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AI has been helping businesses deliver the best service for their customers, meanwhile, helping said customers build closer relationships with their favorite brands.
In the last decade, artificial intelligence has revolutionized numerous industries, bringing about significant changes and diverse applications. In addition, it has profoundly impacted various sectors, including the retail industry, leading to transformative shifts in businesses and benefiting end customers.
One thing many of us do not realize, however, is that we interact with AI on the daily. The virtual built-in assistant in your phone is AI and so is Alexa or a Google Chromecast.
The digitalization of the retail industry has been going on for years. Apart from increasing speed, efficiency and accessibility, it has also helped businesses flourish. In 2021, the retail e-commerce industry made around $5.2 trillion, according to data published by Statista worldwide.
The Chinese retail group Alibaba is the largest e-commerce retailer worldwide with its online sales surpassing $700 billion in 2022. Forecasts are predicting the American e-commerce giant Amazon will surpass Alibaba in estimated sales in the next five years, with estimates showing over $1.2 trillion worth of sales for the US-based company.
Both Alibaba and Amazon are keen users of AI. Alibaba uses AI to drive its sales with optimized recommendation systems (personalized customer search recommendations) and to support variable sales and traffic volumes (help decrease its computation loan and increase product sales).
Similarly, Amazon uses AI for personalized customer search recommendations but also has developed chatbots, voice recognition systems (primarily for its Alexa virtual assistant technology) and fraud detection.
But apart from helping the retail industry flourish in the digital sphere, AI is also making online shopping a more relaxing and enjoyable experience for customers. By leveraging AI algorithms, online retailers can offer personalized product recommendations based on individual preferences, past purchases and search history.
By analyzing customer data, AI algorithms can recommend products and provide outfit ideas tailored to individual tastes. This personalized approach not only assists customers in finding the perfect items but also creates a more engaging and enjoyable shopping experience.
In addition, virtual reality fitting rooms powered by AI have emerged as game-changing technology and were already implemented by some retailers in the likes of Adidas, ASOS and even Macy’s.
Additionally, AI-driven gamified programs can create engaging loyalty programs that offer personalized rewards, recommendations and exclusive perks.
On top of that, customer service has been greatly improved through the implementation of conversational AI, specifically chatbots that are oftentimes available 24/7 for a customer’s convenience. They excel in problem-solving, effectively turning negative experiences into positive ones and help retailers build closer relationships with their customers.
Another crucial aspect to mention is that AI has played a great role in improving supply chain and inventory management for retailers. For example, demand forecasting uses AI algorithms to analyze historical sales data, market trends and external factors to predict future demand.
Furthermore, advancements in AI have the potential to further enhance demand forecasting capabilities leveraging more extensive datasets, incorporating real-time data feeds and refining their predictive models. This would enable retailers to have an even more accurate and reliable demand forecast, resulting in better inventory planning and optimization.
In addition, AI-powered dynamic pricing has emerged as a powerful tool for retailers to optimize pricing strategies, stay competitive and maximize their profits. AI’s ability to analyze vast amounts of market data and customer behavior helps the technology determine the optimal price point for products in real-time, thus bringing forth the best deals for customers.
This is conducted through the analysis of various factors, including market demand, competitor pricing, seasonality, inventory levels and customer preferences. Such analysis can also help AI develop highly targeted and relevant promotions for a business’s individual customer.
For example, AI can identify customers who have shown a preference for a particular brand or product category and offer personalized discounts or incentives for those specific items. In addition, the technology also enables retailers to optimize the timing and delivery of personalized promotions, thus helping businesses plant their seed at the best time when customers would be most interested in purchasing a certain product.
Overall, AI has great potential to turn the e-commerce market into an episode of Black Mirror.
More “futuristic” uses of AI could see businesses using the technology for task allocation and performance monitoring. This could be done by allocating AI to assign employees tasks like quest-givers in a role-playing game, ensuring optimal productivity and employee satisfaction or allowing AI to evaluate employee performance in real-time, pricing feedback and support to help them level up their skills.
In short, AI has been helping businesses deliver the best service for their customers, meanwhile, helping said customers build closer relationships with their favorite brands. The recent popularity of the AI chatbot, ChatGPT, which was developed by OpenAI has only encouraged positive talk surrounding artificial intelligence. Knowing the general nature of technology, the industry is only due to continue growing, bringing newer inventions to the retail e-commerce space.
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