Three Ways Artificial Intelligence (AI) Could Save the “Death of Retail”


27 September 2017

We are living in an interesting age where change is the only constant. Artificial Intelligence (AI) has been in the headlines for years but is only now becoming part of everyday life. When ordinary folks like you and I are now interacting with Chatbots while shopping online; and all eyes are on the new iPhone X, which enable users to scan their faces to unlock the new phone – you can see AI is truly here.


Predictably, consumer-facing industries such as retail, have already begun to feel the chill amid the rise of AI. Doom-and-gloom headlines about shrinking customer numbers in physical departments, and thinning footfalls have been everywhere… And when Warrant Buffet publicly confirmed the death of retail, brick-and-mortar owners can hardly be expected to remain calm.


Is it true that in the next 10 years, physical stores will completely vanish?

Indeed, with over 85% of purchases still being made in stores in the era of e-commerce, it seems premature to proclaim that retail is indeed dead. However, e-commerce is and will continue to diminish purchases made in brick-and-mortar shops, dipping to 70% in just five years’ time. So while it’s too early to claim that physical stores will vanish in 10 years, there’s no doubt that stores who fail to adapt will be gone within this timeframe.


Every cloud has a silver lining. Gartner, the technology research organization, believes that AI could be the technology that helps physical stores level the playing field. It predicts that AI will manage 85% of customer interactions in the retail industry by 2020,1 offering more personalized shopping experiences to digital-savvy consumers.


Here are three ways AI can empower retailers to win back consumers’ hearts to achieve greater success.


1. Revolutionize the retail experience and build the “Store of the Future.”

While online shopping is easy to use and convenient, many consumers still prefer to visit physical stores, predominantly to try-on and feel products before purchase. But the number of customers visiting brick and mortar stores is indeed falling against the backdrop of competitive prices and ultra-convenience that e-commerce has to offer. So how will stores fight back? The ability to offer a sensory experience is what differentiates the physical store from its online counterpart, and is something stores need to exploit. Expect the “Store of the Future” to become an optimized showroom, built to enhance convenience, personalization and invoke excitement. To do this, technology will be increasingly incorporated into the shopping experience. Smart dressing rooms that recommend similar items in different styles and colors augmented reality applications to allow customers to try on something, not in the store, and digital signage to show timely information to a customer wanting to learn more about a product are all solutions that elevate the in-store shopping experience.


2. Enable data-driven marketing and customer service.

With the ability to collect visitor data through facial recognition technology, AI has the means to optimize marketing efforts, customer service, and store operations. While online retailers have long been able to collect vast amounts of information on customers, traditionally, physical shops have rarely known who walks in or how close they come to purchasing something. With the introduction of facial recognition technology, stores gain real-time intelligence about their customers. Firstly, the demographics: is their target audience male or female, Millennial or Generation X? Secondly, AI can monitor consumers’ behavior in-store, identifying reactions through their facial expressions and recording dwell time, even prompting shop assistants on when to step in and offer assistance. Previous purchases can be analyzed and future product recommendations offered. This information and customer data help retailers optimize product displays and offerings, and is especially beneficial for retailers looking to cultivate personalized customer services for their VIP members, who have high purchasing power and equally high customer service expectations.


3. Automate operations and increase business efficiency.

Long queues and slow payment systems are undoubtedly one of the least enjoyable parts of the retail journey but this is changing too. Facial recognition is now being used to automate payments, with solutions such as Alipay’s world-first ‘Smile to Pay’ application at a KFC store in Hangzhou and Amazon Go’s checkout-free shopping experience helping to reduce the need for staff, while enhancing convenience for the customer. AI will continue to make operations more cost-effective by reducing labor wages, something that can only help brick and mortar retailers as they go through challenging times. AI can also assist with backend logistics, using robotics and automation for moving and collecting stock, as well as for detailed inventory management, while at the front end, it provides valuable insights for marketing teams as well as customer interaction.


Retail is not dead but there is no doubt that the industry is undergoing a major disruption as a result of the e-commerce rise and change in consumer preferences. Retailers that survive and ultimately thrive in this environment will be the ones who can create a store experience so great that it entices the consumer away from their computers and into their stores.


1Source: Gartner for Marketers: Predicts 2017: Marketers, Expect the Unexpected  




About Marie Ma

Marie Ma is currently the general manager of Comba Telecom Network Systems Limited. Ms. Ma is responsible for overseeing the strategies and development of the new solutions and product marketing. She graduated from Tsinghua University with a master degree in Information & Communications Engineering in 2007 and a bachelor’s degree in Electrical Engineering &Automation in 2004. Ms. Ma has wide experience in product management, technical marketing and business development. She joined the Group in 2007.

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