The so-called inventory intelligence towers take more than 20 million photos of the merchandise on the shelves daily. AI algorithms receive the images and determine the individual brands on the shelves and the inventory levels with more than 95% accuracy, helping Walmart ensure it can keep items in stock.
Additionally, Walmart has introduced new conversational AI technologies, such as voice ordering, that help customers place online orders. It also provides an AI assistant in stores to help employees find items.
Starbucks was using a similar "automated counting" inventory tool, but scrapped it after it regularly miscounted and misidentified items, such as milk types. That shows that some AI still has room to improve in areas like inventory management.
5. Customer sentiment analysis
As consumer-facing brands, retailers' reputations with the general public are important for long-term growth prospects. So, it makes sense that they would invest in AI technologies for customer sentiment analysis.
Customer sentiment analysis means using AI algorithms to analyze customer feedback, social media posts, and online reviews to measure customer sentiment, respond to complaints before they worsen, and generally identify areas for improvement.
Anheuser-Busch (BUD +3.74%) isn't a retailer, but the earlier controversy around Bud Light shows why retailers invest time and money into managing their brands and monitoring social media accounts. AI can not only help monitor these accounts but also provide suggested responses to complaints -- thanks to generative AI -- and even respond to them if permitted.
Expect retailers to lean into these AI tools to manage customer relations and put out fires as they arise.
6. Customer service
Customer service is a key part of retail, and artificial intelligence is playing a bigger role in customer service, especially in areas such as answering questions and processing returns. Like other companies, retailers are employing AI-powered virtual assistants and chatbots to answer questions.
Many drive-thru chains are now using AI to interact with customers at atleast some of their locations, including Taco Bell, Wendy's, and White Castle.
AI-assisted search is also becoming a valuable tool, as search is a key step in online shopping. Retailers want to ensure that customers can find what they need.
Finally, AI and tools like augmented reality can help a customer "try on" products before they buy them. Brands like LVMH's (LVMUY -1.39%) Sephora have embraced the technology to show customers how certain kinds of makeup would look on them.
Brands can also use a chatbot to provide feedback and advice for customers. Shoe Carnival, a footwear retailer, is using a shopper agent, powered by Salesforce's Agentforce, to provide personalized shopping recommendations to customers.
7. Employee assistance
AI is increasingly being used to assist employees, quickly answering questions when they're out on the selling floor. Target has a chatbot deployed across its stores that can help employees with a wide range of issues, including register malfunctions or giving correct stocking procedures.
Home Depot employees use proprietary handheld devices called hdPhones that guide workers to high-priority tasks, like restocking empty shelves, and can provide instant answers on products and other questions they might get from customers.
Using AI to complement labor, rather than replace it, is likely to be a more successful strategy for retailers trying to win over customers in a competitive environment, especially as some retailers have already rolled back initiatives like self-checkouts.
Why AI is important in retail
Retail is a highly competitive industry, and any new technology can mean the difference between increasing your competitive advantage or getting left behind.
The ways in which AI can help retailers are already beginning to take shape. Functions like predictive analytics, inventory management, recommendation engines, and sentiment analysis are likely to play a permanent role in retail management.
It's still early in the development of AI, as ChatGPT was launched less than four years ago. Retail is a massive industry, and retailers will continue trying -- and finding -- ways to take advantage of AI.
Benefits of AI in retail
AI already offers a number of benefits for retailers. Keep reading to see a few of them.
- Cost savings: Like most businesses, retailers are looking to AI for its cost-saving benefits. AI can help businesses optimize labor, pricing, and inventory management.
- Dynamic pricing: Used by companies like Amazon, dynamic pricing is made possible by AI and helps retailers adjust to changes in demand.
- Customer service: AI can also help retailers better serve their customers with faster customer service, adapting to what customers like and dislike, and managing inventory better so products are fully stocked.
- More profitable product mixes: AI can help retailers analyze the optimal product mix for their business so they can maximize profit.
- Automated item attribution: For online retailers, AI can help automate product listing data that previously needed to be manually entered. Categories like color, size, or material can be determined by AI and listed automatically.
- Supplemented labor: There are a lot of ways that AI can help save time for frontline employees by making day-to-day tasks quicker or by automating them entirely, allowing them to focus on helping customers.
Common pitfalls of AI in retail
Now that we've reviewed some of the benefits of AI in retail. Let's take a look at some mistakes that retailers can make when implementing AI.
- Reliability: Retailers are investing aggressively in AI, aiming for it to be able to handle most customer interactions within five years. However, there are still some questions about reliability as AI responses aren't always accurate.
- Data privacy: Retailers are collecting a lot of data through AI, but it's not always clear that they have consent to do so. That data collection also makes them vulnerable to cyberattacks, both of which create liability risks in a potential data breach.
- Algorithmic bias: AI systems can be biased or discriminate against certain groups. It's important that retailers don't do something like charge a certain demographic higher prices online. They must correct for any biases from AI.
- Overreliance on AI: AI is a valuable tool, but it's important for retailers not to over-rely it, outsourcing strategic decisions for AI, for example. It's better to use it as a support or a supplement to a well-defined strategy.
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