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The Impact of AI in Retail: Revolutionising Efficiency and Personalisation

A few weeks ago, I posted a link to an Australian ABC News report on retail giants over the pond are using AI to catch repeat shoplifters. The purpose was to show how our rapidly evolving digital landscape is bringing new solutions to the table that are solving critical problems for the retail sector. But discussion, testing and insights need to be surfaced before regulation waters down the ability for retailers to leverage these types of solutions.

The post created a load of discussion, especially on the need to better educate the industry and consumers on the evolving world of AI and privacy concerns. One of our favourite friends of RX, ex-Salesforce and Microsoft retail guru and founder of Woven Group, Marcy Larsen posted a quick reminder of the key concepts from the article for those who don’t understand the nuances:

  • Computer Vision is used to process images with a set of general rules while

  • Artificial Intelligence is used to learn from data and make predictions based on that learning

  • Generative AI (like chatGPT) takes artifacts from data and uses them to generate novel material that retains a likeness to the originals but doesn’t repeat them. It can produce media (such as text, images, audio, code, and video), learning methods, processes, applications, synthetic data, and models of physical objects.

Aside from the debate around some critical discussion on the ethics on the utilisation of information on “people”, Artificial Intelligence (AI) technology stands out as a game-changer for the retail industry. With its ability to automate processes, improve efficiency, and enhance the customer experience, AI is revolutionising the way retailers operate. From supply chain management to personalised marketing, AI is reshaping every aspect of the retail sector.

The Rise of AI in the Retail Sector

The potential of AI in the retail sector is staggering. According to a report by Coresight Research, global revenue generated by AI in retail is projected to exceed $38 billion by 2030. The report highlights how retailers are incorporating AI-powered technologies into their storefronts and warehouses to increase efficiency and enhance personalisation across various sales and marketing channels.

Personalisation: Tailoring the Shopping Experience

One of the key areas where AI is making a significant impact is in personalisation. Traditionally, retailers have bombarded consumers with mass marketing materials, but AI is changing that approach. By analysing customer data, AI enables retailers to tailor their marketing efforts to individual customers' preferences and needs.

In the future, every aspect of the shopping journey could be developed specifically for individual consumers in real-time. Coresight Research estimates that by 2030, AI will enable businesses to identify customers' needs based on their previous purchases and browsing patterns, creating personalized marketing that speaks to each person's unique interests and preferences.

This level of personalisation not only enhances the customer experience but also drives sales. Motivation AI platforms like Persado use generative AI capabilities to craft language that resonates with specific individuals and motivates them to act. By speaking directly to customers in a way that connects with their preferences, retailers can increase revenue by up to 5% more for each online shopping cart.

What have we seen in market:

  • Amazon: Amazon uses AI-powered recommendation systems to suggest products to customers based on their browsing and purchase history. Additionally, Amazon's chatbot, Alexa, can help customers find and purchase products through voice commands.

  • Sephora: The Sephora app incorporates some of the latest AI tools and models to offer a virtual lipstick assistant with rewards and promotions for customers. Their interactive tools don’t just allow users to experiment with the latest makeup trends, but also to show their designs to the world using instant social sharing buttons.

Transforming Store Operations with AI

AI is also transforming brick-and-mortar store operations. Machine learning and computer vision technologies are paving the way for automated in-store inventory management and autonomous checkout processes.

By analysing data and identifying patterns, machine learning can track SKUs and facilitate efficient inventory management. This ensures that items are always in stock, reducing customer frustration and improving the overall shopping experience.

Additionally, computer vision technology can automate the checkout process, eliminating the need for customers to wait in line. This has already been brought to life through Amazon Go and Amazon One technology. Six Flags will be the first theme park operator to pilot Amazon’s Just Walk Out technology at a few select locations to reduce wait times for customers wanting to purchase food and drinks.

Efficiency is a key driver for retailers and the buzz of 2023, and AI offers numerous opportunities to optimise operations. Warehouse management can be streamlined, with AI-enhanced automation systems and robotics reducing human error and anticipating performance. This not only improves turnaround times but also helps identify bottlenecks in the system, leading to more efficient supply chain management.

What have we seen in market:

Walmart: Walmart uses an AI-powered system to manage its inventory across its stores. Through machine learning algorithms predict demand, optimize inventory levels, and reduce waste. As a result, Walmart has been able to reduce out-of-stock incidents by 30%, while also reducing overstocking and waste.

Zara: Zara uses an AI-powered inventory management system to optimise its production and supply chain. The system uses data from sales, customer feedback, and social media trends to predict demand and optimise inventory levels. Zara has been able to produce and deliver products quickly, reducing lead times and increasing customer satisfaction.

Sweetgreens: Sweetgreen is now incorporating AI in its Naperville, Illinois pilot store. A system called the sweetgreen Infinite Kitchen seeks to improve service and revamp the dining experience. Customer experience meets product quality management meets labour efficiency

The Power of AI in Visual Search and Customer Service

AI is also revolutionising the way retailers engage with customers through visual search and customer service. Visual search technology allows customers to find products by simply uploading an image or using their smartphone cameras. By leveraging AI algorithms, retailers can match the image to relevant products, making the search process more intuitive and efficient.

More than 85% of online shoppers place more importance on visual information than text information when purchasing items like clothing or furniture.

In the retail world, visual search has the power to make the shopping experience much easier and quicker for customers. They don’t have to think about the right keyword phrase or sift through thousands of almost-there search engine results. The easier it is for a customer to find the product they’re looking for, the less friction there is in achieving a sale. Studies show that visual search leads to check out twice as quickly as text-based search.

Additionally, AI-enabled chatbots and virtual assistants are increasingly being used to enhance customer service. These AI-powered tools can handle customer inquiries, provide product recommendations, and even process returns, freeing up human staff to focus on more complex issues. As AI technology continues to advance, customer service experiences will become more seamless and personalised.

What have we seen in market:

The Warehouse Group: Noel Leeming launched Nola, a Digital Employee chatbot, to assist their team by automating customer care and enabling online retail through the service channel. They implemented this strategy to accommodate their customers and control service costs. What they didn’t expect was just how much revenue Nola would bring in upsells, unlocking even more opportunity.

LayBuy: LayBuy introduced Hugo to work 24/7 on LayBuy’s website freeing up the customer service team to work more closely with customers that have complex queries and requires specialised expertise.

Sephora: Sephora's chatbot, Sephora Virtual Artist, uses AI to help customers find the right products based on their skin type, preferences, and other factors. The chatbot can also provide makeup tutorials and personalised recommendations.

As AI technology continues to advance, its applications in the retail sector will only expand. Retailers will have the opportunity to leverage AI to create more efficient and effective operations, drive personalised customer experiences, and optimise supply chain management.


In the realm of AI, there are multiple challenges that need to be addressed.

  • One major concern within our industry is the inability to consistently verify the source of content. This poses a significant risk in terms of potential plagiarism and legal issues, leading to a sense of unease or mistrust.

  • Additionally, we must acknowledge the presence of inherent bias and an echo chamber effect that can arise from AI usage. There is gold when customers “discover something they never knew they wanted.” This also has the potential to result in unfair outcomes or discrimination, as certain customer groups may be excluded or unfairly targeted.

  • Furthermore, data privacy emerges as another obstacle. Retailers have access to vast amounts of customer data which can be utilised for training AI models. However, it is crucial that this data is handled responsibly and with utmost care.

With these considerations in mind, it is necessary for us to navigate these challenges diligently while leveraging the power of AI technologies in the retail sector. By doing so, we can ensure a balance between innovation and ethical practices when working with sensitive customer data.

Embracing the AI Revolution in Retail

The potential benefits of AI are not limited to big players in the retail industry. Smaller retailers can also adopt AI technologies by either building their own capabilities or acquiring them through partnerships or acquisitions. The key to success lies in integrating AI into the core operations of the business and leveraging it to drive transformational improvements.

With AI at the helm, the future of retail is one that is driven by efficiency, personalisation, and unparalleled customer experiences.


Are you interested in having more conversations with like-minded retailers on issues such as AI?

RX are launching our “Shut out the noise” invitation only CEO/Senior Level retailer breakfast/luncheon sessions in August. These small group sessions will bring together senior retail leaders from different parts of the sector to discuss and explore what is transforming and impacting retail, with the ability to discuss confidentially and opening the impact, concerns, and opportunities they see with others. Contact if you are interested in attending.

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