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Move Over Spielberg: Artificial Intelligence is Very Real (and Very Profitable) for Retailers

Artificial Intelligence for Retail

When you think about artificial intelligence, something from a science fiction movie probably comes to mind, or if you’re a conspiracy theorist, maybe it even makes you a little nervous. But if you’re a retailer, you should be far from nervous: You should be seeing dollar signs. 

Retail artificial intelligence might seem futuristic, but it’s actually already being used…and quite successfully.

Retailers are always looking for ways to upsell. Dr. Peter Funk, a professor at the Malardalen University in Sweden and an expert in applied artificial intelligence, began to examine the skills required for the “perfect” upseller. These skills would include:

  • Memory – To track sales history, products in and out of stock, past/current/upcoming trends, seasonal variations, etc
  • Analysis capabilities on the fly – Ability to access and analyze all sorts of data that could affect shopping, including not only customer preferences, but weather, time of day, that day’s stock performances—anything at all
  • Ability to generate and verify theories
  • Excellent people skills

The first three skills could only be managed by a computer, while the last is a human skill. Dr. Funk’s solution: a hybrid between a salesperson and a computer.

Up until recently, brick-and-mortar retailers had the human touch—with a little bit of personal knowledge of regular customers or basic understanding of demographics thrown in; however, they have been unable to tap into what computers can provide. On the other hand, online retailers like Amazon have had basic upselling capabilities (“If you bought this, then you’ll probably like this…”), but they do it based on assumptions, not on buyer’s actual needs. Plus, online lacks the human touch.

Retail artificial intelligence represents the next generation of upselling—a true blending of human and computer, taking advantage of the qualities of both.

It’s not science fiction. It’s already happening—on both the brick and mortar and the online fronts. It has proven to increase sales 10 to 20 percent. And nearly any retailer can afford to implement it.

How Retail AI works

AI software has algorithms that use big data (statistics like weather, day of the week, time of year…) and small data (individual factors like buying history) to learn and generate upselling suggestions. Tied in with your POS, the software makes suggestions at the time of purchase. The algorithms are also self-learning, so each time customers make a purchase and as big data changes (seasons, trends, etc.), the algorithm learns more and will make difference suggestions.  Best of all, most AI software is easy to install, learn, and manage.

The wonderful thing about retail AI is that it can work for both online and brick-and-mortar retailers. For example, Birchbox, a beauty e-retailer, recently opened a location in New York City. Their goal was to create an experience their online customers were accustomed to, so they provide a large touchscreen and four iPads that float around the store. These devices apply insight and feedback from the company’s hundreds of thousands of online customers, fed to an online platform with artificial intelligence to understand and create a better shopping experience for the brick-and-mortar shoppers. AI personalizes product recommendations and samples for shoppers based on individual attributes, such as skin tone, hair color, etc.

On the online front, Wal-Mart is using AI to stock based on information like weather. When hurricanes are predicted, the affected stores sell more Pop-Tarts. The big-box giant also taps into social media. From Facebook likes, comments, and status updates, its AI software figures out what products people would like. It also searches for unusual products to stock, so, for example, when there was a boom in cake pops, it stocked cake-pop makers.

The possibilities—depending on the data you have—are virtually endless.

How Do You Get AI?

AI software is already being used by retailers of all types and sizes—both brick-and-mortar and online. It is affordable, surprisingly easy to implement, and easy to use. If you’re interested in bringing AI into your retail strategy and gaining a competitive edge, contact ArcherPoint.