How Can AI and ML be Effectively Utilised in the Retail Industry?

4m read
Artificial Intelligence, Machine Learning, Retail

Whether you are running an e-commerce business or a brick and mortar store, AI is revolutionising how the retail industry operates. With the impact of AI being felt by businesses worldwide, retailers are waking up to the transformative power the technology can yield for their operations. 

By 2025 it is projected that 80% of retailers will have adopted AI, and there is little wonder as to why. From improving efficiency to driving sales and creating better customer experiences, here are the ways in which AI and machine learning can be effectively used within the retail industry.  

Create a more personalised shopping experience

In today’s customer-centric world, personalisation is non-negotiable. 2021 research from McKinsey found that 71% of customers now expect companies to offer personalised experiences, and this has only increased in the subsequent years. Retailers looking to increase customer loyalty and boost sales should develop a shopping experience tailored to the individual. 

AI and machine learning algorithms can be used to gain insights into customer behaviour, which can then be used to create hyper-personalised shopping experiences. For instance, retailers can use machine learning to create personalised product recommendations and offers by analysing customer’s browsing history and previous purchases. 

The recent launch of Amazon Fashion’s AI-powered size recommendations is one example of how big brands are using machine learning to create highly personalised and novel experiences for their customers. 

Improve customer service

AI powered chatbots are an increasingly common option being utilised by retailers to improve their customer service. Chatbots that can respond to queries in real time helps troubleshoot problems and better support customers, without the need to pay for customer service staff. AI-powered virtual assistants lead to improved response times and increased customer satisfaction and are one highly effective use case of AI within the retail industry.  

Supply chain and inventory management

A strong supply chain is the backbone of any successful retailer, ensuring fast, cost-effective product delivery to both customers and stores. AI tools can provide end-to-end visibility into the supply chain, allowing retailers to track products at each stage of the process. This visibility helps in identifying bottlenecks, delays, or inefficiencies before they become an issue.  

It can also optimise warehouse operations by predicting demand patterns, improving order picking processes, and automating inventory management. This leads to increased efficiency, reduced costs, and faster order fulfilment. 

Retailers can also use AI to analyse stock and inventory levels in real-time and provide insights into what products are selling, as well as those which are less in demand. This optimisation helps retailers avoid excess inventory and associated costs while ensuring that popular items remain in stock. 

Predict trends and customer behaviour

AI tools can be used to analyse customer feedback, reviews, and social media mentions to more accurately understand customer sentiments and market trends. Retailers can then use this information to make informed decisions about products, services and in-person experiences for physical stores. 

Through sentiment analysis and predictive forecasting, retailers can get ahead of their customers, giving them what they want before they have even asked for it. This is particularly useful in the fashion industry, where setting the latest trends is vital in order to stay relevant within the market.  

Machine learning algorithms can also analyse market conditions, competitor pricing, and customer behaviour to dynamically adjust pricing. This helps retailers maximise revenue by setting optimal prices for customers based on real-time demand and supply dynamics. 

The bottom line

What makes AI and ML in retail so attractive is the ability to solve a plethora of issues at every level of the business, from the supply chain to the sales cycle to customer returns and aftercare.  

But implementing AI and ML with vast datasets does bring an element of risk with it. From privacy and security concerns to intellectual property rights, many factors need to be considered when incorporating AI technology into your business.  

That’s why at MDRx we leverage the knowledge of expert lawyers from the Mishcon de Reya Group to ensure legal and regulatory compliance at every stage of your project. 

When used effectively, AI and ML in retail increase sales and reduce cost – the main objectives of any retail business. 

But when looking at how best to implement AI into your business strategy, retailers need to ask themselves: ‘What problem am I trying to solve?’ Without a strong use case, projects can become a costly exercise with little return on investment.  

At MDRx we help to clearly define the objectives of what you are looking to achieve and deliver effective results. So if you are looking for a strategic AI solution that creates real-world value for your business then get in touch with our team of experts now.