Is Artificial Intelligence Retail’s Most Feared Technology?

Artificial intelligence (AI) shows signs of bringing positive disruption to the retail sector by improving the efficiency to analyze shopper demographic data, order delivery times and customer service. It is predicted that by 2020 and beyond, 85% of customer interactions in some form will be managed by AI applications like natural language processing (NLP) or by combining several different AI applications together. The term “artificial intelligence” is applied when a machine mimics “cognitive” functions that humans associate with other human minds, such as “learning” and “problem solving.” While traditional data mining extracts data for humans to analyze, AI draws conclusions on its own.

Yet, despite the fact that AI helps drive 3%-5% customer satisfaction improvements that in turn drive sales, it is giving some retail executives goosebumps. The reason is the implicit fear associated with machines and algorithms. Some believe that AI-driven automation will take over core retail functions and many associates or employees, especially in stores, DCs and call centers, will become obsolete. 

Retailing has high technical potential for automation and this applies to several innovative technologies such as AI and its machine learning, robotics and NLP applications. It is estimated that 53% of retail activities are automatable, though, much depends on the specific occupation within the sector. To quote Mckinsey: “Retailers can take advantage of efficient, technology-driven stock management and logistics, for example. Packaging objects for shipping and stocking merchandise are among the most frequent physical activities in retailing, and they have a high technical potential for automation. So do maintaining records of sales, gathering customer or product information, and other data-collection activities. But retailing also requires cognitive and social skills.”

My own analysis and in-depth conversations with several retail and consumer goods executives over the past few months reveals the reasons for fearing AI are several, but in most cases such notions can be dispelled as the industries are highly people- and process-driven industries. Systems actually end up supporting the overall game plan of enabling or helping complete the shopper experience in a seamless manner. Customers will want AI automation at some level for seeking product information or looking up a previous order, but employee or associate advice, emotional intelligence and judgement during the customer journey are also critical for a satisfactory shopping experience. Based on a recent survey, 70% of US Millennials and 62% of Millennials in the UK say they would appreciate a brand or retailer using AI technology to show interesting products.

Will we have fully AI and robotics-powered automated stores at some point in the near future? Yes. But those will be yet another type of store format that retailers will unveil. The emotional intelligence and judgement of associates in the stores and warehouses cannot just vanish in thin air and is virtually impossible for machines to imitate today. These human qualities are here to stay in most store and DC formats. However, associate roles are certainly expected to evolve.

When it comes to the art and science of customer-facing retailing and shopping, AI and other technologies can help automate several non-technical and non-interventionist types of headquarter, store and supply chain employee functions. The fact is that retail execution is perpetually resource starved. AI can automate product information, pricing, order engagement, cumbersome back-office and operations-related data mining, analytics and predictive
capabilities.

Key artificial intelligence questions to consider:

1. How will AI and related applications impact your employees?

2. Does your company plan to eliminate any jobs due to AI-led automation?

3. Have you considered all the risks and change management areas associated with AI?