AI gives physical retailers the ammo to fight back
By Steve Hornyak, CEO Americas at Trax
Online retailers are continuing to innovate their services to drive consumer shopping habits to online platforms - whether it's receiving products an hour after purchase, or drone deliveries. However, one of the biggest hurdles to overcome for ecommerce sellers is still the attraction of the physical store.
Research from PWC suggests that interaction with the physical product is still a strong driving factor in the purchasing decision for the majority of consumers. This means retailers and brands must make this experience count and focus their efforts in converting footfall into sales.
New technologies such as real-time tracking systems and scenario modelling are giving the physical stores a level playing field with the virtual. However, it is Artificial Intelligence (AI) technology that is truly revolutionizing the way products are bought and sold in-store, boosting sales and increasing brand performance.
AI platforms, such as image recognition, can gather important data which provides insights to help identify the optimal shelf position for a product, the availability, and performance of rival brands. These technologies can also provide real-time information on pricing and promotions, and how these affect a brand's performance on the shelf.
Take the issue of out-of-stock items. Typically, if a consumer is looking for a product that is out of stock, they will substitute another item 70 percent of the time, yet on the second out of stock occurrence the shopper is equally as likely to make no purchase or go to another store. On the third occurrence, 70 percent will simply go to another store. Retailers can avoid losing these sales if they have the ability to act quickly and prevent the product becoming unavailable. When margins are so tight, retailers cannot afford to lose customers because they're blind to what's going on inside the store environment.
By using AI, retailers and brands can monitor the impact of product pricing and promotional strategies in real-time, enabling them to make immediate decisions instead of waiting to act on old sales data. With this information they can identify the strategies that encourage customers towards products with higher margins and drop strategies that are ineffective. They can also understand where discounts are effective and where they are just losing money. In the race to the top, where margins are so small, this information is vital.
Being able to experiment with shelf layout and respond to shelf changes is key for any retailer. Image recognition technologies are increasing the speed with which retailers can carry out these actions. This tech-enabled and data driven approach is part of new wave of supermarket and brand competitiveness, which is giving them greater accuracy in how they target customers. Price will always be a factor, but with the advent of AI in retail, they can be a lot smarter than just taking a cut on price.
The impact that AI can have on in-store performance is being recognized by retailers and they are already incorporating this into their marketing operations, viewing this technology as a move to the future. A recent research report by KPMG revealed that retail and manufacturing executives are investing significantly in smarter analytics and technologies, including predictive analytics and AI in order to stay ahead of competition.
While physical stores continue to be a vital arena for retailers to operate from, greater use of these innovative technologies is needed if they are to truly drive customers towards the in-store shopping experience.
We've all heard how online shopping has and will disrupt the retail industry, but AI is finally giving retailers the ammo to fight back and stay competitive. And it's clear that only those that embrace the technology will succeed.
image from NicoElNino via iStock.