Welcome to the Era of AI-Enabled Retail
AI-based tools and apps enable retailers to drive sales and anticipate customer demand and help them gain a better understanding of customer behavior.
Artificial Intelligence (AI) is a step forward in changing the retail industry. AI-based tools and apps enable retailers to drive sales and anticipate customer demand and help them gain a better understanding of customer behavior in order to offer personalized promotions. This blog post discusses how AI is changing the way retailers operate and outline the key reasons for retailers to adapt to this technology.
The hype surrounding artificial intelligence and predictive analytics technologies is real. With the customers becoming more aware and retailers scrambling to meet their ever-increasing expectations, investments in AI are dominating the business conversations. In fact, according to a study from Juniper Research, global retail spending on AI will grow to $7.3 billion per year by 2022, up from an estimated $2 billion in 2018. This is a significant increase. This growth comes as no surprise as most retailers believe in the promising future AI holds.
Technologies like AI, Deep Learning, and Predictive Analytics are bringing about a shift in the retail industry by enabling computers to make autonomous decisions. AI is rapidly being used to analyze customer behavior, adapt how brands interact with shoppers and predict customers’ demands in order to better manage the inventory. For instance, AI can help the retailers decide what items to show to shoppers and how to present them, and it can enhance the shoppers’ experiences with their brand. This technology can also empower retailers to drive sales by offering accurate and personalized promotions.
In order to remain competitive, retailers are vying to reap the benefits of AI to provide a personalized shopping experience and to effectively utilize the customer data. With customers’ getting free access to an unprecedented amount of information, the importance to deliver personalized experience is crucial for staying ahead of the competition.
AI-based tools and apps help retailers automate decisions through algorithms informed by the machine learning technology. This technology enables computers to observe and learn from large sets of raw data and make smart decisions without the need for human input. Through AI, computers can observe data, understand customer behavior and implement the best marketing strategy.
Here are three most common applications of AI in retail:
Personalization: Technologies like AI and Predictive Analytics help retailers provide a personalized experience to customers by customizing shopping recommendations, e-commerce portals layout and marketing promotions.
Improved customer service: AI is used to operate chatbots that mimic the customer’s interaction with a customer care executive. Tools and apps based on AI are intelligent able to detect the tone of the customers’ messages and comprehend the best way of responding to their needs.
Inventory management: Retailers can predict customers preferences and buying behavior, thanks to data analytics powered by AI and machine learning. This technology will enable retailers to stock the right items and discard the ones that are not in demand, resulting in leaner inventory operations.
Next-Gen Customer Analytics
Due to the massive volume of data being generated about each customer, retailers are looking for a new generation of AI-enhanced data analysis, which will revolutionize retail analytics. By integrating sensors and automatic learning, retailers will be able to trace their customers’ activities, and experiences and will utilize these advancements to improve customer lifetime value (CLTV). Accuracy in CLTV will allow retailers to allocate marketing budget better and identify high-value customers while minimizing exposure to unprofitable customers.
According to McKinsey & Company, two of the areas where AI tools can be used to immediately improve performance are customer service and personalized marketing. Personalization can be a brand’s competitive advantage by using customer demographics, transaction data, and social media monitoring to offer “next product to buy” recommendations. Retailers can expect a substantial increase in their conversion rates – thanks to AI.
Retailers and various e-commerce brands are also using AI to predict shopping trends, optimize logistics, adjust prices, and personalize their marketing activities. By analyzing buying patterns, retailers can anticipate sales volumes and reduce overstocking, to maximize profit margins.
Any way you look at it, AI and deep learning are shifting the landscape of retail industry worldwide. In addition, in order to stay competitive, retail brands, both big and small, will all have to respond to the AI wave. Using AI to convert raw data into actionable insights is the future for many industries, including retail. It is critical for retailers to gain an understanding of how they can leverage this evolving technology to be at the forefront of this transformative period. Data-driven decisions will be key to overcome the outdated business models across the retail industry, and beyond.