Retailers are increasingly using artificial intelligence to help them drive growth, improve customer satisfaction, and increase their bottom line. AI offers an immense competitive advantage in this economy, with its market size already valued at USD 6 billion in 2022 and expected to rise at a CAGR of over 30% during the next 10 years, according to the latest analysis.
What’s more, research indicates that AI in retail is already having a major impact on retail, leading to $40 billion in additional revenue within just 3 years.
It’s clear that AI has a lot to offer retailers who are smart enough to use it to their benefit. But with great power comes great responsibility, and the integration of AI in retail also presents significant challenges and risks. Let’s explore key statistics, benefits, challenges, and the future outlook of AI in retail to give you a comprehensive overview of this exciting field.
AI in Retail: Key Statistics and Market Trends
- The market size of AI in Retail was valued at USD 6 billion in 2022 and is expected to experience a compound annual growth rate (CAGR) of over 30% from 2023 to 2032.
- In fact, it is estimated that $40 billion of additional revenue was driven by AI in retail in a 3-year span.
- 80% of retail executives expect their companies to adopt AI-powered intelligent automation by 2027.
- Currently, 4% retail use AI in their operations.
Source: (Gminsights, Hitachi, O’reilly)
What Can Artificial Intelligence Do For Retail?
Artificial Intelligence (AI) is like a super-powered assistant for retail stores and brands. According to Marketwatch. AI can collect data about customers such as their measurements, likes, sizes, and shopping habits.
This information helps businesses create personalized shopping experiences by providing desirable product recommendations, virtual try-ons, size studies and more.
AI also makes online buying easier; it can predict what customers want based on previous purchases or preferences and speed up the process.
At physical stores, AI technology means customers don’t have to wait in long lines to check out.
To summarize, AI enables merchants to better understand their clients and provide them with a personalized purchasing experience.
Benefits and Use Cases of AI in Retail
Artificial intelligence (AI) is revolutionizing the retail industry by simplifying the lives of both retailers and consumers. Here are five benefits of AI in retail:
- Eco-friendliness: AI optimizes the supply chain, reducing fuel emissions and making retail more environmentally friendly.
- Predictive analytics: AI predicts customer patterns and prioritizes high-demand products, making the retail process more efficient.
- Price adjustment: AI forecasts consumer behavior in response to changes in product pricing, helping retailers create better promotional offers and attract more customers.
- Personalized recommendations: AI suggests products based on customers’ past purchases and preferences, making their shopping experience more personalized and enjoyable.
- Enhanced customer service: AI can assist customers in finding products they are looking for, answering their questions, and providing personalized recommendations.
Some top use cases of AI in the retail industry include:
- Walmart’s text-based service that allows customers to order goods for delivery while also gathering data for predictive analytics.
- Nike’s AI-augmented reality solution that helps customers find the right shoe size without visiting a physical store.
- Lowe’s customer service robot that assists customers in finding products.
- Kroger’s digital personalized shelves that provide a unique shopping experience for each customer.
The Challenges and Risks of AI in Retail
#1. Ethical Concerns: Bias, Privacy and Data Security
The use of AI could have serious repercussions for businesses. Algorithms that are not well-managed or monitored can lead to biased results which might be unfair to certain groups or individuals.
Also, the customer data collected by AI systems can create privacy concerns – it needs to be protected from hackers or any other malicious parties.
Furthermore, any data must also be securely stored in order to prevent its misuse by third parties.
#2. Implementation Challenges: Integration & Expertise
Retailers may struggle with implementing new AI technologies due to their reliance on legacy systems which could make integration difficult.
On top of this, many retailers lack the technical expertise needed for successful implementation of machine learning algorithms – these require training and experience in order for them to work correctly.
Without the necessary expertise, even if the system is integrated successfully it still might not function properly.
#3. Potential Job Displacement & Impact on Workforce
Automation through AI could lead to job displacement, causing problems for the workforce if it’s not managed properly.
To minimize losses, new roles should be created within the organization focusing on monitoring automated systems and providing employees with support and training so they can understand how new tech works and how it will help their business processes.
#4. Legal & Regulatory Challenges
Before launching any new technology or system retailers need to pay attention to potential legal & regulatory challenges like compliance requirements relating to customer data collection & storage as well as laws governing automation within certain industries or regions.
Researching applicable laws beforehand is essential in order for businesses to stay compliant and avoid issues down the line.
AI in Retail: Future Outlook
#1.Computer Vision Technology
Computer vision technology is a sort of artificial intelligence that analyzes digital images to distinguish objects or persons within them. Artificial intelligence is currently being used in a variety of ways in the retail sector.
For example, some stores are using it to identify shoplifters before they can steal anything. It can also be used to automate customer service tasks — like helping customers find what they’re looking for without having to ask an employee.
#2.Voice Recognition Technology
Voice recognition is an AI technology used in many stores to assist customers. It can help people find what they’re looking for, answer questions about products and even give suggestions based on previous purchases or likes.
Some stores take it a step further by enabling customers to make purchases entirely through voice commands.
#3.Impact of AI on the Future of Retail
There is little doubt that artificial intelligence is transforming the way organizations work today. AI will have a big impact on how retail operates in the future, from improving customer experiences and process efficiency to increasing sales and profits.
When it comes to how retailers can use AI, the possibilities are practically limitless. The benefits range from improving supply chain management and inventory control systems to personalizing shopping experiences with recommendations and discounts based on customer behavior analysis.