AI in retail: smart selling in a digital world
Element AI Element AI
October 4 5 min

AI in retail: smart selling in a digital world

As technology continues to transform the world we live in, consumer expectations are changing accordingly. They’ve become accustomed to new shopping experiences that streamline the consideration and purchase process by understanding and targeting their individual needs. These experiences are now possible thanks to new advances of AI in retail.

But the full scope of smart retail isn’t just customer-facing. AI in retail can also help businesses optimize their processes, discover valuable market insights, and deliver useful assistance to both store managers and associates. Let’s explore some of the possibilities.

Data-driven, personalized recommendations

Today’s retailers collect a lot of valuable data during browsing and purchasing. An AI system can use this data to provide customers with real-time, tailored product suggestions. Amazon’s recommendation algorithm is a perfect example of this – developed and refined over decades, honed on an enormous quantity of data. The retail giant has demonstrated that how companies use their data is now dramatically shaping their competitive advantage.

As Amazon’s Senior Manager in Personalization, Brent Smith, wrote in IEEE Internet Computing: “Recommendations and personalization live in the sea of data we all create as we move through the world, including what we find, what we discover, and what we love.” Well, that sea has never offered greater harvests.

Real assistance from virtual assistants

The AI-driven online retail assistant is another smart selling technology that more and more businesses are adopting. Sometimes the term “chatbot” is used, but perhaps this seems an oversimplification of extremely powerful AI systems that use natural language processing to conduct sophisticated and useful exchanges with consumers via text or speech.

For instance, there are interactive products on the market, some of which you may be very familiar with, that use affective computing and sentiment analysis to understand a user’s mood, emotion, and personality. Furthermore, these assistants are fluent in a multitude of languages, making them ideal for catering to the needs of consumers on a worldwide scale. Conversational AI in retail will only become more sophisticated, more prevalent and more useful to the wider purchasing public.

In-store experience innovations

The impact of AI and digital transformation isn’t limited to online retail. Brick and mortar stores are fertile ground for technology-driven innovation.

Sephora’s Color IQ system scans store visitors’ faces, finding the exact Pantone color code of their skin tone, to help them find the ideal shade of foundation and concealer. This later expanded to create a Lip IQ spinoff for lipstick shades.

Meanwhile, Starbucks developed a virtual barista for their mobile app, allowing customers to place orders via voice or text chats, to be picked up in-store – reducing or eliminating wait-times. The sophisticated language processing algorithms allow the app to ask contextual follow-up questions and handle complicated orders, for instance a “double upside-down macchiato, half-decaf, with room and a splash of cream, in a grande cup.”

Back-office optimization

Away from the cash registers and behind the scenes, AI systems are driving new business efficiencies in stores. Managers can harness insights from store-level data to optimize everyday processes, forecast when products will be out of stock, and orchestrate tasks, to achieve more productivity and happier customers.

With a dynamic AI-based tasking system like this, store associates can keep better track of task priorities, and achieve higher performance in matters such as keeping shelves adequately stocked and handling returns and e-commerce.

AI systems can even assist with that most onerous of back-office tasks: reconciling invoices with payments made. From mom and pop operations to brick-and-mortar titans like Walmart, retailers are increasingly using technology to overhaul their procure-to-pay processes.

Today’s algorithms are advanced enough to be able to process invoices in practically any format without needing to be trained using a blank invoice template first. These AI-driven invoice reconciliation solutions can recognize text and various types of variables, extracting the figures, and making the necessary calculations quickly and accurately. Good news for bookkeepers beleaguered by high volumes of manual invoice processing.

AI systems: flying off the shelves

The global AI in retail market is expected to reach US$4.4 billion by 2024, according to a 2019 report by Vynz Research. And, as an article by the Retail Council of Canada stated, “The use of AI presents the industry with a classic win-win-win finish and one that industry experts are touting as a new best practice.”

An IBM study found that the use of AI-driven intelligent automation in retail and consumer product industries is projected to jump from 40% of companies in 2018 to over 80% by 2021. With the vast majority looking to capitalize on the technology, those who stay behind may face stormy seas as their competitors gain the advantage.

So, AI in retail is here to stay, and adoption may decide whether your customers stay, too. It may be worth considering buying into the technology sooner rather than later.