AI for Retail Revolution | Knowledge Ridge

The pervasive impact of Artificial Intelligence (AI) on the economy is no longer a secret. Its influence is particularly pronounced within the realm of retail.  According to Accenture's projections, 2035 is poised to witness a staggering 59% surge in profits, primarily attributed to AI's efficacy in refining retail operations. Among industries undergoing radical transformation, retail is the fourth most significantly impacted, drawing consensus from experts worldwide.  An impressive 73% of respondents participating in Stagista's comprehensive report, "Business Benefits of AI in the Global Retail Landscape 2023," concur that AI is set to expedite the journey to profitability and elevate productivity and revenue generation while curtailing operational expenses.  Nonetheless, a polarizing debate ensues regarding AI's ramifications for employment. Echoing this discourse, Professor Dionis Guzmán from ISDI Business School opines, "AI won't supplant individuals, but rather, individuals leveraging AI will outpace those who remain oblivious."  This dialogue underscores a crucial consideration: AI's impact hinges on organizations' capacity and willingness to adapt, maximizing the dividends of this revolutionary wave. Drawing a parallel to history, "Power and Prediction," a seminal work by Agrwals, Farber, and Goldfarb, likens AI's emergence to the advent of electricity, which supplanted steam. The authors distinguish between point solutions, app solutions, and system solutions. While the former merely enhances existing processes, the latter redefines paradigms to extract maximal benefit. An analogy is reminiscent of how factories initially swapped steam for electricity before realizing that comprehensive reconfiguration could amplify efficiency tenfold.   <h2 style="text-align: justify;">Role of AI in Retail </h2>Within the retail sector, where digitalization remains incomplete for many enterprises, substantial transformation necessitates overcoming legacy mindsets and the inertia of "business as usual." Such a shift is prompted by financial considerations and the potential for a swift return on investment through judicious process reengineering. In regions like Spain, government initiatives and financial mechanisms further streamline this transition.  In the spirit of pragmatic anticipation, let us unveil seven prevailing trends shaping the landscape today, with even more disruptive applications on the horizon:  Metaverse Momentum The Metaverse, albeit currently on pause, remains far from extinct. While its technology is yet to mature for seamless experiences, advancements like quantum computing and expanded computational capacity hint at a compelling future, possibly within 3-5 years. A prudent stance advises caution, deferring significant investments for now.  Digital Passport and SCM Traceability Amid European retail CEOs, paramount concerns revolve around supply chain management traceability. Emphasizing scalability over blockchain security, industry leader e-SCM streamlines information flow and stakeholder communication. Its forthcoming v12 version extends traceability to tier 2 and 3 suppliers, tracing everything from fabric production to cotton cultivation.  Gen AI Fuels Design Innovation AI's role in predicting trends and expediting 3D design is well-established. With the advent of Generative AI and tools like Midjourney and Adobe's AI capabilities, designers' creativity soars. Rapid design iteration gains momentum, with further potential for AI-driven 3D rendering.  Content Creation Transformed Gen AI guides content development, economizing budgets for small and large brands. Smart utilization of prompts and predictive algorithms slashes photoshoot expenses. Acne Studios' FW23 campaign exemplifies leveraging AI for substantial savings.  Predictive AI Optimizes Planning Predictive AI proves invaluable in planning, allocation, and replenishment. While market solutions like Nextail exist, tailored AI integration gains favor among mid-sized to large corporations. Boutique AI firms, such as a spin-off from Spain's Universitat Politècnica de València, deliver customized success stories.  In-Store Monitoring through Computer Vision Pioneering advancements in AR/VR and computer vision, UPV's Leni Lab, though a spin-off called Quatechnion, yields an advanced system to remotely "read" stores akin to experienced area managers. This technology offers an exceptionally swift return on investment for major retailers.  Predictive AI Elevates eCommerce CRO Retailers with mature eCommerce platforms harvest AI's low-hanging fruit through a staggering 30% conversion rate optimization. Custom-tailored solutions differentiate winners from the crowd, driving meaningful growth.   As technology and AI investments demand prudence, it's evident that intelligent decisions are the cornerstone of retail's long-term survival."    This article was contributed by our expert <a href="https://www.linkedin.com/in/felix-de-iturriaga-2861b91/" target="_blank" rel="noopener">Felix De Iturriaga</a>  <h3 style="text-align: justify;"> </h3><h3 style="text-align: justify;">Frequently Asked Questions Answered by Felix De Iturriaga</h3> <h2 style="text-align: justify;">1. How is AI streamlining supply chain operations and logistics, enabling retailers to achieve better efficiency and minimize costs? </h2>The most immediate application of AI is optimizing predictions. For instance, if we can optimize demand prediction, we can use it to plan purchases for the next season. Alternatively, we can implement it at the beginning of the season to anticipate which stores are most likely to sell the bestsellers. This proactive approach helps us avoid putting those items on sale and enables us to strategize the best distribution to maximize sales. By coordinating store movements before and during sales, we can significantly increase sell-out rates while minimizing the need for heavy discounts. This impact would then reflect dramatically in the final gross margin. Furthermore, AI could even predict which suppliers are more likely to delay their deliveries. This insight would allow us to balance their Purchase Orders with more reliable ones, mitigating potential delays in implementing the new collection. Doing so can prevent sales losses and potential penalties from retailers.  <h2 style="text-align: justify;">2. How is AI utilized to analyze user behavior and interactions on eCommerce platforms, providing valuable insights to optimize conversion paths and user flows? </h2>In the present landscape, each eCommerce engagement generates a substantial volume of traceable data. This data holds the potential to be harnessed through AI-driven modeling, enabling the anticipation of behaviors that tend towards conversion and those that do not. By doing so, we can strategically enhance our customer interactions. The primary focus of AI currently lies in its predictive capacity, a quality that aligns seamlessly with Conversion Rate Optimization (CRO) objectives. At its core, CRO revolves around forecasting outcomes and subsequently taking informed actions.  <h2 style="text-align: justify;">3. How does SCM traceability empower retailers to track and monitor products' journey from raw materials to the end consumer? </h2>The crux lies in establishing a comprehensive framework, a platform designed to orchestrate a seamless workflow involving all stakeholders across every phase of the operation. This journey commences at tier 4, the origin of cotton cultivation, progresses to tier 3, encompassing fabric manufacturing, extends to tier 2, incorporating diverse components and intricate processes such as dyeing, and ultimately culminates at tier 1, where the final product is meticulously crafted and packaged. An integral aspect to underline is that this process is inherently manual in nature. Here, blockchain technology emerges as the guardian against tampering, assuring the integrity of the process's completion. However, it should be noted that blockchain's assurance primarily rests upon the immutability of the process rather than the inherent reliability of its information. Brands are therefore advised to prioritize this concern, a task facilitated by ensuring the user-friendliness of the workflow, permitting seamless engagement even via smartphones, as many stakeholders might lack access to laptops or conventional computing devices.  <h2 style="text-align: justify;">4. How is the metaverse becoming a powerful platform for retailers to engage customers through interactive and immersive marketing campaigns? </h2>Not quite there yet, I'm afraid. The metaverse had everyone buzzing with excitement, but alas, the technology isn't quite done baking in the oven. For starters, we're still waiting for a platform that can handle a crowd without having a digital meltdown. And let's not forget, our computers are like those slow walkers in the hallway – they can't quite keep up with high-res, intricate worlds, leaving us with what might as well be fancy pixel art. Frankly, it's a tad dull and feels like an adult trapped in a kid's game.  Imagine, though! The metaverse that gets everyone's dopamine flowing should look a lot like that dazzling virtual universe from "Ready Player One." Here's the kicker: that movie rolled out its vision of 2045 back in 2018. Talk about being ahead of the game! Fingers crossed, we won't need to twiddle our thumbs for that long. And here's hoping reality looks a bit brighter than the Columbus, Ohio, downer they painted for us back then!

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