Artificial intelligence (AI) has changed the retail sector forever, allowing retail businesses to adapt to consumer expectations, desires and demands.
AI refers to “a number of technologies, including machine learning and predictive analytics, that can collect, process, and analyse troves of data, and use that information to predict, forecast, inform and help retailers make accurate, data-driven business decisions”.
The use of AI in the retail sector has allowed businesses to build better experiences for consumers. Additionally, it can help businesses minimise returns, stock loss and waste and inefficiency.
Since its introduction into the retail sector, it has been estimated that $40 billion of additional revenue was driven by AI in a 3-year span. But how has AI helped the retail sector? For years, consumers have been leaning towards a stress-free, quick, and easy shopping experience. AI has helped businesses deliver this in numerous ways.
Stock and demand forecasting
AI software systems have enabled demand forecasting by ensuring the right products are in stock at the right time. For example, H&M used to stock all stores around the world with similar merchandise. Now, the company is using AI to analyse sales, returns and loyalty card data to tailor their merchandise for each store. This should mean that H&M are able to minimise returns by providing consumers with products they want to buy.
Predictive analytics can also help to order the correct amount of stock, helping avoid forced discounting to clear overstock or reordering products continuously.
In 2018, Amazon opened its first Amazon Go store. Amazon Go is a cashier-less supermarket where customers can walk into the store, take what they want and leave without going to a till. Amazon Go uses Just Walk Out Technology which “automatically detects when products are taken from or returned to the shelves and keeps track of them in a virtual cart”. When customers are done shopping, they can just leave the store and their Amazon account will be charged later. AI has helped Amazon to create a seamless shopping experience where customers aren’t waiting in queues.
Many businesses have also used AI to embed visual search in their websites. Visual search uses real-world images as the stimuli for online searches. 90% of information transmitted to the human brain is visual, therefore visual search should ensure a better shopping experience for consumers. Pinterest, Google and Amazon are the key visual search engines today and have been employed by several retailers such as ASOS, IKEA and Wayfair to help build their visual search tools. Investing in technologies that aid visual search is important as 62% of millennials want visual search over any other new technology. Furthermore, when shopping online for clothing or furniture, more than 85% of respondents put more importance on visual information than textual information.
Shopping assistants that give personalised product recommendations
AI in retail has also enabled personalised shopping experiences for customers. Personalisation in retail has been around for a while, with personalised homepages on e-commerce sites and curated offers and discounts for consumers. However, AI can be used in even more ways to ensure a personalised shopping experience for consumers. For example, BOON’s AI analyses each user’s responses to a series of psychology-based questions which helps it to understand their desires. This then allows BOON to give personalised product recommendations to users. This not only gives users a personalised shopping experience but also streamlines that shopping process so that users do not have to scroll through endless pages of product listings across several categories.
AI allows consumers to virtually try clothes on
Despite the growth in online shopping, retailers have been unable to replicate fitting rooms online. Virtual try-ons have become even more important during the coronavirus pandemic which saw non-essential retail stores close for months at a time. In May 2021, Snapchat announced a range of brand new augmented reality (AR) try-on experiences. Snapchat has partnered with fashion brands such as Farfetch and Prada to test the new technology. Snapchat users will be able to try on virtual clothes using their cameras.
Zeekit, an AI-powered app, allows users to try on clothes online. The app was created in 2013 to help reduce the rate of returns from online shopping purchases. Recently, Walmart acquired the app and will use the technology on its website to help customers try clothes on virtually. Walmart customers will be able to upload their own images or choose from a series of models that best represent their height, body shape and skin tone. Users will be able to share their virtual outfits with their friends too.
It has been estimated that AI revenues will grow to over $36 billion in 2025. AI has allowed the retail sector to provide consumers with seamless, personalised shopping experiences. With a growing number of retailers choosing to invest in AI solutions, it is likely that consumers will benefit from personalised product recommendations, fully-stocked shops and quicker transactions.