One of the biggest outcomes of the digital revolution has been the overwhelming amounts of data being produced every single day. Estimates suggest that 2.5 quintillion bytes of data is being generated each day. With greater digitization and the proliferation of IoT based devices, this number is set to grow. If leveraged in the optimum fashion, digital data holds a veritable gold mine of information and insights that can help companies transform every aspect of their business right from how they source materials, communicate with customers, market their products, manage their inventory, and take executive decisions.
The retail industry stands to gain tremendously from this data revolution. While the industry has been quite proactive in embracing data to transform its operations, there is still a lot more that can be done. Artificial Intelligence (AI) particularly has the potential to revolutionize how data is used by retailers. Here are a few ways in which AI can help retail deliver superior outcomes.
By analyzing huge amounts of data, both external and internal, AI can help predict consumer intent and purchasing behaviour to optimize marketing campaigns for better conversion. Advanced AI machine learning algorithms can help retailers achieve personalization at scale. For example, it can deliver highly targeted and personalized promotions to customers based on a combination of parameters such as purchase history, social media behaviour as well as macro-trends. Several case studies demonstrate that personalized campaigns are more effective than generic messages. Personalization can help maximise e-commerce conversions and also positively impact the average basket size. It can also improve customer retention by encouraging customers to engage more consistently with the retail brand.
Personalized product recommendations based on user data can help drive better sales by enhancing the buying experience. For instance, AI can help design personalized virtual racks that are updated in real time based on the user’s navigation patterns. AI can also help retailers optimize their product portfolio based on user behaviour and preferences. It can augment cross-selling by providing targeted recommendations based on a combination of personal parameters as well as current popularity of products.
AI-enabled chatbots are built to facilitate effective Natural Language Processing (NLP), thereby enabling them to seamlessly handle simple queries that are transactional in nature. For instance, chatbots can help track shipping status of past purchases or guide users to a specific brand or style. This not only results in huge cost savings for the retailer, but can also help enhance customer experience by addressing queries far more quickly and accurately as compared to a human agent. In physical brick and mortar stores, robot-powered panels or kiosks can help customers easily locate items, get product specifications and also narrow down options to facilitate easier purchase decisions.
For many retailers, effective inventory management can prove to be the difference between a profitable and loss-making operation. In the US alone, the cost of dead inventory is estimated to cost fashion retailers $ 50 billion. Using AI to customize inventory requirements for each store in real time can help cut down the number of SKUs considerably. At the same time, AI can also help predict demand for a product accurately by analyzing a multitude of factors such as customer sentiment, competitive offerings, social media trends, pop-culture references etc.
Virtual reality can help create highly ‘real’ experiences that can enable users to experience a product even virtually. For instance, an immersive virtual reality experience can enable users to actually try on an outfit and see how it looks on them before they buy it. Similarly, facial recognition software can help greatly enhance the instore experience for customers by offering customized promotions or recommendations based on the person’s real-time instore behaviour.
When used optimally, AI can influence the fortunes of retailers in a number of ways. Not surprisingly, a study by Global Market Insights predicts that AI investments in retail will likely breach the $ 8 billion mark by 2024. For retailers today, AI is a technology that definitely cannot be ignored.