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Retailers Are Investing More in AI—And It’s Good for Shoppers and Competition

When it comes to artificial intelligence (AI), retailers recognize the future is here now. More than two-thirds of stores plan to increase their technology spending over the next three years, according to Coresight Research, and AI tools are emerging as some of the most desireable resources. 

This cutting-edge technology can help make retailers of all shapes and sizes — both brick-and-mortar and online ones — more competitive, responsive to consumer needs and efficient. Here are a few notable examples of retailers’ AI investments:

The National Retail Federation’s (NRF) annual trade show, hosted in New York in mid-January, demonstrated that many brands are eager to take on new challenges. Advancements in AI were a dominant theme this year among tech vendors. The pandemic and subsequent economic uncertainty have pushed retailers to be even more innovative—one reason why AI tools are now highly coveted.

In the past, the NRF show’s tech spotlight was mostly on hardware such as self-driving vehicles, robots or drones. But the focus now has turned toward ways to sell smarter, using analytics and AI tools to help predict consumer behavior and streamline online and physical stores’ operations.  

Among the many benefits of AI tools to retailers and shoppers is the ability to assist in reducing “shrinkage” or losses due to theft, administrative errors or damage. The NRF reported that in the past five years, shrinkage has become a $100 billion problem for retailers. In 2022, Target attributed hundreds of thousands of dollars in profit losses to theft, and Walmart recently stated that increased theft could lead to store closures and higher prices. Software company Nvidia recently unveiled AI workflow systems that allow stores to track the movement of products across multiple cameras and give retailers a high-level view of the customer journey throughout the store, which can aid in preventing theft.

AI tools can also offer improved automation and supply chain management. By automating many mundane tasks around inventory and stocking, workers can devote more time to serving customers and solving problems. Additional emerging technology such as Google Cloud for Retailers provides alerts when best-selling items are running low. This is particularly useful given supply chain challenges and delays, as it could allow retailers to be more agile and flexible going forward.

Another breakthrough in retail AI is the improvement in the quality of the customer experience. For instance, smart kiosks can help consumers physically navigate brick-and-mortar stores. AI-powered software and chatbots also allow retailers to offer 24/7 assistance and customer engagement for online shoppers. Capable of starting conversations with site visitors, troubleshooting issues and directing requests, chatbots are extremely useful  tools for consumers.

Additionally, AI tools offer retailers new ways to authenticate reviews and ensure trustworthy shopping experiences for customers. Retailers use sophisticated AI-powered technology and machine learning to proactively detect and block fake reviews. This allows stores to stay one step ahead of bad actors who deceive customers by manipulating online reviews.

So, what’s next for AI in retail?

Google Cloud has developed a new tool designed to help big-box retailers better track inventory. It can recognize and analyze the availability of products on shelves using videos and images provided by cameras, self-driving robots and store associates. So, when a retailer is running low on flour, batteries or televisions in a certain store or region, the system immediately alerts staff, giving them a chance to restock items efficiently, rather than guessing when products are running low. 

Sony Semiconductor Solutions’ AITROS tool not only can show retailers when “products are missing on shelves [and] provide merchandising information for brands,” but also flag staffing and operational shortages. For example, if a store department is attracting lots of shoppers but lacks personnel, AITROS’ real-time data and alerts can allow for strategic deployment of team members to assist consumers. 

Nibble Technology has also created a negotiation chatbot that assists customers in getting the best online price for clearance merchandise by letting them make an offer and haggle with the chatbot on the product page with instant responses. Retailers have used this tool  to identify the best online price for clearance merchandise based on customers’ requests. This eliminates the guesswork in discounting and may even increase margins for retailers. Investing in such a tool could allow them to improve competitive pricing. 

Media is another area where AI can help stores, as tools like DALL-E and ChatGPT can generate tailored ads and promotional images. Other tools make it possible to show relevant products to the right customers and allow shoppers to personalize their buying experience based on their interests. Spending on this marketing trend is forecasted to reach $60 billion by 2024 from upwards of $40 billion in 2022. 

Retail is an industry that is driven by innovation and responding to consumer needs. It’s no surprise that stores of all types are investing in AI technology to stay ahead of new shopping trends and improve the efficiency of business operations. As 2023 brings more opportunities to implement artificial intelligence to improve shopping experiences and increase traffic, retailers are likely to increase their investments in these tools — enhancing market competition and producing better outcomes for consumers.