From e-commerce to in-app purchasing on Instagram, the way we shop is now easier and more accessible than ever before. Over the previous decade, online shopping has become more prominent, with e-commerce sales projected to double from $2.3 trillion in 2017 to $4.88 trillion by 2021. [1]
Shopping online through our phones – while we wait in public transport or the elevator, is the norm. Many customers prefer reading online reviews before making purchasing decisions in-store, thereby using their phones. In fact, more than $1 trillion in U.S. sales is influenced by the use of smartphones in retail shopping – from researching a product to purchasing it. [2]
Although many customers prefer shopping online as they can rely on personalized AI recommendations and same-day deliveries, most consumers are still purchasing products by visiting physical stores, as shopping in-store remains the first choice for 62% of baby boomers and 58% of Gen Z. [3]
Hence, even though online shopping has been the talk of the decade, with retailers generating billions in sales, physical stores remain a consumer’s top choice – for now. Seeing as this is the case, retailers have continued to introduce innovations in their stores, and this time, they have sought to AI for increasing their return on interest (ROI).
Analysts estimate that the global annual spending on AI by retailers will exceed $7 billion by 2022. In fact, 25% of the top 250 global retailers are already integrating AI into their organizations. [4]
AI recommendations help customers choose
For years, sensors have been used by stores to identify the number of shoppers and analyze their shopping habits. By integrating AI into these sensors, fashion retailers can identify the preferences of most of their customers, and suggest season styles accordingly. In addition, with cashier-less retailers such as Amazon Go, the future of AI in retail seems boundless.
According to Salesforce, average sales increase by 14% when consumers are assisted by AI-powered product recommendations. Sephora, for example, has made it possible for customers to shop for makeup without applying any makeup testers on their face. Some Sephora stores already provide an option for customers to try makeup virtually through AR, which can scan their face and offer makeup recommendations that help them choose the perfect shade of foundation, concealer, and lipstick. This drives more customers to make in-store purchases and visit physical stores to make suitable purchases that save them both money and effort.
AI assists smoother retail operations
Amongst the most profitable ROI applications observed retailers who used AI in their operations, according to research by Capgemini Research Institute:
- 7.9% ROI in procurement tasks
- 7.9% ROI in image detection for spotting in-store pilferage
- 7.6% ROI in enhancing supply chain processes [5]
In some of Walmart’s stores, robots assist managers by alerting them of the state of inventory. This kind of technology helps retailers remain updated in real-time, create a better inventory model, and assists marketers in forming enhanced marketing strategies to keep prices competitive.
Uniting retailers and third-party tech firms
Although the applications of AI in retail can save the retail sector up to 340 billion dollars, many retailers have not yet detailed a clear roadmap for deploying AI. In fact, only around 36% of retailers today have a clear action plan for AI, which sets light on the importance of reaching out to external AI providers and tech firms that can support the retail sector in this crucial transformation – which can help retailers get closer to consumers and stay ahead of the curve.
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Sources:
[1] Statista, “Retail e-commerce sales worldwide from 2014 to 2021 (in billion U.S. dollars)”
[2] Forrester, “2018 Retail Best Practices: Mobile Web”
[3] Salesforce, “Millennials, Gen Z, Boomers, and Beyond: How Each Generation Shops Differently”
[4] Capgemini, “Building the Retail Superstar: How unleashing AI across functions offers a multi-billion dollar opportunity”
[5] Capgemini, “AI in Retail Report: Retailers moved from AI hype to reality in 2018, but are yet to seize opportunities across functions”