AI’s place in retail

Artificial intelligence has been slowly but steadily seeping into our everyday lives, from the smart home products that learn our habits to try and make our days easier to manage, to more complex use cases within areas such as cybersecurity, the financial sector and the automobile industry.

But what about the retail sector? Aside from the futuristic ideas of robotic assistants whizzing around your shop floor, what are the more realistic applications for AI in the retail space for businesses of all sizes?

“Artificial intelligence has been implemented across various industries over the past few years, particularly the retail industry,” Ryan Deutsch, chief brand advocate at digital marketing company Persado tells PCR.

“While end customers may not be aware of its application, retailers have now been using AI to improve their services. It has the ability to run large data sets through AI algorithms to uncover information about customers or the business itself. With this advancement in data analysis, retailers can learn more about industry trends, their customer’s preferences and requirements – ultimately improving the overall customer shopping experience; by giving them exactly what they want, you can begin to build a more personal and bespoke relationship.

“Some interesting AI technologies seen at NRF in New York this January include mapping customer activity in-store in real time – identifying hotspots and dead zones while understanding how store associates interact with customers, to what degree of success, and why. Drones for tracking store inventory – driving more efficient inventory management and purchasing. And intelligent shopping carts – identifying items placed in the cart and making recommendations for other items in real time,” explains Deutsch.

Looking at how retailers advertise themselves, Persado researched 2018’s online marketing messages by various retailers, and found that when AI is applied to the actual words used in adverts, new language is created to better engage and interact with customers. “During the holiday season, retailers understood that in order to improve sales, they should rely more on digital channels as opposed to more traditional forms of broadcast media,” Deutsch tells PCR.

“For example, by elevating a sense of excitement into gift guides by using superlative language during the holiday season, they seem to dominate the festive shopping market. Persado also found that while free shipping can drive engagement, it should go alongside event-based or achievement-centred language.”

Deutsch continues: “McKenzie & Co. recently published an insights paper suggesting that the next great growth opportunity for business is the coming together of data (AI) and creativity, which found that companies who truly integrate data and creative deliver revenue growth rates twice that of the S&P 500 average.

“An excellent example in retail is the use of AI to understand how language (words and phrases) impact traffic-driving messages and associated conversion. Some of the largest retailers in the world use Persado’s AI platform to understand how specific words convey critical ideas (emotions, personal narratives, brand) to segments and individuals. The AI platform then uses this insight to create content that is mathematically proven to outperform non-data driven language. Conversion rate lifts across Persado’s retail clients average 43%.”

Retail Security

When it comes to collecting large amounts of customer data, the retail industry knows as best as any just how important security is. Paul Lipman, CEO at cybersecurity company BullGuard, outlines how AI cybersecurity is developing and being used at retail.

“Retail is a high priority target for cyber criminals. Traditional attacks such as fraud and point-of-sale breaches are pervasive but as retailers increasingly grow their online presence, attacks on ecommerce websites, data and the supply chain are growing. We need look no further than the Magecart consortium of hackers who have made a lucrative business targeting online shopping cart systems, usually the Magento system, to steal customer payment card information. This is known as a supply chain attack and this group of hackers have, and continue to, wreak havoc across the world,” explains Lipman.

“Given its high profile among cyber criminals it’s hardly surprising that AI-driven cybersecurity is gaining a toehold in the retail industry. But that said, adoption is certainly slow. From a bird’s eye view, the industry is undergoing rapid digital transformation and in an ideal world the introduction of AI cybersecurity would run parallel with these changes.

“But this isn’t the case. Certainly, AI is being adopted and is becoming a key element in the digitalisation of in-store retail. It is being used to personalise the customer experience and create a more engaged relationship with customers. In short it is creating a bridge between virtual and physical sales channels and we are seeing this taking place from Russia to the USA and Europe.”

While adoption of AI cybersecurity for retail may be slow, AI technologies are certainly developing, says Lipman.

“By using AI ‘triangulation’ software on endpoints, the network and bespoke investigative bots, it’s possible to understand threats contextually as they develop and to stop them. This is an advanced approach to cybersecurity but we’re not sure how many retailers are ready to adopt it. That said, AI and machine learning will over time become a cornerstone of retail cybersecurity,” he tells PCR. However, Lipman warns that it’s also important to keep in mind that cyber villains are working at a similar tempo to develop AI- driven malware.

“It can only be hoped that the retail industry in general will take proactive steps to adopt deep learning AI algorithms rather than use them as a reactive measure to damaging hacks, which are surely coming given the highly lucrative opportunities retailers provide for cyber criminals.”

Understanding Customers

As well as helping with the retailer’s own business processes and bolstering its security, AI has the ability to help businesses better understand their customers, which, in turn can help them sell more effectively.

“One of the key benefits of AI for retailers is the ability to uncover new insights and attributes that enable a more personalised experience online and in-store,” says Deutsch. “Any true AI is based on an extensive database of contextually relevant information that allows AI to create insights.”

Persado maintains the world’s largest database of tagged marketing language, and this dataset, when combined with live experiments at retailers, can drive new customer insights.

He explains: “For example, retailers can identify what emotions resonate with customers, do specific customers respond better to the emotion of Urgency or Gratitude? Even more interesting, AI can provide insights as to how segments associate and respond to “personal narratives”.

“Customer A may make purchases that will support a personal narrative of Prestige, whilst Customer B makes decisions when she has the opportunity for Self Expression.”

Deutsch concludes: “As AI becomes more pervasive in retail, I expect the level of personalisation to increase in completely new ways.”

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