receives compensation from some of the companies listed on this page. Advertising Disclosure

How AI Is Changing the Retail Industry

Samantha Donaldson
Samantha Donaldson Contributing Writer
Updated Jan 23, 2023

Artificial intelligence has tremendous power to reshape how stores are run.

Picture yourself sitting at the food court in the center of one of the millions of malls across the nation. The smell of mall food staples such as pretzels and teriyaki chicken fill the air. Passing by you in every which way are hundreds of patrons, carrying bags of goods with smiles on their faces.

What makes a mall so convenient, and what makes many of these individuals go from store to store so cheerfully? Often, it’s the retail workers. However, despite their personable natures and friendly suggestions that add to the retail experience, new breakthroughs in the world of AI technology could replace many retail workers – but could this actually be a blessing in disguise?

To understand why big companies such as Starbucks and Lowe’s are making the switch to AI, we must first recognize exactly how this technology is being used, why it is more efficient, and what this means for the retail industry as we creep even closer to the new year.

How is artificial intelligence being used in retail?

Although many AI specialists speculate that the opportunities are endless, many forms of AI are already being used in retail. According to market firm Tractica, global revenue from AI will see a huge increase from $643.7 million in 2016 to $36.8 billion by the year 2025. This massive jump is not surprising considering that AI technology currently provides multiple industries with alternatives to job creation. In fact, within the same timeframe, Forrester expects that cognitive technology – including AI and automation – will replace 7 percent of U.S. jobs. This means that retail companies could significantly reduce the costs of labor and make their shopping processes far more efficient.

So, how is this technology truly making an impact on the retail industry as of now? For starters, retail companies have massive amounts of data on their customers, their shopping experiences and much more. These collections of big data are often too difficult for the average company to drill down into and analyze properly. Therefore, massive amounts of this useful information are left to rot, resulting in conversion rates of only 2 to 3 percent overall.

However, AI technology may change that for these companies by using this data to create web shops that take your information and turn it into targeted shopping experiences, online chatbots that will easily answer questions and assist customers, and in-store intelligence to make the experience even more interactive.

Web shops that tailor their marketing and items based on customers’ previous purchases, search habits, clicks, age, gender and other variables by using self-learning algorithms could take what once was a lost customer and make their experience far more intimate, targeted and effective. This allows companies to make more sales online and also provide more items on their online stores. The algorithm could easily bring up items it feels the user would want, as a start.

In addition to the automated personal assistant chatbot, a customer could receive targeted marketing campaigns when they shop. Current chatbots rely on particular keywords and phrases to generate responses. However, through advancements in machine learning, a whole new form of chatbots, which will adapt to your questions to answer more complex things and think for themselves, will be deployed on retail sites in the future.

By integrating AI in marketing, retail companies will be able to take these big data sets and use them to their benefit. Companies will create far more targeted ads that could differ from store to store. These ads could focus on big sellers by region, what needs more marketing and what should be removed from the production line.

Not all changes will be made online or in the marketing department. A physical store and its team could be the next to change, thanks to AI technology. For instance, the next time you head to your local Lowe’s, you may be surprised to find a friendly retail robot in place of an employee. Starbucks has also begun to replace staff with automated machines to make consistent drinks and reduce the time to serve customers.

Retail robots could be the future of the in-store retail experience. Even with human staff members, robots could answer basic questions, freeing customers from the discomfort of asking “too many questions” or “dumb questions.”

Some speculate that robots, such as Pepper, could be the start of a far more intelligent line that could be capable of recognizing shoppers as they enter the door, making suggestions, discussing sales and letting them know how purchases affect loyalty points. Eventually, these robots would be capable of doing everything a basic worker does, and of using retail data to make the experience even more personal.

Why is AI considered more efficient than actual workers?

AI’s purpose is not necessarily to replace humans, but rather to assist them and increase tech-based jobs worldwide. Despite current analysis stating that 7 percent of U.S. workers will be replaced by AI technology by the year 2025, Joe Lobo of the artificial intelligence firm Inbenta thinks it may increase job opportunities by expanding the job market to make way for AI.

In an episode of Forbes’ “The Premise,” Lobo said, “What technology is doing is that it’s developing and slightly adjusting the jobs they are having to do while incorporating artificial intelligence within it – we are being able to evolve the types of jobs we can do and increase the scope of what we’re able to offer, thanks to increased productivity.”

This efficiency could be a blessing to retail industry workers, allowing them to focus on other things and create a far more efficient process overall. However, retail is just the start. Lobo believes teachers, doctors, and fast food employees could be the key to keeping and maintaining the proper balance of human and AI interaction in our society. With the personal touch of targeted marketing and face recognition technology paired with the human connection of the average retail employee, these companies could create bigger smiles and happier customers without removing thousands of jobs from their stores or being the last to join the tech revolution.

What does AI integration mean for the retail industry?

It can be difficult sometimes to recognize what the future means for an industry. Will there be setbacks? Will consumers and employees be upset? Will it be more efficient, or will it only seem that way until it is put in place? These are just some of the many questions retailers must ask themselves before choosing to integrate AI into their everyday operations.

From the creation of more jobs with specific skills never offered before to customer experiences that are far more well-rounded and personal, artificial intelligence is the future of the retail industry – an industry that has sat on customer data for too long and deserves a chance to put this information to good use at last.

Image Credit: Zapp2Photo/Shutterstock
Samantha Donaldson
Samantha Donaldson Contributing Writer
A web developer and freelance journalist, Samantha Donaldson specializes in cyber security and business, as well as being a Most Valuable Contributor for Red Hat.