AI in the Retail industry: A valuable ally during challenging times

Similar to other sectors, the retail industry is facing pressures from the rising cost of living, including high inflation and significant interest rate hikes. With expectations of reduced consumer spending, shoppers are opting for more affordable options and cutting back on non-essential purchases. As a result, retailers are forced to find innovative strategies to attract customers and mitigate declining sales.

Artificial intelligence offers a range of applications in retail, from enhancing customer service to managing inventory. However, retail leaders face the challenge of effectively integrating AI to harness its potential for gaining a competitive edge. According to the latest State of AI Retail report by Raydiant, while retail leaders are enthusiastic about AI and confident in their understanding of it, fewer than half are actively leveraging the technology to drive transformation within their companies.

While traditional strategies may be losing effectiveness, AI provides advanced analytics and forecasting to help retailers rapidly adjust to market changes.

Typical use cases include:

• Supply Chain Management - AI can improve efficiency and transparency in the supply chain.

• Chatbots and customer service automation—AI can enhance customer service with chatbots or other automated options.

• Customer behaviour analysis - AI can understand customer preferences and behaviour to tailor experiences.

• Product recommendation systems - AI can recommend products based on customer preferences and purchase history.

• Personalized marketing - AI can customise marketing messages for individual customers.

• Fraud detection - AI can identify and prevent fraudulent transactions.

However, effectively implementing these use cases necessitates investment in skills development and technology infrastructure.

For successful AI adoption, organizations must:

An innovative digitalization project in the retail industry begins with the implementation of tools that enhance the customer experience in e-commerce and across all digital platforms of the brand. An example of this is Google Cloud's Discover AI for Retail, a tool that enables retailers to improve the quality of searches and recommendations across all brand channels. The Recommendations AI tool, which is part of the Discover AI suite, significantly enhanced Benetton Group's digital shopping experience project. Utilizing Artificial Intelligence, the Italian fashion group saw a substantial 6-fold increase in the conversion rate of customers who utilized the AI-based suggestions, as well as a 7% increase in sales and tripled time spent on the website within the same target audience. Another example in the fashion industry is the English brand Mulberry, which leveraged BigQuery to support its global expansion. By creating a comprehensive data warehouse providing a 360-degree view of stock, customers, and products with minimal initial investment, the brand saw a 25% increase in online sales and achieved personalized campaigns through machine learning, resulting in a 110% return on advertising spend. Furthermore, Looker Studio was utilized to establish an operational dashboard for order monitoring and reduction of shipping issues.

Amazon has announced an upgrade to its AI model that will enhance its checkout-free shopping experience and further its effort to incorporate AI into retail. The technology, which enables customers to select items and leave stores without going through a traditional checkout process, now offers improved accuracy and efficiency. This update is part of the e-commerce giant's integration of a new multimodal foundation model into the AI system that powers its checkout-free shopping experience.

 The digital changing room in brick-and-mortar retail enhances the shopping experience by providing personalized product recommendations and allowing 3D adjustments to selected clothing items. Customers can scan clothing using their smartphone and receive it in the fitting room without trying it on. Items stored in the digital shopping cart can be purchased directly or paid for at a self-checkout. A touch display in the fitting room enables customers to request additional items. This innovation strengthens customer loyalty and helps retailers efficiently tailor their product offerings to customer needs. So far, the digital changing room has been primarily utilized in online retail, including by the eyewear online shop Mister Spex and furniture manufacturer Westwing. In the fashion industry, H&M has developed a prototype in collaboration with a virtual reality expert.

The DM-Tech website showcases the direction of the popular Karlsruhe drugstore chain. Currently, over 70 vacancies, primarily in the programming field, are being advertised. The company is actively incorporating artificial intelligence (AI) into its operational processes, demonstrating the potential of AI in the retail sector. Last summer, they introduced dmChatGTP and have now gradually rolled it out to all employees after a successful testing phase. The program operates exclusively on the dm infrastructure to ensure high-security standards and minimize risks related to data protection conflicts and contractual framework conditions.

Similarly, the mail order company Otto has a dedicated team working on AI product development. For instance, AI forecasting is utilized in logistics to predict the arrival of items in the warehouse, expected sales, and potential returns, enabling optimized warehouse logistics and procurement management. This showcases AI's ability to make accurate predictions about the future based on historical data.

Carrefour France launched its 3rd use case on generative AI, "Askia". The goal is to provide personalized support for Carrefour France employees by allowing them to ask their daily questions. Askia has been trained to address common employee requests such as reimbursement for transport tickets, accessing pay slips, updating addresses, accessing training, and receiving restaurant vouchers. Askia is accessible to all employees in France through their workspaces and mobile devices. In addition to this, Carrefour is using generative AI for its e-commerce operations, employing ChatGPT and GPT-4 for digital transformation.

in today's challenging retail environment, the integration of AI in the retail industry is absolutely essential for companies to survive. By enhancing customer experiences through personalisation, streamlining operations with data-driven insights, and improving inventory management, AI empowers retailers to meet the changing demands of consumers more effectively. As competition intensifies and consumer expectations rise, retailers that leverage AI technologies will position themselves not only to survive but to thrive in a dynamic market. Embracing AI is crucial for driving innovation, boosting efficiency, and ultimately securing a competitive edge in the retail sector.