5 ways AI in retail is transforming the industry in 2024

5 Key Ways AI in Retail Is Transforming the Industry in 2024

India’s retail landscape is undergoing a seismic shift, propelled by artificial intelligence (AI) integration. 

A recent report released by Deloitte and the Retailers Association of India states that currently, 25% of retailers today employ one form of AI in retail operations while a further 45% of leaders are considering integrating AI solutions in the next 24-48 months. 

From personalized recommendations to streamlining operations, AI is reshaping how retailers interact with customers and manage their businesses. 

In this comprehensive blog, we will explore the impact of AI on Indian retail, examining specific applications and real-world case studies that illuminate its transformative potential.

What does Artificial Intelligence in Retail mean?

Retail operations generate vast troves of data, that when confined to silos, do not generate insights or revenue. Applying advanced statistical analysis methodologies to analyze this data helps derive insights about the business that reveal new avenues for smarter decisions and business growth. 

Artificial Intelligence in retail is the next step in the evolution ladder of integrating technology into the retail business. 

At the core of AI in retail are machine-learning algorithms that process the data to identify patterns in user behavior. For example, an AI engine could be used to predict the way a person living in a certain location shops, based on the data generated from their shopping history. 

How is Artificial Intelligence employed in retail?

The adoption of AI in retail has improved the efficiency of retail businesses. From developing personalized retail experiences, through seamless omnichannel experiences, to augmenting retail cybersecurity, the advantages offered by retail are many as well as diverse. 

Listed below are some of how adopting AI in retail can transform the category. 

How AI in Retail Affects Customer Personalization 

Everyone loves when they are given special attention, it is a basic human response. 

AI-powered algorithms are revolutionizing the way retailers understand and engage with their customers. By analyzing user data generated online, platforms like Flipkart deliver tailored product recommendations and promotions that resonate with individual preferences and browsing behavior.

When you last logged into Netflix or Spotify, the application would have prompted you to check titles and songs based on your view history. The advanced machine learning algorithms developed by these companies generate a customer profile that best matches their taste. 

Increasing adoption of artificial intelligence in marketing activities, managers can now define highly specific campaigns. For example, instead of searching for customers who are between 18 and 35 years old and like SRK’s movies, the manager can tell the AI to figure out the exact attributes of the ideal customer of the brand. 

This empowers marketing managers to then send highly customized messages that target the specific problem faced by the customer and provide solutions 

AI in Retail and Omnichannel Experiences

Research conducted by retail think tanks has established the advantages of adopting omnichannel retail strategies in boosting revenue. 

According to the latest retail trends for 2024, retailers, both digitally native and purely physical brands, are adopting omnichannel strategies to increase their revenue. 

Integrating AI omnichannel strategies into their retail operations empowers brands to increase their sales while retaining a loyal customer base. Omnichannel integration empowers the brand to become a part of the customer’s network rather than just being a store. 

Omnichannel strategies facilitate the ability of a brand to continue the conversation strengthening the bond between the customer and the brand. 

For example, consider the example of a customer who views an ad for a particular shade of lipstick on their social media feed. They click on the link on the ad and land on the campaign webpage of the brand. After browsing through the product and using the AR-enabled chatbot to virtually try on the product they decide to test the product in person before purchasing it. 

They go to the nearest store with an intent to try the product. When entering the store, their information is captured and the algorithm pulls the latest information about the customer. 

The customer executives are alerted to the requirements of the customer, allowing them to offer a seamless shopping experience.

Now, the customer might reconsider purchasing the product from the store. Trained AI models can send alerts to the customers about the product to build trust with them eventually leading to the sale. 

How Are AI Chatbots Used in the Retail Industry?

Opening a digitally native retail store today is like letting a child lose into a candy store. With the number of options available, there is a high chance the consumer will suffer paralysis from the choices available. This psychological effect is commonly termed the choice paradox.

But, what if you had a personalized concierge every time you went shopping helping you select exactly the correct product? 

AI-driven chatbots and virtual assistants, such as Myntra’s “Style Advisor,” offer round-the-clock support and personalized fashion advice, enriching the shopping experience for consumers.

Sephora’s virtual artist is an AR-powered assistant that scans the customer’s face and allows them to try the various shades of beauty products on offer to find their perfect kit. 

Zomato already offers the Zomato Foodie AI chatbot taking over the time-intensive functions previously handled by human agents. 

We are only a few iterations away from AI chatbots providing around-the-clock support for customers, helping them immediately resolve problems while providing satisfactory conclusions and improving the brand loyalty and retention factor of the customers. 

AI in Retail Operations 

Efficient operations form the backbone of any successful retail venture, and AI is playing an instrumental role in streamlining processes and maximizing efficiency. 

Companies like BigBasket leverage AI solutions for demand forecasting and route planning, ensuring optimal inventory levels and timely deliveries. By harnessing the predictive capabilities of AI, retailers can minimize costs, reduce wastage, and enhance overall operational performance.

How AI Helps Retailers Forecast Demand 

Consider the example of a Quick Service Restaurant (QSR) serving delicious burgers. Now, the managers at this restaurant are dependent on the prices of the various ingredients, aligning staff rotation, generating tailored customer interactions, and efficient inventory management. 

A human manager might get overwhelmed with the sheer volume of problems that need to be solved before a store opens. However, an AI solution would be able to help the QSR anticipate the staff performances and ensure that the restaurant is adequately staffed during rush hours. 

Furthermore, the AI solution can track inventory and ensure that the restaurant does not run out of stock.

Integrating an AI retail solution into forecasting demand considers factors like seasonality, product, external factors (the global economy), and competitor trends to generate an accurate forecast. 

In the example of the QSR, integrating AI technology allows the managers of the restaurant to efficiently predict price fluctuations and forecast demand for the products allowing them to strategically approach any problem. 

How AI in Retail Improves Security 

According to the latest retail trend in cybersecurity and privacy, there has been a 278% increase in ransomware attacks in just the two years between 2021-2023. 

A more worrying metric for retailers is that only 26% of brands can proactively prevent ransomware attacks internationally. 

In an increasingly digitized retail landscape, safeguarding against fraud is paramount. 

AI-powered algorithms, such as those employed by Razorpay, are adept at detecting and preventing fraudulent transactions in real-time. 

By analyzing patterns and anomalies, AI enhances security measures, protecting both retailers and customers from potential threats and financial loss.

AI in Retail for Store Expansion

From relying on the gut-based-wisdom of the ground staff of a business that is prone to human biases to using data intelligence to accurately predict the profitable locations for expansion. 

AI in retail is transforming the way businesses approach store expansion.

The RetailIQ platform is a custom-built AI solution providing critical insights to retail businesses for their expansion. 

The AI solution helps a business,

  1. Locate the spread of its Target Audience
  2. Determine its Total Addressable Market
  3. Identify the presence of its competitors
  4. Ascertain the cannibalization from same-brand stores
  5. Generate a heatmap of the selected locations 

[Click here to watch a demo of the RetailIQ solution here]

Conclusion: How is AI transforming retail? 

Generative AI is reshaping retail, offering tailored experiences, targeted marketing, streamlined operations, and fostering innovation.

Some of the avenues how AI in retail is changing the business are, 

  • Personalized Experiences
  • Operational Efficiency
  • Omnichannel integration
  • Security 
  • Automation and improving customer experience

In 2024, retailers should consider integrating Artificial Intelligence into their processes to improve productivity while reducing the time required to achieve break-even on their investment. 

But, the sheer volume of data that a retail brand has to process to derive any actionable intelligence is a time-consuming process. 

What if there was a custom-built AI solution product that could help a retailer pinpoint the exact location to expand their business? 

Presenting RetailIQ

RetailIQ is a cutting-edge AI solution revolutionizing offline expansion for the retail sector. It is built on top of extensive location data and brand data to give street-level answers to expansion problems. 

RetailIQ is a powerful tool providing site recommendations to maximize success at the store level and minimize the risk of closure. It also helps identify the total addressable market, conduct competition analysis, better understand your target audience traits and their presence, and perform detailed site analysis and reports, all adding up to a successful expansion strategy.  

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