Changing how we search, discover and shop, digitalization is transforming the retail landscape. Although there’s still a place for brick and mortar stores, e-commerce has brought fierce competition, along with new standards of customer expectations. To strive ahead of new entrants and keep up with a full digital transformation, retailers can employ new technologies, more specifically AI, to maintain relevancy in a crowded market.
Tackling many retail challenges head on, AI can be used to personalize shopping experiences, optimize the supply chain and increase conversion through large amounts of customer data. AI is also helping more traditional brands remain competitive and allowing physical stores gain an advantage. So what popular applications of AI are we seeing in retail? Let’s look at 7 trends making an impact across the industry.
New format retail
1. Micro-fulfillment centers
Given that fast delivery is vital for any e-commerce strategy, micro-fulfilment centers are proving effective. Micro-fulfilment centers are small-scale warehouses, generally located in urban areas near the end consumer. Not only do these centers hold more than regular supermarkets, but they can also be 94% smaller than a traditional warehouse. Within these vertically stacked centers, AI is implemented to advise the best location for goods on the shelves. It’s also used to prioritize tasks and navigate ground robots to collect and organize goods. Israel’s Rami Levy, America’s Walmart and UK’s Ocado, are all retailers who are implementing micro-fulfillment centers globally.
2. Amazon’s Grab and Go
Many are aware of Amazon’s recent attempt to shake up the retail space with its Grab and Go convenience store. The bold move is heralding a new way for retail with no cash or cashier. This concept uses AI, but not in the most obvious way. Instead of facial recognition (due to privacy concerns), computer vision is used to pick up a shopper’s physical presence. Tracking their every move, computer vision also identifies items removed from the shelf. By sending all this data to a centralized system, Amazon can then charge people accordingly as they exit the store. But is this concept a novelty or an actual transformation for in-store retail? Well for some it may feel like a gimmick, however CB Insights identifies over 150 companies working to transform brick-and-mortar stores to a human-free environment with the help of computer vision and automation.
Search and discovery
3. Neiman Marcus’s image recognition app
AI is supporting search and discovery in a saturated retail landscape. Retail stores are using image recognition to make it easier for customers to acquire items for which they are searching. Neiman Marcus’s Snap. Find. Shop. app allows customers to quickly browse inventory in search of the same or similar products. Similarly, Target has used this approach via a partnership with Pinterest. Using Pinterest Lens, customers upload an image of any product and are presented recommended products that are similar and available at Target. Both these approaches use machine learning to identify similarities in items, whether it’s the subject of an image or the visual patterns that match the likes of other images. And for Target, partnering with a leading company in visual search was a forward-thinking move, not only saving an enormous amount of time but also capitalizing on the influence of social media in consumer decision-making.
The AI stylist
4. Expert advice online
Although e-commerce has boomed in the past decade, customers still value brick-and-mortar stores where they can touch an item and try on different sizes before purchasing. North Face is trying to bridge the gap between the physical and online store with its Expert Personal Shopper. The app mimics a retail expert, helping customers navigate the e-commerce store while receiving advice similarly to an in-store experience. For online shoppers, extra support and further guidance is maybe what’s needed with nearly 70 percent of shopping carts being abandoned before purchase is completed.
5. Fitting rooms of the future
Tech is vamping up the traditional fitting room with a more exciting, streamlined experience for shoppers. Instead of waving down an employee or venturing out of a cubicle in an uncomfortable item, American Eagle customers can ask for alternative sizing directly to the room. As well as these requests, customers use AI enabled touch screens to receive personalized product recommendations based on the items they’ve selected.
Not your regular Bot
6. H&M integrate bot into popular messaging app
As the modern-day consumer seeks to connect with brands wherever they are (emails, social media, forums), brands need to be available on numerous channels. Fashion brand H&M launched a chatbot within the trending message app Kik – a popular app in the States, used by 40% of American teenagers. The bot is not your regular AI-powered communication tool. Customers can buy items directly, and can also receive styling tips after the bot learns what the user likes.
7. Macy’s enhance the in-store experience with AI
Ever walked into a department store and felt overwhelmed by the sheer number of products on display? Macy’s On Call app saves customers from a daunting shopping experience. After entering a store, users open the app and begin chatting with an AI bot. It’s not the everyday bot experience to receive directions to a specific in-store item. The bot can also check whether an item is in stock and alert a human employee if it senses the customer becoming frustrated. Here, the bot uses sentiment analysis, the process of understanding and categorizing opinions expressed through language (text and voice), to read the customer’s emotion. This tool is one of the most valuable AI solutions for brands and proven extremely powerful, allowing for real-time monitoring about what people are thinking or feeling.
The retail landscape is in a time of shift. And as new ways of shopping continue to evolve, AI will be crucial for traditional retailers to provide exceptional value. AI in retail is mature; and thanks to the abundance of use cases, retailers have plenty of inspiration so they too can apply AI to their businesses and yield strong returns on investment.