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A smarter future: AI and the rise of the robo-retailers

By John Gillan, Managing director

Criteo

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The Drum Network article

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August 27, 2019 | 6 min read

The AI race has begun. No longer a speculative commercial solution, businesses are now committing significant resource towards asserting their place in an intelligent future. Few industries stand to reap the benefits of AI as much as retail. According to IDC, the retail industry recently overtook banking to become the industry leader in terms of AI spend, investing $3.4bn on use cases such as automated customer service agents, expert shopping advisors and product recommendations, and merchandising for omni-channel operations.

Criteo assess what impact AI will have on the retail space.

Examples of AI applications in retail are extremely varied. Common examples include the curation of price data and algorithmically tailored product recommendations. But AI is also combined with robotics and drones to improve supply chain, packaging and distribution of goods, and enables the use of self-checkout shopping carts in physical shops, as is being pioneered in Amazon Go stores. AI can also help at the back end, allowing retailers to eliminate certain manual activities in areas such inventory forecasting, automatically adjusting stock levels in times of higher demand and optimising supply chain operations.

The technology clearly has a range of use cases, but to maximise the value of AI, retail brands need to understand how it can be applied to support their business objectives. A key trend across the market is rising adoption of multi-channel or omni-channel retailing. AI will be an important tool for bridging the gap between online and offline retailing, increasing choice for consumers in where, when and how they want to shop.

There are three key reasons for traditional retailers to embrace AI:

  • Smarter decision-making: At a micro level, retailers can embrace transactional data to make smarter decisions, with more accurate and real-time forecasting. Fast-changing consumer preferences and an ever more competitive market environment require retailers to be lean and adopt a predictive approach to retail. By identifying and learning from patterns in large volumes of data, AI can help companies quickly adapt to an increasingly dynamic market environment, and make informed decisions on different aspects of their operations, resulting in a more seamless shopping experience for customers. AI can also help retailers to make better strategic decisions on the future of their business. This includes optimising existing store space and locations and predicting future store performance when expanding their physical footprints.
  • Greater operational efficiency: Historically, operational costs have been a major factor in whether retail revenues translate into profits. AI can make operations more efficient using a combination of robotics and process optimisation that enhances productivity and reduces manual labour costs. Demand for faster and greater levels of output necessitate automation in warehousing and store operations. AI serves this demand by allowing autonomous robots to work alongside people to increase productivity and lower costs. Growing economies such a China are leading the way in this regard. Last year, for example, a major JD.com retail fulfilment centre near Shanghai made headlines due to the fact that it was operating with only four staff. This trend is also gathering pace in European markets. Ocado is one company that has embedded AI at the centre of its operations, using machine learning algorithms to manage and direct warehouse operations. Customers’ orders are picked and packed using swarms of purpose-built robots capable of collaborating to pick a typical 50-item order in a matter of minutes.
  • Increasing revenue per customer: The third key attraction of AI for retailers is its ability to help reduce friction in customer service. Using AI, retailers can increase both the number of customers and the average amount they spend by creating personal and convenient shopping experiences.Customers have grown used to cheaper, faster, easier shopping, and AI promises to take the entire consumer experience to the next level. Retailers are lining up to embrace this opportunity. Indeed, a 2018 Capgemini survey found 99% expect AI to increase sales by up to 15% annually.

To meet the demand for greater personalisation, retailers are leveraging connected technologies and cognitive services. This results in better-informed employees, seamless checkouts and real-time, physical recommendations which help to deliver valued shopping experiences that work for the shopper and connect them efficiently to their required and desired products.

Traditional retailers need to start gaining access to data assets to compete. Carrefour, for example, reported a 600% increase in app users after it deployed electronic beacons in stores. The beacons are used to collect data about customer behaviours and purchasing patterns, which is then processed using machine learning algorithms to determine which personalised promotions to send to customers as they shop.

Embracing change

The retail industry is at the beginning of a period of massive transformation. Great leaps in technology combined with drastically different expectations from customers has created a new battleground for market share. To keep up with their competitors, retailers need to invest in data-gathering at all stages of their value chain, and in cognitive technologies that are capable of leveraging what they capture. The value is there for the taking, by those that are ready to grasp it.

John Gillan, MD UK and Northern Europe at Criteo.

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