The steady decline in business profitability across the retail industry threatens to erode future investment, innovation and shareholder value. Fortunately, the age of AI-powered retail is upon us, promising an unprecedented amount of data and information that, if used in the right way, can help retailers grow their businesses and at the same time revolutionize the customer experience.
Thanks to Amazon’s Alexa and Google Home, the technology is becoming more pervasive. It’s changing how we shop, how we experience brands and how we live our everyday lives.
As AI becomes normal for today’s consumers, it’s hard to believe that, as recently as the turn of the Millennium, the technology was mostly restricted to science fiction and the horizon-scans of the most forward-thinking companies. Today, more and more retailers are considering its potential. After witnessing the advances that their online-only rivals have achieved, they see AI as key to providing an exceptional customer experience in the digital age.
And yet, some retailers are unsure how to proceed. They ask how they can make the most of this exciting new opportunity. How can they make AI the face of the brand?
In our view, there are three principal ways that AI can be used to revolutionize the retail experience:
1. Helping customers find what they want
Retailers can use AI to help customers choose what to purchase. That means using it for two distinct purposes: first, helping customers find what they are looking for; second, helping them find things they don’t yet know they’re looking for.
For large online brands, the range of products is so huge that the ability to guide customers in the right direction is a serious competitive advantage. Many online retailers have also been quick to recognize the value of the second purpose: using machine learning to anticipate consumers’ needs and nudging them toward further purchases.
With an eye on these trends, leading retailers are exploring how AI can help their customers find what they need by improving reviews and providing more sophisticated recommendations on the website. Retailers can also use AI to customize their homepage for each user, so consumers are presented with the items they want to buy. We are already familiar with the idea that each visitor to a site will see different, tailored adverts. Why not tailor their experience of the whole site?
Google already uses AI to tailor its search results for individual users, and some online retailers are using structured data to adapt what they show customers according to what they have searched for in the past. Used sensitively, AI can help customers feel that retailers understand them and what they want.
2. Getting even closer to consumers
Retailers can use AI to find out even more about how customers behave and what they are looking for – helping them ensure they are stocking the right goods and targeting them at the right consumers.
Retailers already use the data from their online platforms to develop richer and more accurate customer profiles. Such insight does not, however, need to be restricted to the world of online shopping. Imagine a store in which AI technology detects, learns and eventually predicts which products customers take off the shelves but then decide not to buy. This would offer retailers valuable information about which nudges to give customers, at what times.
3. Delivering the wow
Retailers can use AI to give customers an experience they enjoy. As AI makes online shopping easier, customers are less likely to visit stores because they need a “commodity” product that can easily be ordered from home, such as laundry detergent, and more likely to go for the pleasure of the experience. This could incentivize retailers to give their customers the best possible in-store experience and service.
Coop Italia, for example, has led the way with a system that breaks boundaries. Wave a hand over a box of grapes and information about their origin and nutritional information appears on a monitor above them. The supermarket also displays information on “vertical shelving” – touch applications that enable customers to search for other products and find out more about them. Customers can bring up information about related products, promotions, and even waste-disposal. We can also expect retailers to increasingly exploit AI to carry out multidimensional conversations with customers: text-based chats, spoken conversations, gestures, virtual reality.
Retail’s ultimate prize
In just a few short years, AI has transformed how we think about technology in retail. It has created new opportunities to delight customers, and has given retailers new urgency to get up to speed with the latest advances. In the coming years, as AI becomes increasingly entrenched in the everyday lives of consumers, the leading chains will use AI to win retail’s ultimate prize: turning their customers into fans.