Artificial intelligence in retail

Directions of AI use in trade

In 2024, the following areas of AI use in trade were identified.

Demand Forecasting, Behavior Pattern Analysis

AI can analyze market data to identify current and future trends, helping retailers and wholesalers adapt to the changing needs of the market by analyzing buying preferences and behavior, both at the macro level and at the individual level, offering the product only the one that the consumer needs here and now.

Inventory and Logistics Optimization

Best optimization of delivery routes and distribution of goods, reduced delivery time and costs. AI can forecast demand and automate the replenishment process, minimizing costs and reducing risks associated with excess or insufficient inventory, carefully tracking current and future demand, trends and seasonality.

Delivery of goods using quadcopters.

Pricing optimization

AI can assist in dynamic pricing by analyzing supply/demand factors, macroeconomic, financial and behavioral trends, determining optimal price strategies, effectively balancing inventory, maximizing trade margins.

Optimizing merchandising, personalized offers for customers, updating the display of goods in online stores in real time.

Automatic customer service and feedback analysis

Automatic customer service and analysis of feedback using AI allows you to adapt in real time to customer preferences, quickly identify errors and adapt to market needs, while providing high-quality and fast customer support through chatbots.

2020: Accenture: 61% of directors in retail are not ready for artificial intelligence

On January 9, 2020, Accenture summed up a study of the impact of marketing on the successful growth of retail companies. The findings, published in the "New marketing in retail" report, suggest that marketing directors must take a key role in transforming retail companies to meet changing customer demands. However, many of them are not ready for this. Accenture's survey included 935 marketing directors and 564 CEOs from companies in several industries, including 116 executives from retail companies.

Top managers understand the need to change the traditional model of relations with the buyer and move to a modern and technological approach. At the same time, many of them did not realize how the work of marketing departments should become a driver of business growth in the era of technology. In particular, only 17% of the surveyed marketing directors noted that over the past two years they have become better at controlling and applying traditional and technological levers of growth.

The report provides analysts' forecast that in the period up to 2022, companies investing in artificial intelligence may receive a 41% increase in revenue (compared to 2018). At the same time, 61% of marketing directors of retailers believe that they are not ready to use artificial intelligence tools in their work.

The most important task to be solved, marketing directors call customer engagement and personalized service, changing depending on changing needs and context.

"Marketers in retail are looking for a balance between traditional activities (such as BTL promotions) and the use of modern digital tools. A successful path is to get as close as possible to your customers, adapt to their individual needs, affecting the customer experience in real time. Using advanced analytics and design thinking in the process of studying the client, you can not only gain maximum knowledge of the buyer's wishes, but also become a company capable of creating personalized products and services on demand, " noted' Dmitry Khokhlov, Managing Director of the Department "Services for Organizations of the Consumer Goods, Retail, Pharmaceutical Industry, Transport Sector"

Accenture highlights the following steps to help marketing directors achieve tangible results:

1. Switch priority from traditional tools to high-tech
   ones Accenture believes that the balance between traditional marketing and modern approaches is important. Despite this, it is worth revising the model of work and transferring the main resources for working with modern technologies, including those based on artificial intelligence and human-machine interaction.
2. Use the
   Data and Analytics dimension
   to provide a dynamic view of the customer. The task of the marketing director is to collect data at every interaction with the buyer in order to understand him and offer the right service at the right time.
3. Focus on key customers
   The most valuable customers should become the
   basis of the business marketing strategy. The Marketing Director should be one of the initiators of the change in the operating model towards personalized interaction with the most significant customers for the company. This means a radical transformation of retail business priorities: not evaluating departments, decisions, investments and success rates in favor of measuring customer profitability.
4. Develop abilities in the marketing team
   The participants of the study consider the ability to protect personal data of users and revise what a safe client experience should be as important professional qualities of "tomorrow."

2019:42% of Russian retailers use artificial intelligence

On December 12, 2019, it became known that a joint study conducted by RAEK and the Higher School of Economics with the support of Microsoft "AI in Retail: The Practice of Russian Business" showed that 42% of Russian retailers already use AI technologies, and another 35% plan to start within 5 years. According to experts, retail is one of the leading industries in the implementation of AI in Russia.

At the same time, only 2% of respondents noted that their company has fully completed the development of procedures and processes for using AI, 3% - risk determination and 4% - the designation of clear roles and responsibilities for the introduction of artificial intelligence. The greatest difficulties for retailers were caused by the development of policies, procedures and processes, as well as the designation of roles and responsibilities. In a third of the surveyed companies, systematic work on assessing risks and benefits from the introduction of AI technologies, drawing up plans and reorganizing business processes has just begun, or less than half of the work has been done. This means that AI in Russian retail is used rather fragmentally, without a systemic reorganization of the business. However, according to the authors of the study, in the next 5 years we can expect a full-scale application of AI in various business processes that require intersystem integrations and external interaction.

"We see huge industry interest in adopting AI technologies. At the same time, their implementation in retail is mainly targeted, which confirms the trend towards commoditization of AI and the transition from technological to product solutions, " noted' Sergey Plugotarenko, director of RAEK '

"Russian companies have huge potential in the field of AI: according to a study by Microsoft, managers in Russia are more active than their foreign colleagues in introducing this innovative technology. At the same time, the results of the current study confirm our key thesis: digital transformation is not a single introduction of any digital tool, but, above all, a comprehensive business initiative. Only with this holistic approach can the use of technology bring tangible business results, " noted Elsa Ganeeva, Microsoft Government Relations Manager in Russia

"Our study demonstrated the segmentation of companies in terms of the level of use of AI technologies. Experts single out the top of the pyramid, these are high-tech large companies that experiment a lot and have a qualified staff in-house. The vast middle layer is companies that are just entering this niche, using ready-made solutions in parallel. And at the base of this pyramid are companies that are just thinking about AI technologies, studying successful cases and justifying the need to implement them, " noted Olga Logunova, Associate Professor, Department of Sociology, HSE

According to the results of the study, the most popular among Russian retailers were AI solutions for personalization (26%), virtual assistants and chat bots (23%), intelligent systems for decision-making and predictive analytics (20%). In the five-year perspective, the majority of respondents plan to use analytical AI solutions to identify patterns and deviations (36%), despite the fact that according to December 2019, only 13% implement them. The relevance of solutions for personalization (35%) and chatbots (35%) will remain.

Among the main risks of implementation, reputational (impact on the brand image of unsuccessful cases, etc., 39%), safety (39%) and inconsistency of benefits with project costs (28%) were noted. The main challenges when introducing AI for Russian retailers are the need to change existing business models (35%), distrust of decisions made by AI (33%), as well as financial restrictions (30%).

2018: How artificial intelligence is changing shopping

The artificial intelligence (AI) revolution will dramatically change the shopping process - from hyper-personalization to voice-controlled digital assistants - and this will happen soon, experts promise, according to a December 21, 2018 publication by ZDNet.

Algorithms will help with selection

To cope with a large number of consumers and improve the quality of interaction in a mobile environment, many manufacturers turn to AI.

Thanks to the influx of technology in the fourth industrial revolution, customer expectations have become higher than ever. Research shows that customers are 9.5 times more likely to view AI as an important step forward than a minor phenomenon. 87% of buyers believe that over the next 5 years, AI will change their expectations from companies.

Most users say they like AI-based capabilities such as detecting credit card scams, personal recommendations and voice-based personal assistants. And "personal recommendations" no longer simply mean adding a person's name to the subject line of an email. 59% of company owners are confident that an individual approach based on past interactions is very important for winning their business.

Artificial intelligence is changing purchases of goods and services

In 2018, 35% of all revenues came from an AI-based recommendation, up 25% from 2017. The main thing is that these 35% of revenues come from 6% of buyers on holidays, that is, buyers who receive the right recommendations make a significant share of purchases.

Purchases will be made using smart home devices with a voice and visual interface

In the next five years, top retailers will have mobile apps that work with digital assistants like Siri to make it easier to shop.

I foresee people moving from ordering through apps or websites to using voice technology or text messaging systems. I'll be able to say, "I have a date tomorrow night. Pick up my clothes! " And the system will know so much about my life - about my style preferences, about what things I like, what are suitable, what is most likely to be appropriate for this event - that it will just make an order, "says Jennifer Hyman, CEO of Rent the Runway online clothing rental service.

According to forecasts, by the end of 2020, smart home devices equipped with screens will become the main channel for shopping on the Internet. Because the human brain processes images 60 times faster than text, voice assistants with screens will become widespread. Smart devices with screens will allow you to view several options for the product that the buyer wants to buy.

As for the personalization of proposals, it will go two ways.

• Sort results by personal preference. For example, show the buyer sneakers similar to those that he bought earlier. CRM or DMP, social listening and integration of sales, service and marketing will help here.

• Integration with recommendation sites. For example, show sneakers with user reviews, user photos, corresponding posts on social networks, etc. Meanwhile, ensuring reviews are authentic and avoiding fake reviews is also crucial.

The gap between online and in-store shopping will disappear

Research Salesforce shows that 82% of customers are willing to provide information about themselves in exchange for combining personal and online experiences. But few retailers are rolling out new technology in their stores to capitalise on it (such as sending SMS out -reorders or offers).

Diane von Furstenberg's DVF 360 is one brand that takes an innovative approach to bridge the gap between online shopping and in-store shopping. Owners give users the opportunity to take a virtual walk around the store, see the product exactly as it is displayed in the store, and buy online.^[1]

2017

The emergence of AI in the luxury goods and services market

In November 2017, the publication Financial Times (FT) published an article on how (artificial intelligence AI) is fundamentally changing the luxury market. Inspired by successes, and Amazon Google other tech giants, watch and jewelry brands are turning to artificial intelligence to win customers. For example, virtual interlocutors based on messengers can help brands collect user data without violating European law.

Chat box ring from De Grisogono collection

In March 2017, at the Baselworld Watch Show, the watch and jewelry brand de Grisogono unveiled a chatbot that helps customers choose a jewel decoration from the Crazymals collection. The interlocutor talks about himself, asks customers about tastes, and then offers jewelry to choose from.

In the winter of 2017, de Grisogono introduced its first IT product, the Botler concierge service, which is a cross between a chatbot and a butler who acts as a guide to the Swiss ski resort of St. Moritz.

According to Southpigalle co-founder Olivier de Coente, the difficult economic situation and growing competition has led luxury brands to innovate, including virtual interlocutor systems, to retain customers.

More than 50% of respondents are more comfortable texting than calling customer service, according to a 2016 study by Facebook. The study showed that various companies received over 1 billion messages every month.

As the FT writes, AI not only improves customer engagement, but also serves as an important source of information for brands. Since the information is provided directly by the client, this data is more useful than information obtained through cookies or browsing history.

Combined with other data, such as the user's social media profile and demographics, brands will be able to better understand customer trends, emotions and moods and adjust product management strategies accordingly.

In the summer of 2017, Montblanc introduced the Summit smartwatch, equipped with an AI-based Google assistant. Despite its classic appearance, the model functions as a navigator, translator and voice-controlled assistant.

As part of the SIHH exhibition in Geneva in January 2017, the Jaeger-LeCoultre brand invited everyone to test their developments. Visitors were given a bracelet with a QR code and asked to choose a watch using the iPhone app. This augmented reality technology has helped the company gather customer information.^[2]

Facebook taught the bot to bargain with people

Engineers at Facebook's artificial intelligence research laboratory presented in June 2017 the results of work on a bot that can lie and bargain with people. According to Quartz, during the training, the system used more than 5.8 thousand real human dialogues during negotiations collected using the crowdsourced online platform Amazon Mechanical Turk.^[3].

Analyzing dialogue, the bot not only learned to negotiate - he learned to lie. Engineers note that artificial intelligence can imitate interest not in what it is really interested in, but in another subject. Having won preferences during the negotiations, he returns to the object of interest. However, engineers are not completely sure whether the bot learned a lie from human dialogues, or came out on tactics by accident, in the process of self-study.

Notes

Robotics