The conversation around artificial intelligence (AI) usually splits into two main strands. Will it take my job? And is it going to take over the world? Hollywood often portrays the latter, with robots taking over the world, but in the retail sector, what impact will AI have?
AI is already making waves across industries, and when utilised properly, can bring substantial efficiency advantages. Recent research from Microsoft reveals that 77% of retail decision-makers believe adopting AI in the next three years is critical for competitiveness. With capabilities to optimise operations and enrich customer experiences, AI brings the promise of substantial disruption for retail.
Enhancing the customer experience
In Australia, AI is set to reshape the customer experience in retail with improved service and personalised recommendations. Supported by data from Servion, it’s projected that by 2025, AI will be a part of 95% of all retail experiences.
Our recent report, Online Consumer Behaviour Global Report 2023, found buyers overwhelmingly expect speed and convenience when shopping online. This high demand highlights the need for retailers to step up their game. AI offers solutions through chatbots, voice or visual search, and hyper-personalisation, proactively suggesting products. This promises more efficient, personalised shopping.
One area in which AI is already revolutionising e-commerce operations is in the process of introducing products and brands to online platforms. Consider a pair of shoes. How you choose to market them with descriptions may vary from one online marketplace to another based on your target audience. This distinction becomes significant when you’re faced with the task of uploading thousands of product descriptions to multiple online marketplaces.
AI can do just this. By analysing and modifying product descriptions and characteristics to match the platform’s requirements, AI can make the task much simpler for both the seller to upload, and the customer to find what they want. With the help of a simple algorithm, the manual work of adding supplier brands and products is significantly streamlined. This not only saves time but also makes products accessible to customers much faster.
In the not-so-distant future, AI will also have the capability to personalise product descriptions for each customer. For instance, if you’ve recently watched the Barbie movie, the product description for those pink sunglasses you’ve been interested in will mention that they will take you to a magical place resembling ‘Barbie Land’. We aren’t that far away from AI being able to generate a personalised image of what you’d look like wearing those Barbie sunglasses.
Retail logistics and supply chain
AI is driving major improvements in supply chain optimisation. Effective inventory management is an ongoing challenge for retailers, but AI excels at forecasting demand during shifting seasons and holidays. Such insight allows proactive stock planning to minimise excess inventory and product unavailability.
This enhances the shopping experience, maximises profits, and maintains customer satisfaction by prompting restocking of popular low-stock items. Australian retailer, The Iconic, boosted return rate prediction accuracy by 80% – four times better than before by analysing data using AI-driven insights. This enables much more precise stock management down to individual item sizes.
In addition to inventory management, AI enables real-time pricing optimisation based on demand, stock levels, material costs, and delivery expenses like fuel prices. This dynamic pricing can boost sales via discounts and promotions when demand slows and adjust prices depending on increased costs. Advanced algorithms also analyse competitive pricing, consumer behaviour, and real-time market data to identify ideal price points. This ensures retailers remain competitive and avoid being undercut.
Early adopters will thrive
AI bears substantial benefits to the retail sector, however, recent data from Deloitte demonstrates many Australian retailers are merely keeping pace with 50% global AI adoption rates, with only 22% leveraging AI for a true competitive edge.
Despite the relatively low adoption rate currently, there is immense potential for growth and transformation within the Australian retail landscape. AI is not just a tool for playing catch-up, but a means to leap ahead. Retailers that embrace the power of AI to enhance customer engagement, streamline operations, and pioneer innovative approaches, will give themselves the best opportunity to succeed.
Gordana Redzovski is managing director for APAC at CommerceHub.