AI is transforming the retail sector in a huge variety of ways. Some brands are using AI technologies to streamline supply chains; others are using these technologies in more sophisticated ways to provide bespoke recommendations and shopping experiences for their customers. The numbers are hard to ignore. Business Insider predicts that AI will boost profitability in […]
AI is transforming the retail sector in a huge variety of ways. Some brands are using AI technologies to streamline supply chains; others are using these technologies in more sophisticated ways to provide bespoke recommendations and shopping experiences for their customers.
The numbers are hard to ignore. Business Insider predicts that AI will boost profitability in retail and wholesale by nearly 60% by 2035, and online mega-retailer Amazon attributes 55% of its sales to its AI-driven recommendation engine.
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AI can also be a powerful driver of customer engagement, either through chatbots or other forms of AI interface. In turn, these interactions are a powerful way of driving sales: according to another report by Business Insider, customers who interact and review online with retailers are 97% more likely to make a purchase.
AI is particularly important for large, online retailers, where it can be informed by data on customer interactions, and be scaled to provide improved customer experiences to as large a customer base as possible. However, retailers who rely on physical shops are also making use of AI technologies, and bricks-and-mortar retailers still make up a significant percentage of the retail sector: a report by National Retail Federation recently showed that 79% of consumers make at least half of their purchases in-store.
Today, we’re going to look at some of the most successful and innovative uses of AI in the retail sector. Some of these systems are designed to improve and streamline basic functions of the retail business, such as supply chains. Others aim to offer more complex and bespoke services. What they all have in common is that, by using AI to improve any part of a brand’s operations, they contribute to improved brand image and positive brand association.
H&M’s Smart Supply Chain
H&M, as a fast-fashion retailer, relies on agility. The brand has to keep ahead of the trends curve, of course, but it also needs to make sure that the right clothes are available in the right stores. A few years back, you could walk into any H&M store, from Helsinki to Hong Kong, and you would find the same clothes. Today, each store stocks a different mix of clothes.
That’s great for consumers but also greatly complicates the supply chain: not only do multiple and complex shipping orders need to be processed, but this supply chain also needs to react in real time to changes in demand.
H&M has overcome these challenges using an AI system that analyses sales at each store, and predicts what will sell well in each location. The same algorithms that power this supply-side system also have direct benefits for customers and brand image because H&M has integrated them into its app. As a result, the app can make bespoke recommendations to each customer, based on their previous purchasing history, their location, and (of course) what’s on trend that month.
Starbucks’ AI Barista
Starbucks faces different challenges to those of H&M but they have also overcome them via AI technologies. During the morning rush hour at the coffee giant, customers used to have to wait in line to order their coffee. You’ve been able to order your coffee in advance on the Starbucks app for some time now, but more recently the chain launched a voice-activated app that relies on AI technology.
The success of the app is a good example of a basic principle of app design: understanding the actual needs of the customer. It is also an example of a truly useful application of AI. Adding a voice control feature to most apps would be unnecessary, but Starbucks appear to have understood that during the morning rush hour their customers would appreciate one less thing to do. An AI-driven app interface therefore adds genuine value to their customer-focused offer.
Uniqlo Can Read Your Mind
One of the most innovative and impressive uses of AI in the retail sector has been the ground-breaking work of Uniqlo, a clothing brand, in this sector. The company has used AI technologies to drive their purchasing and marketing decisions for some time now, but have also recently launched more spectacular applications of the technology.
One of these is the UMood kiosk, which has premièred at several of the chain’s most high-profile stores. These kiosks show customers’ clothes in a variety of styles and colours, and measure their reaction to them via neurotransmitters. Customers do not need to push a button, or even talk: their brain waves are enough for the kiosk to make recommendations.
Uniqlo’s kiosks sound like science fiction, but show just how much is possible using state of the art AI technology. Crucially, they also incorporate a spectacular element that is missing in more mundane applications of the technology. Humans have been able to recommend clothes for each for quite some time, of course, and so the value of the kiosk is partially based on just how weird (and entertained) customers feel while using it.
Walmart’s Dependable Robots
Given the size and dominance of Walmart in the US grocery market, it is no surprise that the company, who is the largest global retail employer, is leading the way when it comes to deploying AI. Though the robots used by Walmart are not as spectacular as some of the technology on this list, they are undoubtedly useful.
These robots slowly move up and down the aisles of Walmart’s biggest stores, scanning the shelves for missing items. This might sound like a pretty basic task for a robot to do, but recognising real-life objects is in fact an ability that AI researchers have spent years trying to achieve. If one of Walmart’s robots detects a missing item, it can then log a request for it to be re-stocked, again by the night-shift robots.
This use of AI is a good example of another basic principle in the deployment of this technology. Ultimately, the value of AI does not lie in its ability to replace humans; rather, it is best used to automate repetitive tasks that humans find boring. Using robots to do what they do best, prediction and analysis, frees up humans to do what they do best: creativity, improvisation, and empathy.
Neiman Marcus’ Advanced Search
Google image search has been around for so long now, and is so widely used, that it is easy to forget it relies on advanced AI technology. It’s also surprising, given the utility of this functionality, that it did not find its way into the retail sector until now.
Neiman Marcus is a luxury department store in the US, and has been one of the first to use image recognition software in its apps. The Snap. Find. Shop. app lets customers take pictures of clothes or other items that they see when out and about, and then uses image recognition systems to recommend similar items carried by Neiman Marcus.
Again, the value of this app is that it addresses a genuine problem for customers. In this case, it is super difficult to find a particular lamp, for example, by typing into Google ‘short green lamp with gold frilly bits’! Searching via image is much more intuitive, but until recent advances in AI technology has been beyond the reach of most brands.
Events, Brand Experience, and AI
Depending on your brand, it might be that some of these applications of AI in the retail sector are directly applicable. Even if they are not, we hope that they’ve given you some idea of the breadth and range of what AI can do.
All of these examples also point to a broader value of utilising AI: when it comes to brand image, AI technology positions you as forward-thinking and innovative brand at the forefront of the sector.
If you’ve planning to develop an AI-driven installation or app, it’s important that you carefully consider how you will launch it to market. Here, we have one piece of advice: make a song and a dance about your new offering. Most of the examples above were launched during spectacular events. Doing so has a number of benefits. It provides a strong platform from which to promote your new service to a targeted and engaged audience. Allowing attendees to personally trial the AI software at the launch will create a real buzz which is bound to score plenty of online coverage on social media. This audience interactivity increases brand loyalty and will extend your product showcase legacy, resulting in higher adoption rates.
The Human Touch
Finally, however, a word of warning. AI technologies come with an inherent risk of overuse, in that customers can become frustrated if you automate absolutely every element of your brand experience. This is particularly true for millennials who want a personal touch. Customers value the convenience of AI-driven assistants, certainly, but there are times when they want to talk to a human being. Technology is an enabler but not a total replacement.
For bricks-and-mortar retailers, achieving this relies on a number of factors that are familiar. Hiring the right staff, and making sure they are well informed, should be the start. For online retailers, giving a human face to their website is a little more difficult. But here at MCI, we have a solution to that: why not organise a brand event? This can be themed around the launch of an AI service, promoting this to customers and allowing them to use it in advance. Why not create an immersive experience to reward your loyal customers or internal employees? We’d love to collaborate on your next retail brand experience, get in touch to start your experience journey.