How AI will shape future retail strategy

The hype around artificial intelligence has reached stratospheric levels, leaving retailers to wonder how exactly it will influence traditional retail operations and the customer experience.

Questions include, which AI technologies should retail companies be investing in today? How can AI really deliver on the promise of business improvement? What will be the long-term impact on retail jobs? And will consumers appreciate innovative new ways of being served?

At a packed Retail Connections event in central London on 16th November, a panel of retail experts grappled with these issues. The debate – fuelled by probing questions from the floor – revealed that the UK retail sector is ready to embrace the possibilities of AI, but is thirsty for more knowledge about what it can realistically achieve.

Transforming insight into action, faster

Defining “the promise of AI to retailers”, Nick Lansley, Director and Innovation Insider of Lansley Consultancy, said he considers this to be “the ability to speed up the process of transforming insight into action”. His view is that with AI, retailers will be able to implement solutions to deliver business efficiencies faster, and as a result, better serve consumers in their daily lives.

Lansley’s vision is that AI, in the form or machine learning, will take behavioural and demographic analysis to new levels, vastly improving the customer experience. “AI will also be increasingly powerful in areas of retail security, for instance, for risk analysis and credit card fraud detection,” he said. And in supply chain management, machine learning will fine-tune data mining processes and drive inventory accuracy.

However, he alluded to the limitations of the technology. “Beware of poorly specified goals when setting AI algorithms,” said Lansley. “There may be unforeseen and undesired consequences from poor planning. Remember that AI can pull out patterns in data, but it doesn’t have its own ideas.”

Watch out for gimmicks

Anusha Couttigane, Senior Analyst of Kantar Retail, flagged up the ways in which the fashion retail sector is already using AI to improve the customer experience and fulfilment operations. She cited Net-a-Porter, Asos and Alibaba as leading the field in highly-accurate product recommendations and visual search capabilities.

But she warned against letting AI gimmicks cloud retail strategy. “Consumers have multiple forms of entertainment competing for their attention, so if that’s all your technology does, then as soon as a rival retailer does something new and more interesting, that attraction is going to wear off.”

Don’t destroy the emotional experience

Delving into the impact AI will have on the psychological needs of consumers, Katharina Wittgens, Managing Director of Innovationbubble, spoke passionately about the dangers of relinquishing the human element of retail interactions. “Businesses should remember that consumers are human, emotional beings. They often crave reassurance when making high value purchase decisions, and they need a human element they can trust within the process. My worry is that AI has the potential to damage any chance of delivering the kind of emotional experience consumers really want.”

Retailers were assured that IT practices that already underpin their business will be enhanced by AI, not replaced by it. Paul Wilkinson, Head of Tech Research at Tesco Labs considers AI in retail to mean “having systems that learn”. For instance, tech that can learn that a customer always orders Warburtons bread, and skimmed milk, so automatically ordering that for them when they request ‘bread’ and ‘milk’ via their virtual digital assistant. He also outlined the importance of focusing on simple problem solving, rather than leaping for the next AI technology fad.

Clearly AI represents countless opportunities in retail, but many elements are not available yet, the experts agreed. Paul Wilkinson alluded to the “multi-capability robot” and its potential to replace humans in stores in the future. “That’s a very long way off, we’re probably talking decades. In the meantime, there are limitations. Robots today are clever at carrying out repetitive actions, but they can’t make a cup of tea.”

Watch out for blog posts giving further insights from our event Artificial Intelligence: the new game changer in retail


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