How Artificial Intelligence is Transforming Retail

Artificial intelligence (AI) has emerged over the past three years as a key component of digital transformation. As a result, this technology is fundamentally changing the retail industry. The ability to analyze, understand, recommend and predict based on statistics and data-driven processes promises to change how retail workers perform their jobs, how consumers buy products, and how retail organizations support and interact with their customers.

At the same time, the market for intelligent conversational assistance continues to grow exponentially, fueled by the use and acceptance of consumer tools like Google Assistant, Siri, Microsoft Cortana and Amazon Alexa. IDC predicts that by 2020, 40 percent of commerce transactions will be enabled by cognitive/AI personal shoppers and conversational commerce.

Millennials and Generation Zers are changing the way they shop for retail goods. For many of these consumers, voice-enabled control has become more prominent and widely used. We know that 55 percent of consumers use voice assistants daily or weekly, and about half indicated overall satisfaction with such assistants. This represents marked improvement in satisfaction and also in usage from years past — and it' only growing. As a result, many companies are considering how to add voice-activated functionality to their current mobile retail applications.

The recent successes by Google Assistant, Siri, Microsoft Cortana and Amazon Alexa indicate a future where many voice and chat assistants will soon be readily available to assist with daily tasks including shopping. Unfortunately, the first generation of these AI assistants failed to live up to the hype leaving some consumers cautious.

While it's true that AI assistants are able to recognize words and phrases better than ever before, contextual understanding and natural language processing are still a challenge. Many conversational user interfaces only respond with limited answers and actions because the application isn't designed to be adaptable, knowledgeable and cognizant of context.

Retail shoppers and companies need intelligent applications that can remember context from one interaction to another with the ability to take previous information and learn from it so that dialogues and requests don't need to be repeated across several interactions.

UNIQLO, the global casual apparel retailer, has taken a leadership position by offering customers an expert, AI-powered assistant with deep knowledge about the retailer's product catalog, store locations and more.

“As one of the world's leading fashion apparel companies, UNIQLO is committed to delivering the industry's gold standard for customer service and support," said Makoto Hoketsu, group senior vice president and CTO at Uniqlo's parent company, Fast Retailing.

In addition, this past holiday season Amazon.com reported that customers purchased and gifted a record-setting number of devices from the Amazon Echo family, with sales up over nine times compared to last year’s holiday season. Google Home also sold out in stores.

Despite sales maintaining momentum, the success of voice interfaces is dependent upon the ability to answer increasingly complicated questions and have the ability to be incorporated within existing apps — especially in retail, where 51 percent of shopping is now done online. An ideal scenario would be an interface that understands, “I need a replacement for my favorite jeans, in my size, from my preferred brand, by Monday.”

The possibilities of an intelligent voice interface with the ability to answer multilayered and complex questions could have overarching positive implications, both online and in-store. Say, for example, an AI-based app knows which store a consumer is currently visiting. The retail app can take into account what's currently in stock, utilize the person’s shopping history and past preferences, and make intelligent suggestions like a personalized shopping assistant.

The more a shopper uses a retail app, the better the AI becomes at catering to his or her personal needs. For instance, a customer could walk into a store and ask for recommendations to go with things that he purchased a week earlier. Or, if a customer says she needs a particular article of clothing, the app would take into account the weather that time of year, the customer’s measurements, style preferences and more.

For retail businesses, AI solutions provide massive understanding into consumers’ preferences and shopping habits. It’s all about more contextual relevance. For example, how many different articles of clothing did a customer try on before buying? What clothing did they actually try? What brands are they most likely to try on? By implementing intelligent voice assistant interfaces, retail businesses have the potential to disrupt the industry in a way that yields greater profits while simultaneously creating an amazing user experience that keeps consumers happy and maximizes customer retention. The potential is limitless.

Tim Tuttle is the CEO and founder of MindMeld, a company that creates AI-powered conversational interfaces.