Top Benefits and Challenges of AI in Retail
Posted by Alex Samuely on Nov 21, 2023
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Artificial intelligence, commonly referred to as “AI,” is one of the Internet’s top buzzwords – and top technologies. AI applications like ChatGPT are now popular among consumers and brands alike for language-based tasks and project management assistance. As AI continues to permeate society, retailers can leverage its capabilities to help with more automated functions. However, AI adoption within the retail sector will likely occur gradually rather than overnight.
While retailers will inevitably encounter some barriers to AI adoption, the benefits of integrating AI features into their systems will also yield benefits. Those that do experiment with AI in retail may earn the title of being innovators – a prime attribute in today’s omnichannel world.
Read below to learn more about how the challenges and benefits of implementing AI in retail will affect both the customer and store associate experience.
To avoid AI’s potential pitfalls, brands should ensure they keep the below business barriers top of mind.
One potential downside to leveraging AI in retail at this budding stage is overpromising functionalities that may not be currently feasible or don’t work as advertised most of the time. Brands may then attract customers who are intrigued by a particular offering, only to become disappointed if it underdelivers on their expectations. This could result in significant negative impacts to the brand’s reputation.
As all brands know, customer data and proprietary information must be safeguarded at all times. Those that choose to experiment with AI must ensure that the AI platforms adhere to compliance and offer minimal risks of a data breach. Additionally, companies that use open systems of any kind must contend with the risk that their proprietary data may also get breached.
As consumers continue to demand more transparency around how their personal data is collected and used, retailers must make this information available as it relates to their integration with any AI systems. Customers must be able to give consent around their privacy and data. Since AI is still a new concept for many people, retailers may need to publicize more information on their use of AI to proactively address customers’ ethical concerns.
To successfully leverage AI in retail, companies will need to invest in experienced talent that can integrate it within their current systems. AI has the power to significantly streamline retail operations, inventory management, and customer service, but brands must make sure they maintain the proper technology infrastructure and staff for successful integration. Otherwise, the potential risks – such as mismanagement of data and clunky customer experiences – may become a detriment to the business.
Despite the challenges that lay ahead for any retailer seeking to take advantage of AI, it can offer major benefits to both the customer and store associate experience, including:
Consumers expect quick and top-notch customer service, regardless of where they’re completing their shopping. One benefit of AI in retail is the ability to help scale customer service by powering bots that can respond to questions online or in a mobile app. AI customer service bots can give instant responses to customers in a multitude of languages – and they’re available 24/7.
Bots can also quickly track shoppers’ ordered items to provide accurate delivery times, collect and aggregate customer feedback, and field FAQs from shoppers. All of this enables human customer service agents to respond to more complex queries and foster a better sense of customer intimacy.
To complement their customer service experiences, retailers can also leverage AI to give consumers personalized recommendations when shopping on the website, mobile site, or in the app. Artificial intelligence systems are able to follow people’s purchase patterns, including what types of items they usually buy and their preferred sizes.
The AI systems can then use this data to prompt customers to purchase complementary items (such as workout leggings to match a top they previously purchased) or products that will likely appeal to their style. Additionally, AI can leverage this information to upsell products or services – such as showing customers higher-end versions of previously purchased items.
Another top use for AI in retail is automated inventory tracking. Artificial intelligence can provide demand forecasting by analyzing data around products and purchase volumes, which retailers can then leverage to buy more or less stock from manufacturers. Offering the right type of inventory that appeals to local clientele can help increase shoppers’ average basket size, and consequently, boost retailers’ bottom lines.
AI supports more seamless communication between inventory tracking systems, which is beneficial for brands offering omnichannel fulfillment options that pull inventory from warehouses, distribution centers, or other brick-and-mortar store locations. By investing in AI for inventory management, retailers can outsource these logistics to free up time for associates to help customers in stores.
Since customers have access to such a wide variety of retailers these days, they can easily conduct price comparisons while researching a product and choose to buy from the retailer offering the lowest price. Another benefit of using AI in retail is leveraging dynamic pricing features. Dynamic pricing relies on AI predictive analytics to analyze real-time product prices based on inventory levels and customer demand.
An AI system with dynamic pricing can adjust products’ cost based on this data to offer promotional prices for slower-selling products or higher prices for hot-ticket items. These types of adjustments enable retailers to compete more effectively in the crowded marketplace and drive better omnichannel pricing strategies.
Brands can also tap AI to enhance their loss prevention tactics. Some retailers have AI systems at checkout counters that can detect products’ weight and determine whether customers are scanning a lower-priced alternative instead. Others employ AI-powered video cameras to watch shoppers’ movements and flag anything that seems suspicious. These features can all complement retailers’ existing loss prevention strategies, such as RFID technology.
To stand the best chance at effectively leveraging AI to enhance experiences for store associates and customers, retailers should:
By employing a methodical approach to exploring AI in retail, brands can take advantage of this new technology while ensuring they remain compliant. A pragmatic method also requires brands to take their time with rolling out new features, as they should make sure everything works as advertised before customers experience it. If retailers are willing to engage in deep research around AI before they plug and play with its many features, their likelihood of reaching innovator status in the competitive marketplace will grow exponentially.
Have questions around whether your business should start experimenting with AI? Speak with one of our experts today.
