The Future of AI in Retail: Predictions for 2020 and Beyond
When it comes to vendor hype in retail, perhaps no other term is being tossed around as casually and frequently as “artificial intelligence.” A cursory look at technology vendor claims would have the retailer believe that AI is successfully deployed in every corner of the business, working flawlessly and delivering profoundly transformative results.
But anyone in the retail world knows that's not the case. In fact, the road is littered with incomplete or even failed attempts to truly harness AI and analytics for actionable retail insights. How can retail innovators sort through the hype and understand how they might genuinely benefit from AI in their real-world environment? In more than 10 years of deep engagement with retailers working to adopt AI-based price and promotion optimization, I’ve formed some predictions for 2020 and beyond on the likely future of AI in retail:
- Retailers that succeed with AI will be those adopting it strategically and holistically. AI and analytics alone do not power true transformation to a more agile and nimble strategy. True success comes when an organization embraces wide-ranging organizational change and skill development as part of a larger initiative supported by analytics-focused and prescriptive AI solutions. With a combination of top-down executive leadership and mandates, matrixed influencer campaigns to build broad support among peer groups, and proven AI technology that has a track record of real-world success, an organization can leverage emotional intelligence and AI to be both responsive and proactive in a fast-paced, unforgiving market environment.
- Lab-grown AI will be overshadowed by AI that has been proven out in real-world environments. Products that leverage AI can incorporate a broad range of AI techniques, algorithms and approaches, from simple to complex. Creating AI solutions in a controlled laboratory environment may yield a promising approach, but the hard truth is that real-world data and problems are complex, messy and constantly changing. AI solutions that have been battle-hardened for authentic retail environments are effective at detecting the true shopper, competitor and market signals among the noise created by diverse and proliferating data sources. This means solutions that are able to inhale both historic and real-time data to intelligently factor for seasonality, product lifecycle phases, item strategy, etc.
- Retailers will get the most value when they can set “bumpers” and adjust AI weightings through an intuitive interface. While it’s true that AI science can be a complex and specialized domain, users with real-world business backgrounds need to be able to see assumptions in an AI engine, create automated workflows with exception-based flags, and adjust relative weightings of various factors to align with business needs. It’s important that the user interface accommodate business users and let them interactively generate what-if scenarios, as well as tweak weightings on parameters relating to competition, shopper behaviors and market trends to realistically predict outcomes from various strategies.
- Successful AI will leverage machine learning’s ability to continuously evolve. Retailers will find optimal results with the sophisticated AI that leverages self-learning algorithms to optimally function — and evolve — in dynamic market conditions. The accelerating pace of change means that retailers can’t hit the pause button on their critical applications to wait while highly paid strategic consultants perform complex optimization exercises to keep their AI relevant and impactful. Science that leverages machine learning to detect early changes, and evolve accordingly, will be key to keeping retailers agile and positioned to succeed in a brutal market.
Although there’s plenty of hype around AI, there are also plenty of areas in retail where there are proven technologies delivering measurable value, notably in pricing, promotions, chatbots for shoppers, and in-store experiences including robots. Retailers that embrace AI strategically and realistically stand to gain competitive advantage and enhance customer loyalty in 2020 and beyond.
Jeff Smith is founder and executive vice president of corporate strategy and development at Revionics, a SaaS-based pricing, promotion, markdown and space solutions provider.