🤖 Artificial Intelligence in Retail: Revolutionizing the Shopping Experience
As technology continues to advance, the retail industry is not left behind. The integration of Artificial Intelligence (AI) in retail has brought about a significant transformation in the shopping experience. In this article, we will explore the various applications of AI in the retail industry, including the evolution of cash-free stores, chatbots, voice and visual search, dynamic pricing, and the aspect of virtual fitting rooms. We will also take a look at how McDonald's and H&M have perfected the art of AI in their business.
Introduction to Artificial Intelligence in Retail
Artificial Intelligence (AI) entails using computer science to motivate human or natural intelligence in machines. Algorithms or formulas enable machines to solve problems, and they can learn on their own. In retail, AI and data automation are used to deliver customized shopping experiences to customers. AI caters to customer experiences in a multi-channel setup, which entails both physical and online stores. In an online setup, AI-driven chatbots or bots give customers personalized recommendations or charge them based on their behavior in the past and other relevant data. In physical retail stores, AI leverages data from several sources, mainly customer in-store interactions on mobile devices and by sensors. AI, including machine learning and deep learning, is key to generating these insights.
Applications of Artificial Intelligence in Retail
🛍️ Cash-Free Stores
The automation of physical stores will result in no queues using human employees' involvement, which will ultimately lead to savings in expenses. The example in this case could be Amazon Go. Amazon AI has already introduced checkout-free stores. Amazon's "Just Walk Out" shopping technology works smoothly when you take something from the shelf or put it back. Ultimately, when you walk out of the shop with products, the Amazon account will deduct money from your linked wallet.
🤖 Chatbots to Assist Customers
AI chatbots extend a higher level of customer service, improve elements of search, notifications, and suggestions of similar products. Two-thirds of the global brands are already using or going to use AI chatbots in the next couple of years. For instance, Tommy Hilfiger and Burberry have launched chatbots to aid their customers scan through their collections.
🛍️ In-Store Assistance
Retailers also invest in technologies that help both customers in the shopping process and their staff in stores and warehouses. The technology by Kroger Edge removes paper price tags in their stores. Electronic smart shelf tags are now being used. This technology provides video advertisements and promotions on display.
💰 Dynamic Pricing
The application of AI for retail stores could help businesses change prices for their products, visualizing the likely outcome of dynamic pricing strategies. The key to this is data systems collect data about other products' sales figures and promotional activities. Companies can present the best offers suited to each customer's needs and capability and also get new customers based on dynamic pricing. In fact, Amazon has nailed the entire element of dynamic pricing, with the prices of their products changing every 10 minutes.
🚚 Supply Chain Management and Logistics
Retail supply chains are evolving each day, and brick and mortar and online stores leverage this every day. Inventory management has a lot to gain from AI. Scenarios of unsold and out-of-stock inventory can be reduced. Estimating the demand for a particular merchandise based on factors such as past sales, geographic location, weather trends, promotion, etc., can be done.
🔍 Visual Search
Visual search enables customers to upload images and find similar products based on parameters such as colors, shapes, and patterns. For instance, at a runway in 2017, Tommy Hilfiger launched an app that allowed viewers in attendance to click photos of merchandise being modeled and upload them to a visual search engine. Visual search works wonders for fast fashion, which entails a quickly changing trend of products that shoppers are looking to catch on, and they may not have the bandwidth and language to find it.
🎤 Voice Search
Voice search breaks the barrier of written language. Customers can today just ask Alexa for the desired product and its delivery status without even typing anything. In fact, one-third of the people worldwide use voice search in mobile, and half of them prefer it to mobile apps and websites for their convenience. Retailers such as Walmart, Tesco, and Costco use Google or Amazon AI technology to offer customers the ability to conduct a quick voice search.
👗 Virtual Fitting Rooms
The dynamics of the fitting of the trial rooms have undergone a major change in the last decade. Retailers have realized that this is the place where major shopping decisions are made. Virtual fitting rooms save time for customers and help them find the perfect output while going through many options. For instance, a virtual fitting kiosk from a Canadian company called MeLT can scan a person in 20 seconds and measure up to 200,000 points of your body in this period.
AI in the Retail Supply Chain
The applications involve improving retail value chain planning, reducing costs for third-party partners and their customers, predicting and lowering risk, and adapting the course of action when unforeseeable events occur.
Statistics in the Artificial Intelligence Space in the Retail Industry
According to Markets and Markets, global spending on AI in the retail supply chain will reach about 10 billion dollars by 2025, growing annually by over 45 percent. According to a survey by Capgemini at the AI and Retail conference, the application of technology in retail could save up to 340 billion dollars each year for the industry. An estimated 80% of these savings will come from AI's improvement of the backend operation, the supply chain management, and returns. In 2023, around 325,000 retailers will be using AI and machine learning in some form.
Examples of AI in the Retail Industry
McDonald's
McDonald's seeks to transform the drive to technology. In March 2019, McDonald's acquired Dynamic Yield, an Israel-based company focused on personalization and decision logic. Through this acquisition, McDonald's will use artificial intelligence to automate its drive-through menus. This AI integration is set to take personalization a notch higher with automated systems that can make real-time menu recommendations based on consumer trends, ordering habits, and even weather conditions.
H&M
H&M utilizes artificial intelligence to predict trends. H&M employs more than 200 data scientists to predict and analyze trends. H&M's AI algorithms gather fashion trend data by capturing information on search engines and blogs worldwide. Through this information, they take decisions on how much they buy, when they buy, and where it should be placed in its stores.
Pros and Cons of AI in Retail
Pros
- Personalized shopping experiences
- Improved customer service
- Increased efficiency in inventory management
- Better decision-making based on data insights
- Reduced costs for retailers and customers
Cons
- Job displacement due to automation
- Privacy concerns with the collection and use of customer data
- Dependence on technology, which can lead to system failures and downtime
Highlights
- AI in retail is transforming the shopping experience, from personalized recommendations to dynamic pricing and virtual fitting rooms.
- The integration of AI in the retail supply chain can lead to significant cost savings and improved efficiency.
- Companies like McDonald's and H&M are already using AI to automate their operations and predict trends.
- While AI has its benefits, it also raises concerns about job displacement and privacy.
FAQ
Q: What is AI in retail?
A: AI in retail entails using computer science to motivate human or natural intelligence in machines. Algorithms or formulas enable machines to solve problems, and they can learn on their own. In retail, AI and data automation are used to deliver customized shopping experiences to customers.
Q: What are the applications of AI in retail?
A: The applications of AI in retail include the evolution of cash-free stores, chatbots, voice and visual search, dynamic pricing, and the aspect of virtual fitting rooms.
Q: What are the benefits of AI in retail?
A: The benefits of AI in retail include personalized shopping experiences, improved customer service, increased efficiency in inventory management, better decision-making based on data insights, and reduced costs for retailers and customers.
Q: What are the concerns about AI in retail?
A: The concerns about AI in retail include job displacement due to automation, privacy concerns with the collection and use of customer data, and dependence on technology, which can lead to system failures and downtime.
Resources
- [Amazon Go](https://www.amazon.com/b?ie=UTF8&node=16008589011)
- [Tommy Hilfiger Chatbot](https://www.tommy.com/en/chatbot)
- [Kroger Edge](https://www.kroger.com/i/edge)
- [MeLT Virtual Fitting Kiosk](https://www.meltmirror.com/)
- [Dynamic Yield](https://www.dynamicyield.com/)
- [H&M AI](https://www2.hm.com/en_us/life/culture/inside-h-m/h-m-uses-artificial-intelligence-to-predict-fashion-trends.html)
- [Capgemini AI in Retail Survey](https://www.capgemini.com/research/artificial-intelligence-in-retail/)
- [Markets and Markets AI in Retail Supply Chain Report](https://www.marketsandmarkets.com/Market-Reports/artificial-intelligence-in-retail-market-36246496.html)
Introducing AI Chatbot: https://www.voc.ai/product/ai-chatbot. This AI chatbot can automatically reduce a large amount of work on customer services.
