It's not only e-commerce that's using AI in retail. Brick-and-mortar stores, like this one, are also reaping the rewards...

Retailers must use every tool at their disposal to stay competitive in an increasingly busy sector. Few are as effective or versatile as data, but raw information is meaningless on its own. The true value of data lies in the insights you draw from it, and today's retailers are increasingly turning to artificial intelligence (AI) to unlock that value.

What’s driving AI adoption?

Between 2014 and 2017, customer journey interactions grew by 700%. As personalisation becomes an increasingly important point of differentiation for retailers, consumers demand shopping experiences carefully tailored to their preferences.

Deloitte identifies several other major trends responsible for reshaping the retail sector. These include the:

  1. Emergence of non-traditional competitors
  2. Availability and accessibility of new technologies
  3. Shift from a goods-based to a service-based industry

Together, these trends are fuelling AI adoption across the retail sector. But while many retailers recognise the value of well-structured data and advanced data analytics, some remain on the fence.

AI is driving transformation across the UK retail sector in response to  changing consumer expectations. Discover how in our detailed report.

Do retailers understand AI?

Last year, we teamed up with DJS Research to compile a comprehensive report on AI adoption in retail. We interviewed senior IT and technology decision-makers from across the sector to understand, among other things, current levels of maturity.

80% of the retailers we interviewed claimed to understand the practical applications of AI across multiple business areas, with data and analytics the most common. Of more interest were the 20% who said they had a poor understanding of AI – especially as half of these admitted they have no plans to implement the technology anytime soon.

In most cases, this is due to a lack of clarity. Some don’t fully understand how current AI systems work or what value they provide.

Great Expectations: UK Retailers' Big Bet On AI To Drive Transformation


How are retailers using AI?

70% of retailers already use some form of artificial intelligence in their organisations. The biggest exponents include the likes of Tesco and ASOS, who have discovered a wide variety of applications for the technology.

1. Data analytics

AI systems are capable of analysing large volumes of data – far beyond the capabilities of a human being. The insights generated allow retailers to better understand their customers and identify inefficiencies within their internal processes, as well as predict and capitalise on market trends.

Machine learning and AI-driven analytics are also finding applications in sales and marketing. Even without Personally Identifiable Information (PII) to hand, AI allows you to segment customers more accurately and shape demand by displaying the most relevant products to every customer.

2. Personalisation

What’s the first thing you think of when someone mentions e-commerce personalisation? If you’re anything like us, it’s product recommendations.

Until recently, this was pretty hit and miss. Even market leaders, like Amazon, struggled to provide relevant recommendations. You’d head online to buy a TV and, the second you completed your purchase, would find your recommendations feed inundated with all the models you didn’t buy. It wasn’t the most positive experience.

Thanks to AI, today’s product recommendation engines are far more intuitive. So when you buy a new TV, you receive product suggestions that complement and improve your viewing experience – a compatible soundbar or surround sound speaker system, for example.

3. Cross-channel fulfilment

Current estimates suggest retailers lose up to $1 trillion in sales every year due to stock shortages. Supply chain issues, delayed shipments, misplaced products: countless variables that can reduce the accuracy of your inventory data.

The raw processing power of today’s machine learning tools makes it easier to understand the complex relationships between customers and the products they buy. This gives you a clearer insight into availability and helps you optimise your inventory, reducing the risk of stock shortages.

Situ Live

The applications of AI are almost limitless, and retailers continue to develop innovative new ways to use the technology. A perfect example that we’ve collaborated on is Situ Live.

Situ Live helps innovative brands market their products through fully managed, interactive customer experiences. They recently decided to open a new, cutting-edge shop in Regent’s Street that allows customers to go hands-on with the latest smart home appliances.

To make the experience as valuable as possible for their partner brands, they decided to use AI. They planned to use a combination of CCTV and Azure Cognitive Services to record customer interactions in real-time. The data they gathered allowed them to compile anonymous profiles for each customer that would help them track emotional responses to each product – what they liked and what they didn’t. Leveraging this data, they could deliver personalised recommendations to each customer as they left the store based on real behavioural data.

It provides a far less obtrusive way to gauge customer engagement and helps visitors make informed purchasing decisions, without requiring any PII.

Consumers are wary of AI, so you need to be transparent and ethical

Retailers that don’t adopt AI will fall behind their competitors. It’s no coincidence that the most successful businesses are data-driven and receptive to innovation.

The challenge for retailers is that many consumers remain wary of AI. Bad experiences have left them sceptical as to the accuracy and relevance of the product recommendations they receive, while still more have concerns about how retailers use and store their data.

You must approach AI with an ethical and transparent mindset to allay those fears. As long as you’re transparent in the value AI provides – accurate recommendations, fewer obstacles, and less friction – you’ll find that most people are happy to hand over their data. For more guidance, reach out to our AI consulting professionals. We'll help you explore and define the right approach to AI for your organisation.

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