Retailers and AI in 2023: Focus on Supply Chain Efficiency and Interactive Store Experiences
Predictions for 2023 seem pretty dismal right now. As the recession and labor shortage continue to batter retailers, however, there are a few things they can do to become more efficient while setting themselves up for a more promising 2024.
Supply chain efficiency will be one of the biggest challenges facing retailers and impacting consumers. Inflation plus scarcity create something pretty scary: manufacturers will need to get production up and there needs to be significant improvement in supply chain efficiency. For retailers, artificial intelligence (AI) is really the secret weapon to time management and supply chain efficiency. By implementing AI tools in their business, retailers can improve ordering accuracy and time management by a factor of three or more. Automated, AI-powered warehouses will also be a game changer when it comes to efficiency. Think about how warehouses can increase throughput and reduce costs in an already labor tight market. AI can see and solve problems before a human is aware of them.
This shouldn't be an all-or-nothing proposition when it comes to implementing AI technology. For example, Just Walk Out technology is a much bigger investment and requires in most cases a complete overhaul to a store. There will be a transition phase over the next 10 years from the way things have always been done to pure frictionless checkout. Retailers can start implementing other AI technology to make better predictions and manage inventory in a much more accurate way. For example, comparing digital twins of live product inventory to on-hand levels and purchase velocities will enable supply chain efficiencies by measuring ground truth vs. what's predicted. Imagine knowing the state of a store in real time. It leads to all sorts of halo effects, like labor optimization through directed work loads, accurate inventory ordering while increasing the inventory turns in a store, and the creation of responsive retail, which has been the promise of omnichannel.
By enabling forecasting technology with real-time data, product forecasting will be highly accurate vs. the traditional method of uneducated guessing, and should prevent retailers from ordering too much or too little. This is the year Just in Time should really be a priority for retailers to get forecasting and inventory management fine-tuned to improve efficiencies and reduce unnecessary costs.
The fact is Amazon.com's approach isn't at all retail efficient or profitable. It is like a glorified catalog business with direct shipping, and Amazon is making no money on retail. Amazon behaves like a data company — there's tremendous waste in the system and it's killing efficiencies, but it doesn't care because it's all about the data.
Retailers, on the other hand, have to be efficient with products and time of delivery to survive. Implementing technology that will improve the supply chain will be key to weathering the storm of 2023 and setting up for success in 2024.
The other focus for retailers in 2023 should be about making the in-store experience more enticing for consumers. Throughout history we’ve seen a pendulum swing when it comes to consumer trends. In the words of John Templeton these five words, “But this time it’s different” will always get you into trouble. While e-commerce has been great for shoppers from a convenience factor, post-COVID has taught us that people have really missed in-store shopping. When the government lifted COVID restrictions it was like Black Friday for weeks. In-store shopping is how retailers can really compete with others instead of the e-commerce race to the lowest price. When brick-and-mortar can pivot to larger distributions it's much more profitable than e-commerce with its one-to-one distribution model.
To take the in-store shopping experience to the next level and attract customers to their stores, retailers should implement technology that combines physical and digital experiences, allowing consumers to interact with products and have tangible, tactile experiences with online navigation and visual effects. This means taking existing surfaces and transforming them through technology into educational, interactive experiences for the consumer that guides them to learn more about the product — e.g., touching a car, a wall, a display — and creating deeper customer engagement with that product in the store or showroom. Retailers can also track and analyze data from these experiences to get actionable insights.
While 2023 may not be a booming year for retailers, there are steps they can take to improve their supply chain efficiencies, save money, and engage more deeply with consumers in-store to prepare for a better 2024 when innovation budgets will hopefully return.
Skip Howard is the founder and CEO of Spacee, a computer vision and AI company that empowers organizations with near real-time actionable insights for managing inventory and interactive consumer behavior.
Skip founded Spacee, Inc. in 2016 with the idea of building natural user interfaces and reactive intelligence into the physical world. Since then, Skip has been instrumental in developing Spacee computer vision technology, making it one of the leading technology companies in the spatial augmented reality and robotics sectors. Skip has worked in the technology industry for 20+ years, gaining experience as a Founder and CTO for Cancer Gene Connect, a hereditary cancer risk assessments leader, and Co-Founder of Pave Systems, a judicial software company. From 2007 to 2015, Skip served as an integral member of Ross Perot's technology team at Hillwood Development Company which included building of the media department for Hillwood and designing /implementation of a family office financial system. Outside of Spacee, Skip is passionate about advancing technology knowledge and runs one of the largest Computer Vision Developers group in North America. Several publications have recognized Skip as a top CEO and innovator, including DCEO (2020 Winner of Innovation in Retail) and Ernst & Young (Finalist for 2019 Entrepreneur Of The Year®). He was named Top 500 most influential business leaders in Dallas by D Magazine in 2020, 2021 and 2022. He is a member of YPO and EO.