AI in Retail – How Artificial Intelligence is Improving the Retail Shopping Experiences

Sudeep Srivastava April 17, 2024
AI in retail

The retail sector has been experiencing a significant digital transformation for the past few years. This shift is powered by the integration of advanced data analytics and predictive systems and facilitates notable improvements in speed, efficiency, and accuracy across diverse retail industry segments. One of the greatest drivers of this transformation is the combination of the Internet of Things and Artificial Intelligence. The presence of AI in retail has offered enterprises sophisticated data insights, which are harnessed to optimize retail operations and uncover intelligent business prospects.

AI has taken on a central role in introducing a new era of unparalleled insights and untapped potential in the retail ecosystem. AI offers retailers an extensive collection of advanced data and intelligence by utilizing complex algorithms and machine learning abilities. This data is gathered from various sources and helps set the base for making operations run smoothly across multiple retail sections.

Let us understand how the integration of IoT and AI has revolutionized the retail sector as we know it. Through intelligent analysis, AI utilizes IoT as a channel to bring about necessary changes. This seamless interconnection of devices and systems enables the smooth flow of data, enhancing various aspects of retail. From inventory management to supply chain optimization and personalized customer experiences, the fusion of these two disruptive technologies has significantly improved efficiency, precision, and overall effectiveness in retail operations.

Amazon, the eCommerce giant, widely uses AI in its retail operations, while Walmart and Target are closely behind. According to IDC, retail will be one of the sectors that will invest highly in AI during 2023, after banking. Furthermore, the adoption rate is expected to double by the year 2025. Retailers are seeking the help of AI-based digital solutions to tackle challenges like changing consumer behavior, labor shortages, supply chain disruptions, and rising costs.

This blog will help you understand everything related to AI in the retail industry and the multiple use cases of the technology in the retail sector. In addition to looking at the benefits, we will uncover the major application of AI/ML in retail.

AI-based solutions for retail

But before diving into the details of AI for retail, let us first take a good look at the latest market size of AI in the retail industry and how it can impact your business.

AI in Retail: A Brief Market Overview

The global AI in the retail market is set to experience significant growth due to evolving consumer preferences, and the drive for operational efficiency. This fusion of technology and retail is revolutionizing the shopping experience and shaping the industry’s future.

According to Grand View Research, the global AI in the retail market is expected to reach $40.74 billion by 2030, witnessing a CAGR of 23.9% from 2022 to 2030. The increasing market size can be attributed to the increased digitization across the retail sector.

Asia pacific AI in retail market

AI is a powerful tool for retailers, enabling them to quickly analyze large amounts of data and make customer-focused decisions. Predictive analytics help with demand forecasting, optimizing pricing strategies and managing inventory, improving the overall cost efficiency.

According to a Gartner report, nearly 50% of retail respondents actively employ AI technology in their daily operations. Generative AI, specifically OpenAI’s ChatGPT, has piqued the interest of the retail industry. As this technology becomes more accessible, retailers are faced with a decision. They must embrace the potential of generative AI for retail to improve their performance while identifying the real use cases of the technology that align with their business prospects.

The growing use of AI in retail and the industry’s expanding market size show that it is a viable option for retailers looking to improve efficiency and maximize ROI. This trend suggests that delving into the retail sector with AI-based solutions can be a promising business enhancement and optimization pathway.

What Are the Benefits of AI in Retail?

Integrating AI and ML in retail has increased speed, efficiency, and accuracy across every sector of the industry. They have empowered businesses with high-level data and information leveraged into improved retail operations and new business opportunities.

Benefits of AI in Retail

So, while AI has countless benefits in retail, here are four primary ones that retailers can count on.

Increased Customer Engagement

Using artificial intelligence retail solutions, retailers can provide smooth customer support in different scenarios – starting from automated checkouts to customer mood tracking. AI-based retail solutions also provide customers with personalized and immersive shopping experiences. This ultimately leads to more customer engagement.

Enhanced Customer Experiences

To drive continued interest, retailers need to differentiate their products and offer compelling services and experiences to consumers. By integrating predictive analytics to gather more market insight, retailers can lead with innovation rather than react to change.

[Also Read: How Will AI Improve Customer Experience in 2023?]

Effective Promotion and Merchandising

Artificial intelligence retail solutions drive marketing and merchandise planning, helping segment customers, generate content, and plan and execute targeted advertising programs. For example, Walmart is already using AI to scan competitors’ offerings, and in the near future, it hopes to use robotics to scan its shelves to optimize its product mix.

Enhanced Operational Efficiency

While routine tasks are automated, AI supports and enhances increasingly demanding work. The role of AI in the retail industry is to optimize labor scheduling, delivery tracking, and delivery route planning, among other tasks.

[Also Read: The eCommerce Revolution: 10 powerful ways AI is changing the game for online stores]

Multiple Ways AI is Disrupting the Retail Industry: Understanding the AI Applications in Retail

With thousands of traditional retail stores announcing their plan to close down their operation after being unable to deliver the same output as online retail stores, the brick-and-mortar retail world, as we know, is facing a ‘Retail Apocalypse.’

Seeing the horror that now stands to face the future of retail, several retail giants have started applying the power of artificial intelligence in the retail market to keep them afloat.

Let us look into a few areas where retail and AI are marking a strong appearance.

Multiple Ways AI is Disrupting the Retail Sector

Streamlining Supply Chain and Logistics

One of the major elements of the mere concept of a factory of the future is a smart, connected, and very efficient supply chain. The fact that there are a vast number of stakeholders participating in the supply chain cycle — manufacturers, suppliers, retailers, distributors, and customers — the supply chain itself presents several opportunities for introducing automation in the business process, something that the supply chain focused generative AI solutions for retail is known to handle effortlessly.

AI-enabled supply chain and logistics management can help companies predict and then react to changes in demand, the amount of available inventory, the environmental condition, supplier capabilities, environment condition, and even customer needs. This ensures better productivity, timely product and service delivery, and increased revenue.

Here are a few ways AI in supply chain and logistics is revolutionizing retail:

  • Improving the accuracy of demand forecasting
  • Lowering the operations and inventory costs and providing faster customer response times.
  • Forecasting the demand for new products
  • Improving the factory scheduling and production planning accuracy by accounting for various constraints and then optimizing the supply chain for each
  • Reducing freight costs, improving supplier delivery performance, and finally, minimizing plier risk.

Understanding Your Customers

AI and ML in retail gives retailers a complete idea of who their customers are. Studying customer data and reviews gives businesses an idea of what their customers want and what keeps them from making repeat purchases.

The insights drawn this way lay the future of AI’s impact on businesses and how it can be your way to get direct insights into your existing and prospective customers. The information can further be used for running targeted marketing campaigns, which are known to improve customer retention numbers across several retail houses.

Offering Customized Experiences

Answering the shoppers’ unique requirements is one of the most foolproof ways to grow and maintain the customer loyalty count. Something conveniently possible through the blend of artificial intelligence and customer experience.

Several reports suggest that customers would be a lot more loyal to the brands that added personalization features in their outlets. With retail transactional data, AI, and machine learning, brands can easily track and analyze past purchases, customer behavior, and loyalty cards to deliver more customized offerings.

A perfect example of customer-oriented AI in retail is Sephora’s Color IQ. The brand’s AI-driven in-store offering scans the skin surface and recommends makeup products based on skin color.

Lowering Out-of-Stock Instances and Markdowns

Using solutions backed by AI in retail stores, the seller can get direct insights into the sales pattern in the stores and lower the safety stock usage. The extent of how AI is revolutionizing the retail industry can be seen in how handy it comes while allocating or replenishing the inventory, as retailers will no longer have to depend on seasonal markdowns.

For instance, H&M utilizes big data and artificial intelligence retail solutions to analyze the store returns and receipts to evaluate purchases per location and then stocks the inventories on the basis of these insights.

Employing AI solutions in retail for the purpose of analyzing the inventory will help lower instances where stores order bulk items of products that are not in demand, which ultimately get wasted and have to be returned – bringing an unnecessary hike in the purchase and shipping cost.

MAP Analysis

One of the most-sought after applications for AI for retail is MAP Analysis. The Minimum Advertised Price (MAP) is the lowest price any retailer can quote to sell a product. The products sold at a rate lower than MAP can adversely affect business for the retailers. Thus, tracking sellers who play around with the MAP price is necessary. Using retail artificial intelligence, brands can prevent violations of their MAP pricing by tracking and monitoring products in real-time.

Revolutionizing the In-Store Customer Experience

By integrating smart mirror technology in the store, clothing brands can help visitors check how the piece of clothing looks on them. All they have to do is hold the garment before their body.

The mirror technology – one of the most popular uses of AI in the retail industry – can be made more advanced and user-friendly by giving visitors more options to wear with their selected piece of clothing along with the cost of each item.

The use of solutions backed by AI for retail operations can also replace sales personnel to assist customers in the store, reduce queues through cashier-less payment, and replenish stock through real-time stock monitoring.

Detecting Non-Scans

Retailers, every year, lose out around $45 billion in the name of non-scans and shrinkage. The catastrophic checkout problem can easily be solved with AI. By using computer vision and AI algorithms, retailers can analyze the video feed, detect the instance where the product is left unscanned, and inform the checkout staff in real-time. These technologies also help identify scams and mistakes at the time of checkout.

Smart Product Searches

Artificial intelligence in the retail market can likewise simplify product searches for customers. Customers can now take a photo of an item or product they like in reality and then utilize the image to search for a retailer selling it online. Here machine learning classifies a large number of things from different merchants and sorts them for the customers within seconds, making item search and comparison simpler than ever.

Behavior Analytics and Forecasting

AI technology is believed to be vital for retail businesses. Utilizing this innovation can assist retailers with sorting out the customer’s requests and needs, which will make them more customer-centric.

With the assistance of information procured through AI-driven analytics, retailers can make well-informed business choices about the amount of stock to be ordered based on the customers’ conduct. It won’t just build productivity but also save the organization time and money.

Utilizing AI calculations, retail organizations can run focused marketing and advertising campaigns based on customers’ locale, inclinations, gender, and buying habits. It will help in improving customer loyalty and retention as a customized experience is an incredible method to show them that you care.

Streamlining Store Operations

Multichannel retail has made store operations complex. Store associates have to play multiple roles in a warehouse. Their job is no longer restricted to receiving goods, stocking them, and managing inventories. They also need to provide product information, keep track of promotional offers and handle merchandising. Using AI in retail can streamline the work of a store manager by automating back-office activities and using robotics for quality checks. The time saved can be effectively utilized for other productive work, thereby saving a lot of time in the warehouse.

Now that we have looked at how AI can be incorporated into your brick-and-mortar retail space, let’s look at some real-world examples of AI in the retail industry.

Embrace the potential of AI-driven transformation

How Are Major Retailers Using AI: Uncovering the AI Use Cases in Retail

Let’s face it – retailers using artificial intelligence in the retail business have a competitive advantage. A few big brands have already started leveraging AI in their business operations to improve efficiency and offer an enhanced shopping experience to users.

Here are a few examples of big companies that are using AI/ML in retail to improve the overall user experience and increase sales. These AI in retail examples can help you understand how the disruptive technology is revolutionizing daily operations across every retail sector.

AI Use Cases in Retail

Lowes’ LoweBot Guides Shoppers

Lowes uses the LoweBot, a robot that assists customers in navigating its stores. These robots ask questions to help customers find products, offer directions, and share expertise while keeping track of inventory.

Walgreens Monitors Flu Spread

Walgreens tracks flu spread using AI by analyzing antiviral prescriptions filled at its locations. This data provides insights to customers about flu activity in their area and helps the store in managing the inventory.

Sephora’s Makeup Assistance

Sephora’s Color IQ scans faces to recommend personalized foundation and concealer shades, while Lip IQ helps find the perfect lipstick shade, making way for a seamless makeup shopping experience.

Neiman Marcus Visual Search

Neiman Marcus employs AI in its Snap-Find-Shop app, allowing users to find similar items in its inventory by taking pictures, offering a convenient alternative to text-based searches.

Taco Bell’s Tacobot Ordering

Another use case of AI/ML in retail is Taco Bell’s Tacobot that makes way for AI-driven ordering through Slack, enabling customers to easily customize and place orders through text or voice.

Macy’s In-Store AI Assistance

Macy’s On Call app is a primary example of using AI in retail stores. The app guides customers within stores, offers directions, checks stock availability, and even alerts human employees when customers need assistance.

Walmart’s Shelf-Scanning Robots

Walmart tests robots that scan shelves for restocking needs, price adjustments, and missing items, allowing employees to focus on customer service.

[Also Read: The Complete Guide to Amazing Features of Retail Business Apps]

Amazon Go Cashier-Free Shopping

Another one of the famous retail AI use cases is Amazon Go. The Amazon Go stores use AI-powered sensors and cameras to facilitate cashier-free shopping, automatically charging customers’ accounts for the selected products.

Uniqlo’s UMood Experience

Uniqlo’s UMood kiosks analyze customer reactions to styles and colors, recommending products based on these responses, offering a unique shopping experience.

West Elm’s Pinterest Style Finder

West Elm’s AI-powered Pinterest Style Finder scans customers’ boards to recommend home décor and furniture items aligned with their preferences.

Zara’s Robot-Assisted Pickup

Zara utilizes robots to streamline order pickups, enhancing efficiency and convenience for customers.

Starbucks Voice Ordering

Starbucks’ My Starbucks Barista app enables voice and text-based orders, allowing customers to skip lines and find their orders ready upon arrival.

You may like reading: How Much Does It Cost to Build an AI-Based Shopping App like Target

How Can Appinventiv Help in Your AI Retail Journey?

The advantages of utilizing artificial intelligence in the retail market are endless. From offering clear insights into new trends to improving customer experiences, implementing AI can enhance your business’s proficiency.

The future of AI in retail is expected to witness remarkable growth while making way for increased personalization, efficiency, and customer engagement. It is further vital to understand that the latest disruption in the AI ecosystem caused by Conversational AI in retail will also hold promise in creating content like product descriptions, advertisements, and even virtual shopping experiences across several retail sectors. The technology is expected to offer retailers a sure-shot way of crafting unique and tailored customer interactions, enhancing overall brand loyalty.

The ability of AI to handle extensive datasets will lead to hyper-personalized recommendations, bolstering strategies for cross-selling and upselling in the retail industry. As the functionalities advance, the integration of artificial intelligence in the retail business will act as the most vital way for retailers aspiring to maintain competitiveness and provide unparalleled customer experiences.

Appinventiv is an Artificial Intelligence services company whose highly-experienced team of professionals will help you implement intelligent AI-driven solutions for your retail business while taking care of all your challenges at the same time.

Get in touch with our experts for top-notch artificial intelligence services. Consider your AI in retail needs officially handled!


Q. How is AI changing the retail industry?

A. AI, in its many forms and facets, is changing major industries across the globe. As for the retail industry, it is making it a lot more predictive, forecasting, and preventative. It is helping businesses understand their customers better, estimate the item requirements, map the price they should be sold at, etc.

Q. What’s the future of AI in retail?

A. The future of AI in retail, which is estimated to be worth $40.74 billion, is likely going to see itself getting combined with other disruptive technologies like AR/VR, Blockchain, etc., with the aim to make the retail store smart and future driven.

Q. Does AI improve retail and help increase sales?

A. Yes. AI in retail gives a complete insight into customers – their purchase preferences, what irks them, etc. It also gives them information about the stocks they should reorder or stop ordering for a while, among other insights directed at their long-term sales and profit-generating capability.

Q. What are the benefits of AI in retail?

A. Some of the benefits of AI in retail are enhancing consumer satisfaction, streamlining the supply chain, creating new experiences for users, detecting non-scans, and more.

Sudeep Srivastava
Co-Founder and Director
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