Over the past few years, artificial intelligence (AI) technology has made major progress in several sectors, particularly retail. Not all retailers use it due to the high costs of this still-young technology. Nevertheless, the biggest brands are actively developing AI tools.
Artificial intelligence collects a large amount of data on a subject then analyses it using algorithms like neural networks to produce a model that can then generate answers similar to a human being qualified in the field. These answers are based on what the artificial intelligence has learned from all the data analysed.
What are the advantages of ai for retailers?
The data that artificial intelligence uses to create models is real customer sales data. When this information is analysed using machine learning algorithms, a model is created. This is used to find useful information on a company, customers or inventory.
- Artificial intelligence allows retailers to learn more about customers, their preferences and their behaviour;
- The customer can be encouraged to buy more. When a brand uses artificial intelligence to better understand customer needs, it can for example give them a discount coupon for a product they might need. This encourages them to buy an item they didn’t come in for, generating additional income.
- Another issue that AI can handle is merchandising. Machine learning can detect trends in customers’ purchasing preferences and learn about their priority purchases. Artificial intelligence can then suggest items to place side-by-side in your store to encourage cross-selling. These suggestions are based on real data provided by actual customers who really buy from a brick-and-mortar outlet.
retailers setting themselves apart in the field of artificial intelligence
The start-up AI Trigo Vision, founded and managed by retired members of the Israeli army’s special forces and intelligence community, developed technology that eliminates the need for in-store cashiers. Cameras and advanced algorithms automatically monitor buyers and products.
Once they’re done shopping, customers can simply confirm their purchases in a special confirmation kiosk. If they’re in a hurry, they can also log in to an application when they arrive, help themselves to items from the aisles, and leave the store without having to carry out a physical transaction. The Trigo Vision system is specially designed for retail sector outlets.
Amazon opened a store in Seattle using this type of application to enable grab-and-gopurchases. Trigo Vision’s technology powered by artificial intelligence develops this concept and aims to compete with Amazon and its brick-and-mortar outlets.
IBM Watson Cognitive Computing
Watson offers e-retailers a wide range of order management and customer engagement services.
The North Face adopted IBM Watson’s cognitive computing to help consumers to determine what jacket suits them best, based on variables such as where the jacket is going to be used or the person’s gender. For example, a hike in Iceland in December and a run in Paris in January will give different results. The pilot test conducted in 2015 involving 55,000 users gave a 60% click rate and 75% total sales conversion rate.
Since 2013, PayPal has used fraud detection algorithms to protect customer transactions.Over the past few years, thousands of purchase models have been learned by the system, which can now tell the difference between a group of friends buying concert tickets and a fraudster making the same type of purchase with a list of stolen accounts. A study referenced by LexisNexis revealed that this approach to transaction security adopted by PayPal helped to reduce fraud rate to 0.32% of turnover.
Kroger: leader in the field of artificial intelligence
Kroger, one of the biggest US mass retail chains, decided to take to technology to survive and continue to prosper faced with the 4th industrial revolution, the digital revolution. In autumn 2017, Kroger unveiled an audacious $9 billion, 3-year plan called Restock Krogerwith the aim of developing its omnichannel retail activities and redefining customer experience. Kroger plans to use its data, purchasing prospects and scale to stay at the cutting edge of the market. According to a survey by the Food Marketing Institute, the brand should represent more than 20% of all grocery purchases by 2022 and hit $100 billion of turnover. Therefore, Kroger and its competitors need to find ways to use technology to their advantage.
The mass retail brand already makes 3 billion custom recommendations each year to its 25 million connected customers. It is looking to improve customisation efforts to create different experiences for customers. The extension of the “Scan, Bag, Go” pilot programme, sending information on products in store to customer smartphones, is also part of the Restock Kroger scheme. After having been tested in 20 stores, it should be unveiled in 400 stores by the end of 2018. Additional investments will be made in Internet of Things sensors, machine learning and artificial intelligence to increase operational efficiency.
A partnership between Kroger and the UK online supermarket Ocado should help Kroger to automate its warehouses and use artificial intelligence to increase its income. Ocado has the world’s most sophisticated automated warehouses. The brand has already collaborated with Uber and Instacart to test delivery options, and it’s this know-how that Kroger is looking to harness with its investment.The two companies announced that they were opening three new warehouses to be operated by Ocado, followed by 17 others over the next three years.
Ocado’s warehouses are managed by robots powered by machine learning algorithms to navigate and select products for orders. With this investment and access to Ocado’s technology, Kroger will be able to ship products to stores more efficiently.
In France, it’s the Casino brand that’s joined forces with the UK company. The automated warehouse should be completed by the end of 2019.
AI for marketing
In-house, Kroger deployed Kroger Precision Marketing, a powerful marketing tool that usespurchasing data from 60 million Kroger customer households to launch online marketing campaigns. This not only makes it possible to improve customisation for customers, but also to offer product manufacturers excellent opportunities to market the ideal product for customers based on the relevance of the information received.
Kroger set itself the priority of activating and integrating machine learning into its operations, where a “learning machine” can generate and deploy new models with very little human involvement in a project called Embedded Machine Learning. The aim of this project is to enable the organisation to use machine learning.
A smart store
When a Kroger customer uses the mobile application in store, sensors installed on the shelves identify the customer, propose custom prices and highlight products that could interest the customer.
With this commitment to artificial intelligence, machine learning and smart technology, Kroger is on track to stay competitive during the digital revolution.
As in many fields of AI innovation driven by industry leaders, the future will probably be dictated by cases of successful use of this technology in retail. Artificial intelligence represents the next phase of the digital revolution and stores must be the first to make this technology useful for their customers. In-store artificial intelligence is invisible for end customers and the success of these schemes is based solely on customer satisfaction and the creation of new consumer experiences.