Embracing AI: Retail's next evolution is here.

After years of investment, development, and build-up, experts predict that the impact of AI (Artificial Intelligence) will grow significantly this year and its revolution will finally come to the forefront. AI can be a highly powerful and influential tool due to its various capabilities including machine learning, pattern recognition, decision supporting and adaptability. Therefore, its impact will be undoubtedly felt across all industries, including retail.

As we delve further into 2024, it’s evident that AI technologies are evolving rapidly and will soon take centre stage in shaping the future of retail. So, what advancements should the industry expect, and how can retail brands embrace AI for an impactful outcome? In this blog, we’ll discuss how AI is set to revolutionise the customer experience, personalisation, sustainability initiatives and more.

Powering personalisation

In retail, the importance of personalisation cannot be understated. It allows businesses and brands to tailor the shopping experience to the individual preferences of its customers, leading to increased loyalty and better profitability. As an essential aspect to all businesses, how will AI support in powering personalisation? AI-driven algorithms can analyse vast amounts of customer data, providing a deeper insight into the preferences, behaviours, and purchase patterns of its customers. This allows businesses to offer personalised recommendations and product suggestions that match customers specific interests and preferences. For example, you may have noticed this when shopping for products online, soon after you begin to see other similar adverts pop up. We used to think Google was somehow reading our minds, when in reality, it was AI driven algorithms providing brands data based on our previous search results.

Starbucks is a great example of incorporating AI to enhance its personalisation. It’s now using AI-personalised offers distributed via its rewards app to drive conversion, resulting in nearly 4 million new members joining its rewards programme in the last quarter. As a result, retailers are now investing in AI to better connect to potential customers, increase brand awareness and drive sales.

Enhancing the customer experience

When it comes to upholding brand reputation and maintaining a competitive edge, curating a memorable and unique customer experience remains a top priority for retailers. As technological advancements reshape consumer expectations and behaviours, retailers are reimagining the shopping experience to stay ahead in a competitive landscape. As a result, we are beginning to see retail brands incorporate AI. For instance, fashion retailer Moss is currently testing an advanced virtual try-on tool on its website. The technology enables shoppers to visualize themselves in different outfits on-screen. By uploading a headshot and sizing information, shoppers can create a realistic avatar of themselves to try on various combinations of clothes virtually, providing a personalised and seamless shopping experience. And reducing the likelihood of returns, meaning happy and satisfied customers and increased profitability for the retailer!

But it’s not just online where AI is being utilised; bricks-and-mortar stores will soon be able to benefit from the advantages that AI can bring to enhancing the customer experience. The possibilities are exciting and endless, with a recent Forbes article suggesting that soon, in-store screen displays could change based on real-time data. For example, relevant products or clothing could be suggested to suit the weather. So, if you’re ever stuck in the rain and need to buy an umbrella, you’ll know where to go!

Supporting sustainability

The opportunity for businesses to implement tangible and successful sustainability initiatives has never been more accessible, thanks to evolving technologies such as AI. With three-quarters of Gen Z stating that sustainability is more important than brand when making a purchase decision, businesses must prioritise sustainability to avoid losing customers and damaging financial performance.

With recent advances in IoT (Internet of Things) applications, the retail industry is undergoing a transformation in sustainability. IoT refers to the network of physical devices, appliances, and other objects embedded with sensors, software, and network connectivity, enabling them to collect and exchange data over the internet. These devices are commonly found across stores and warehouses within the retail industry. Combined with AI (AIoT), AI can analyse data provided by IoT to extract new insights that can inform decisions in various areas of a business. For example, in retail this may include facilities management, logistics, inventory management, and waste management. Waste management is especially crucial considering that the retail sector generates 1.1 million tonnes of waste each year in the UK.

AI can also be used in other areas of retail to improve sustainability, such as supporting the transition towards a fully circular economy.

The year ahead and beyond

As we look to the year ahead and beyond, it’s clear that AI will continue to play a pivotal role in shaping the future of retail; from enhancing customer experiences and personalisation to driving sustainability initiatives. Moving forwards, it’s evident that retail brands who are investing in, and adopting the use of, AI will maintain a competitive edge, ensuring they remain relevant and responsive to evolving customer demands.