Technology has always been a primary impetus towards evolution within the retail sphere. From railroads, and milling machines in decades past to computers and innovative technology like Artificial Intelligence or AI in more modern times. Tech and its implementation in how consumers buy and how products are offered to buyers has played a large role in the trajectory of the retail industry overall. Innovative systems like Kroger Precision Marketing, Walmart Connect and other ecommerce tools have largely impacted the way that a business interacts and appeals to a consumers within the retail industry.
Precedence Research predicts that AI use in the retail marketing space will impact $45.74 billion in retail sales by the year 2032. This means there is an expected growth compounded annually of 18.75% between the years 2023 and 2032. Therefore, getting on board with this revolution and understanding the impact it is making is vital to staying relevant in modern markets.
How AI is Being Integrated into Modern Retail Transactions
AI has emerged as a game-changer for the retail industry. Its ability to quantify and analyze vast amounts of data to personalize a buyer's purchasing experience has transformed the way the industry operates. In fact, an astounding 91% of consumers are more likely to shop with a brand that offers tailored or recommended offers, generated by AI technologies. This showcases one way the entire retail industry has switched and embraced AI as part of the buying process. In logistical terms, there are many ways that this technology has altered the way that the retail industry does business and how it attracts and serves customers. However, there are a few main areas where AI is driving efficiency, growth and innovation within the retail landscape:
Inventory Management: One aspect of AI shaping the future of retail overall is through the optimization of inventory management. In other words, today's technologies allow businesses to forecast buying trends based on predictive analytics, which then allows them to purchase smarter in terms of their inventory. There is a reduction in wasted stock, meaning stock that won't sell, and these AI tools can even predict social media trends. This is like having a crystal ball. One retail giant, Walmart, has been using AI algorithms for analyzing their sales data and social media for many years and continues to be industry leaders in its implementation.
Supply Chain Streamlining: Not only does AI positively impact the way that modern businesses oversee their inventory and its management, but it also plays a huge role in supply chain operations. Computer vision technology and machine learning have impacted retailers greatly when it comes to better route planning, real-time inventory tracking and predictive maintenance. A good example of this is found in the well-known brand DHL, which is a logistics company. This brand uses AI algorithms to optimize delivery routes, considering factors like package sizes, weather conditions and even current traffic patterns. This has effectively reduced DHL's supply chain costs and improved their delivery speeds.
Personalized Marketing Efforts: As mentioned above, today's consumers prefer a more personalized marketing approach. Thankfully, through the integration of AI into many marketing systems and the use of AI algorithms, this is now possible for virtually every brand. Information like customer data, their purchasing history, their browsing behavior and more to run targeted or personalized marketing campaigns. Amazon is a great example of this as they have led retailers in how to provide personalized recommendations to buyers, which has increased their customer satisfaction numbers as well as improved their conversion rates and even their customer loyalty overall.
Pricing Strategies: Another way that AI is shaping retail overall is through pricing strategies. AI analyzes market trends, then looks at consumer behavior along with competitor pricing. This helps hone in the pricing models which are ideal for ensuring profit as well meeting consumers where they are in terms of budget allowances. In fact, AI allows retailers to adjust pricing in real-time, with changes based on various factors like supply and demand fluctuations. The end result is pricing that is competitive in terms of the market while still netting the brand, the profit they need to sustain, and even thrive.
Shopping AI: AI has also made its way into the more personalized side of the equation by offering styling recommendations, try-on technology and even virtual shopping assistance. This is also personalized to each shopper by analyzing their browsing and purchasing history. This helps save time for the consumer as they browse through various products. It also helps them find just what they are looking for much quicker and easier.
Customer Experience: AI is shaping retail now and into the future through changes in customer experience. In fact, customers' experience overall might be the way that AI has altered the trajectory of the retail industry in the most impactful way. This is implemented in a variety of strategies or models from personalized recommendations, advice and virtual assistants to chatbots powered by AI that can interact with customers during their purchasing process. Customer engagement, their overall satisfaction levels and their ease of purchasing an item is greatly enhanced with the right form of AI, including user-friendly apps and more. This allows them to buy with assurance knowing that the product is right for them.
Fraud Prevention and Detection: A look at how the role of AI is shaping the future of retail would not be complete without a mention of how it has been utilized within the industry to detect fraud and continues to provide this service. With more and more consumers purchasing online, the risk of fraud has increased. However, thankfully, AI algorithms use various data sources to formulate patterns for a consumer in terms of purchasing. This can show changes that could indicate fraud. In addition, real-time monitoring has allowed for even more immediate fraud identification and prevention, which keeps consumers safer when purchasing online. AI has to stay one step ahead of fraud technology in order to be able to head off any attempts at fraud, and thankfully it is fulfilling that role.
The Future Looks Bright
The bottom line is that AI is here to stay both in terms of the retail market and throughout various other industries as well. Therefore, understanding how to leverage it to the benefit of consumers and businesses alike is the best way to embrace the future of retail and all the many benefits that come along with it as it relates to all things retail.