Ignore artificial intelligence at your peril
Published May 12, 2021
For retailers AI and machine learning can deliver game changing benefits
Artificial intelligence (AI) and the machine learning it enables can be fascinating subjects often leading to hypothetical questions like “Will AI eventually take over humankind?” That notion was laughable a decade ago—and it’s still not likely—but AI has made some large advances towards becoming more humanlike, including the basics such as reading, writing, speaking, smelling, touching and more. It’s even making actors like Robert Dinero look thirty years younger and allowing cars to drive themselves. And for retailers, AI is delivering a lot of benefits which may explain why AI in the retail industry grew by 600 percent in two years—and that was before the pandemic.
What is AI and machine learning?
Before delving into how retailers can and should be using AI to boost their business, what is it and how does machine learning relate to AI—are they the same thing? First a quick answer to that question. No, AI and machine learning are not the same thing. Machine learning is a subset of AI, it enables it. But AI also needs machines (computers and robots) to demonstrate its human-like intelligence.
AI allows computers to perform tasks that normally require cognitive reasoning and decision making. AI tracks real world inputs, assesses and learns from the data and surrounding context, and drives optimal actions in response. In short, it makes decisions without allowing human emotion to get in the way.
AI interrogates this data and it learns from the patterns it discovers, while avoiding many of the biases that plague human behavior. In many cases, AI can help drive more powerful action and can be used to augment and automate some of your business decision making. And the concept of AI isn’t new.
The basic elements of AI can be traced back to Mary Shelley’s 1818 novel Frankenstein (some claim it’s the first science fiction book to be published) about a “monster” that was created using human body parts and chemicals. But today in real life, AI is accomplishing things that might have blown Mary Shelley’s mind—who was just 18 when she began writing the book.
Related: Back to the future: What pop culture got right about modern retail—and what’s coming next
For example, AI machines can make phone calls like Google Duplex did to book a hair appointment at a salon. And the phone call gets to the reason why AI is in demand in the first place. It takes care of the mundane routine tasks most people would rather not do. That’s why Alexa can automatically place orders for routine items (if its owner wants it to). But what does AI and machine learning doing for retailers?
The importance of AI for retailers
Like so many other things, the pandemic has impacted AI accelerating its use worldwide and particularly for retailers mainly because of the rise in demand for ecommerce. And, as reported by Forbes, Rohan Amin, the CIO of Chase says retailers are seeing a lot of AI benefit this year.
“Our latest AI research shows 86% of businesses currently reaping the benefits of better customer experience through AI, and 25% of companies with widespread AI adoption expect to see the tech pay out in increased revenue during 2021. The pandemic has uncovered the value of AI, lending itself to enhancing tasks related to workforce planning, simulation modeling and demand projection.”
So, what are those benefits exactly?
There are a lot of ways AI benefits retailers—from making better pricing and stocking decisions to improving overall operational efficiency, but there are a few bigger benefits to dig deeper into, including the following five.
1. Understanding your operations and your customers. Predictive analytics can help you keep track of how your customers are interacting with your brand in all the various channels and then plan and make adjustments accordingly. For example, if you want to know where your customers spend the most time in your stores there are AI machines that can capture that information and you can change your floor plans to boost sales. And machine learning can capture historical data that can help drive purchasing decisions and predict product demands.
2. Better customer experience through personalization. According to an article by McKinsey & Company “a survey of 1,000 US adults by Epsilon and GBH Insights found that the vast majority of respondents (80 percent) want personalization from retailers.” And AI and machine learning can give you a big boost in personalization. When you understand your customers’ preferences—whether it’s what they buy from you or what they enjoy doing in their free time—you can easily gain that information and use it to improve your online and in-store experience, upsell more products, increase conversion rates and most importantly deliver better personalized customer service that builds loyalty.
Here’s a fascinating example as reported by Supply & Demand Chain Executive: “[AI] is helping the world of beauty by being able to personalize ingredients based on individual genetics and using real-time readback with a questionnaire to determine fit and accessing database of collected data to fine-tune results.”
3. Reduce costs and improve labor with automation. Thin margins have made automation in the retail industry a priority for years—when you can improve your margins by automating routine tasks it’s easy to see why. You can improve accuracy with automation and save labor costs while utilizing your staff to perform higher-value tasks like increasing customer conversions. Whether it’s sophisticated chatbots on your website interacting and helping customers or in-store robots stocking shelves, automation powered by AI and machine learning can be a significant way to improve operations and save costs.
4. Improve your ecommerce experience. If your online shopping experience had a mind and that mind was like a human’s, how much more intuitive would it be for your customers? Their need to make time-consuming searches for what they want would be greatly reduced and they could easily see more things to buy that they didn’t even intend on purchasing all while getting a personalized shopping experience. And when they can quickly find what they want to buy and check out quickly they will keep coming back to your website (hello, Amazon).
5. Gain more effective marketing. According to a recent Forbes article, “AI and machine learning are on track to generate between $1.4 Trillion to $2.6 Trillion in value by solving marketing and sales problems over the next three years.” Thanks to machine learning you can gain a wealth of information about your customers and use it to personalize marketing campaigns that offer customers what they want and value—so you’re reaching the right audience which is much more likely to lead to conversions.
Related: Future, interrupted: The new store of tomorrow and how retailers can adapt
Retailers who don’t adopt AI and machine learning will be at a disadvantage
Thin margins, quick pivots—two things that retailers have long been used to and likely wary of particularly during the pandemic. Because of the benefits of AI and machine learning they’re the way of the future for retailers. For those who have gotten on board, keeping up with the competition, especially as communities start to reopen once the pandemic is under control, will have the advantage over competition that doesn’t.
