How AI Is Changing the Retail Industry

Following the launch of ChatGPT, artificial intelligence (AI) has been sweeping the business world, and big changes are happening with AI in retail.

The retail industry is always evolving according to customer demand and available technology, going from brick-and-mortar to e-commerce to omnichannel. Artificial intelligence is helping retailers improve their operations in a number of ways, including demand forecasting, pricing, and recommendations, to use three of the more prominent examples.

2. Recommendations

Recommendations are another popular AI application for the retail industry. For example, when you buy something on Amazon, the website will suggest other things based on your past order history, user profile, and other details that AI algorithms process and combine to provide the best answer.

Most online retailers are also using some form of recommendation AI to improve the customer experience and sell more products to customers. That same recommendation engine can also determine the products you're shown when you go to a site like Amazon based on past orders and searches.

Absent the natural cross-selling benefits of a brick-and-mortar store, online retail uses AI to accomplish similar things since retailers don't want to miss an opportunity to upsell a product or recommend a complementary add-on.

3. Cashier-less technology

Retailers are experimenting with ways to ring up customers more efficiently. Self-service registers are the most common technique for automating the checkout process and eliminating lines. However, Amazon has moved in a different direction with its Just Walk Out technology.

Using a series of cameras on the ceiling, this AI-based system tracks what customers pull off the shelves. It then automatically charges them via an app when they walk out of one of its Amazon Go stores, forgoing the need to stop and pay.

Amazon now has the technology in 15 Amazon Go convenience stores, but it recently removed its Just Walk Out technology from its Amazon Fresh supermarkets to test its smart cart technology. The company is now focused on licensing Just Walk Out, and there are more than 140 third-party locations using Just Walk Out technology, opening up a valuable new revenue stream.

4. Automated Inventory Management

Inventory management is a crucial task for any retailer. Companies need to make sure they have products in stock without having too much inventory, which can lead to extra management costs and markdowns.

Walmart, for example, uses AI technologies to help it better manage its inventory. That includes attaching cameras to floor scrubbers that record inventory levels on shelves and send the information to an AI-powered data center, which in turn helps the company make better decisions about its inventory.

Is AI the future of retail?

AI is already influencing retailers, but it's mostly taken place behind the scenes. While generative AI tools like ChatGPT may offer new ways for retailers to engage with customers, the influence of AI in retail seems likely to remain behind the scenes, especially for brick-and-mortar players.

Still, there are many ways that AI can help these retailers improve their businesses, including through inventory management, product optimization, and demand forecasting. As Amazon experiments with the technology, we should see more examples of AI in online shopping.

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