The impact of emerging technologies like artificial intelligence (AI) on retail is becoming increasingly profound. The use of AI in retail is not only transforming how retailers interact with customers, but also how they manage supply chains.
It enables retailers and small businesses to create personalized shopping experiences while also keeping a handle on the complexities of logistics management.
When used right, AI can become an essential tool for improving improving efficiency, customer feedback and satisfaction.
Let’s look at the ways AI is shaping the retail industry, and discuss the practical applications, benefits, and challenges.
But first, why should you consider implementing AI you in your retail business?
AI’s role in retail
AI in retail refers to the use of machine learning (ML), data analysis, and automation technologies to improve various aspects of the retail industry.
If retailers want to understand customer behavior, AI can assist in analyzing vast amounts of data in real time. This makes it easier for retailers to predict demand and make data-driven decisions.
AI can be used in several areas within the retail industry, from inventory management and customer services to product recommendations and delivery optimization.
How AI in retail is changing the industry
AI’s benefit in retail is not only limited to customer experiences. It can also be used for back-end logistics like inventory management and supply chain management.
Here are some of the most impactful changes brought about by AI:
1. Personalized shopping experiences
Algorithms driven by artificial intelligence can help retailers to create highly personalized shopping experiences.
By analyzing customers’ past behaviors and preferences, AI can suggest products, offer promotions, and even predict what a shopper may need next.
You might personalized shopping experiences is a waste of time, but research by Commerce Tools show that Australian customers are willing to pay extra for it.
ALSO READ: Aussie shoppers want personalization: New study
How to get it right? Amazon, for example, uses recommendation engines to improve a customer’s experience by tailoring suggestions to individual shoppers.
2. Supply chain and inventory management
AI software and tools can also optimize stock levels by predicting product demand.
By analyzing real-time customer data and seasonal trends (among other factors), these tools help retailers minimize the risk of over- or understocking. It also helps to reduce waste.
When products are available at the right place and time, it reduces delays, cuts costs, and keeps customers happy.
3. Dynamic pricing and promotions
AI can also help retailers to adjust pricing in response to market conditions.
By using valuable customer data alongside data from competitors, sales history, and customer behavior, AI can optimize prices in real time to boost your profits.
These tools can tailor promotions to specific customers, ensuring the most effective deals are offered at the right moment.
Retailers could even reach a certain segment of their audience by customizing subscription models for customer retention.
READ: Here’s how to reinvent the subscription model
4. Improving customer service
Many retailers have implemented AI chatbots to handle common customer inquiries.
These chatbots can help customers to find products, track their orders, and process returns.
The ease of AI chatbots offers customers instant support while also reducing the burden on human customer service teams.
AI-powered logistics in retail
No retail business can be successful without two critical components: logistics management and delivery. And AI tools can help you manage these processes with ease.
From route optimization to real-time tracking, AI-powered solutions can your logistics management a much-needed boost to meet growing consumer demands.
1. How AI optimizes route planning
Efficient route planning is essential for retail deliveries, especially as consumer expectations for same-day or next-day delivery grow.
Route optimization tools, like those offered by Locate2u, can analyze traffic patterns and weather conditions to make delivery processes a breeze.
It can also take driver availability into account and create the most efficient delivery routes. This significantly reduces delivery times and operational costs.
2. Tracking and real-time updates
AI-powered systems can also enable real time tracking of deliveries which allows both retailers and customers to monitor the status of orders from start to finish.
A comprehensive tracking solution that provides customers with live tracking links can boost customer satisfaction since they can follow their delivery in real-time.
This feature is particularly valuable during peak shopping seasons like Black Friday and Cyber Monday when retailers handle a surge in orders.
3. Using AI with Transport Management Systems (TMS)
Another way to incorporate AI in retail is to use it with a transport management system (TMS).
A TMS can optimize the entire supply chain, from streamlining freight costs to managing fleets. This means retailers can handle everything from dispatch to billing within one system.
Generative AI in retail
Generative AI is a newer subset of AI technology but it’s growing impact on the retail industry cannot be understated.
But first, what exactly is generative AI? We need to understand the distinction between the previous iteration of AI and the current advancements.
Before generative AI, we had discriminative AI. This type of AI can classify data and make specific predictions based on input, but it is very limited.
Think of it as an ‘either/or’ model, making ‘yes’ or ‘no’ decisions based on the data it has learned. The most popular example of this is email spam filters.
Then there’s generative AI, the most recent iteration which is taking the world by storm thanks to OpenAI, Anthropic, Microsoft, Google and other tech giants.
ALSO READ: Anthropic’s new model is a game-changer for online retail and delivery
The difference is that generative AI uses large language models to create new content and solve complex problems outside of discriminative AI’s parameters.
Where discriminative makes simple ‘yes’ or ‘no’ decisions, generative AI can create new, original outputs.
When this tech first rose to prominence, retailers used it to create custom product models to analyze customer reviews. It’s constantly evolving, however, meaning there are always new things to try.
Forward-thinking retailers are using it to optimize cross-channel experiences and for promoting sustainability.
Others are using to give their brick and mortar stores a virtual makeover, so to speak.
READ MORE HERE: 5 ways generative AI is changing the industry
Overcoming AI anxiety in retail
With the rise of AI technologies and machine learning, there has been an ongoing debate about its impact on jobs within the retail sector.
While some fear that AI will replace human workers, others view it as a tool that can complement human efforts, making tasks easier and more efficient.
LEARN MORE HERE: Will the machines steal your job, or be your new wingman?
AI and retail trends to watch
The use of AI in retail is still evolving, and several emerging trends are set to shape the future of the industry.
AI-driven visual search
AI-powered visual search tools are helping customers find products faster by analyzing images.
For example, a customer can upload a picture of an item they like, and AI will identify similar products available for purchase.
Voice commerce
With the rise of virtual assistants like Amazon’s Alexa and Google Assistant, voice commerce is becoming a key trend in retail.
AI-driven voice recognition allows customers to shop hands-free, further personalizing the shopping experience.
AI for sustainable retail
AI is playing a key role in helping retailers adopt more sustainable practices by reducing waste, optimizing inventory management, and ensuring products are sourced ethically.
The future of AI in retail
From improving customer experiences to streamlining logistics, AI will continue to play a pivotal role in the retail industry.
Retailers that embrace AI and integrate it into their operations – such as with delivery management tools like Locate2u – will be in a better position to thrive in competitive industries.
Those who stay ahead of the curve and adopt the latest tools and technologies will not only meet customer expectations but also secure their future success.
NOW READ: AI in e-commerce: Are there any risks?
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About the author
Cheryl has contributed to various international publications, with a fervor for data and technology. She explores the intersection of emerging tech trends with logistics, focusing on how digital innovations are reshaping industries on a global scale. When she's not dissecting the latest developments in AI-driven innovation and digital solutions, Cheryl can be found gaming, kickboxing, or navigating the novel niches of consumer gadgetry.
