of the company. Retailers are able to forecast demand and understand buying patterns with a lot more accuracy.
Dominic Jones, Innovation Architect - Doris IT
Using online purchasing data, retailers understand consumers buying preferences and can organise the layout of a store in a way that can potentially increase revenue.
AI is being widely used by online retailers and evidence has proven the success it has on the brands bottom line. High street retailers need to innovate with AI to stay in competiton.
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