Retail in the Age of AI: Innovative Strategies for Modern Consumer Demands

Retailers are experiencing a surge of energy due to Artificial Intelligence, which is revolutionizing the customer experience (CX), streamlining operations, and uncovering new avenues for consumer engagement. Personalization is the next frontier for retail success, but retailers must contend with tech-savvy consumers whose ever-changing preferences are expected to deliver quick, easy, and personalized shopping experiences. With its ability to comprehend consumer needs and provide individualized services, Artificial Intelligence (AI) is the ideal technology for meeting these expectations [1].

According to Analytics Insight, 80% of retail executives anticipate their firms will employ intelligent automation technology by 2025, with 40% already doing so. However, shops cannot merely install AI and expect a miraculous solution. A pragmatic strategy focusing on business domains where AI can have the biggest effects is essential [1]. Signs of AI's impact on revenue and profits are evident: Retailers using AI and machine intelligence outperform those who don't, as reported by Statista [2]. By leveraging AI to enhance engagement and operational strategies, retailers can position themselves for success in a digitally-centric commerce environment.

The AI Transformation: Real-World Applications

AI models are optimized to function as stand-alone digital retail platforms or integrate into existing retail platforms, ERP systems, AI CRM software, and corporate websites. These models manage inventory, supply chain operations, customer relations, data analytics, and other aspects of the retail lifecycle. Contrary to the belief that AI reduces human interactions and negatively impacts performance, early adopters find that AI can effectively imitate human traits in consumer interactions, freeing up staff to tackle more complex customer issues and plan future user-centric experiences [3].

How can you use AI to drive Marketing? [3]

1. AI enhances targeted advertising and promotions by analyzing past customer behaviour, heatmaps, and granular demographic data to create and deliver ads at optimal times.
2. AI-driven customer segmentation may leverage highly detailed data to generate more focused, purchase-ready buyer groupings, in contrast to traditional customer segmentation that is based on larger demographics or purchasing history
3. Personalized shopping experiences caused by Artificial Intelligence (AI) swiftly recognize potential customers and forecast what they will add to their basket based on their habits and past purchases by logging and evaluating reactions to recommendations on product pages.
4. AI enables dynamic pricing assessing real-time factors like demand and competitor prices to optimize product pricing, leading to higher sales. Increased sales are frequently the result of dynamic pricing without having retailers to intervene directly. Navigating the complexities of a volatile pricing landscape demands more than just intuition; it requires the right tools and data. That's where FOBOT (Forecast and Optimization Robot) steps in. Created by Cheil RPM Intelligence, FOBOT is an advanced dynamic pricing system that offers precise pricing recommendations to align with specific sales goals.
5. AI also improves social media and sentiment analysis for Retailers to gain a better grasp of their consumers' opinions about a brand and individual goods by using AI models to gather and evaluate multichannel customer feedback.

Zara’s Just-In-telligent Technology

To get more insight into customer behaviour, Zara has formed a strategic alliance with Jetlore, a top supplier of predictive customer analytics. Utilizing Jetlore's cutting-edge AI algorithms, Zara can foresee preferences and provide individualized suggestions by analyzing enormous volumes of client data. Through targeted marketing efforts and carefully considered shopping experiences, this partnership enables Zara to improve consumer engagement and loyalty, resulting in an increase of sales and revenue development [4].

Zara has adopted the Just-In-telligent supply chain technology in addition to predictive customer analytics to address logistical issues. By using real-time data and predictive analytics to forecast demand variations, improve inventory levels, and expedite distribution procedures, this cutting-edge AI-driven technology optimizes supply chain operations. Because of this, Zara can to efficiently remove obstacles in the supply chain, guaranteeing prompt product delivery to both physical shops and online clients, increasing overall operational effectiveness and client happiness [4].

Prada Embraces AI to Elevate Luxury Fashion's Future

Prada partnered with the payment platform Adyen to enhance the in-store payment experience. With mobile-equipped sales assistants, the brand now recognizes returning customers, accesses their shopping history, and provides tailored recommendations for a more personalized shopping experience. Quick payment processing with a simple tap of a credit card or iPhone eliminates the need for traditional checkouts. AI-driven data analysis further enables Prada to provide highly tailored shopping experiences, both in-store and online, by customizing product recommendations and service interactions based on customer preferences and shopping history [6].

Prada’s website redesign emphasizes the brand’s aesthetic while minimizing distractions. Prada also tailored technological solutions to regional needs, integrating unified e-commerce ecosystems in Asia, particularly China, while adapting to the fragmented systems in Europe and the USA where separate platforms handle different aspects of the shopping experience. Sales increased because of AI-powered customized shopping experience that offers clients more relevant product recommendations. Furthermore, the effective and customized service has increased client loyalty and promoted return business [8].

Charlotte Tilbury

Virtual fitting rooms aren’t just for fashion retailers; beauty brands are leveraging this technology to enhance the in-store shopping experience as well. Charlotte Tilbury, a renowned beauty brand, installed a virtual mirror in its flagship London store. Shoppers can walk up to the mirror and see one of ten famous makeup looks applied to their faced in real-time. They can then take a photo of the makeup look and email themselves a list of the products used to create it.

This innovative use of virtual mirrors has led to an increase in in-store cosmetic purchases for Charlotte Tilbury, demonstrating the effectiveness of interactive technology in boosting sales and customer engagement [9].

Retailers who wish to capitalize on this technological advancement have several options, even if AI in retail is still far from reaching critical mass. Global retail chains have already invested heavily in AI solutions for various purposes, demonstrating that AI can transform the entire purchasing process and provide quantifiable returns for merchants. Companies investing in AI today will position themselves as industry leaders, potentially making billions in revenues in the years to come [8].

About Retail Performance Management: A leading consumer intelligence consulting department delivering insights and strategic recommendations to optimize the retail experience. Composed of industry experts, intelligent data analytics, and innovative technologies, our comprehensive approach offers a holistic view of how we support our clients' retail initiatives and objectives.

About Cheil Germany GmbH: Cheil Germany belongs to Cheil Worldwide Inc., one of the world’s leading marketing solutions companies. Established in 1973 with headquarters in Seoul, South Korea, Cheil's thousands of global employees create ideas that move brands, products and people from its 44 offices and 7 affiliates in 37 countries. Cheil delivers innovative communications strategies that drive business results through full-service advertising capabilities and beyond, with specialties in shopper marketing, experiential retail design, PR, sports marketing, and special events. Cheil's creativity is world renowned, as the network is highly awarded by international festivals, including Cannes Lions, CLIO, Spikes Asia, Dubai Lynx, AdFest and Effie Awards. The network enjoyed a stellar performance at the latest 2013 Cannes Lions International Festival of Creativity, winning 21 Lions.

References:

1. https://www.forbes.com/sites/sap/2024/04/19/artificial-intelligence-in-retail-6-use-cases-and-examples/
2. https://www.statista.com/statistics/1453198/ai-and-ml-impact-on-retail-performance/
3. https://www.eweek.com/artificial-intelligence/ai-in-retail/
4. https://www.dhirubhai.net/pulse/shaping-future-retail-zaras-ai-innovations-vignesh-sairam-uw11c/
5. https://bhavis.medium.com/zara-ai-stylist-marketing-campaign-idea-a48d55ebb56e
6. https://aiexpert.network/prada-ai/#:~:text=AI%2Ddriven%20data%20analysis%20enables,their%20preferences%20and%20shopping%20history.
7. https://www.pradagroup.com/content/dam/pradagroup/immagini/newsandmedia/2019-news/daegu-lotte-nuova-apertura-prada-/cover.jpg
8. https://eagleeye.com/blog/ai-in-retail-marketing
9. https://www.shopify.com/ph/retail/virtual-fitting-rooms
10. https://images.ctfassets.net/wlke2cbybljx/2ctLhiOwjUiPuX5ql7p7Cu/25a870ca9c61e54e4279cf7403162cbf/1x1_the_magic_mirror_instore_FI.jpg