How is AI Changing Retail in 2024?

Shopping has changed forever. 

The retail industry is rapidly moving in a more intelligent and customer-oriented direction. Retailers strive to provide ever-enticing and personalized offers to keep ahead of the competition. The pandemic played its part as well. Businesses were forced to find innovative ways to offer goods and services without a physical presence. Artificial Intelligence (AI) technologies such as facial recognition, product visual search, and emotion tracking all help retailers identify what customers are looking for.

In this article, you’ll learn what AI truly means for the retail industry and the importance of adopting AI solutions in order to keep your business afloat.

Hard Facts about Artificial Intelligence in Retail

• The market for global AI in retail is expected to rise from $5 billion to more than $31 billion between 2021 and 2028 (Fortune Business Insights)
• Gartner predicts that by 2025, 80% of customer service organizations will utilize generative AI to enhance agent productivity and customer experience. 
• The adoption of AI in retail and consumer products industries is expected to leap from 40% to more than 80% of all companies in the next three years (IBM Corporation Study)

Еxamples of AI in Retail

Shopping has become an almost effortless activity thanks to AI solutions. Let’s take a feature such as a product visual search as an example. You see a celebrity’s fabulous outfit and would like to try it on. Simply take a picture of the outfit, upload it into a tool, see if it suits you, and in a split second you’ll be directed to the very online store where you can purchase it.

• A StyleMatch app by Asos has a catalog of more than 80,000 items from a range of brands with a feature that enables customers to find matching apparel. Or you can visit a virtual fitting room to see if an item really works for you. The visual search option has become a must-have AI solution for retail and, not surprisingly, giants like Amazon, Google, and Ikea have successfully integrated it into their customer experience.
  
• Another example of an AI in retail game-changer is Amazon’s ‘Just Walk Out’ stores. These are physical stores without cashiers and queues, where customers just pick up the items and, after leaving a shop, receive a payment bill by email.
  
• AI also helps with mundane tasks. AI usage in the retail industry extends far beyond online shopping and analytics. It can also be actively used in both online and physical stores. For example, AI in retail stores can enhance efficiency and reduce overall costs by automating inventory management.
  
• Demand forecasting and automatic disposition (ordering) – This could improve stock availability within the constraints of a warehouse. According to experts, modern companies lose about 3% of their profits annually due to out-of-stock occurrences. AI can monitor inventory levels and forecast demand, aiding retailers in fine-tuning their inventory management, minimizing wastage, and circumventing stock shortages.
  
• Recommendation systems – this use case tries to match clients to products in order to increase their basket sizes by upselling. This would also create a more personalized shopping experience.
  

AI solutions have revolutionized the retail industry and our shopping habits in general. It’s hard to imagine how some retailers might cope without integrating AI solutions into their business. 

AI in Retail: Real-Life Solutions

AI and ML solutions in retail are changing the shopping experience, making it more personalized, easier, and faster. Admittedly, technology can’t quite provide customers with the same personal touch and empathy as humans — but give it time!

Artificial intelligence also helps retailers to improve their supply chain efficiency and automation processes.

Now, let’s look at the use cases of AI solutions in retail.

Check out other examples of AI solutions for retail.

Benefits of AI in Retail

Zara, the world-renowned apparel retailer attributes a significant chunk of their growing success to their continually developing use of AI in multiple customer and supply chain management operations.

Here’s a summary of a few of the benefits of implementing AI in retail:

1. Automation in optimizing routine tasks. AI can successfully replace in-person workers with duties like managing inventory and processing orders. AI also empowers retailers to precisely predict staffing requirements and enhance the efficiency of work schedules. This way, workers are able to spend more time on tasks solving more complex customer problems. 
2. AI predicts clients’ demands and preferences 一 resulting in growing customer satisfaction levels. By analyzing previous client behavior, AI can forecast consumer behavior patterns. In addition, AI can help to connect potential clients with the best deals and offers that are likely to suit their preferences. And when businesses meet customer’s needs more closely, they are far more likely to succeed!
3. Supply Chain optimization for cost reduction. AI can calculate the demand for certain products in a store, give insights into buying patterns, and find the optimal route to supply chain optimization. So, implementing AI can also reduce costs.
4. AI provides better data security services. Data security is crucial for any business because companies keep vast amounts of information on their customers. Nowadays, AI technologies identify atypical activity in the system very fast, unlike human administrators.
5. AI solutions help companies reduce their carbon footprint. AI solutions, such as smart shelves by Kroger Edge technology, allow businesses to move away from using printed price tags and cardboard promos.

AI Solutions in Retail: Risks

Naturally, artificial intelligence in retail has its pitfalls, and we should consider the drawbacks and try to work around them when implementing AI into our business.

• Cybersecurity breaches. The use of artificial intelligence for cybersecurity has its pros and cons. AI solutions improve security, but at the same time such solutions can make it easier for cybercriminals to attack the system.
• Potential AI bias. In analyzing clients’ data, algorithms can enforce biases, like making prices higher for different genders or races, even if it’s not a part of their algorithm. Here we can recall a famous case involving Apple where its credit card provided lower credit limits to women than to men. This happened even though gender wasn’t a part of its algorithm and the result was a major scandal for the company!
• Appropriateness and sensitivity of client’s data. Appropriateness issues are mainly about the usage of emotion tracking. For example, retailers use AI solutions to monitor clients’ emotions and then create personalized offers. On the surface, this sounds fine, but in some cases technology might make inappropriate assumptions. The nuances of human emotion and expression are arguably highly complex and might be misconstrued. For instance, recommending antidepressant medication to a client who looks sad or happens to indicate repeated signs of depression in their facial expressions.

Usually, people don’t mind the sharing of personal information while doing regular shopping. Even so, sensitivity of customer’ data plays an important role when we are talking about more sensitive/delicate purchases, larger investments, and more personal service interactions. In such cases, people prefer not to provide certain personal information, so these subtle areas of customer behavior must be factored into any AI considerations.

Things to Consider When Implementing AI in Retail

When adopting AI in your business, the standard approach is as follows:

1. Prepare the data. Artificial intelligence solutions in retail are based on data. If the provided data is not complete and correct for AI-specific datasets, organizations must develop a thorough understanding of the data involved. Companies need good comprehensive metadata libraries.
2. Choose the right technology. Tailor your business goals with AI implementation strategy goals. It would help you determine the right technology and hire an appropriate provider or build an in-house solution.
3. Understand ethical issues. Biased and intrusive AIs are one such example. To combat this, businesses need to ensure that privacy and data security are at the forefront of any initiative.
4. Educate your managers. The key to correct implementation of this step is to improve the skills of existing employees, increase information sharing and technical literacy in all areas, and find the right partners. Your priority should be to rapidly build essential in-house expertise to collaborate with delivery partners, manage outcomes, and scale across the organization.
5. Keep your system up! Your work doesn’t end after the AI solution has been implemented and launched. Keep going: test the solution, offer advice and support, and, if necessary, make improvements.
   

Case Study: What Does it Take to Adopt AI Solutions in Retail?

Now let’s see how AI in retail is implemented in practice. A client ー a global management consulting firm ー had developed a retail network management system which needed improvements. The company required an ML-powered retail data warehouse solution with built-in data analytics tools that determine prices and promo ideas for products at stores.

The solution for their business objective was an ML-powered retail data warehouse with three modules: an assortment tool, a pricing tool, and promo analytics.

The Assortment Tool ( an ML-based module) helps identify the best places for the items in the shop. The user can pick a shop, products and shelf parameters, and group products, and the modulе will determine which physical locations may increase the sales of the item.

The pricing tool makes a competitive comparison and provides an overview of target economics. The managers may adjust pricing by managing settings.

The promo analytics tool helps to plan promotions. This instrument analyzes budgets that were spent on previous promos and predicts the costs of future campaigns. In addition, this tool analyzes places and opportunities for posting ads by searching magazines, TV, and the Internet.

As a result, all the client code is moved to a specific area. The product is standardized, making it easier to onboard and support new clients.

The Future of AI in Retail

There’s no going back. 

Artificial Intelligence (AI) is poised to continue revolutionizing the retail industry in ways never seen before. As technology continues to advance at an exponential pace, the integration of AI into retail operations promises to reshape the entire shopping experience. One of the most significant transformations lies in the realm of customer personalization. AI algorithms can analyze vast amounts of data, including past purchase history, browsing behavior, and social media interactions, to tailor recommendations and offers to individual shoppers. This level of personalization not only enhances customer satisfaction, but also drives increased sales and loyalty.

Furthermore, AI is driving significant improvements in operational efficiency. Automated inventory management systems powered by AI algorithms can accurately predict demand, optimize stock levels, and even automate ordering processes. This not only reduces the risk of overstocking or stock outs, but also streamlines the supply chain, leading to cost savings and improved profitability. Additionally, AI-powered chatbots and virtual assistants are revolutionizing customer service by providing instant support and guidance to shoppers, whether they are browsing online or in-store. As AI continues to evolve, its impact on the retail sector is only expected to grow, paving the way for a more seamless, personalized, and efficient shopping experience for consumers worldwide.

Conclusion

Clients are more demanding, and the market is more competitive. AI solutions for retail are a must-have for businesses to survive and stay competitive. A deep understanding and prediction of customer needs convert into client satisfaction and, as a result, bring revenue growth. Implement a suitable AI for retail initiative if you haven’t already done so and see how it boosts your sales.