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Over the past couple of decades, artificial intelligence has emerged from being some vaguely-defined and futuristic concept into an omnipresent and essential component in every modern business’s operations.
Today, AI has a vast array of applications across B2C and B2B industries. However, in retail and ecommerce particularly, AI has transformed businesses by empowering them to tailor the customer experience to an individual’s unique preferences.
With more than a third of consumers saying retailers should be offering more personalised shopping experiences and Gen-Z shoppers expecting an increasingly high level of personalisation in all touchpoints, AI is something that you can’t ignore if you want to thrive in the modern B2C arena.
If you’re looking to embrace the potential of AI in your retail or ecommerce business, then this post is for you. In this guide, we’ll take a closer look at how AI is transforming ecommerce and brick-and-mortar retail, and the best strategies to follow when adopting it in your business.
How AI is Transforming Retail
Better Demand Forecasting
One of the biggest ways that AI is disrupting the retail industry is by giving brands access to more accurate and granular demand forecasting, and in turn, more effective logistics.
Faced with fierce competition and complex supply chains, modern retailers can leverage AI to forecast customer demand, and therefore drive efficiencies in their buying decisions, allocation, stock replenishment, and more.
By forecasting at a granular level, and making decisions that manage stock levels by the week, day, or even hour, retailers can ensure they always have the products their customers are demanding, while also clearing storage of backup stock and reducing the risk of spoilage.
Optimised Supply Chains
In the same vein, AI is becoming an increasingly prevalent technology in supply chain optimisation, allowing retailers to automate away repetitive tasks that are typically prone to human error.
Routine tasks such as document and invoice processing have already been made far more efficient with the help of basic AI programs. However, this is just one area in which the modern supply chain is changing rapidly thanks to artificial intelligence.
Warehouse automation adoption is picking up pace at all levels of the supply chain. According to this piece by business tech journal G2, industry experts predict that “4 million commercial warehouse robots are to be installed in over 50,000 warehouses by 2025”.
On the more sci-fi end of things, transport automation is becoming a bigger and bigger subject in the world of supply chain management, with autonomous truck companies completing hundreds of miles in driverless hauls.
These developments and many more are hinting at a future retail sector where retail supply chains are infinitely more efficient, and stores are able to maintain stock lists and levels that delight customers all year around.
Better Hybrid Experiences
AI is also transforming the modern retail sector by supporting in-person shopping experiences with traditionally ecommerce-only technology such as chatbots and algorithmic product recommendations. Card readers are another example of how sophisticated AI technology can help the retail industry transform their in-store experience by utilising innovative payment methods for an overall better customer experience.
By encouraging customers to begin buyer journeys by interacting with AI-powered tools, retailers can glean powerful insights for an all-around better customer experience. Though this service is ultimately picked up by a human stylist, the use of AI passes useful insights up the chain and empowers staff to provide a better customer experience informed by shoppers’ preferences shopping habits.
3 Ways AI is Transforming Ecommerce
Informed Product Recommendations
One of the most prevalent ways that AI is transforming the world of ecommerce is by empowering businesses to construct detailed pictures of customer preferences and behaviours, and make better product recommendations accordingly.
When shoppers agree to share their data with an ecommerce brand, the site can then use that data to make more informed recommendations, often leading to more sales and higher average order values.
Modern consumers love personalised shopping experiences, and feel more valued by the brands they shop with when their product recommendations are relevant to their interests and tastes.
It leads to an all-around quicker and more convenient experience with all ecommerce stores, getting them straight to the products that they want and need, rather than having to browse or search through endless pages of stock.
Time and Cost-Efficient Customer Service
Another widely-adopted example of how AI is transforming ecommerce is through the use of chatbots, which are leveraged to provide site visitors with 24/7 support for common customer service inquiries.
Though current chatbots aren’t sophisticated enough to have full conversations and deal with nuanced requests, they still offer a wealth of benefits on both parties in the ecommerce sector.
For customers, they’re able to resolve common questions about products, shipping, returns, and other areas of the shopping experience. For business owners, chatbots can ease the strain on time and resources that more traditional customer service can represent.
Statista reported that the global chatbot industry’s revenue rose to roughly $83 million in 2021.
With chatbot software becoming increasingly accessible to small and medium businesses every year, chatbots are set to become a basic expectation for any customer visiting an ecommerce store in the near future.
Better Personalisation in Marketing Strategies
With modern people spending a huge chunk of their waking hours on mobile devices and computers, consumers’ first contact with your brand tends to happen a long time before they first visit your ecommerce site.
Targeted banner ads, social media ads, and promotions can all shape public perception of a brand in the very earliest phase of the buyer journey. This will influence the way customers interact with a given brand in the future, and have a profound impact on the average customer’s perception of their entire shopping experience.
Marketing strategies informed by big data allow ecommerce brands to run ad campaigns with a higher ROI, and avoid sullying the brands’ reputation by making customers feel inundated with ads that are irrelevant to their interests and preferences.
With nearly 60% of consumers feeling positively about hyper-personalised digital advertising, this is one AI application ecommerce marketers can’t afford to ignore. Forward-thinking ecommerce brands across all niches are leveraging AI to achieve closer customer relationships and more repeat customers.
4 Strategies for Integrating AI at your Retail Business
Now that we have an understanding of some of the key ways that AI is beginning to shake things up, here’s 4 key strategies to use when integrating AI at your business.
Whether you’re a fledgling ecommerce start-up or a long-established store that’s a household name in your locality, these will ensure that your AI integrations work for you rather than against you, and allow you to leverage all the major benefits of AI with minimal disruption.
Identify the Issues You’re Hoping to Solve
The first step for any retailer looking to leverage AI is to draw up a list of specific challenges that you’re hoping this tech will solve.
Spend a while brainstorming the problems faced by your business that could be mitigated with AI solutions, then combine this with research into AI solutions to come up with specific use cases.
For example, if you’re struggling to stay on top of loss prevention in your store, you might want to plan for AI solutions that analyse return behaviours and flag possible cases of fraud. If you’re getting a high click-through but a low ROI on your advertising, you may want to think about leveraging AI to better personalise your ad targeting.
The exact issues and solutions you focus on will depend on your business’s unique goals, challenges, and other nuances. Whatever those may be, going in with a clear idea of issues and use cases will help you direct a more well-informed and purposeful long-term AI strategy.
Address the Capability Gap in your Business
Like many tech adoption cases, there’s likely to be a significant gap between the things your business could accomplish with AI, and the things that you’re actually capable of doing within practical timeframes.
Establishing what’s possible and what’s not based on your existing talent, budget, and resources is an essential step to take before launching into a full AI implementation drive. Let this step fall to the wayside, and you could quickly find yourself biting off more than you can chew, and losing your vision for AI integration in a mess of false starts and confused projects.
This step can take a long time and can be hard to balance with routine internal comms and operations. However, carrying out a thorough capability gap analysis is an essential step in any successful AI integration.
Start Off Small
No matter the size of your operation, it’s always wise to start off using AI on a small sample of your data, rather than charging head-first towards your loftiest ambitions.
Taking on too much too soon is one of the biggest reasons why businesses fail in executing their AI integration strategies. By moving incrementally with small, targeted changes to your operations, you’ll set yourself up for small wins and gain an all-around better understanding of exactly how AI can benefit your business.
Going back to our earlier point, a large part of this will be starting with the issues that you’re planning to solve, and using this to be selective about the kind of data you’re leveraging.
If, for example, you want to leverage more sophisticated personalisation tech to serve better product recommendations to your customers, there’ll be no need to collate data that’s drawn from your warehousing and logistics.
When you carry out your AI integration step-by-step and ensure that it’s backed up by a solid data management strategy, you’ll gain a stronger understanding of exactly how AI can solve your pressing issues, and avoid the common pitfalls that can cause your AI strategy to cave in before it’s taken shape.
Make Trust a Priority
In the retail and ecommerce sectors, AI isn’t much use without swathes of data about your customers. Who they are, how they interact with various brand touchpoints, and even their behaviour post-checkout, all form the foundation of the long-term value that AI technology can offer a retail business.
Though customer data can be teeming with potential for your AI integrations, in our digital-first age, it’s more important to make sure you’re using it ethically than ever before.
A 2022 study by Adobe revealed that a huge 73% of customers feel worried that the data companies collect has no benefit to them, and an even larger proportion consider choosing how companies use their data important to their decision of whether or not to buy a product.
When you set out to make AI a bigger part of your operations, it’s essential to make trust a priority.
Making sure that customers can access accurate and transparent privacy data, and make choices as to how you use the data they share with you, will go a long way in showing your customers that you care about their privacy, and that your AI tech is intended to help them as much as you.
Using aggregate data rather than excessive data mining focussed on individuals, and adjusting your KPIs to avoid negative privacy experiences with your brand, can also be a big help in ensuring your AI doesn’t alienate your customers through breaches of trust.
The Best Types of AI Tools to Get Started
If you’re just taking your first steps into using AI for retail/ecommerce business, then a far-reaching bespoke AI solution may not be practical for the foreseeable future.
Building AI solutions that are a good fit for all the various nuances of your business takes a tremendous amount of time, energy, and resources, and realising your artificial intelligence vision won’t happen overnight. Having said that, there are still plenty of more accessible ways that you can start enjoying some of the great benefits that AI has to offer.
Here’s 4 of the best kinds of AI tools for use in retail and ecommerce.
- Conversational AI Chatbots
As we mentioned earlier, chatbots are rapidly becoming one of the most popular and visible forms of AI leveraged by modern businesses.
By providing customers with answers to their queries around-the-clock, you’ll be able to enhance their overall experience with your store with prompt responses, while saving precious resources that you’d usually invest in traditional, person-to-person customer service.
Conversational AI chatbots represent a new wave of customer-facing AI that promise consistently high-quality results. They apply powerful natural-language processing to analyse the nuances of your customers’ texts, emails, and other communications, ensuring a more natural flow of conversation and smoother processing of customer support tickets.
- Shopper Recommendation Integrations
If your site traffic looks healthy but you’re lagging behind your sales targets, then AI-powered shopper insight recommendation integrations could be the perfect AI tool to use in your retail business.
These tools are designed specifically to generate real-time product recommendations to customers visiting your store. Once added to your site, they’ll analyse current and past visitor behaviour, and use this data to show them the products they’re most likely to be interested in.
Though the features of these integrations are wide-ranging, we recommend finding a platform that places a lot of emphasis on restraint. This means finding a recommendation tool that will only influence the shopper’s experience on your store when it’s mathematically viable.
This will help you reduce the risk of saturating your visitors’ sessions with offers they’re not likely to respond to and other unnecessary elements, which could down their overall relationship with your brand.
- On-Site Search AI
There are a wide range of tools on the market that use both natural language processing and machine learning to optimise your on-site search results based on the behaviours exhibited by your customers.
Through these innovative integrations, customers can enjoy a site search experience that’s more in-line with search engines like Google, reaching the results that are most relevant to their unique browsing profile as quickly and easily as possible. Some tools also offer their own A/B testing platforms for more granular and manual analysis of your site search performance.
By allowing customer data to inform this integral element of your store, many retail businesses will be able to enjoy stronger brand loyalty, higher average order values, and healthier conversion rates.
- AI Visual Quality Inspection
If you’re running a larger retail or ecommerce operation and control a significant proportion of your supply chain, then automated quality inspection tools could be the perfect way to get started with AI integrations.
These exciting tech tools are designed to give manufacturing facilities an easy way to automate their visual quality inspection, and limit the detrimental effects of supply chain issues, labour shortages, and other things that can mar the efficiency of a retail operation.
Easy to integrate into a range of secondary-sector operations, visual inspection automation is designed to accurately pick up on defects or anomalies during the manufacturing process, even in cases where products have minor, intentional variations.
Integrating artificial intelligence to your retail or ecommerce business isn’t without its challenges, but the rewards for finding the right solution will promise practically limitless returns. This guide should have given you strategies to help transform your retail business with the help of powerful AI technologies.
Whether you’re taking your first steps into the world of AI or you’re looking to optimise existing tools and processes, we hope this guide has helped you make greater sense of the topic, and map out a path towards your long-term vision for implementing AI into your business. From understanding which AI integrations will help your specific business leverage the benefits of this technology to discovering a variety of tools including conversational AI chatbots and on-site search AI.
Being well placed to identify areas within your business where AI can help scale your offering will help to provide exceptional customer service in 2023 and beyond.
Daniel Groves is a business coach and author, constantly developing his knowledge and sharing his experience with like-minded entrepreneurs, business owners, and growth strategists: https://danielmgroves.co.uk/.
Connect with Daniel on LinkedIn: danielgroves90