If you’ve ever researched a topic online only to be presented with an ad for a related product seconds later, you’ve experienced the power of artificial intelligence in the retail industry. Most consumers know AI is playing an ever-larger role in enticing us to make purchases—it’s a level of personalization that can be welcome at times (and a little alarming at others).
But retailers are using AI for far more than sending out email promotions or displaying timely online ads. AI is helping the retail industry track consumers’ behavior both online and in stores; guiding retailers in making smarter decisions when it comes to pricing, inventory levels and store layouts; and much more. Below, 15 members of Forbes Technology Council explain some of the ways retail businesses leverage AI that many consumers don’t know about (but should).
Members pictured from left to right.
Photos courtesy of the individual members.
1. Analyzing Customers’ In Store Behaviors
Some retailers are starting to use volumetric tracking and AI spatial analysis of customers in-store through cameras such as Azure Kinect. Through this process, customer behaviors can be analyzed like never before—where a customer stops and looks, what they touch, and what pathway they take can be investigated. Then, through augmented reality, this trend data can be overlaid onto the real-world retail site. – David Francis, Virtual Method
2. Determining What To Sell Online Versus In-Store
Combining loyalty program data from stores and online shopping data into one profile has provided the perfect dataset for AI to predict which items you prefer to buy online versus in-store. Have you noticed certain items disappearing from stores or that your favorite store layout has changed over the last 10 years? Thank AI. – Alex Levin, Regal.io
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3. Charging Variable Prices
Retail businesses use AI for price discrimination, a strategy under which they charge customers varying prices for the same product or service. Consumers don’t know that their buying patterns and social segmentation are being used to set prices, and they should be made aware of this. – Harikishore Sreenivasalu, Aarini Consulting BV
4. Tracking Data From In-Store Touchscreen Sales Systems
By using touchscreen systems as interactive sales tools in stores, retail businesses can track touch data in a way that’s similar to tracking clicks on an e-commerce website. This can have a huge impact, given that retailers have always looked jealously at online analytics. – Matthias Woggon, eyefactive GmbH
5. Providing BNPL Options For Purchases
Consider the rapid rise of bank and retail point-of-sale lending. Buy now, pay later solutions allow consumers to acquire quick, short-term financing on online or in-store purchases and pay the item off in monthly installments. Customer usability is hard to argue. A consumer can shop online or in-store, choose the BNPL payment option and be accepted in seconds. It’s a millisecond economy. – Ankor Rai, EXL Service
6. Protecting Themselves And Their Customers From Fraud
AI can be used for fraud protection. It can identify patterns or anomalies that may indicate fraudulent activity. For example, an AI system may flag a series of purchases with semi-human behavior made by bots or detect complicated patterns, which is not possible with classical methods. Retailers can protect themselves and their customers from financial and data losses. – Gerasim Hovhannisyan, EasyDMARC, Inc.
7. Providing Targeted Offers
A number of retailers use AI-based targeted offers as a strategic personalization tactic to stay at the forefront of customers’ minds. The choice of who receives a BOGO deal, a 10% storewide discount or 25% off is made based on AI algorithms that use a variety of factors, including the consumer demographic mix, user interactions, inclinations to purchase, price elasticity of goods and more. – Niki Khokale, Fountain9
8. Conducting Competitive Intelligence
Retail businesses leverage AI for competitive intelligence and advantage. AI can act as a watchdog, keeping an eye on perceived competitors within the retail business space and ensuring retailers don’t miss out on game-changing trends within their respective markets. AI keeps track of price or product specification changes and makes necessary adjustments to help a retailer gain a competitive advantage. – Steve Uma, NSIA INSURANCE LIMITED
9. Distribution Planning
Especially for hot sales (where small stores don’t preorder items), using machine learning, retailers can predict which stores will run out of which items and load those items into delivery trucks. Loading and delivering the right items can increase the chances of a consumer finding an item and, hence, increase retailer revenue by as much as 5%. Items that are not needed are not loaded and delivered, thus reducing CO2 emissions. – Zehra Cataltepe, TAZI AI
10. Analyzing Customers’ Behavior On Websites
The goal of any retail business is to make you spend money. Learning more about you and your behavior on websites fosters this. E-commerce businesses analyze which pages you spend time on, when you buy more and so on. Thus, they are able to manipulate you a little—for example, an e-commerce company may send you emails offering discounts. Is it good or bad? Well, it allows for a personal touch when shopping, which is hard to resist. So, make sure returns are easy! – Nadya Knysh, a1qa
11. Minimizing Churn Risk
Retailers are using AI to understand customers’ journeys across channels and determine what to offer customers next and where. AI is also deployed to predict customer behavior and estimate churn risk, triggering reactivation campaigns with special offers to win back customers who are likely to drop off. – Mitul Jain, refive
12. Conducting Spatial Analytics
In spatial analytics, video data capture and AI technology are combined to enhance the customer experience in brick-and-mortar stores. Customer movement and flow information is captured to enable store managers to make informed decisions on the placement of product categories in stores, as well as which products should be placed adjacent to each other. It also helps to improve browse-to-purchase times and monitor dwell times and conversion rates. – Chakri Gottemukkala, o9 Solutions, Inc.
13. Providing Self-Service Options For Customers
AI helps retailers give customers self-service options via chat and voice bots. The customer’s information and purchase history are loaded into the context awareness of the bot so it can start guiding the user from the get-go. This can drastically increase the speed and success of personalized, automated self-service for everything from parcel tracking and returns to a relevant upsell. – Halvard Totland, boost.ai
14. Informing Store Design And Layout Improvements
Intelligent video is an under-recognized retail marketing tool. Heat maps based on video analytics and AI help retailers visualize customer traffic to inform store design improvements and identify the best-performing products. After changes are made to the store layout, retailers can easily evaluate the impact on product placement, customer behavior, shopper traffic, sold items, marketing displays and more. – Fredrik Nilsson, Axis Communications
15. Gaining Visibility Into Margins
As crazy as it sounds, many retailers have no idea what their gross margins will be next week. Many supermarkets, for example, see data six weeks after the fact. So they pad prices (and kill competitiveness) to protect themselves. Retail AI startups such as Puzl give real-time gross margin visibility many weeks in advance, enabling hyper-aggressive pricing to compete with the Amazons of the world. – David Yunger, Vaital
