The retail industry is constantly evolving. With the rise of online shopping, traditional brick-and-mortar stores have to adapt in order to stay competitive. Amazon is one of the many examples of how far online shopping and e-commerce have developed. One of the biggest trends in retail right now is artificial intelligence (AI). AI has the potential to completely change the way we shop, and it is already starting to have a significant impact on the industry. With the introduction of the COVID-19 pandemic, online retail shopping soared to an all-time high, as seen in the graph below.
Since e-commerce is one of the largest industries, it is vital to consider the role that AI and technology have had on retail shopping. In this article, we will discuss the power of AI in retail and how it is changing the way we buy things.
How AI is Changing Retail
The first way that AI is changing retail is by personalizing the shopping experience. Online retailers are using AI to collect data about their customers and then use that data to provide a more personalized shopping experience. This includes things like showing customers items that they are likely to be interested in based on their previous purchase history. AI can also be used to provide customer service. For example, if a customer is having trouble finding an item on a website, they can chat with an AI agent who will help them find what they are looking for.
AI is also changing the way retailers interact with their customers. In the past, retail shopping was a one-way interaction where the customer would come into the store, and the retailer would try to sell them something. However, with AI, retailers can now interact with their customers in a more personal way. For example, if a customer is looking at a product on a retailer’s website, the retailer can use AI to send them personalized messages about that product. This is a great way to build relationships with customers and keep them coming back.
Another way that AI is changing retail is by making it easier for customers to find what they are looking for. Online retailers are using AI to create search engines that are more accurate and relevant to the customer’s needs. This is especially helpful for customers who are looking for specific items or who have a general idea of what they want but don’t know where to start.
The Benefits of AI in Retail
AI can help retail businesses in a number of ways, from reducing costs and increasing efficiency to driving sales and improving the customer experience. Here are just a few of the ways AI is transforming retail:
- Automated customer service: AI can be used to provide automated customer service, such as answering simple questions or providing recommendations. Therefore, companies can free up staff to provide more personalized service and focus on more complex tasks. A company called Amplify.ai provides a customer service chatbot that is powered by artificial intelligence. Chatbots are becoming more prevalent in retail as businesses can reduce the customer service personnel they hire.
- Targeted promotions: AI can be used to analyze customer data and identify patterns that can be used to target promotions and discounts. This personalization helps to increase sales while also providing a better experience for customers, who are more likely to take advantage of offers that are relevant to them. A study by McKinsey found that targeted promotions can increase sales by up to 20 percent.
- Personalized recommendations: AI can be used to provide personalized recommendations to customers based on their past purchase history and browsing behavior. This helps to increase sales and customer satisfaction by providing them with products that they are more likely to be interested in. According to the figure below, consumer trust in AI-generated advice in retail is the highest across industries.
- Improved inventory management: AI can be used to track inventory levels and predict future demand, which can help businesses to avoid stock-outs and overstocking. This helps to improve customer satisfaction by ensuring that products are available when they are needed.
AI is clearly having a transformative effect on the retail industry, and it is only going to become more important in the years to come. Businesses that embrace AI and machine learning will be well-positioned to stay ahead of the competition and provide a better experience for their customers.
The Challenges of AI in Retail
While there are many benefits to using AI in retail, there are also some challenges that need to be considered. Here are a few of the challenges of AI in retail:
- Data privacy: Retail businesses have access to a lot of customer data, which can be used to inform AI applications. A study by Banana Republic found that 76 percent of consumers are worried about how companies use their personal data. This concern is appropriate, as there have been several instances of H&M, Target, and other retailers being hacked and customer data being leaked. Businesses need to be transparent about how they are using customer data and put protective measures in place.
- Implementation costs: AI can be expensive to implement, as it requires access to data, computing power, and specialized talent. Enterprise resource planning (ERP) systems are extremely expensive and require extensive research and planning to implement. A study by Bain & Company found that the median cost of an AI project is $12 million. Therefore, businesses need to consider whether the benefits of AI justify the costs.
- Ethics: AI applications can make decisions that may have ethical implications, such as whom to target with promotions or how to price products. Additionally, the introduction of AI in retail shopping is leading to the loss of jobs as workers that carry out repetitive tasks are no longer needed. Retail businesses need to consider the ethical implications of their AI applications and put in place appropriate safeguards.
Despite these challenges, AI is still a powerful tool that can be used to transform the retail industry. Businesses that are able to overcome the challenges will be well-positioned to reap the benefits of AI.
Conclusion
Overall, AI is having a major impact on the retail industry. While COVID-19 has amplified the need for e-commerce in retail shopping, consumers have sustained that need. The popularity of e-commerce stems from personalizing the shopping experience, making it easier for customers to find what they are looking for, and changing the way retailers interact with their customers. While its popularity grows, we can only imagine the ways that AI will continue to change retail in the future.
What do you think about the power of AI in retail?