Retail is an ever-evolving and ever-changing industry. In just about every era in world history, we have seen a different form of the same retail industry we’ve all come to love. From the first cash register in the late 19th century, all the way to the growing world of eCommerce in today’s times, innovation and technology have been large contributors to how quickly and effectively retail has been able to evolve.
How AI Will Shape the Future of Retail
In recent years we have seen an overwhelmingly beneficial impact on the retail industry by Artificial Intelligence (AI). With the technology, developers have found ways to improve common retail processes to produce greater outcomes that benefit both the retailer and consumers.
In nearly all parts of retail, AI has shown its benefits. Even in the early stages of the product design process. Specifically within the apparel industry, it’s important for designers to stay up to date on current trends and what products are producing the most sales for a particular company. This data in combination with creative patterns, fabrics, and trims, creates the amazing products we see in stores.
But how do retailers gather this data and analyze it in a way that is beneficial to the design and production process? Well, that’s where artificial intelligence comes in. Integrated within the technology is machine learning which allows AI to gather data constantly and as it does, enhance its own knowledge. For example, let’s say a machine gathers information about predicted trends and styles for two years.
From the beginning of year 1 to the end of year 2, the machine’s input of data has increased causing its intelligence and accuracy in predicting trends and understanding customers’ tastes to improve as well.
AI is also beginning to make its mark in 3D product design as well. With the production process of furniture products, for example, requiring an immense amount of time and expertise, designers and manufacturers have looked for ways to make the process simpler without losing the quality of the piece. In an experiment testing the implementation of AI into the 3D design process, users found it to be successful in improving the tedious process.
By using AI to encode a database of prior knowledge and then build a natural language text model to interact with that database, the user is able to sample products and ideas from the database. In simpler terms, AI’s machine learning capabilities eliminate several tedious steps of the process and allows the designer more time to focus on the creativity behind the design. While this experiment tested relatively simple product designs, it shows the amount of opportunity there is for retailers to utilize the technology in their design and production processes.
Examples of AI that you’ve likely seen in your own experiences are in physical retail stores. The integration of technology into the modern shopping experience has greatly impacted the way consumers shop and how much they buy. Retailers like Walmart are able to gather data about their products with AI technology. In 2018, the company tested the use of AI technology for product inventory.
Essentially, a robot was able to scan shelf items across the store to provide employees with information about in-stock and out-of-stock product, product locations, and missing barcodes. Not only does this make certain processes easier on the employees at Walmart, but it also provides customers with more accurate information when looking for an item in-store or online.
Sephora is another retailer that uses AI technology for the benefit of its customers. The company uses the technology as a part of its in-store Color IQ Scanner. For shoppers at Sephora, it is a common difficulty to find makeup products that match your skin color exactly. To fix this problem, the Color IQ Scanner allows customers to scan their face and analyze their natural skin tone.
From there, AI allows the scanner to find products in-store that accurately match the customer’s skin tone. The digital display shows the list of products to the customer with necessary information like brand name, shade name, and SKU so that they can find the product easily for purchase. You can also add your recommended shades of products to your online Sephora account to review and purchase online as well.
These both are very unique ways that we’ve seen AI impact the in-store shopping experience and we’ll likely see many other retailers begin to join this trend of AI implementation in-store.
Much like the in-store shopping experience, AI has made quite the impact in eCommerce as well. Online shopping continues to grow because of its efficiency in comparison to in-store shopping and AI is a large contributor to that. Many of us can agree that Amazon has taken the lead for a number of years in the world of eCommerce. Much of this comes from their ability to effectively and seamlessly utilize AI technology to their advantage. While it is part of their Amazon Alexa and Echo systems, they also use it directly on their site in their recommendations feature.
This feature has been a large part of Amazon’s success because it is able to personalize product recommendations to specific users based on their search history, purchase history, cart contents, and a number of other variables. Every account holder on Amazon’s website has a unique homepage that is riddled with an abundance of products specific to them.
Through machine learning, the feature is constantly gathering data and compiling it to make more accurate recommendations over time. While this is ideal for Amazon’s customers, the company claims that this feature alone is responsible for 35% of their sales meaning it has most certainly proven itself to be successful.
Another example is the use of visual search technology. Researchers are finding that about 62% of Generation Z and Millennial consumers prefer the use of visual search technology over any other technology in eCommerce shopping which of course, causes retailers to respond. We are seeing more implementations of visual search features on eCommerce sites and retailer apps than ever before and will likely continue to see this feature in the future.
A visual search tool allows users to upload a photo to the site or app and the technology will search for items within the retailers’ product line that are similar to their uploaded photo.
This comes in handy for users who may not know the exact name of the product they’re looking for. It is also beneficial for retailers because consumers are purchasing products 2x faster with visual search than they would if they were using a text query. Well-known eCommerce retailers like Target, Forever 21, and Neiman Marcus have implemented this feature into their site and many other businesses are beginning to do the same.
There wouldn’t be many benefits to the use of artificial intelligence in retail if it wasn’t driving sales and profits and you may have guessed, it most definitely is. Not only has its implementation in the mentioned sections of retail make the technology profitable, but the technology can also help make the sales process more efficient and profitable as well.
First, although it’s a relatively controversial topic, AI “employees” can be very profitable for retail companies. While you and your company may not be interested in adopting robots into your workforce, the technology has proven itself in some cases to drive more revenue and decrease expenses. The above example of Sephora’s Color IQ scanner is an example of an AI employee. As you can see from the example, the technology is not replacing human employees and their important and necessary positions.
Rather, it is lighting their load of things to do which in turn, allows them to be more productive. At Sephora, employees can spend less time testing and searching for products that match the customer’s skin tone. Instead, their helpful counterpart completes this process for them very quickly and they can spend more time focusing on the sale of that product to the customer. The Color IQ scanner is also an example of how companies can reduce human error which in this case would directly affect the return conversion rate. The more accurate the products Sephora customers purchase are, the less likely they are to return them.
The technology has also been extremely beneficial in the identification and prevention of fraud, specifically, during the return process. About 9% of retailer returns are fraudulent and amount to about $27 billion in lost revenue so this gives retailers plenty of reason to find an effective plan of attack.
AI’s implementation into retail stores means automating the return process. While many are hesitant about the use of bots in stores, the technology will actually be able to accurately identify suspicious patterns. In combination with video analytics and ID verification, the technology can most certainly help to crack down on fraudulent transactions.
Marketing and advertising are sectors of retail that have been positively impacted by the use of artificial intelligence and machine learning. Marketing, as we know, is based on data, and AI works to compile and produce accurate outputs with that data. So, essentially, with the immense amount of data that AI can gather, you can produce more effective marketing campaigns in return.
As mentioned previously, Amazon is able to market products to their customers better because of the abundance of data gathered from AI and machine learning. However, the technology’s implementation into a company’s advertising department can help create a better consumer experience for ads and marketing campaigns as well.
An example of the great opportunity for AI in advertising was seen a few years back from a company called M&C Saatchi, who experimented with an artificially intelligent poster. The company set out to create an advertisement that can create itself and still manage to be attention-grabbing to those passing by. The company explained the technology as being similar to the reproduction of a species of animal. When an organism reproduces, some of its genes mutate. For the offspring, there are genes that are more beneficial to their survival and by nature, those are the genes that carry on through the DNA of the offspring to come. However, the least impactful genes die out.
This is essentially what happens with the artificially intelligent poster. The poster gathers data on what components of each ad are most effective in driving consumer engagement. With that data, the poster understands which components are most and least beneficial. Those that are impactful carry on within the advertisements while the least impactful are no longer needed. The more data that the poster can gather, the closer a brand can become to creating an effective and attention-grabbing advertisement. While this was merely an experiment, I found this to be an amazing way that retailers can improve the consumer experience through advertisements and in return, better market their products and services.
The world of retail has changed in so many positive ways when we think about where it started. Technology in general has opened up a world of opportunity to improve design processes, shopping experiences, sales, marketing, and advertisements for retailers everywhere. Artificial intelligence, specifically, has played an important role in the success and development of these departments.
In past decades, retailers didn’t have nearly as much data as they do now from all that AI tools can gather. Because of that, many company decisions and strategies were based on assumptions or a skewed representation of consumers. Now, AI has allowed retailers to bring in and analyze more data than ever before and as you can see, many companies are reaping the benefits of it.
While AI can be implemented in a number of ways, it’s important that going forward, companies look deeply into what form of implementation will work best for them. The companies we discussed, Walmart, Sephora, and Amazon, have not only used AI and machine learning to their advantage, but also found ways to make it most beneficial to their company and brand.
This is arguably a large contributor to the technology’s success within the company as well. So as artificial intelligence grows within the retail industry, we may begin to see more creative ways that companies have applied it to better the consumer experience and drive profits.