How Retailers Can Apply Artificial Intelligence to Improve Their Profitability
What does the future of retail look like in 2023? It’s going to be another roller coaster year, with chronic labor shortages, changing consumer behavior, and an uncertain economy creating disruption – but also opportunity. What will separate those who get disrupted from retailers that thrive? One answer: the wise use of artificial intelligence (AI) to improve the bottom line in stores.
Forrester: Retail Needs to Adopt AI
According to Forrester, retailers and consumer brands are bracing for strong, macro-level headwinds, including inflation, labor shortages, and supply chain issues. Analyst Brendan Witcher notes that retailers are wondering where the unturned stones of profitability may lie. He says AI has a lot to do with the answer. He wrote recently,
Automation will be the savior for continued retail labor shortages. Ripple effects from the Great Resignation will force retailers and brands to invest more heavily — and more strategically — in automation in 2023. Investments will automate functions required to run the business in corporate areas (e.g., marketing, HR, analytics) and in the store. A critical component of these investments will be technologies that utilize AI. For example, retailers will tap computer vision and natural-language processing, which emulate sight and listening, respectively, to make mundane but critical and traditionally time-consuming operations such as receiving, customer service, and task management far more efficient.
AI delivers tangible benefits by reducing spend and improving efficiencies from forecasting to inventory planning. For instance, supermarket chain Piggly Wiggly has delivered 30 percent-to-100 percent growth across its stores by piloting AI. Specifically, cameras equipped with computer vision helps the store manage everything from restocking to labor management.
At Piggly Wiggly, AI automates labor management as the cameras update tasks instantly as out-of-stocks occur and rank-sorts the tasks by lost sales. In the area of merchandising, AI identifies “chronic outs” — UPCs that are under allocated on the shelf resulting in too much replenishment labor and too much customer dissatisfaction.
Meanwhile, Lowe’s is using computer vision to create a better customer experience for consumers in need of help and can prevent possible loss or theft. Computer vision has helped Lowe’s identify that 20 percent of their inventory shrinkage comes from mis-scans (such as a scanner not working properly or a criminal deliberately manipulating the scan), which helps Lowe’s zero in on particularly vulnerable areas.
And Walmart is implementing AI across the entire retail ecosystem. The company has opened up first-of-their-kind fulfilment centers that use robotics and machine learning to speed up fulfilment. The company claims that combined with its traditional fulfilment centers, Walmart will now be able to reach 95 percent of the U.S. population with next- or two-day shipping. In the store, Walmart is using AI to help customers and personal shoppers choose the best substitute for an out-of-stock item. Following the deployment of this tech, customer acceptance of substitutions has increased to over 95 percent.
But not every retailer has the reach and scale of Walmart. Where should they begin implementing AI? We believe three areas stand out as foundational:workplace safety, shrink protection, and customer satisfaction.
Workplace Safety and Shrink Protection
The surge in crime and safety threats is one of the biggest stories in retail and the services industry in general. FBI data shows that the number of aggravated assaults that took place in restaurants increased by 60 percent from 2018 to 2020, and the number in grocery stores increased by 73 percent during the period.
In 2021, Kroger cited organized theft among the factors pressuring its profit margins for the first time, and CVS is among the many other retailers having their profits squeezed by a spike in theft.
A technology known as behavior anomaly detection can play an important role. Behavior anomaly detection consists of the use of AI-powered computer vision and pattern recognition to keep stores safe, fight theft, and improve customer service. It’s the kind of technology cited above in the Lowe’s example.
Behavior anomaly detection observes suspicious behaviors such as someone trying to distract an employee at the checkout lane, making multiple purchases, spending too much time going through store inventory, or slipping a product into their purse or overcoat.
This application of AI shows tremendous potential for helping stores save money by reducing inventory shrinkage. With as much as $69 billion worth of products are stolen from the nation’s retailers each year (or 1.5 percent of sales), the opportunities for AI to save money are tremendous.
For more insight on this topic, read our blog post, “Safeguard Stores and Improve the Customer Experience with Behavior Anomaly Detection.”
Behavior anomaly detection can improve customer service, too. The same use of computer vision and pattern recognition can help retailers identify customers who need help, thus deploying sales associates at the right place and time.
For instance, computer vision might alert a store manager of any of these scenarios and much more:
- A customer struggling to load an oversized box on to a palette in a home goods store.
- A shopper in a grocery store trying to decide between different types of wine to serve at a dinner.
- A customer struggling to read a price tag on a product but not asking for help because the store is crowded and no sales associates are nearby.
We discuss this topic in more detail in the recently published blog post, “How Artificial Intelligence Can Track Shoppers’ Emotions in Real Time.”
Centific Can Help
Centific can help retailers achieve tangible improvements by applying AI to create more intelligent, human-centered experiences. Our Scout solution focuses on behavior anomaly detection to improve the customer experience and to keep stores safe.
Scout provide personalized and prescriptive analytics in real-time, intuitively alerting a store’s team to events ranging from people needing help to potentially bad behaviors.
Scout's human-in-the-loop foundation mitigates bias through comprehensive AI training data sets,and leverages Centific’s global team of risk mitigation expertsforreal-time situational analysis, decreasing false positives. As Scout’s knowledge of patterns grows, they are shared with users through the exclusive and secure pattern recognition network.
Whether it’s understanding a particular customer’s behavior, detecting fraud at self-checkouts, or identifying on-premises hazards, Scout empowers retailers to act with confidence in real-time.
Contact Centific to learn how we can help you