Leveraging AI for Personalised Shopping Experiences: A Retail Revolution

AI is an ever-changing, ever-improving and explosive technology that is revolutionising how retailers operate and engage with their customers. It not only facilitates better inventory management and faster supply chains and streamlines operations, but AI also delivers valuable data insights into customer behaviour.

This allows retailers to personalise their customer’s shopping experience and unlocks multiple growth opportunities that were near impossible until AI arrived. But just what is AI? How is it changing the face of retail so successfully, and how does it benefit the retail business in reality? 

Understanding the basics of AI in retail

 Artificial intelligence delivers valuable data and insights for retailers that help them make better, more informed decisions about their business, their operations and their customers. Whether it’s understanding product placement and pricing, managing inventory and their supply chain, or learning about customer buying behaviour to offer a tailored customer service, AI is helping companies in the retail industry to increase revenue.

 What is Artificial Intelligence (AI)?

 AI is an extension of machine learning; AI technology learns how to mimic how people think, act and learn, enabling computers to carry out complex tasks, such as data analysis.

 For example, in retail, AI technology gathers vast amounts of data, analyses it and learns customer buying habits. With this information, computers can automatically suggest the best products and services for each customer, allowing retailers to customise their buyer’s shopping journey.

By predicting what the customer is likely to purchase, retailers now know what stock they need, how to run their operations and manage their supply chain to streamline the entire customer buying process quickly and effectively. 

The role of AI in modern retail

 One of the biggest impacts AI has had on retailers is automation, which has reduced the time, manpower and resources usually associated with many manual tasks. As a result, retailers can streamline their operations, improve accuracy and efficiency, and provide much better customer service.

 Jobs normally undertaken by staff in stores are now being handled online by virtual personal assistants, image recognition and chatbots. In addition, customers can now find the answers they want 24 hours a day, enabling them to make informed buying decisions, track their orders and access customer support.

 Another key aspect of AI is how data gathered by retailers, online and offline, can now be fully analysed quickly. AI-driven data analytics provides retailers with valuable, actionable insights, providing a more comprehensive view of their customers’ shopping behaviour.  Using tools like predictive modelling, retailers can tailor their products to buyers' wants and needs. Automated AI solutions can be used to deliver personalised recommendations, special offers and advice to their customers. Align this with apps and loyalty apps, creating an even more personalised approach, i.e. through customer loyalty schemes, and retailers will be able to retain existing customers more effectively and attract new customers. 

The rise of personalised shopping experiences through AI

 One of the biggest drivers for retailers to adopt AI technology is the benefit of being able to provide their customers with a shopping experience that is highly personalised to them. Indeed, a recent report from Klarna and retail expert Kate Hardcastle MBE (aka the Customer Whisperer) revealed that 65% of consumers want even more personalisation from their shopping experience, both in-store and online.

 How AI enables personalised shopping

 AI in the retail industry accounted for $8.41 billion in 2022, and it’s predicted to grow to an incredible $45.74 billion by 2030. But, just how does AI enable retailers to deliver the personalised experience customers want?

 AI-based algorithms are capable of collecting, organising and analysing reams of customer data, such as browsing history, social media activity, buying history and even product views.

With this data, retailers can better understand their customers and create a highly personalised, individual and tailored shopping experience throughout their buying journey.

 This could be anything from product recommendations based on the customer’s previous purchases and viewing preferences, and offering alternative similar products or services (known as upselling and cross-selling) opportunities.

 Customers today search for products and services in new, innovative ways and through the use of AI and NLP (natural language processing) for voice-enabled searches, as well as image recognition and AR (augmented reality) – using images to search for and ‘try on’ items virtually – retailers can maximise selling opportunities while giving customers what they want when they want it 

Case studies: Successful implementations of AI-powered personalisation

 Let’s look at some case studies from retail brands that have successfully implemented AI development technology to drive customer personalisation and its impact on their business.

 Simons, the fashion retailer, used AI-driven predictive analytics to analyse all the data they had that impacted demand forecasts, allowing them to:

  • Forecast product demand for the products that were less popular and without a sales history.
  • Forecast accurately sized fashion and apparel.
  • Forecast demand according to certain times of the year or events, like seasons and Christmas.
  • Optimise the depth and diversity of their product range to ensure the correct inventory levels, and also offer customers variety.

 This analysis meant they improved forecast accuracy by as much as 40%, ultimately making significant savings on resources, time management, inventory levels and manpower costs.

Amazon is a huge omnichannel retailer that uses AI-driven data analytics to give every individual customer their own personalised home page based on their purchase history, buying behaviour, created wish lists and cart entries. The retailer uses real-time and historical data combined with hyper-personalised marketing campaigns to enhance their customer experience offering.

Zara, another fashion retailer, uses demand forecasts created via their AI algorithms to automatically adjust their supply chain requirements. For example, production schedules allow for changes in demand to manage quantities of resources. This AI automation ensures a sufficient level of their popular products whilst avoiding overproduction of items that do not have such high demand.

Lowe, the home improvement retailer, uses AI-driven camera technology in stores that gather real-time data on shelf stock levels, sending a real-time notification to staff and warehouses when the product needs re-stocking on the shelf.

Sephora, which sells a wide range of beauty products, uses chatbots with Reservation Assistant and Colour Match technology to provide their customers with 24/7 support. With CRM (customer relationship management) being one of the top AI use cases in retail, Sephora uses its revolutionary AI-based tool, ‘Sephora Color IQ’, to deliver truly enhanced customer service in-store. 

AI: Driving a retail revolution 

AI is changing more than just the customer experience in the retail sector. It significantly impacts so many other areas of business, such as operations, supply chains, inventory management, logistics and manpower. 

How AI is changing retail operations

The power of AI is being harnessed by retailers and is touching every part of a retail business. It’s already transformed how retailers manage their customer base and intelligently offer a unique and truly personalised shopping experience for consumers. But AI is now being used beyond personalisation to streamline operations, predict demand, improve supply chains and manage inventory.

Being able to predict customer demand throughout the year, including the peaks and troughs, through AI-driven analysis of historic data means retailers can identify what level of resources, products and labour they will need at any given time. This impacts inventory and enables retailers to better manage the stock they hold. AI is also used to track orders and change pricing based on demand.

AI also impacts productivity as retailers can manufacture only what they need, reducing the potential for overproduction. Inevitably, it impacts transport and operations, too. However, there is still a tendency within the retail industry to ‘wait-and-see’ what the future holds for AI in retail, not least because many believe the technology has so much more to offer yet, but also because it’s not cheap to implement. 

The future of retail: AI’s next frontier

While AI is changing the face of retail, and fast, there is yet more to come from this game-changing technology. As retailers look at where they can use AI to their advantage and leverage it to integrate their physical stores with online channels, what’s the future of AI in retail?

  • AI, Generative AI and ML. AI will extend to more than providing an enhanced customer experience. Recommendation engines powered by AI will be expanded into personalised marketing campaigns and tailored customer promotions to drive more engagement with consumers. Retailers will automate thousands of product inventories, including product tagging, image, audio and high-quality content (known as generative AI) to create high-end online product catalogues. As well as gathering online data, AI will extend into the store in the form of smart shelves and video analytics. Algorithms driven by AI will analyse real-time data across a multitude of categories, like stock, pricing, demand and market conditions, enabling retailers to maximise profit margins and revenue.
  • Chatbots. Virtual assistants and chatbots will become commonplace, able to handle customer enquiries, deal with customer service problems, provide customer support 24/7, speed up response time and drive greater consumer satisfaction.
  • Automation. McKinsey reports that 52% of all retail activities can be automated, so retailers need to invest in automating many tasks with AI-powered solutions to manage labour-intensive repetitive tasks. This will improve quality, customer service and productivity by reducing errors, thereby saving money.
  • Augmented Reality (AR). Touted to be the next ‘big thing’ in retail, retailers are turning to Augmented Reality to close the gap between their customer’s in-store and online shopping experiences. Virtual fitting rooms are encouraging 60% of millennials to shop and spend more with retailers offering virtual fitting rooms or staging. For example, L’Oreal uses AR so customers can try on various makeup products virtually, while H&M is trialling smart mirrors in-store so consumers can ‘virtually’ try on and style clothes.
  • Smart technology in-store. Retailers are adopting smart solutions within their physical stores to boost their omnichannel customer experiences, including RFID (radio-frequency identification) and QR codes to track and identify product tags. This also boosts real-time inventory checks and enhances security to protect against theft and fraud.
  • Mobile. With two-thirds of shoppers using smartphones to search for products and store information, and buy online, adopting GPS technology to send alerts and push notifications creating a seamless mobile checkout in-store and online, as well as allowing consumers to redeem loyalty points, is crucial. 

Leveraging AI for your retail business

Whilst implementing AI is not cheap, it is becoming a necessity for retailers. When considering the technology, there are certain steps to follow, and several challenges to overcome.

Steps to implement AI in retail

 As part of the process of introducing AI into your retail business, follow these basic steps:

  1. Identify your business’s needs and where AI could streamline certain processes and tasks to add value, such as automating repetitive jobs to enhance the customer’s journey.
  2. Understand the different AI technologies to select the right AI solution(s) to meet these needs.
  3. Implement your AI solution and integrate it with your existing one to maximise the benefits.
  4. Monitor and evaluate how your AI solution is performing against specific KPIs (key performance indicators) and make adjustments as needed.

Maximising the benefits of AI in retail

 As your retail business grows and develops, its needs change. So, to consistently get the most out of the AI technology implemented, monitoring and evaluating performance is important for continuous learning and improvement. This can be achieved by various techniques, including:

  • Setting KPIs in various categories, like customer service, response times, inventory management, customer satisfaction, accuracy of forecasting and more.
  • Monitor the level of error rates, which can identify performance trends and reliability.
  • Usage metrics can provide valuable insights into user acceptance and effectiveness.
  • Conducting a cost-benefit analysis to evaluate how AI is impacting finances. 

Embracing the AI-powered retail revolution

 In many ways, the retail industry is leading the way when it comes to using AI technology to transform how consumers envisage and interact with retailers. As well as providing a highly personalised, tailored customer experience and a streamlined, efficient and effective buyer journey, AI is also extremely useful in predicting customer demand at various times of the year.

This helps retailers more accurately manage resources and productivity, impacting supply chains and transport, ultimately driving the opportunities to maximise revenue and optimise the business.

 At ADAMAPP, our AI Development team has the skill and experience to help you implement your bespoke AI solutions in-store, online and via a mobile app to successfully grow your retail business. We combine the latest AI technology with a collaborative approach to create powerful tools specific to your requirements. Get in touch with us to discuss your digital product plans in more detail.

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