It’s clear that people’s shopping habits are changing. E-commerce is on the rise and the increase of smart mobile devices are forcing retailers and brands to re-evaluate their plans for the future. However, brick-and-mortar stores are far from dead.
Despite the temperamental relationship people have with supermarkets, research from PwC suggests that many consumers still desire a physical interaction with a product, so retailers and brands alike must make the in-store experience count and convert footfall into sales. While some technology such as mobile devices and the internet are keeping shoppers out of stores, other innovations such as artificial intelligence (AI) is being used to boost sales, increase brand performance and improve the customer experience in-store.
Many supermarkets and consumer goods manufactures are using AI platforms, like image recognition, to gather data which can deliver actionable insights to help identify the optimal shelf positioning of products, the trends of the shelf, availability and the performance of rival brands.
Take, for example, the issue of out-of-stock items. Typically, if a consumer is looking for a product that's out of stock, they will substitute another item 70 percent of the time. However, on the second out-of-stock occurrence, the shopper is equally likely to substitute, make no purchase or go to another store. On the third occurrence, 70 percent will simply go to another store. If a retailer has the ability to act quickly to avoid a product becoming unavailable, then it will avoid losing sales. Retailers cannot afford to lose customers because they don’t know what’s going on inside the store environment.
Supermarkets have had to react to the threats caused by Amazon.com and other online platforms. However, there are other types of retailers that face similar problems and could reap similar benefits by using AI technologies, particularly consumer tech retailers that also battle against the online giants.
As the use of mobile shopping and access to the global market increases, retailers and brands will always be subject to fierce competition, and when prices fall this will inevitably hit margins. However, a race to the bottom on price is rarely the best long-term strategy.
Nowadays, retailers should (and can) be much smarter and innovative in their strategies to increase profit. By using AI, retailers and brands can monitor real-time price and promotional strategies, understand where discounts are effective and where they're just losing money. From this information they can then identify strategies to encourage customers towards products with higher margins — this is critical in the race to the top where margins are so small.
Image recognition enables retailers to be incredibly responsive about how they stock their shelves to get consumers to buy. They can experiment quickly, look at the data, and then roll out successful promotions or abandon things that aren’t delivering. This tech-enabled, data-driven approach gives retailers and brands more control over how they target customers. Whereas price will always be a factor, retailers can now be a lot smarter than just taking a cut on price.
This approach also has the potential to gain customer loyalty, a trend which has been in decline. To date, retailers have had no way to see the impact of the strategies they deploy at a shelf level to combat this trend, relying instead on historic sales data which can only show them what people have been buying at the tills. By making use of advances in image recognition, retailers have a way to instantaneously gather data about what happens at the shelves so they can create better customer experiences in-store and keep them coming back.
Leading brands and supermarkets are already waking up to the significant impact AI can have on their operations, and see it as part of the marketing mix moving forward. A recent research report by KPMG revealed that retail and manufacturing executives are investing significantly in smarter analytics and technologies, including predictive analytics and AI, in order to stay ahead of competition.
However, the world of retail still has much more to do. A survey from PwC found that only 15 percent of consumers believed their favorite retailer was the leading innovator for the in-store experience, while only 17 percent thought the retailer was leading the way for product availability.
While supermarkets may be leading the way in researching these new technologies, what's clear is that only those retailers and brands that truly embrace the changes will succeed. Those that use technology to enhance the offline and online experience will improve the customer experience and, therefore, boost sales. AI really is essential to the future of retail and the brick-and-mortar stores we all love.
Steve Hornyak is the CEO Americas at Trax, a company that helps retailers improve their in-store execution and audits with image recognition technology that turns everyday shelf images into real-time actionable insights.