Operations and CX are top benefits of AI in retail industry

20 May 2019 Consultancy.uk

With operations and CX having become increasingly important to the future of retail companies in the UK, many are turning to AI for help. A new survey has found 80% of retailers believe AI has the potential to increase customer loyalty, while 75% intend to engage an external technology supplier to enhance their AI capabilities

Customer Experience (CX) is an aggregate of a customer's A-Z experience with a brand, and it is increasingly crucial in holding on to customers: UK companies which fail to maintain customer relevance could forfeit an estimated £100 billion in revenues in coming years. At the same time, as pricing pressures and decreased consumer confidence impact the bottom lines of businesses across the board, finding operational savings to safeguard profits has become similarly vital.

New research by law firm CMS and consultancy Retail Economics shows brands and retailers believe artificial intelligence (AI) can deliver significant opportunities on both fronts. 63% of respondents said AI could give rise to significant opportunities to optimise supply chains, while 53% thought it could reduce costs, and just under half (47%) said it could create more meaningful relationships with customers.AI will create more meaningful relationships with consumers

With target areas of investment for the deployment of AI including sales and marketing (66%); warehouse, distribution and logistics (53%); and buying and merchandise (47%), AI clearly shows strong promise for the retail sector in particular. This is because AI-powered data analytics could enable more sophisticated and personalised targeting of customers, which might improve loyalty and lifetime value.

While 80% of organisations believe AI has the potential to increase customer loyalty, AI could also encourage footfall. Two-thirds of shoppers would be encouraged to visit a physical store if they could check real-time product availability. This is something many bricks-and-mortar retailers would give their left arm for, having seen their market share ravaged by ecommerce competitors in recent times.

Areas of opportunity

According to Richard Lim, CEO of Retail Economics, technology is at the very heart of disruption in the retail industry, driving a period of unprecedented change. While this has led to a certain level of disruption, however, it also presents large opportunities.

Lim explained, “Seismic shifts within the consumer and retail industries are being exacerbated by AI integration at every step of the customer journey… Retailers are acutely aware of potential AI-derived cost savings, increased productivity and efficiencies. This is evidenced by 85% of retailers who think that AI-powered data analytics will enable more sophisticated targeting of customers.”

Overall, companies across Britain are positive about AI-powered technologies and their ability to improve their businesses and interactions with consumers. This is likely because there are a host of areas which can benefit from AI, with the research indicating that 62.5% of retailers.Greatest areas of opportunities

Consumer organisations believe that achieving ‘more efficiency in the supply chain’ presents the biggest opportunity for them. Just over 53% said that realising cost savings would provide the greatest benefit, followed by 46.9% who feel that ‘creating more meaningful relationships with customers’ would have the greatest impact on their operations.

When asked which AI-related technologies would have the biggest impact on the industry, nearly 70% of the organisations polled said that virtual assistants would be one of the most positively disruptive forces in the industry, followed by 59.4% who said they believed that the ‘internet of things’ would have the greatest impact. Chatbots, autonomous vehicles and dynamic pricing were the next most cited technologies. Perhaps most surprising were the technologies that scored the lowest. Despite the media interest, high-profile technologies such as drones, virtual reality and 3D printing do not appear to be high on companies’ radars

Identifying which area of a business to target for AI investment is a fundamental exercise for retailers to carry out. Customer engagement and enhancing the way in which goods reach consumers seem to be the top priorities. 65.6% of businesses in the survey felt that ‘sales, marketing and insight’ was the most essential area to focus on, in part because improved sophistication of AI-centric marketing strategies is resulting in a better return on investment. More than 53% of retailers said they would focus AI investment on their warehousing and distribution divisions, while 46.9% said they were keen to improve their buying and merchandising through the use of AI. Back office functions such as HR and finance do not appear to be prominent targets for investment.

Issues ahead

While most businesses want to adopt AI technologies, many do not have the internal capabilities, meaning they either have to recruit and build up an in-house team or bring in an external provider. An overwhelming 75% of respondents said they intended to engage an external technology supplier to enhance their AI capabilities.

However, there are a few challenges with AI implementation. Just one in five consumers trust retailers and consumer companies to responsibly handle their sensitive data. At the same time, only one in six consumers feel comfortable with the idea of AI powered in-home delivery, and 42% of shoppers forecast that drone deliveries will never become mainstream. Companies will also need to up-skill rapidly to accommodate their new offerings. Nearly 60% of organisations feel they lack the specialised skills required to roll out new AI technology.

CMS Partner Matthew Bennett concluded, “Whether delivering direct into fridges or using biometric data, AI-powered business models require heightened levels of trust. Our survey shows that consumer trust in retailers and consumer brands is low. However, we were pleased to see that organisations understand that AI ethics must be a key area of focus for them.”


×