How AI is Transforming Retail with its Innovation

As the modern world seeks innovation and convenience, retailers are faced with the challenge of keeping up with the latest trends or risk falling behind. There’s no shortage of promises that Artificial Intelligence (AI) will fundamentally change the way we shop but its implementation has been found to be an uphill task. AI adoption challenges in retail are many, and they are real.

According to Statista, by 2021 online Ecommerce sales are set to total a record of $4.8 trillion USD, while in 2018 this amount was estimated at a lower $2.8 trillion. An industry in rapid growth, with no signs of  slowing down, makes one factor exceptionally clear – If you want to stay competitive in the retail business, no matter whether you are a small business or a multinational enterprise, you need to consider optimizing your operations with new technology. And, across web, mobile, and in-store, such technology is poised to include AI and Robotic Process Automation (RPA).

Use Cases

North America is the front-runner in adopting AI and many retailers have deployed AI-based solutions to optimize their supply chain operations and inventory. To engage customers and to improve sales turnover, AI-based technologies are being adopted by both offline and online retail businesses.

For instance, in April 2019, Warby Parker, an online retailer of prescription glasses and sunglasses started using AI for enabling its customers to try the virtual Try-On, that allows them to try on virtual frames through AR, a technology that overlays computer-generated images onto real-world images. At Sephora, an industry-leading champion of cosmetic brand in the U.S, employees are equipped with a handheld device that, when held to the face, scans the surface, capturing a person’s exact skin tone and matching it with a combination of numbers and letters from an existing “shade library.” The resulting four-digit code is a Sephora customer’s Color IQ. The program was created in 2012 in collaboration with the Pantone Color Institute to help shoppers find the foundation and concealer that’s the best scientific match for their complexions. Since its launch, Sephora stores have generated 14 million Color IQ matches and the company has also created a spinoff, the Lip IQ, for lipstick shades. The North Face, an American retailer can help users pick up the perfect Coat. Using the shopper’s information, The North Face can make personalized recommendations to help customers find the perfect coat for their activities.

Ethical Concerns

The more powerful a technology becomes, the more can it be used for nefarious reasons as well as good. After all, we’re dealing with a system that is faster and more capable than us by orders of magnitude. Data driven retail is not new, and this technology has been around to help companies understand their business from a data perspective. Retailers in the past would simply look at daily and weekly transactional data and draw conclusions and forecasts and would make personalized recommendations to the customers. Although current AI offers us few ethical issues, social roles may be filled by AI algorithms, implying new design requirements like transparency and predictability. AI with sufficiently advanced mental states, or the right kind of states, will have moral status, and some may count as humans, perhaps very much unlike the sort that exist now, perhaps governed by different rules.


AI-powered solutions are transforming the E-commerce industry in the following areas:

  •  AI-enabled Email Marketing that sends out marketing emails for products (or services) that are of interest to the recipient. Apart from reading more human than automated, these email marketing tools make an intelligent user analysis based on their response and are more aligned to individual customer needs.

  • AI-enabled Supply Chain Automation that enable effective management of supply chains for E-commerce platforms. Other benefits include enabling business decisions related to vendors, delivery schedules, and market needs.

  • AI-based data analytics tools for the E-commerce sector that provide a host of benefits such as business intelligence, customer profiles, and online sale analysis.

  • Omnichannel AI solutions that are creating a consistent and seamless customer experience across online and brick-and-mortar retail stores. For instance, AI-based omnichannel solutions from Sephora are utilizing a combination of AI and Machine Learning, Natural Language Processing and computer vision to reduce the gap between in-store and online customer experiences.

As the business of doing retail becomes more challenging, retailers are turning to AI to improve everything from operations and inventory management to the customer experience. AI adoption is ramping up quickly with an estimated global retail spend of $7.3 billion per year by 2022, according to Juniper Research. Retailers are adopting AI to solve large-scale business problems, including the top customer service challenges. By bringing AI into the workforce, retailers augment the work of human agents to delight customers with quick resolutions across channels.

AI in retail industry will have a major impact on the customer experience in retail stores. It not only provides the link between the online and offline connection with the customers but helps in personalizing the total shopping experience. Conversational AI (CAI) can, for instance, offer advice in products, and can be adapted as the ‘wishlist’ of the customers. Moreover, it is more time-efficient for customers and cost efficient for companies as it decreases the time they spend to search for products. CAI also contributes to the data collection about the shoppers and through this, for example, special offers can be created more easily.  To sum it up, AI increases engagement with existing customers, while at the same time, increase the customer base by attracting new customers.

SBP offers SAP Commerce (Hybris) services to help you make the best of online retailing.

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