Retailers have an unfortunate history of resisting change. Faced with the challenge of e-commerce, retailers’ expertise of selling goods in physical brick-and-mortar stores didn’t translate into online conversion optimization. The people in charge simply didn’t have the skillset or failed to embrace the opportunity the Internet provided.
In a 2011 Harvard Business Review article titled “The Future of Shopping”, the contrast of retailing expertise and tech adoption is apparent as the author writes:
“They know precisely where a fixture should be, exactly how lighting is likely to affect sales, and which colors work best in which departments. As a group, however, they are shockingly subpar in computer literacy. Some retail executives still rely on their assistants to print out e-mails.”
Retailers have paid the price of slow tech adoption. E-commerce brought in new competitors and shook the foundation of the market. Major brands went extinct and leaders were dethroned. But this is a story we already know.
Looking forward, the industry slow to embrace change should see that the future will be defined by accelerating change. If retailers were shaken by e-commerce, retail and e-commerce should brace themselves for what is to come.
AI Will Change Everything
There are a lot of devices, platforms, and behavioral trends making waves, but none will be as big as AI. Google’s CEO, Sundar Pichai recently said “[AI is] more profound than, I don’t know, electricity or fire.”
For retailers, AI, machine learning, neural networks, and the like, have the potential to touch every point of the supply chain. In the life cycle of a t-shirt, artificial intelligence could be put to use optimizing everything from when the cotton is harvested to targeting the buyer who will pay the highest price. AI can be used to identify new designers or design the shirt itself.
#1 AI Products Will Be a Competitive Advantage
On the surface, AI will change retail because the goods that are sold will increasingly be equipped with AI technology. The Internet of Things (IoT) is slowly turning into the Internet of Everything. Already, everyday items like toothbrushes, thermostats, and sneakers are collecting data and using intelligence to analyze and perform functions.
But the bigger story here is that as consumers adopt more IoT goods, retailers will have more information about how those goods are being used. This information can guide manufacturers and retailers to design and supply better products.
Companies that put forward IoT goods will have a competitive advantage over those that do not. These connected devices will give retailers an exclusive source of user data. Using AI, retailers can analyze this data to see how their products are being used and forecast how product changes would affect sales.
This information will guide them to design better and more profitable products.
#2 AI Will Optimize Internal Operations
AI is also set to significantly change internal operations.
Slack is developing AI to help employees stay focused on only the most relevant incoming messages.
AI can lead the recruitment process. An article in CIO Dive explains how HR is currently using AI to optimize human talent within a company:
“AI provides the data. Need a full-timer? At the ready is information about any candidate in the talent pipeline. It can even estimate the time and cost to both hire and get the new employee up to speed. When looking at an internal candidate, AI can tell who can do the job, who's waiting for promotion and where they are skills-wise in regards to the position.”
Intelligent systems can make supply chains extremely efficient. Manufacturing and distribution centers have numerous applications of AI. Already, robots are regularly employed in fulfillment centers. And in the future, autonomous vehicles show potential to solve issues in last-mile delivery and open opportunities for retail mobile shops, pop-ups, and kiosks.
#3 AI Will Enhance How Retailers Interact with Customers
As more consumers go online, retailers will have more opportunities to use AI to optimize and personalize their brand experience. The more data consumers generate, the better these systems will be at delivering exactly what the customer wants.
One of the first notable uses of this is search and recommendation engines. AI, makes it possible to offer online shoppers products based on contextual rather than literal interpretations of their searches. This means a general search for “duck” can return a hunter duck-hunting items, duck toys for children, and duck recipes for a chef.
Behavioral targeting is another application for AI and machine learning. AI can analyze user data in real-time, making it possible to reach out and address issues with online shoppers while they are shopping, and sometimes even before they know they need help!
Falling Behind The Competition
Just as e-commerce disrupted the market, AI is in position to completely change retail. How retailers embrace AI will determine their future.
Christopher Walton, a retail consultant and former vice president of Target Store of the Future wrote,
“Few retailers are willing to take a risk and think about exciting, new technology implementations fresh from the ground up, like redesigning their operations from scratch today versus trying to evolve the legacy systems and operations they have carried with them for decades.”
Those who embrace AI will be able to optimize, streamline, and innovate at a pace and level far above the rest. They’ll see their internal operations become cheaper and more efficient, and their products more valuable. The others will not be able to keep up with the accelerating pace of their competitors who do.