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The Future Is Cognitive: Using AI in Retail to Meet New Hurdles

By Microsoft on March 14, 2018

Filed under Retail & Consumer Goods

Today’s shoppers have developed a new standard of behaviors, preferences and expectations for all of their retail experiences. Responsible with meeting these elevated needs, retailers seek to overcome the hurdles of legacy technology and captivate each of their customers on a 1:1 basis.

In the past, consumer value expectations were centered on three variables: cost, choice, and convenience. With instant gratification available at the push of the button, customers are looking to have more control of their purchase journey and are seeking out personalized shopping experiences. Today’s customers want…

Real-Time Engagement

Accustomed to the instant access of e-commerce shopping, customers are looking for opportunities to skip the line and have direct communication channels to ask, troubleshoot, and of course, shop.

Differentiated Personalization

Always on the move and constantly tethered, today’s consumers may be transitory, but they shop as they please. They expect retailers to keep pace with their mobility and provide consistent personalization depending on where they’re shopping.

But for retailers to drive value to these new set of shopper expectations, they need to tackle the headwinds of operational headaches, legacy software and other disruptions is only more challenging. Today’s retailers need to…

Make Sense of Their Data

Faced with an onslaught of user data, retailers need to filter the excess and transform these information sources into consumer-first strategies.

Synchronize Offline and Online Retail

Digital and physical shopping channels typically assume a different set of initiatives and shopper expectations, but the separateness between these channels poses a threat to operational efficiencies and adds friction to customers hoping to shop in a seamless and consistent fashion.

Maintain Logistics Networks

In order to service a wider field of customers, retailers need to reconsider their traditional supply chain ecosystem in favor of adaptive and flexible resource management that reduces waste, yet fulfills the consumer’s purchasing behavior.

Artificial intelligence and cognitive services allow retailers to navigate a new tide of consumer trends and deliver unprecedented value to their customers, employees and organizations. Bharat Popat, Industry Solutions Director of Retail & Consumer industries at Microsoft, provides insights about these industry disruptions and how using artificial intelligence in retail can drive a sea of powerful transformation.

Interviewer: What shifts are you seeing occur in terms of consumer behavior in the retail space?

Bharat: The consumer’s shopping expectations are shaped by three experiences. Firstly how digital commerce is so frictionless – no checkout line, ease of search and instant access to product information. Secondly how their personal digital assistants automate mundane tasks and thirdly how every industry attempts to interact with the consumer at a personal and experiential level.

These and future experiences shape expectations and behavior in how they shop on-line or in physical spaces. Consumers expect greater ease, more personalization and more experiences.

Interviewer: What changes are you seeing in terms of internal retailer operations?

Bharat: Digital commerce will continue to push the boundaries on ease of shopping, speed of fulfillment and digital experiences. These innovations greatly impact a retailers technology, marketing and supply chain operations.

However, 90% of all retail revenues still come from physical stores, so they still very important for retailers. What is interesting is the pace at which the physical spaces are being transformed as retailers define strategies to keep customers loyal and maintain store profitability. These strategies are aimed at meeting customer expectations on ease of shopping, based on their digital commerce experiences and meeting customer expectations for what are unique assortments and experiences in physical spaces.

Retailers want to make things much more personal, inspiring and experiential. Part of the attraction of physical stores is discovery and being able to go and try things — touch, feel, smell and taste. It’s how those experiences are enabled in new ways so that customers still feel like it’s worthwhile to go visit physical stores and that the experience is memorable.

Interviewer: How can an AI architecture help retailers manage these shifts occurring throughout the customer experience, internal operations, or shopper marketing?

Bharat: While digital and physical store commerce operations are increasingly being integrated, let me focus on the immediate challenge of transforming physical stores and how AI capabilities might help.

Assortment planning to keep loyal customers coming to the store is a challenge. If a retailer is trying to identify their best customers, their individual preferences and events that drive their individual purchase behavior and at the same time consider inventory carrying costs- the analysis becomes very complicated. How can a merchandiser do very complex assortment planning without having to be a data scientist?

This is where AI capabilities come in. Imagine an AI Assortment Planning Application having a natural conversation with a merchandise planner about their goals and about what they’re trying to optimize, what knowledge bases and data they’re trying to utilize. AI can push the complexity into the background, making it very easy for the merchandiser to complete this complex exercise.

As stores move towards creating more experiences and measure store profitability on the halo effect of store experiences on total sales across all channels, I see additional opportunities to apply AI. AI enabled experiences such as virtual checkout; measuring store success by measuring experience delivery KPI’s suing IoT sensors and AI insights mining.

For each operations challenge, like assortment planning or inventory planning, you can remove the complexity for your specialists, and apply AI in order for them to unlock the power of data.

Interviewer: What are some best practices retailers can adopt in order to prepare their business for AI?

Bharat: Best practice starts with having a great sense of where your biggest opportunities lie. Identifying the friction points in the customer journey and understanding where there’s leakage and opportunity in the internal and customer facing process.

Given it’s new technology, retailers need to be open to experimentation. The best practice is small learning projects and then go for big things as soon as you get the learnings.

The third aspect is to partner. AI is not a single technology, It’s a whole stack of technologies that come together and are used in order to achieve a business outcome. You’ve got to think in terms of partnering with a platform and ecosystem provider like Microsoft.

Developer or business analysts in Retail should be able to use the AI platform and push the complexity of the underlying AI technologies down towards those who are experts in it. Work with an ecosystem of partners and use your open innovation network. Be part of a community of innovators so that you learn and contribute as well.


For more intelligent retail insights and findings, download Microsoft’s AI Retail Playbook or visit microsoft.com/retail.

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