Artificial Intelligence

How Does AI In Retail Work?

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<p>Retail is an ever-changing industry that evolves according to available technologies and customer demands. Retailers used to offer their products only in their brick-and-mortar stores. Then, they started building online stores as the Internet became mainstream. These days, retailers are adopting an omnichannel approach.</p>
<p>Retailers are embracing a newer technology capable of improving their operations in several ways: artificial intelligence (AI). AI isn’t totally new in the world of retail. Key players in the retail industry, including Amazon, Walmart, and Target, have long embraced AI. However, the technology only gained more popularity in recent years as it has become more advanced and accessible.</p>
<p>AI has become so popular that retailers and<a href="https://www.podium.com/article/ai-for-small-business/"> small businesses</a> who don’t want to lose insurmountable market share should consider investing in the technology as well.</p>
<p>But how does AI work? Which tools work as AI for retailers and where to use them? Why should retailers use this technology? Let’s find out.</p>
<h2>What Technologies Does AI in Retail Use?</h2>
<p>Many of you probably think of artificial intelligence as an application that automates processes or something that can act and think like humans. In a sense, that’s not wrong. However, artificial intelligence is more than just that. It’s a broad term that encompasses different technologies.</p>
<p>By now, you likely have encountered chatbots, ChatGPT, digital checkout, etc. These applications use different artificial intelligence technologies to function. For example, most modern chatbots use natural language processing (NLP), while ChatGPT uses deep learning. Machine learning, in addition to NLP and deep learning, are technologies that fall under the AI umbrella.</p>
<p>Let’s take a closer look at each of these technologies.</p>
<ul>
<li style="font-weight: 400">NLP technology enables computers or machines to interpret, manipulate, and comprehend human language. It’s typically used in creating chatbots, virtual assistants, and other AI tools that help customers by generating responses to their questions or prompts.</li>
<li style="font-weight: 400">Machine learning allows systems to learn from data and improve their performance over time. It’s particularly useful for predicting what customers most want to buy, how purchase trends will shift, and the overall brand sentiment.</li>
<li style="font-weight: 400"> Deep learning is a subset of ML that simulates the human brain, helping systems perform complex tasks, like identifying images.</li>
</ul>
<h2>10 Examples of AI in Retail</h2>
<p>AI is a powerful technology that can help improve various aspects of a retail business. Here are ten of the many common and unique applications of AI in retail.</p>
<h3>1. Inventory Management</h3>
<p>Inventory management is a crucial retail process. Retailers need to ensure that they have enough products in stock to meet the customer’s demands. However, keeping an accurate inventory is often a challenge.</p>
<p>Artificial intelligence in retail can help<a href="https://www.podium.com/article/crucial-benefits-of-ai/"> improve demand forecasting</a>. This technology can mine insights from consumer, marketplace, and competitor data to predict changes in the industry. They can also help retailers improve marketing, merchandising, supply chain planning, and other business strategies.</p>
<h3>2. Adaptive Homepage</h3>
<p>Consumers tend to use different devices to access an e-commerce website. AI can be used to create multiple website versions and load the one that best fits the user’s device. It helps ensure that the web page will be displayed properly, irrespective of the user’s device. Web designers refer to this as adaptive design.</p>
<p>With an adaptive website design, visitors can get the full website experience no matter what device they use. They can access and view every product, description, and other information quickly with no UX hiccups. It’s just one of the ways AI systems can evolve a user’s digital experience.</p>
<h3>3. Interactive Chat</h3>
<p>Another great way to use AI technologies in retail is by building interactive chat systems. AI-powered bots can hold human-like conversations, answer frequently asked questions, and direct customers to relevant resources or staff. At the same time, these bots can collect valuable customer information retailers can use to inform business decisions. As a result, interactive chat programs powered by bots can improve customer service and engagement in the retail sector.</p>
<h3>4. Guided Discovery</h3>
<p>AI can also be useful in providing shoppers with a more seamless and personalized shopping experience. You can incorporate guided discovery into your online retail shop to guide site visitors to the products they are looking for. This technology uses advanced analytics to monitor the customer’s search history and browsing behavior, using the data to predict their needs and intentions.</p>
<h3>5. Conversational Support</h3>
<p>Consumers may reach out to you at any time of the day. You can hire a customer service representative to handle queries round-the-clock, but that requires additional expenses. The more cost-effective alternative is implementing conversational support.</p>
<p>Conversational support systems are like live chat but can do more. <a href="https://www.podium.com/article/conversational-ai/">AI-powered conversational support</a> systems use NLP to help customers find solutions to their problems, in most cases, on their own. With this tool, customers don’t have to search endlessly through web pages to find answers or wait on hold.</p>
<p>Furthermore, you can provide round-the-clock <a href="https://www.podium.com/article/ai-in-customer-service/">customer service</a> without hiring extra staff available 24/7.</p>
<h3>6. Visual Search</h3>
<p>Some consumers may want to buy products they don’t know the name of. They may merely remember what the product looks like. An AI-powered visual search will allow customers to easily and quickly find the products they’re looking for by uploading or capturing images on the e-commerce site. It does this by curating product recommendations based on similarity and aesthetics.</p>
<p>But it’s important not to confuse visual search with image search. Visual search only uses images to find another image, while image search also uses URLs and keywords to fulfill the search query.</p>
<p>In the retail industry, visual search functionality can offer many benefits. It includes integrating online and offline shopping experiences, easy tracking, and increased conversion.</p>
<h3>7. Interactive and Adaptable Online Clothes Fitting</h3>
<p>Virtual try-ons are another incredible AI application that revolutionizes how consumers shop for clothes. For fashion retailers, this interactive and adaptable online clothes-fitting solution can be an ultimate not-so-secret weapon.</p>
<p>Virtual try-on capabilities can solve some of the most common issues when shopping for clothes online, like getting the size wrong or buying clothing that doesn’t match one’s body type. By using machine learning algorithms and computer vision, a virtual try-on lets shoppers see how clothes fit even without having the items on hand.</p>
<p>This application offers many benefits. Allowing customers to try clothes virtually may reduce customer returns and boost profit. It’s also a great way to make shopping more engaging and immersive.</p>
<h3>8. Order on the Go</h3>
<p>Food retailers can also take advantage of artificial intelligence technology. They can use it to make ordering on the go easier, faster, and more accurate. By creating or using digital ordering systems powered by conversational AI, customers can order naturally just like they would with an actual person.</p>
<p>Taco Bell was one of the first restaurants to allow customers to order food through AI. They’ve teamed up with Slack to provide TacoBot, which customers can use to place their orders by sending text or voice messages.</p>
<h3>9. Task Automation and Workforce Optimization</h3>
<p>AI-based algorithms can analyze customer traffic, sales data history, and other factors to predict demand patterns. These predictions will allow retailers to accurately determine their staffing needs and optimize their team’s work schedule. Hence, the business can avoid overstaffing or understaffing.</p>
<p>Furthermore, AI can be used to automate routine and time-consuming tasks, like processing orders and inputting data. Therefore, employees can devote their time to strategic tasks, customer service, and other useful activities. These are just some of the <a href="https://www.podium.com/article/ai-in-ecommerce/">ways AI boosts e-commerce efficiency.</a></p>
<h3>10. Intelligent and Dynamic Pricing</h3>
<p>Dynamic pricing refers to adjusting product prices based on several factors like customer behavior, supply and demand, and market conditions. Although this strategy allows retailers to maximize their margins and remain competitive, its implementation can be challenging.</p>
<p>AI can help retailers overcome the challenge. AI algorithms can analyze real-time data to forecast demand, determine pricing trends, and adjust prices accordingly.</p>
<h2>5 Reasons Why You Should Use AI in Your Retail Business</h2>
<p>AI technologies may easily overwhelm retailers who aren’t tech-savvy. If you’re on the fence about using automation in retail, think about all the benefits you’ll be missing out on. Below are some of them.</p>
<h3>1. Captivate Customers</h3>
<p>AI for retail can be useful in attracting and retaining customers. In a hypercompetitive retail industry where customers can easily find hundreds of online stores with just a few clicks, retailers need to find ways to capture their target market&#8217;s attention quickly.</p>
<p>You can attract target customers through your <a href="https://www.podium.com/article/ai-in-marketing-automation/">marketing efforts. </a>And AI can be useful in improving various parts of your marketing, including segmenting customers and creating personalized content. You can also use retail marketing automation to <a href="https://www.podium.com/article/ai-marketing/">make your marketing cost-effective.</a></p>
<p>Additionally, you can use AI to retain customers. Consumers love excellent customer service, straightforward return policy, seamless and engaging shopping experience, etc. With AI technologies, it’s possible to offer all that and more.</p>
<h3>2. Create Insights from Disparate Data</h3>
<p>Another reason to use AI in retail business is to analyze data easily, quickly, and accurately. Your retail business is likely gathering large volumes of data from disparate sources across the supply chain. You extract valuable insights from the data and use them <a href="https://www.podium.com/article/examples-of-artificial-intelligence-in-business/">to improve workflows</a> and make data-driven business decisions.</p>
<p>Unlike traditional data analytics, AI analytics can process large volumes of unstructured, raw data. It uses machine learning, natural language processing, and deep learning to provide accurate insights quickly in real-time. With this tool, you can make the most of the information you gathered.</p>
<h3>3. Synchronize Offline &amp; Online Retail</h3>
<p>If you’re operating an online and brick-and-mortar store, then there’s more reason to consider retail automation. Physical and online shopping channels run under different sets of approaches and initiatives. However, treating each channel as an individual business unit will likely result in operational inefficiencies. It also adds friction for customers who want a seamless shopping experience.</p>
<p>AI technologies can be useful in integrating online and offline operations, helping retailers offer a more convenient and generally <a href="https://www.podium.com/article/how-to-leverage-ai-to-improve-customer-experience/">improved customer experience</a>. Effective synchronization can also reduce inefficiencies and enable retail businesses to reach their full potential.</p>
<h3>4. Empower Flexible Logistics</h3>
<p>Part of satisfying customers is ensuring their orders arrive on time. However, demands changes and unforeseen events that could affect business operations happen. With flexible logistics, retailers can easily adapt to market shifts and unexpected situations.</p>
<p>Flexibility in logistics refers to the ability to reduce or expand warehouse resources to adapt to changes, like higher production line output or increased orders. It is useful in ensuring there’s available stock for end customers while limiting cost overruns in product transport and storage.</p>
<h3>5. Make More Money</h3>
<p>Embracing automated retailing may also bring in more profit with less effort. AI can help you determine what products are more likely to sell and where to display them in store. Automating time-consuming and repetitive processes reduces operational costs while optimizing your team’s efficiency.</p>
<p>Additionally, AI can be useful in improving <a href="https://www.podium.com/article/ai-lead-generation/">lead generation</a>, boosting customer engagement, and gaining customer loyalty. A high customer retention rate reduces marketing expenses and ensures steady cash flow.</p>
<h2>Will AI Change Retail?</h2>
<p>AI is already changing retail. Well-known retailers, including Levi Strauss &amp; Co., American Eagle, and Puma, either plan to incorporate AI in their processes or already do. American Eagle has already automated their inventory tracking, while Puma uses AI for personalized customer styling. Meanwhile, Levi plans to use AI to help with its models to produce clothing for more diverse body types.</p>
<p>But it&#8217;s not just large retailers that implement AI. Even smaller businesses are starting to take advantage of the technology. <a href="https://www.forbes.com/sites/allbusiness/2023/11/17/how-small-businesses-are-using-ai-and-how-your-business-can-benefit-too/?sh=25f3ebb92344">Nearly half of small businesses</a> started using AI systems in 2022. It should not come as a surprise since <a href="https://www.forbes.com/sites/allbusiness/2023/11/17/how-small-businesses-are-using-ai-and-how-your-business-can-benefit-too/?sh=25f3ebb92344">AI benefits small businesses</a> in various ways.</p>
<p>Automating tasks allows small businesses to cut costs, all while scaling and adapting to changes. The ability to streamline processes, make data-driven decisions, and offer innovative solutions also gives them a competitive advantage.</p>
<p>No matter the business size, automation technologies are already permeating many aspects of retail operations. Retailers use these innovative technologies in various ways–from personalizing and improving customer experience to boosting operations efficiency. It is starting to make what was once impossible possible.</p>
<p>But AI still has a long way to go. The preconceived notion that this technology will replace humans won’t happen anytime soon. Many AI technologies still need human oversight.</p>
<p>Nevertheless, who knows what will happen several years from now? But one thing is for sure: this technology will continuously reshape the retail industry.</p>


How Does AI In Retail Work?

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