Artificial intelligence (AI) has become one of the most impactful technologies of our era, transforming the way we live, work and communicate. In this article, we will explore how artificial intelligence is transforming the retail sector, providing examples of how companies are using this technology to improve their business strategy.
What is artificial intelligence?
Over the past few years, artificial intelligence has become ubiquitous in our daily lives, and we are often unaware of it. Various industries have experienced significant benefits thanks to this technology, which has enabled them to improve efficiency in their processes.
For those who are still not very clear about the concept of artificial intelligence, we bring you a short explanation. AI is a branch of computer science that focuses on the creation of computer systems capable of performing tasks that require human intelligence, such as problem solving or decision making. In other words, in a simpler way, AI is a simulation of human intelligence by machines.
How AI has transformed the retail sector
The retail sector is undergoing a profound digital transformation and artificial intelligence is playing a crucial role in this process. AI is being implemented across the industry, from improving customer experience to inventory management and business decision making.
Retail companies adopting this technology are gaining a significant competitive advantage in terms of efficiency, profitability and customer satisfaction. On the one hand, for more traditional companies AI may be viewed with suspicion, as they are undergoing a digital transformation process given the importance it has gained in business processes. In contrast, many startups are born with a digital foundation and a data-driven approach, allowing them to implement AI as a decision support.
Moreover, it not only benefits retailers, but also consumers. Consumers can enjoy an enhanced user experience by accessing services that focus on their tastes and preferences, allowing brands to better adapt to their specific needs.
What are consumers looking for?
According to the relationship marketing study prepared by Mediapost, consumers are increasingly digitally savvy with balanced behavior between online and physical channels. This is because they enjoy direct contact with products, but also appreciate the convenience and speed of online shopping. In fact, 52% of 18-34 year olds use their mobile device while shopping in a physical store, mainly to get more information about a product and compare prices in other stores.
In terms of communication with the brand, a change in behavior has been observed. 23% of consumers under the age of 54 prefer to use online chat, while those over 55 prefer the telephone to get in touch. Therefore, it is vital to implement an omnichannel strategy throughout the entire brand experience. Thus, retailers must maintain constant communication with their customers to ensure that communications, promotions and product information are available and accessible through any channel.
What are the benefits of artificial intelligence in retail?
The use of artificial intelligence in the retail sector offers a great opportunity for improvement. Thanks to the great capacity to analyze data about customers and processes, it provides valuable information to improve the entire process a brand goes through, from manufacturing to communication with consumers. Some of the benefits it brings to the industry are:
Demand forecasting.
Artificial intelligence makes it possible to analyze customer behavior in a comprehensive manner. The purchase history, average ticket, preferences or interaction patterns with the brand in different channels, allows a complete report on the consumer and predict the demand for products. In this way, it is possible to anticipate the amount of stock needed to avoid both shortages and overstocking.
Many retailers apply machine learning in demand forecasting to analyze the impact of factors, such as weather, on sales. Today, companies are already applying machine learning techniques or are beginning to upgrade systems to offer a better experience. This machine learning system gives them the ability to learn automatically without the need for any additional programming. Thus, they manage to improve their predictions using only data.
Shift optimization
Accurate planning of work shifts is highly cost-effective for companies, as personnel is often one of the largest operating expenses. In addition to generating significant annual cost savings, it also increases employee satisfaction by preventing work overload and enabling them to provide higher quality customer service.
This planning can also improve the customer shopping experience by predicting the workload in customer service, store replenishment or online order preparation. However, it is important to keep in mind that not all employees have the same skills, so AI should recommend the most qualified staff for each task.
Empower the omnichannel experience
As we have mentioned in this article, consumers expect to have an omnichannel experience in their interaction with the retailer. The use of this technology helps to unify all the channels in which the brand is present. Both to recommend those products that best fit their needs, answer doubts, help in solving problems or have personalized assistance.
User behavior analysis
Collecting data on consumer behavior in physical and online stores allows for a deeper analysis of their needs and preferences. In order to understand how to position certain products, introduce new products to the market or improve the shopping experience throughout the entire process.
Although the above examples are just a few of the many benefits that artificial intelligence brings to the industry, other examples include: reducing waiting time in stores, dynamizing prices according to the moment or optimizing marketing and advertising.
Artificial intelligence applications in the retail sector
To provide a more complete view of the capabilities of artificial intelligence in a brand, we will present examples of its application at different points in the buying process.
Automation in the supply chain
Since 2017, Walmart has been implementing AI for the automation of its warehouses. Since that time, the company has equipped 25 distribution centers with a high-tech system focused on meeting logistics needs; becoming one of the best supply chains in the industry.
Some of the improvements provided by an automated warehouse are: storage density, increase of available SKUs, reduction of product damage, improvement of order management performance…
Intelligent advertising campaigns
One of the main applications of artificial intelligence available in Google ads is the use of machine learning for the optimization of bids given when a user makes a search.
By performing this technique, Google’s algorithms can analyze historical campaign data and determine the best bid for each ad in real time. In this way, advertisers can maximize ROI and ensure that their ads will be shown to the users most likely to convert.
Complete experience without paying on the spot
Amazon has demonstrated an outstanding ability in all of its ventures and its “Amazon Go” store is no exception. With a focus on artificial intelligence, they have eliminated the need for checkouts for payment, allowing the entire checkout process to be done through an app linked to the Amazon account.
The technology used in these stores automatically detects when the consumer takes or returns a product from the shelves and tracks the virtual cart. This way, upon leaving the store, the purchase expense is removed and the consumer receives a detailed ticket of their purchases.
Automated price management with dynamic tags
Digital tags are the modern version of conventional product labels. This format allows for improved inventory management and the updating of information on characteristics, prices, promotions…
Almacenes “Surtimax” opened in Colombia “Donde Max”, a store with own-brand products at low prices. It installed more than 100 electronic tags throughout the store, making it one of the first stores in the country to implement this technology.
In short, artificial intelligence has the potential to revolutionize the way retail companies carry out their production processes and interact with their customers, thus taking the shopping experience to a whole new level.
Discover our next webinar
At Cognodata we are experts in data management and analysis. We are able to analyze and design a retail media strategy through machine learning and artificial intelligence techniques.
Discover it next April 20th in the webinar presented by our experts Elena Llamas and Andrea Carillo. They will talk about the keys to understand our customers and maximize their end to end experience. You can’t miss it!