- Artificial intelligence is becoming more advanced than ever, and retail experts say it will become increasingly essential in making stores more efficient and convenient for shoppers.
- The artificial intelligence market in retail is expected to surpass $8 billion by 2024, according to the business management company Global Market Insights.
- "The speed at which AI can work through issues and create solutions — and just the sheer volume of data that it can collect, but more importantly, analyze in a really intelligent way — can improve lives," Chelsea Grayson, board member of Inheritance AI and former CEO of American Apparel, told Business Insider.
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While the term "artificial intelligence" may summon futuristic images of robots and machines, in the retail industry it has become a catchall term for everything from customer service chatbots to virtual reality apps.
Artificial intelligence services have become big business in retail: The sector is expected to surpass $8 billion by 2024, according to business management company Global Market Insights. As e-commerce continues to reign supreme, AI continues to flourish out of business necessity, according to Emil Alon, CEO and founder of augmented reality company Resonai.
"Retailers can finally map and understand the full shopper journey across both digital and physical sales channels to achieve an omnichannel picture," Alon said. "It allows retailers to gather a more detailed understanding of their customer segments to refine their product portfolios and better connect brands with target customers."
Today, nearly everything a shopper does is being mined and tracked for data. While this may sound scary on its face, retail experts say AI will become essential in making stores more efficient and convenient for shoppers.
"Everything that a consumer does online, and an increasing fraction of what they do offline, generates data which is associated with them," Andrew Konya, CEO and cofounder of the AI startup Remesh, told Business Insider. "This data is sewn together across devices, people, companies, and transactions. It is leveraged by increasingly advanced algorithms which are continually getting better.
How AI is improving inventory management
According to Chelsea Grayson, board member of Inheritance AI and former CEO of American Apparel, AI has been most beneficial to retail by improving the way companies track and manage inventory.
"No retailer I have ever worked with has this down to a perfect science," she told Business Insider. "In fact, the predominant majority of retailers I work with are terrible at inventory management and demand forecasting."
Inventory challenges have been a major thorn in the side of retailers struggling against the retail apocalypse, specifically those that continue to over-index on apparel that goes unsold before being pushed to clearance racks at significant discounts. Such sales are dangerous because they can weaken the brand by establishing a "promotional culture," she said.
However, growing AI technologies like RFID tracking are helping brands streamline the inventory process by tracking it online. Today everyone from Nike to Outdoor Voices uses this system, which Grayson said is especially helpful in tailoring product based on geographic region.
"[Retailers struggle with] having a particular item or set of SKUs in the right place at the right time," she said. "They often have the same item in every single one of their locations, for example, without figuring out that in a particular geography, a floral skirt might work, while elsewhere they're going to need a big puffer because it's cold."
On the consumer side, Grayson said augmented reality technology like Sephora's Color IQ program has already proven beneficial to helping shoppers pick out products. In addition to allowing shoppers to "virtually" try on makeup, it saves information on favorite hues, a move that can help drive consumer loyalty and prevent "the graveyard of makeup."
How AI can improve shopping
With so much data at their disposal, retailers are still identifying the best ways to use this information to bolster sales and engage with consumers in a way that doesn't feel invasive. This is easier said than done — while brands like Gucci have implemented intelligent customer service chatbots, a New York Times report found that the company powering the bot could see what shoppers were typing before they sent it, and used this intel for future targeting.
"It is one thing to think, 'O.K., somehow my clicks are being recorded somewhere,'" Christine Bannan, a consumer protection lawyer at the Electronic Privacy Information Center, told the Times. "But to think of an individual sales rep watching all of your clicks, I think it will resonate with people that this sort of tracking is so prevalent and what it really means."
Grayson said that despite concerns over the technology, the pros of retailers tracking consumer habits through artificial intelligence ultimately outweigh the cons.
"The speed at which AI can work through issues and create solutions — and just the sheer volume of data that it can collect, but more importantly, analyze in a really intelligent way — can improve lives," she said. "AI is going benefit humanity far more than it hurts any individual."
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