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Impact of AI in Retail – Is Amazon Go the Start of Fully-AI Retail?

By Sudeep Srivastav
December 20, 2018 10. min read
Last update on: August 26, 2020

In the heart of Seattle lies a one-of-a-kind disruptive retail store – Amazon Go, a retail concept that gained popularity after making an appearance in headlines after opening its first Beta store earlier this year.

For those who are new to the world of Amazon Go, it is a grab and go retail model, where all you have to do is take up an item from the shelf and leave the shop and the items will automatically get added in your cart and the amount will be debited from your Amazon account.

The concept with which Amazon Go has been launched is something that the retail world has never seen. With Artificial Intelligence at its center tracking what items users are buying and the amount that has to be charged from them, Amazon go is venturing into the traditional retail setup and has introduced the technology yet again in its retail setup.

The popularity that Amazon Go Retail has been able to achieve in just a few months of its official launch has led to a number of other retail stores investing in deep learning and artificial intelligence technologies to follow the lead that Amazon has set. Walmart and Microsoft are also apparently planning to level the cashier-less retail outlet space which is presently only dominated by Amazon.

AI-powered Amazon Go venturing into traditional retail plans has proved itself to be a hit with the brand hoping to expand its business to over 300 stores and making itself one of the major AI technology trends that the retail houses will be looking at in 2020 and beyond. But AI’s capability as the medium to bring Retail industry transformation is not restricted to just one disruptive use case that Amazon Go retail is. There are a number of other ways AI in Retail is changing the industry’s outlook. In this article, we are going to dissect the use of AI in retail in its many facets and extent. 

Table of Contents:

  1. Why Do You Need Artificial Intelligence in Retail Industry
  2. How Can Artificial Intelligence and Retail Be Clubbed
  3. Artificial Intelligence (AI) Use Cases in Retail: how major retailers are currently using AI
  4. FAQs About the Digital Transformation of the Retail Industry with AI

Stats Showing Role of Artificial intelligence in Future Retail Market

AI in retail- infographic

Now that we have looked into the role of AI in the future retail industry, let us move on to why the need of AI even arises in the retail domain. 

Why Do You Need Artificial Intelligence in Retail Industry

The use of AI in retail is mainly talked about in the front of their applications. What is comparatively less discussed is the need of using AI in retail. 

  • Captivate more customers 
  • Create insights from dissimilar data
  • Synchronize online and offline retail experience, a.k.a Omnichannel Retail 
  • Better flexible logistics network

The need cum benefits of AI in retail goes as far as how well you manage the AI project in your retail business. 

How Can Artificial Intelligence and Retail Be Clubbed

With 7,000 retail stores around the world announcing that they are ceasing to exist in 2018 and thousand other announcing their plan to close down their operation after being succumbed to not being able to deliver the same output as online retail stores, the brick and mortar retail world as we know it is facing what is called a ‘Retail Apocalypse’.

Seeing the horror that now stands to face the future of Retail, a number of retail giants have started applying the power of Artificial Intelligence to keep them afloat.

Let us look into a few areas where the combination of Retail and AI is marking a strong appearance.

1. Streamlining Supply Chain

AI in supply chain management is the most popular adaption of the technology in the Retail industry.

One of the major elements of the mere concept of a factory of the future is made of 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 the customers — the supply chain itself presents a number of opportunities for introducing automation in the business process, something that the supply chain focused AI solutions for retail is known to handle effortlessly.

Insights taken from big data analytics can help companies predict and then react to the changes in demand, the amount of available inventory, the environmental condition, the supplier capabilities, the environment condition, and even the customer needs, which all ultimately ensures better productivity and a timely product and service delivery.

The prominent role of AI in supply chain planning is what IDC estimates will bring half of the mature supply chains to incorporate AI by the time we reach 2020. Even in the present day, there are a number of ways AI and Retail amalgamation is revolutionizing Supply Chain Management.

Ways AI in Supply Chain and Logistics is Revolutionizing Retail

  • Improving the accuracy of demand forecasting
  • Lowers the operations and inventory costs along with providing faster response times to the customers.
  • 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, improvement in the supplier delivery performance, and finally, a minimization of the supplier risk.

2. Understands Your Customers.

Machine Learning gives the retail houses a complete idea of who their customers are. Upon studying the multiple customer data and reviews, it gives businesses an idea of what their customers want and what is keeping them away from making repeat purchases. 

The insights drawn this way lays the future of AI in retail and how it can be your way to get direct insights into your customers – all lost, present, and new. The information can further be used for running targeted marketing campaigns, which is known to better the customer retention numbers across several retail houses.

3.Customized Customer Experience

Answering the shoppers’ unique requirement is one of the most full-proof ways to grow and maintain the customer loyalty count. Something conveniently possible through the blend of Artificial Intelligence and Customer Experience.

In a survey, 70% of respondents revealed how they would be a lot more loyal to the brands which added the features of personalization in their outlets. With the transactional data and machine learning, brands can easily track and then analyze past purchase, customer behavior, and loyalty cards etc to deliver more customized offerings.

An example of this customer oriented AI in retail use cases would be what Sephora is doing with Color IQ. It is the brand’s artificial intelligence driven, an in-store offering which scans the skin surface and recommends makeup products on the basis of the skin color.

4. Lowered Out of Stock instances and Markdowns

Using 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 be dependent on seasonal markdowns.

An example of AI in the retail industry can be seen in the case of H&M that declared the plan to adopt Big Data and AI for analyzing the store returns and receipts for the evaluation of purchase per location and then stock the inventories on the basis of these insights.

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

5. MAP Analysis 

The Minimum Advertised Price (MAP) is lowest price which any retailer can quote for the sale of a product. The products which are sold at a rate lower than MAP can adversely affect business for the retailers. Thus, it is necessary to track sellers who play around with the MAP price. The Retail analytics firms like Intelligence Node make use of AI for helping brands selling online prevent violation of their MAP pricing by tracking and monitoring products in real-time.

6. Virtual Trial Rooms Revolutionizing the in-store customer experience

By integrating smart mirror technology – an AI in retail stores’ use cases that is growing in popularity – in the store, clothing brands will be able to help visitors check how the piece of clothing is looking on them, while all they have to do is hold the piece of garment in front of their body.

The mirror technology – one of the most popular use of AI technology in the retail industry – can be made more advanced, more conversion friendly by giving the visitors option to wear with their chosen piece along with the cost of each and an embedded checkout option which would be in sync with the system placed in the checkout zone.

7. Detecting Non-Scans

Retailers, on a yearly basis, lose out around $45 Billion in name of non-scans and shrinkage. The catastrophic checkout problem can easily be solved with AI. By using computer visions and AI algorithms retailers can analyze the video feed and detect the instance where the product is left unscanned and inform the checkout staff in real time.

One of the retail-focused AI vendor companies offering technology to solve this very problem is StopLift. It makes use of video analytics and computer vision to identify scams and mistakes at the time of checkout. It compares the items detected on the video to the real POS data for tracking items which have not been scanned, thus saving a great number of scam instances.

Now that we have looked at the different ways AI can be incorporated in your brick and mortar retail space, even when your plan is not as ambitious as Amazon Go, let us look at the use cases of AI in Retail Industry by looking at some big name retailers that have successfully implemented AI. Businesses setting the best examples of AI to improve the retail experience.

Artificial Intelligence (AI) Use Cases in Retail: how major retailers are currently using AI

AI use cases in Retail

1. Pepper Robot

Pepper is a humanoid robot which can interact with the walk-in customers while perceiving the human emotions, is the best example of the use of AI in retail. The robot is already a hit in Japan where it is being used as customer greeter and rep in over 140 SoftBank mobile stores. A pilot of Pepper in California stores – Palo Alto and Santa Monica – received a 70% rise in the foot traffic in Palo Alto, along with 50% of Neo-pen sales in the Santa Monica region.

2. Domino’s Robotic Unit

Integrated with artificial intelligence technology used for military combat training, the DRU sensors help it in the navigation of the best path for delivery of pizza. Seeing the amount of investment that Domino’s is making behind the technology, the future when delivery persons will be replaced by robots is not very far.

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3. Amazon’s Drone

Coined as Amazon Prime Air, drones are a major futuristic part of Amazon delivery system. While the launch date is not announced yet, the future where the items we buy are delivered to our home through drones is not very far. A future that will set a benchmark of use of AI in Retail.

Want yours to be the next name in the list as a disruptive use case of AI in retail market? Contact our team of developers specializing in the adoption of Artificial Intelligence in Retail.

AI in one form or the other has placed themselves as an important part of the brick and mortar retail industry.

4. Sephora’s Color IQ

Sephora helps you find the best makeup shade the moment you step inside the store. Their Color IQ AI solution makes you try shades on the screen and test how they would look on you without having to try them in reality. 

5. Neiman Marcus’s Visual Search 

The luxury department store makes use of AI for making it convenient for their customers to search items. Through their Snap. Find. Shop. app, users can take pictures of items they saw when outside the store and then search the  Neiman Marcus inventory to get the item. In place of using unclear search terms to search for an item, the photos help them find similar items.

While its integration is comparatively a lot easier in case of mobile retail or mCommerce apps, integration of the disruptive technology in store would call for a major overhaul of your business model and would only deem to be useful when the integration that you have made is technically advanced – something that can only be achieved when you have partnered with an equally sound AI specialist development company who understand the technology to its core.

Wrapping up the article with the answer to the question we started with – Is Amazon Go the Start of Fully-AI Retail? Yes. The adoption of AI in Retail Stores that had already started will now move in full swing with the trend that Amazon Go has now set in the Retail industry.

FAQs About the Digital Transformation of the Retail Industry with AI

Q. How AI is changing the retail industry?

AI, in its many forms and facets is changing many industries. 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?

The future of AI in the Retail which is estimated to be worth $5,034 million, 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?

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

Sudeep Srivastav
Sudeep Srivastav
CEO, Appinventiv
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