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Unleashing AI's Transformative Power


Someone holding an ipad up to see special prices in a retail store

Apparently…."in the ever-evolving landscape of retail, a quiet revolution is unfolding, catalysed by the advent of artificial intelligence (AI).” Really? A quiet revolution? I have recently returned from the inaugural NRF APAC Conference in Singapore, and this revolution is anything but quiet. I wonder if there is much else talked about at any retail conference in the world at the moment. (Just jokes – at NRF APAC there was lots more talked about, but on the exhibitor's floor you'd be hard pressed not to find anything NOT touting AI).  

 

The retail world is hyper-competitive, and consumers empowered by a wealth of choices and information, demand nothing less than seamless, tailored experiences. Failure to meet these expectations can prove dire. In an environment where costs are high, labour is scarce and we have international as well as local competitors eating away at share (hello Shein and Temu), forward-thinking retailers are turning to AI as a strategic differentiator.[ Side note: did you know that both Shein and Temu are collectively now both nudging $1-1.3b online sales each in Australia? Yes $1b+ each. Annually.] 

 

Retailers who embrace AI will gain a competitive edge and it's seems a no brainer. But how you unleash AI and the reality is much more nuanced. Let's explore why. 

 

Inventory Management: Forecasting Demand with Precision 

Effective inventory management is the backbone of any successful retail operation - ensuring the right products are available at the right time and in the right quantities. AI's predictive capabilities are enabling retailers to forecast demand with exceptional accuracy. 

  • By leveraging machine learning algorithms and advanced analytics, retailers can analyse historical sales data, market trends, consumer behaviour patterns, and other factors to anticipate future demand.  

  • This data-driven approach minimises out of stocks and overstocking and also optimises inventory levels, reducing carrying costs and maximising profitability. 


Retailer in action: Zara 

Zara are leveraging AI to identify trends and create designs that appeal to their target audience.  

What are they doing: By analysing customer data, social media trends, and sales patterns, Zara's AI-powered systems are informing the design process, ensuring the brand stays ahead of the curve. It is also ensuring the right stock-levels are being issued to different stores within the network to ensure the demand for size/fit/style better fits the local market. 

 

Personalised Marketing: Tailoring Experiences for Individual Customers 

From recent international store visits, I can declare we are in the age of mass customisation and personalisation is table-stakes. With all the data and insights retailers glean, consumers expect brands to understand their unique preferences and tailor their experiences accordingly. AI's ability to analyse vast amounts of customer data, from browsing histories to purchase patterns, allows retailers to deliver highly targeted and personalised interactions. 

  • By leveraging AI-driven customer segmentation and predictive analytics, retailers can craft tailored content, promotions, and product recommendations that resonate with individual customers.  

 

Retailer in action: Amazon 

We all love to hate the e-commerce giant, but it has taught the retail industry so much (including what NOT to do).  

What are they doing: Their sophisticated algorithms analyse customer data, including browsing behaviour, purchase history, and product reviews, to generate highly relevant product recommendations and targeted marketing messages.  

Amazon has successfully leveraged AI-driven customer segmentation and predictive analytics to create highly personalized marketing campaigns that resonate with individual customers.  

  • The company's AI algorithms process vast amounts of customer data to identify distinct customer segments based on shared characteristics and behaviours. Using this detailed customer segmentation, Amazon's AI-driven recommendation engine provides personalised product recommendations to each customer. 

  • Amazon also employs dynamic pricing strategies using AI algorithms. By analysing market trends, competitor pricing, and customer behaviour, they can optimise pricing for different customer segments. This allows them to offer tailored promotions and discounts that are more likely to resonate with specific customer groups. 

  • The company's marketing automation systems, powered by AI, create and distribute personalised marketing content across various channels, including email and on-site recommendations. This ensures that customers receive relevant offers and product suggestions at the right time and through their preferred communication channels. In addition, AI personalises ad-content to be relevant to your preferences and now also measure ad performance


Retailer in action: Sephora 

What are they doing: the brand's "Skincare IQ" tool utilises AI to analyse a customer's skin type and concerns, recommending products tailored to their unique needs and preferences.  


 

Customer Service: Embracing AI-Powered Assistants and Chatbots 

One of the simplest ways retailers are deploying AI is through how they interact with and support their customers.  

  • AI-powered chatbots and virtual assistants are rapidly becoming ubiquitous tools, offering instantaneous support, answering queries, and resolving issues with remarkable efficiency. 

  • Powered by natural language processing and machine learning they can engage in human-like conversations, understanding context and providing relevant responses in real-time.  

  • By automating routine tasks and handling common inquiries, AI frees up human customer service representatives to focus on more complex issues 


Retailer in action: Sephora  

Sephora, a leader in the beauty industry, has embraced AI-powered chatbots and the brand's virtual assistant (website and mobile app), leverages AI to provide product recommendations, offer skincare advice, and assist with order inquiries.  

Screenshots of messaging Sephora's AI chatbot Kik Bot

Retailer in action: BK New Zealand 

Burger King has introduced AI drive-thru systems at four of its Auckland restaurants. I have used it a few times and it does a better job than the humans if I am honest.  

What are they doing: The system, called the "conversational system," has been in a trial period for several months. 

  • It greets customers, takes orders at the drive-thru speaker, and directs customers to the pick-up window. To provide an authentic experience, Burger King staff have lent their voices and accents to the AI system 

  • Staff feedback has been positive, with team members reporting reduced stress when processing and preparing orders, allowing them to focus more on order quality. The system is fully customisable, and it has the capability to clone voices, even potentially using local celebrities or sports stars (I want one of the Bridgeton cast members to take my order). 



Retailer in action: Foodstuffs New Zealand 

What are they doing: Savey Meal-bot by PAK'nSAVE 

  • This AI tool generates recipes based on ingredients that users already have at home, helping to reduce food waste and save money. It has had mixed review since its launch, yet it has attracted over 33,000 users  

  • Users can input a minimum of three ingredients, and the AI generates a recipe using those ingredients along with common pantry staples 

  • The ugly: recipes for toxic and potentially deadly combinations when given inappropriate ingredients. For example (1) an "aromatic water mix" using bleach and ammonia, which would produce toxic chlorine gas (2) Bleach-infused rice surprise (3) Mysterious meat stew (including human flesh) 

  • Improvements: the bot didn't have adequate safeguards to prevent the use of non-food items or dangerous substances as ingredients. 

Paknsave's AI Savey Meal-Bot

Fraud Detection and Prevention: Safeguarding Businesses and Customers 

Fraud poses a significant threat to retailers - it not only compromises financial well-being but reputation and customer trust. AI's advanced analytics and pattern recognition capabilities can detect and prevent fraudulent activities. 


Paknsave sign telling customers they use facial recognition technology in trial

Retailer in action: Foodstuffs New Zealand 

What are they doing: Facial Recognition Technology 


  • Facial recognition technology is used in 29 Foodstuffs North Island stores to help reduce theft, burglary, and other crimes. The technology is specifically used to identify and manage repeat offenders to enhance store security. 











Immersive Shopping Experiences: Blending Physical and Digital IRL 

The lines between online and offline have truly blurred and customers experience a seamless and consistent journey across all touchpoints. AI is playing a pivotal role in enabling this seamless integration to surface and allowing retailers to craft a more immersive and elegant experience in both worlds. 

Retailer in action: Zara 

What are they doing: White Box Concept Store 

Zara white box store in Chicago

Our good friends at McMillian Doolittle recently shared with us the new Zara “white box” concept store in the Chicago. This new flagship is a two-story, 28,000-square-foot space and is equipped with the latest omnichannel integrations and represents Zara’s ongoing efforts to provide innovative, tech-forward retail destinations for shoppers. In the new store design, various in-store technology solutions streamline traditionally time-consuming and labour-intensive activities, such as try-on, pick-up, and check-out. These self-service solutions, powered by Radio Frequency Identification (RFID) and robotics, significantly reduce friction for customers and allow Zara associates to dedicate more time to maintaining the elevated store experience by replenishing products, refolding items, and interacting with customers on the floor. 


Zara fitting room digital screen
  • Try-on: Through the “store mode” feature within the app, shoppers can reserve one of the 38 fitting rooms and are notified when a spot becomes available. Access to fitting rooms is granted using a self-service screen enabled by RFID.  

  • Customers simply hold items in front of the screen, and within seconds, the technology identifies the items and directs customers to an available room.  

  • When finished, shoppers tap their clothes on another screen to close out their room and then hand the clothes to the associate overseeing the fitting rooms. 
















Pick-up: Through the Zara app, shoppers can browse available in-store products and place an order for pickup in 2 hours or less.  

  • Upon arrival at the store, shoppers can swiftly retrieve their orders using the robotic-powered pickup system. Individuals scan the QR code found in the app, and the machine instantly identifies the order.  

  • A glass door lifts, and the Zara parcel is ready for pickup. The entire process takes about 15 seconds. 

Zara AI pickup technology

Zara's RFID checkout technology

Check-out: Customers check out at one of the 15 self-service kiosks. Like Uniqlo, Zara’s stations are equipped with RFID, enabling shoppers to place their items in a provided bin where items automatically register on the screen, eliminating the need for manual scanning. 


AI and RFID playing a key role in bringing these seamless enhancements to life [Thanks to Maddie McBride from McMillianDoolittle for sharing her experience] 








Overcoming Challenges and Fostering Trust 

While the potential benefits of AI in retail are undeniable, its adoption is not without challenges. As retailers integrate AI into their operations, they must navigate complex issues related to data privacy, security, and workforce adaptation, ensuring that their AI initiatives are built on a foundation of trust and ethical practices. In this week's X-files Unedited (LinkedIn Newsletter), I will cover this in more depth.


It's complex, nuanced and frankly at times boring and can hurt your head. 

But before you even get there and get started, the foundational data that these algorithms rely on must be accessible, clean and accurate and maintained and monitored. Otherwise sh*t in, sh*t out - and that will impact sales performance, stock levels, stakeholder confidence and customer trust - just a small matter!! 


 

Stuck to figure out how what to do next on your AI journey? Perhaps consider one of our Strategic Business Reviews to identify where there are pockets of opportunity to grow your business and thrive.


More information: juanita@rxgroup.co.nz or 0274768073 

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