The key internal capabilities needed to ensure a successful digital shopping experience are personalization, automation and the unique identification of the customer across shopping channels. In this report, we discuss how AI and IoT are impacting the retail industry. Retailers that aim to remain competitive cannot afford to ignore the potential benefits of these technologies. AI, a technology that enables computers to make autonomous decisions, is a step forward in automation that is changing the retail industry. Retailers are using AI to analyze customer data, adapt how they interact with shoppers and predict demand in order to better manage inventory. Because consumers are bombarded with an unprecedented amount of information, being able to deliver highly personalized content for each individual customer is crucial to staying ahead of the competition. Meanwhile, the use of AI to anticipate demand and estimate when items will be returned should translate into more efficient business operations. Digitalization is the key that will unlock the future of brick-and-mortar retail, and the IoT is a crucial part of it.
The retail industry is in a constant state of transformation. The retailers are attempting to survive the fierce competition in the market and fast-changing customer shopping habits. Retail business owners are investing in cutting-edge technologies, including Artificial Intelligence (AI), robotics, data analytics, and logistics automation, becoming more customer-centric and responsive to demands in the industry. Among these advanced technologies, AI has a significant impact on almost every operation within a retail business. By 2020, retailers are expected to spend $7.3 billion annually on Artificial Intelligence technology.
The retail industry is undergoing a sea change so massive that many industry insiders have termed it the "retail apocalypse." In a sign of this industry upheaval, in 2018 major retailers closed 5,524 stores in the U.S. and 1,432 stores in the U.K., according to figures compiled by the Coresight Research, a firm that studies the retail industry.1 In some good news for the industry, Coresight predicts that 2019 "will not be the year of retail apocalypse or even decline. Instead, it will be a year of reinvention -- for the retail sector as a whole and for physical stores in particular."2 This predicted reinvention of the industry stems in part from the use of sophisticated technology, specifically artificial intelligence.
Artificial intelligence and automation has everyone scared for their jobs these days -- especially in retail. It's being used to predict demand, reduce inventory and automate decision making. Walmart is deploying robots to analyze shelving inventory and look for missing labels or prices. Kroger is implementing smart shelves that automatically update pricing. Amazon recently launched cashierless checkout with Amazon Go and is planning on opening more stores this year.
Implementing AI solutions in brick-and-mortar retail is naturally more challenging than online retail, yet taking a step back, both are still surprisingly only in early stages. According to a 2018 study by Capgemini, over a quarter of the top 250 global retailers are integrating AI into their organizations (a sharp increase from 2016, when it was only a small minority of 4 percent). However, the study also found that only 1 percent of AI initiatives reach full-scale deployment. This is about to change. According to McKinsey Global Institute, investments by retail and CPG in artificial intelligence are expected to exceed $8 billion by 2024.