The COVID-19 crisis arrived on the heels of the “retail apocalypse”. Now more than ever, retailers need to invest in AI and its related technologies if they want to move forward.
There’s no doubt that the retail landscape is changing. In 2019, Black Friday foot traffic was down in stores, but Cyber Monday set new records. Add to this the increasing number of people who shop online and pick up in-store, and it’s easy to see where trends were heading.
And then COVID struck. Shelter-in-place orders and social distancing propelled online shopping up even further.
Aside from causing considerable turbulence for retailers, what do these things have in common? They highlight the need to adjust to customers’ changing expectations. Staying current with consumer behavior trends is a challenge, but it’s a necessary part of doing business in today’s markets – companies that don’t adjust can’t expect to lead. They may not even survive.
Many retailers are taking advantage of AI’s capability to find emerging shopping patterns and help retailers adapt to them. As the new decade unfolds, we can expect AI, Machine Learning (ML), and other technologies to play a big part in retailers’ success.
Agility is the Name of the Game
The 2019 holiday shopping season was shorter than usual, which gave retailers less time to adapt to changing consumer demands. Retailers who used AI were better able to cope. Why? Because it not only finds developing trends far faster than any human can, it also can optimize every part of retail operations. Take a look at three examples:
Planning & Supply Chain: Usually, retailers prepare their holiday sales well in advance so that there’s enough lead time for the supply chain. As AI detects patterns in shopping data, it also gives retailers precious time to change product mixes, devise impactful messaging and merchandising strategies, and more. And , of course, AI can be used to process various data types and optimize the supply chain itself.
Customer Experience: Personalization is a textbook case of how AI improves the customer experience – we’ve all browsed through Amazon’s suggestions for us and found something to click on. As customers continue their shopping journey across multiple devices, AI can follow them along the way, capturing that data. It can even be applied to delivery options (i.e. ship to home vs. in-store pickup). Essentially, AI helps retailers build very detailed profiles, which they can use to customize each shopper’s experience. Incidentally, this pays off in another way: reducing returns. By using AI to understand customer behavior and to fine-tune recommendations, retailers can eliminate some returns while boosting customer satisfaction. (So far, there’s nothing AI can do about supplier inconsistencies and size/fit differences.)
Locality: AI can help retail stores choose the best physical location by processing demographic, geographic, competitor, and foot traffic data. But “locality” implies more: putting the right store types in the right areas, choosing the best product mix for local demand, etc.
Is it a Risk? Yes. Are There Rewards? Yes.
Why did some well-established brands – with their deep inventories and strong supplier relationships – suffer so much from online startups’ disruption of retail? A major reason was that they didn’t want to take any risks. Some did adjust, but others fell by the wayside.
Focusing too much on the risk inherent in adopting new technologies and business models is counterproductive. By all means, examine the risk and make a smart decision, but don’t forget about the rewards you’ll gain from meeting consumers’ new demands.
On the flip side, we have newer businesses who have heartily embraced AI. They take a risk, but by providing an experience that their target audience wants, many of them succeed. It’s a good lesson on how AI can pay off.
So, retailers, now is the time to rethink your investment in AI. Can you give your customers the experience they want without AI? Will you be able to keep up in a market that demands agility and adaptability? In the coming years, deploying AI will not be a choice, it will be the only option. And how quickly retailers embrace it will define their success and survival.