AI in Retail: Use Cases that Drive Business Innovation

The days are gone when businesses blindly follow and adopt one-size-fits-all recommendations and bland product descriptions. Today, AI has taken charge of the retail industry in improving it for good. It has changed how people shop and interact with products, leading to more personalized experiences for both businesses and customers. 

Today, retailers are embracing AI technologies and tools within their retail workflow, showing a 25% increase in AI adoption. But, the question that comes to every new retailer’s mind-

• How are these AI solutions and advancements driving growth 
• How can AI help retailers boost sales and engage potential customers?

In this blog, you will explore endless AI possibilities in the retail landscape and how can AI be used in retail.

The Role of AI in Retail

However, AI in retail is still evolving, 87% of retailers are already implementing it for better and instant results. 60% of retailers are planning to invest more in AI soon. By 2025, 80% of retail companies expect to use AI automation for streamlined operations and elevated shopping experiences.

AI has become the magic element that no retailer must avoid. AI has become a necessity leaving retailers with no option rather to implement it. Either they can use AI to unlock new opportunities or fall behind. 

Customers are eager to use AI tools to enhance their shopping. 

• 87% of shoppers had a great experience with AI-led shopping. 
• 73% of people prefer using AI chatbots for customer service, and 60% have used voice commands to shop and help them resolve queries faster.

AI is changing the retail world. Those who use it will succeed, while those who don’t may struggle. Research shows that 69% of retailers using AI have seen their revenue go up, and 72% say their costs have gone down. McKinsey predicts that improving online customer interactions with AI could add $310 billion to retail.

Why is AI becoming more popular in retail? Here are some key reasons:

• Supply Chain and Logistics
• Improving Products
• Helping Customers in Stores
• Analyzing Payments and Pricing
• Managing Inventory
• Customer Relationship Management (CRM)

Use Cases of Artificial Intelligence in the Retail Industry

AI in retail goes beyond just automation. It can change entire industries by improving shopping, speeding up processes, and helping the economy grow.

You can choose retail software that fits your specific needs and goals. This way, you get more benefits that match your vision. Let’s look at some key ways AI is transforming retail and helping both customers and businesses like never before.

1. Improved Customer Experience

AI helps retailers understand what customers like, how they behave, and what they buy. This lets stores personalize their interactions and tailor their offers for each shopper. When customers feel valued and appreciated, they prefer to shop with them.

2. Personalized Recommendations

AI can analyze a lot of customer data to create unique product suggestions. It looks at past purchases, browsing history, and personal information to find items that match what customers like. Customers appreciate these tailored recommendations because they are useful and relevant. This leads to greater satisfaction and loyalty.

For example, Amazon uses its recommendation engine to suggest products based on customers purchasing and searching history. Amazon uses AI to analyze patterns and guess which items you might want to buy next.

3. Inventory Management Optimization

AI makes real-time monitoring possible. AI algorithms can analyze past sales data, current market trends, and external factors like the weather and the economy to deliver relevant data. This automates the entire inventory process, including-

• Prevent stockouts
• Reduce extra inventory costs
• Accurate forecasting
• Fulfill orders faster

For example, Target uses an AI inventory system called the Inventory Ledger. This system uses smart technology to give real-time inventory data across 2,000 stores. It is very effective, processing up to 360,000 inventory transactions every second and managing 16,000 inventory requests each second—tasks that only a machine can do.

4. Predictive Analytics for Demand Forecasting

Do you know, AI-led demand forecasting can lower inventory costs by 10% to 40%? Today, when customer preferences keep changing, retailers must analyze their needs and forecast demands to keep them engaged. This is where AI predictive analytics and algorithms help them to stay ahead. It helps in keeping favorite items in stock, manage inventory, and deliver faster.

This is how Walmart saved millions, leveraging AI-driven demand forecasting to optimize and manage inventory. 

5. Virtual Try-ons

With virtual try-ons using AI and augmented reality (AR), customers can try and buy products without strolling in stores. This feature lets customers try products virtually, making shopping more enjoyable and satisfying. Our generative AI services create very realistic images of customers wearing different outfits or accessories. This allows retailers to offer a virtual fitting room experience.

This new approach improves online shopping and reduces the need for trying things on in person. It also lowers return rates, leading to happier customers and better efficiency for stores.

6. Improved Supply Chain Management

AI can greatly simplify how businesses manage their supply chains. It helps optimize logistics and keeps everything visible throughout the supply chain.

By using generative AI tools like predictive analytics and machine learning, retailers can improve forecasting, routing, scheduling, and purchasing. This helps them avoid potential problems before they happen.

Also read- AI in Supply Chain: Transforming End-to-End Workflows and Experiences

7. Sentiment Analysis

Retailers can see how customers feel about products or brands by using AI to analyze reviews and social media posts. This helps them decide what to sell and how to improve and market their products. For example, Sephora uses AI to check customer feedback. This helps them improve product recommendations and store layouts by finding trends and preferences in the data.

8. Loss Prevention

AI helps stop theft and fraud by watching in-store activities and spotting suspicious behavior, which reduces losses. For example, Walgreens uses AI to analyze security videos and detect potential shoplifting in real time. This technology uses machine learning to watch video feeds, identify suspicious actions, and quickly alert security staff. The system gets better over time by learning from past incidents.

9. Hyper-Personalization

Hyper-personalization uses AI to analyze a lot of customer data. It aims to create unique shopping experiences. Imagine getting product suggestions based on what you’ve bought before and what you might want next. This can show you new trends and recommend items that fit your style. Whether you shop online often or just occasionally, AI makes each visit feel special.

AI product suggestions are very important for retailers. A report from Monetate says that targeted recommendations can increase click rates by up to 20%. This helps turn more visitors into buyers and boosts sales. It also builds loyalty because customers feel understood. If businesses don’t offer this kind of personalization, they may lose customers to those who do.

10. Automatic Product Description Generation

Writing product descriptions for many items takes a lot of time. AI can help by automatically creating these descriptions. It looks at product features and customer reviews to generate text.

A study shows that AI can write product descriptions 70% faster than humans.

This saves retailers time and makes sure the descriptions are accurate and consistent. AI can also change the descriptions based on what different customers want. Whether someone wants a fun story or detailed info, AI can adjust its writing. This helps engage customers and can lead to more sales.

11. Better Experience with Visual Product Search

Many online shoppers—74% in the US and UK—have trouble finding what they want. This shows we need better search options. Visual search could grow to $33 billion by 2028.

Visual search uses AI to let people find products by using pictures instead of words. This helps those who don’t know the right words or make typing mistakes. Since 90% of what we understand is visual, making it easier to find and buy products is important. 

12. AI chatbots for Personalized Interaction

AI chatbots or conversational AI for retail are changing customer service in retail. These smart assistants can answer questions, provide product information, and help customers any time of day. In fact, 64% of people like talking to chatbots more than waiting for a human.

Using chatbots helps stores respond to customers quickly, which makes them happier. Since 75% of customers use different ways to shop, AI ensures they get the same good service no matter how they reach out.

Benefits of AI in Retail Industry

AI can help retailers in the following ways. 

1. AI for Better In-Store Analytics

AI helps retailers understand customer behavior. It shows how customers move around the store and what products they like. This helps improve store layouts and product placement.

For example, Nike uses AI to see which items get the most attention, helping them arrange products better. Zara uses AI to quickly change where items are placed, making popular products easy to find. This boosts customer engagement and sales.

2. Energy Efficiency in Retail

AI helps save energy in stores by monitoring energy use. It adjusts lighting and heating based on how many customers are in the store, reducing waste and costs. Walmart and Tesco use AI to manage energy. For instance, Tesco uses AI to control lighting and refrigeration, saving energy during quiet times. This helps both the environment and lowers costs by 10%.

3. AI for Employee Training

About 70% of people feel their companies need more training on AI in retail commerce. Around 65% find it hard to keep up with new AI technologies. Nearly 60% say that investing in these technologies is tough. They struggle with training staff on new tools, handling pushback from employees, and facing resistance to change in the company.

AI changes how employees are trained by offering personalized programs. It looks at how employees perform and creates training to help them improve. Walmart uses AI to customize training, making it more effective and increasing job satisfaction.

4. AI in Waste Reduction

AI helps retailers cut waste by managing inventory better and making supply chains more sustainable. It predicts demand accurately, which means AI for retailers can avoid making too many products and reduce waste.

By reducing waste, AI helps retailers save money on extra inventory and disposal costs. This focus on being eco-friendly also improves the retailer’s image, matching what consumers want from businesses today. Loreal is making strides in sustainability with AI and reducing waste.

5. Dynamic Pricing and Promotions

AI can change prices and promotions in real-time based on demand. It learns from sales data to set flexible prices. AI also looks at customer buying patterns to promote items customers are likely to buy, making marketing more effective.

6. Loss Prevention and Security

AI in retail stores helps prevent theft and improve store security. It analyzes transactions to find unusual patterns, reducing fraud. By providing real-time updates and tracking, AI can help you track lost items. 

7. Workforce Optimization

AI can improve how your retail business works. It can automate repetitive tasks that waste time and resources. With predictive algorithms, AI can help forecast resource needs, allowing for better scheduling and staff allocation. This means that routine tasks get done automatically, letting employees focus on more important work.

8. Tailored Marketing Campaigns

AI looks at data to create effective marketing campaigns. It examines customer preferences to see what they like. This helps retailers create marketing strategies that target specific customers.

9. Automated Checkout

AI makes checkout faster and more accurate. It speeds up payments and reduces wait times. AI scans items and processes transactions without human help, improving efficiency and customer service. For example, Amazon Go stores use AI to know when customers take or put back items. Customers are charged automatically as they leave. This technology uses cameras, sensors, and smart algorithms to track items and interact with shoppers in real-time.

No doubt that AI is changing the retail industry. However, the implementation is not new. Many brands have been using it and leveraging its benefits for better engagement and sales. 

Let’s take a look at some brands and how they are achieving success with AI in retail.

Real-world Examples of AI in Retail. Explore How Top Brands are AI-proofing their Retail industry

1. Amazon: Personalized Product Recommendations

Brands that use advanced digital tools for personalization see their revenue increase by 6% to 10% faster. Amazon is a great example of AI in shopping. It uses AI to personalize each customer’s homepage based on their shopping habits, preferences, wishlists, and cart items.

By looking at both past and current data, Amazon learns what its customers like. This helps them create very personalized marketing campaigns, improving customer satisfaction. According to McKinsey, recommendations are responsible for 35% of Amazon’s sales.

2. Walmart: Voice Search Shopping Experience

Walmart is using voice shopping to help customers. With Google Assistant or Siri, people can add items to their Walmart carts, make shopping lists, and check out just by talking.

Walmart makes it easy for shoppers to find their past purchases. This helps them reorder items quickly without extra steps. Plus, customers can pick up their orders in-store or have them delivered.

3. H&M: Advanced Product Description Generation

H&M, a popular clothing store, uses an AI system called “Cherry” to create product descriptions for its website. Cherry looks at pictures of clothes and uses smart technology to write descriptions. Human writers then check and edit these descriptions. This method helps H&M make product descriptions faster and keeps them consistent and accurate for customers.

4. Amazon: Dynamic Pricing

Price plays a big role in what people buy. Surveys show that 90% of shoppers might change brands or look for cheaper prices because of higher costs. More than half are already doing this.

Amazon uses a tool called Amazon Price Optimizer to change its prices several times a day. This tool looks at demand, competitor prices, sales, and stock levels. By adjusting prices this way, Amazon stays competitive and makes more money. Reports say this has helped increase Amazon’s sales by 5% and profits by 2%.

5. eBay: AI Chatbots

A great example of a chatbot in online shopping is eBay ShopBot. It’s a virtual assistant you can chat with on Messenger. ShopBot quickly answers your questions and gives instant replies, saving time for everyone. You don’t have to scroll through eBay or tick boxes anymore. Instead, ShopBot has friendly conversations and sends you direct links to the products you want.

6. PayPal: AI Fraud Detection 

PayPal uses an AI system called Deep Learning Fraud Detection to spot and stop fraud in transactions. This system looks at user behavior, transaction patterns, and information like credit card details and address verification.

It checks for signs of users with multiple accounts or those using proxy servers to make purchases. The system learns and improves over time, helping PayPal get better at catching fraud. Thanks to this AI, PayPal has reduced its losses from fraud by 25%.

7. LOWE’S: Inventory management and demand forecasting

Lowe’s, a home improvement store in the U.S., uses AI to improve how it manages inventory and makes shopping better for customers. They have small cameras placed on shelves in important areas, like where the light bulbs are.

These cameras watch the stock levels all the time. If they see a shelf is empty, they quickly alert the store’s devices. This helps the staff know when to restock items. By using AI this way, Lowe’s makes sure customers can always find what they need and have a smoother shopping experience.

8. IKEA: Personalized Experience for Customers and Employees

IKEA Kreativ is an AI tool that gives personalized home design advice. It helps customers see how furniture looks in their own rooms. Using a version of ChatGPT, customers can scan their spaces and get custom suggestions. IKEA is also teaming up with tech companies to improve its AI. Tools like Hej Copilot help workers create images and presentations more quickly, so they can focus on important tasks.

This is amazing how brands are setting benchmarks for everyone to leverage AI in their retail business. However, implementing AI and benefiting from it in one go is impossible. AI comes with some challenges that make it difficult for retailers to succeed. To streamline your retail workflow, take experts help.

Let’s understand the challenges.

Challenges of Artificial Intelligence in Retail

Brands should keep these challenges in mind when using AI:

• Overpromising Features
  One issue with AI is that companies might promise features that aren’t really possible yet. If customers expect a lot but don’t get it, they may be disappointed. This can hurt the brand’s reputation.
• Security Risks
  Brands need to protect customer data. If companies use AI, they must ensure it follows security rules to avoid data breaches. Using open systems can increase the risk of sensitive information being compromised.
• Customer Concerns About Ethics
  Consumers want to know how their data is collected and used. Retailers must clarify how they will use their information and take their consent. Since AI is new for many people, retailers should explain their use of AI to address any ethical concerns.
• Technology Integration Challenges
  To use AI effectively, companies need skilled workers who can connect it to their current systems. AI can help improve operations and customer service, but brands must have the right technology and staff. If not, they may face problems like poor data management and unsatisfactory customer experiences.

Despite these challenges, AI has a promising future in retail industry.

The future of AI for Retail industry: What to expect?

Is AI the future of retail? 

Yes, it is! AI is changing how stores work and how they help customers. 

For example, chatbots provide quick help, while systems like Netflix recommend products you might like. Amazon’s Just Walk Out technology makes shopping easier by removing checkouts. There’s also a new type of customer called the “machine customer.” These are smart devices, like refrigerators and printers, that can order things on their own without human help. 

Experts say that by 2028, there could be 15 billion of these devices, changing how shopping and supply chains work. By 2030, many companies expect a big part of their earnings to come from these machine customers. 

So, AI is not just part of the past and present; it’s definitely part of the future of retail!

Don’t get left behind

The 2024 AI retail stats are clear: AI is the future of everything. It’s growing faster than smartphones or tablets. Retailers who want to stay competitive use retail AI solutions to make their supply chain better, from manufacturing to marketing. To succeed in retail today, you need to know about AI tools and trends. 

As retail changes, it’s clear that you need AI development services to stay competitive. AI isn’t just a trend; it’s a powerful tool shaping the future of retail. With AI, you can offer personalized recommendations and automate tasks. The benefits of AI in retail are obvious, helping businesses grow faster and become more innovative.

FAQ

Q. What is AI in retail?

AI in retail means using technology to make shopping better and more efficient. It helps businesses analyze data, automate tasks, and make smart decisions. With AI, retailers can predict what customers want, manage their stock, and improve how they interact with shoppers.

Q. How do big companies use AI?

Big companies like Amazon and Walmart invest heavily in AI to enhance customer service and daily operations.

Q. What are potential AI use cases in retail?

AI is used in many ways in retail, such as:

• Personalized Recommendations: Suggesting products based on what customers like.
• Inventory Management: Keeping track of stock levels and automatically ordering more when needed.
• Dynamic Pricing: Changing prices based on demand and competition.
• AI Chatbots: Offering 24/7 customer support.
• Predictive Analytics: Forecasting trends to manage the supply chain.

Q. What are the benefits of using AI in retail?

These tools help retailers provide better service and run more smoothly. AI also helps with pricing by adjusting costs in real time, ensuring competitive rates while maximizing profit. Additionally, AI improves supply chain management by predicting needs, optimizing inventory, and finding efficient delivery routes.

Q. What advantages does AI offer in retail?

Overall, AI benefits retail by enhancing customer experiences, increasing efficiency, improving inventory management, aiding decision-making, and boosting profits.

Q. How does AI understand customer feelings?

AI analyzes customer feedback to understand feelings about products, helping retailers improve and personalize their services.