AI is No Longer Optional in the World of Retail
Artificial intelligence (AI) has become one of the most powerful tools a retailer can wield. From recommending an author to a customer to recommending a store location, AI empowers retailers to a degree that wasn’t thought possible 20 years ago. Mike Mack, Co-Founder and CEO of Fract, a geospatial AI platform for retailers, illuminated just how valuable AI technology is to the retail world and covered parts of its application in a recent conversation with Retail Technology Insider.
Mike opened up the conversation by discussing the challenge of omni-channel retailing and how sometimes retailers are spread too thin to properly maintain every channel, meaning some interactions fall through the cracks. Enter an AI solution that’s able to not only monitor these channels but hold entire conversations with inquiring customers. “With AI, you can make recommendations and look at things a person never would.”
When asked to elaborate on AI’s advantages, Mike brought up the compelling notion that human retailers are skilled at tracking their inventory and being knowledgeable about their products, but lack in knowing what’s missing. AI programs are able to analyze the patterns of what customers are purchasing, what competitors are selling and what price points are most competitive in one fell swoop, enabling users to optimize their shops online or in-store.
The Emergence of O2O
The differences between online and brick-and-mortar retailers are starting to diminish as we see O2O (online to offline/offline to online) retail beginning to take shape. The strengths of each model are distinct, with brick-and-mortar stores offering the ability to touch and feel a product in real-time and online retailers being able to capitalize on their data-driven view of the customer.
But both models are pulling from each other to add depth to their offerings. We’re seeing online retailers like Warby Parker and Bonobos opening physical stores operating as showrooms. And at the same time, brick-and-mortar shops are embracing the Internet of Things and capturing valuable customer data as they walk through the store. AI presents obvious advantages for both of models through the use of their data and their ability to make immediate improvements to their offerings.
From a geospatial stance, Mike explained that AI can track movement with every sale at all times and constantly identify new patterns to take into account, something that wouldn’t be feasible via traditional marketing research. And while store visits still have to take place, AI helps retailers understand specific challenges or advantages about certain locations, making it easier to optimize in a timely fashion.
A Word of Caution
AI is only as powerful as the data it’s using. And while it does the majority of heavy lifting for retailers when it comes to creating patterns and crafting recommendations, retailers need to know that regularly refreshing their data is paramount. Mike explained that neglecting to update the data in your AI platform yields one of two results: the data is useless and won’t provide any real insights if they are based on old data or irregularly updated data will produce reports that are as reliable as the ones from standard market research (which is normally accrued over several months, as opposed to several days).
Mike was clear that there are no real disadvantages for implementing an AI program, but it can easily be rendered useless through neglect. The answer is to engrain the data refresh process into your regular maintenance routine.
When asked about the future of AI in retail, Mike stated point-blank, “If you don’t have AI in your plan in the next three years, you’re going to be out of business.” Given all of the obvious advantages it presents, this is probably not surprising to any retailer. While the upfront cost of the infrastructure and hardware can be mildly deterring, Mike explained that AI helps cut costs for retailers in the long run. This cost will only decrease as the technology continues to mainstream.
Mike also noted that AIs will likely begin to collaborate with each other and leverage the power of the Internet of Things to help pinpoint very specific insights like price points, which are constantly in flux. Through collaboration and data-sharing, AIs will be able to stay abreast with those changes better than a human ever could.
Those insights will likely also carry over into returns by helping retailers minimize returns through educated customer recommendations and could even predict the likelihood of a return taking place. This benefits both the retailer and customer, who is more likely to be pleased with their purchase and return to the store.
“Soon enough, no one is going to care about it,” stated Mike, commenting on the inevitable mainstreaming of the technology. With a constantly growing marketplace both on and offline and customers with increasingly sophisticated expectations, the only way for retailers to keep up is with the help of AI.