AI is akin to giving a computer a human-like brain. AI-powered devices don’t just compute; they can learn, make decisions and solve problems.The technology enables machines to use massive amounts of data to uncover new trends and insights, making new markets accessible and businesses more efficient.However, data is the key, as more data beats better algorithms in terms of AI efficacy. According to market intelligence firm IDC, global spending on AI will reach $19.1 billion in 2018, a 54% year-over-year increase, and investment in the technology is projected to grow to $52.2 billion in 2021. Retail is expected to overtake the banking sector as the biggest investor in AI in 2018, and to account for $3.4 billion in spending on the technology. IDC projects that Japan will be the global leader in terms of AI spending growth between 2016 and 2021, with Japanese firms’ AI investment set to grow at a CAGR of 73.5% over the period. IDC predicts that such spending in Asia ex Japan and China will grow at a 72.9% CAGR and that it will grow at a 68.2% CAGR in China over the period. AI applications are virtually unlimited, but in retail, they fall into three main categories:  computer vision (which enables e-commerce image searches, robotics and healthcare diagnostics), language processing (which enables chatbots,text analytics and translation, and content creation), and data analytics (which enables business intelligence, predictive analytics and forecasting, and search recommendations). These AI applications help retailers eliminate friction in the shopping process, deepen their engagement with customers, and close the information gap between e-commerce and physical stores.

AI Creates Better, More Personalized Customer Experiences

AI helps retailers improve the customer experience by eliminating friction in the shopping process, deepening engagement with customers, and closing the information gap between online and physical stores—without the need for additional staff. For example, AI powers tools that manage many customer relationships that were traditionally handled by humans. Chatbots enabled by AI are able to understand and respond to the majority of customer requests quickly and efficiently.And AI-enabled voice recognition technology means that shoppers can now complete many transactions without human assistance. The Tmall Genie is a smart speaker that functions much like the Amazon Echo. The Genie can answer shoppers’ in-store questions and enable online shoppers to search for specific products via voice commands. Companies such as Point Inside and Pegasystems offer solutions that use AI to enhance the customer experience. Point Inside, a provider of digital-mapping and indoor location-based services, deploys AI-powered chatbots help shoppers find products and/or services through a vendor’s app, and enables vendors to customize product and deal search. The firm’s smartphone location and in-store beacons guide shoppers within retail spaces, so they can easily find the departments and products they are looking for. Pegasystems offers customer engagement software that helps retailers acquire and retain customers, build loyalty with them, and upsell and cross-sell products. The company’s software uses AI technology to combine real-time context with big data and analytics to create and present the perfect one-to-one offer to each customer, even on digital and social channels. AI enables other types of personalization, too. The technology is applied to analyze data that can be used to create customer profiles. Retailers can compare those profiles to other, similar customer profiles to predict preferences, make recommendations and create personalized incentives for shoppers. In some cases, AI may know customers better than they know themselves. Personali is a company that uses AI and behavioral economics to analyze current and past behavior patterns to segment shoppers based on purchase probability and willingness to pay. The company’s solution generates targeted and tailored incentives to increase conversion. Thursday Finest provides customized fit and style options for apparel accessories. The company’s proprietary AI software drives robotic knitting machines that enable consumers to personalize knitwear with their own text. Certona is an experience management platform that can present individualized content, promotional offers and product recommendations across all customer touchpoints. The technology collects big data on visitors and keeps learning from additional interactions as well as from aggregate community behavior.

AI Yields Smarter Business Insights

Retailers can also deploy AI to analyze data and uncover business insights that weren’t previously available. For example, AI can be used to generate sales estimates, track actual sales and optimize inventory. The technology can power analytics that not only forecast demand on a store-level basis, but also ensure that items stocked are suited to each store and displayed with other items that can be cross-promoted. AI can also help retailers identify overstocks and enable automatic replenishment from warehouses. Vekia offers an end-to-end supply chain, logistics and retail management platform with AI algorithms designed to improve sales forecasts, reduce inventory levels, optimize stock and improve logistics productivity. Badger Technologies’ AI system provides actionable data and analytics for retail operations. Its solutions span fully autonomous robot, software, store integration, maintenance and analytics offerings. Blue Yonder provides AI-powered solutions that that optimize inventory and merchandising for pharmacy retail. The company’s platform generates forecasts and delivers decisions based on hundreds of variables, including weather, promotions and holidays.

AI Enables Automation

AI also allows retailers to automate processes and functions. For example, AI-powered robots can scan shelves looking for misplaced or out-of-stock inventory. The technology can also facilitate autonomous checkout and enable computer vision and deep-learning technologies that identify objects on shelves. Bossa Nova is the leading developer of AI robots designed to provide real-time inventory data, better inventory analytics and insights into consumer trends. Trax Retail allows CPG manufacturers and retailers to collect, measure and analyze information at the store shelf level. The firm’s proprietary computer vision and deep-learning methods identify objects on shelves, enabling retailers to better gauge what consumers are choosing, putting back or searching for. Standard Cognition offers solutions that facilitate autonomous checkout as well as analytics for loss prevention and real-time inventory management. In terms of optimizing pricing and promotions, AI can help retailers identify and monitor factors that influence pricing, such as local weather and market conditions, as well as in-store metrics. In addition, it can help companies determine the optimal entry price point for newly launched products and automate pricing decisions for each product by channel and store. Gartner predicts that AI will help enable the top 10 retailers to redeploy up to one-third of their headquarters’ merchandising staff by 2020, which will allow them to move employees from the backroom to the sales floor, where they can help customers AI is already putting powerful tools into retailers’ hands. The technology can enable companies to automate many functions that once required human action, both on sales floors and in offices. AI can help generate customer profiles that can be used to target marketing efforts and provide customers with an engaging, personalized shopping experience.It can also be used to produce sales estimates, track actual sales, optimize inventory and generate other business insights. Finally, it can help retailers and brands automate a variety of functions, from inventory management to store checkout.