My Takes from Retail Fest Days 2 and 3: Your AI led, ‘data-driven’ decisions are probably complete mistakes… on their own

Retail Fest has been enlightening, understanding the challenges retailers are facing in 2024. Particularly laid bare in the keynotes, were business leaders pouring their hearts out over the toughest conditions in living memory. Cost-of-living is the primary concern, however recurring interest revolves around Artificial Intelligence (AI). This is where we come in… and please bear with me on explaining my article’s title. Soon it will (hopefully) make sense.

While AI's influence is transformative, its effectiveness and impact are often overstated, especially in the short term. The reality is that AI systems are only as effective as the data they process. This dependency on quality data introduces significant limitations, particularly in complex decision-making scenarios where human nuance and experience play critical roles.

One of the key misunderstandings about AI is its ability to make decisions independently. Unlike humans, AI lacks the ability to perceive the subtle nuances that often guide business decisions. For instance, consider the case of any Aussie retail clothing chain looking to optimise its inventory for the upcoming summer. The AI system would analyse years of sales data, customer demographics, and purchasing trends to forecast demand. While the AI's conclusions might optimise stock based on historical data, it would miss emerging fashion trends that a seasoned retail manager could foresee due to intuition.

Culture Kings’ Founder Simon Beard highlighted this point (albeit not AI related) within his first day keynote, a highlight of mine and many other delegates I spoke to. Many of the decisions he made were based on emotion, rather than logic; for good reason… his customers purchase on emotion and then justify the logic. Specifically, though, Simon called out the concept that nobody has the business context that you do; it cannot be replicated by external consultants nor data points alone.

This is a perfect analogy for the way we should consider AI in decision making, as a tool but not the full picture. I think most in retail will get this, however it is easy to get caught up in a world only now discovering the enormous potential AI will have on society. However, we’re still far off surpassing AI’s lack of intuition. In retail, where trends can shift unpredictably, the seasoned insight of a passionate leader who has weathered similar market shifts before is invaluable.

Furthermore, the data dependency of AI raises concerns about the quality and breadth of data inputs. AI systems function on the principle of "garbage in, garbage out." If the underlying data is biased or incomplete, the AI's decisions will reflect these flaws. In the retail context, this could mean misjudging customer preferences or failing to cater to a significant segment of the market, potentially leading to stock imbalances and lost sales.

While AI can enhance efficiency and provide analytical insights, its current state does not allow for the complete replacement of human oversight, especially in fields that require a deep understanding of human behaviour and cultural shifts. Business leaders must maintain a critical perspective on the tools at their disposal, understanding that technology is an aid, not a panacea.

I’d love to help you get the most out of AI, particularly through a thorough consideration of the data points you currently have. Are they integrated, cleansed, democratised, and ready for harnessing AI? You might not know the answers to that, but that’s okay; it’s something we can work out together.

With that said... herein comes my final take from Retail Fest. This isn’t a story on Artificial Intelligence alone, more so the nuances humans have which can bring AI to life through their own decision making. Most entrepreneurs enter retail because of a business problem they’re looking to solve. The data may not back up the route you take towards your success, and the nuances Artificial Intelligence would give you would be the complete wrong choices to make. If it doesn’t make sense on paper but your gut is telling you otherwise, maybe this is a case where being data-driven is a mistake. Back yourself.