The retail sector is embracing artificial intelligence (AI) in ways we never thought possible a mere decade (or even a year) ago. The need to streamline eCommerce processes and experiences has inspired retailers to adopt AI for broad variety of use cases and applications. This sector, like many others, is poised for enormous growth.
The market size for AI in retail was $5.5 billion in 2022, but by all accounts we're still at the nadir of what promises to be an AI revolution. AI in retail is expected to be worth USD $55.5 billion in North America alone the next ten years.
Source: Fortune Business Insights
There is (seemingly) nothing that AI can't do. Retailers are using it to improve customer engagement, personalize content and experiences, and aid in inventory forecasting (to name a few applications).
We’ve put together a few examples that illustrate AI is being used in eCommerce. Our goal is to provide a tangible understanding of how retailers can benefit from various AI-enabled technologies.
AI for Product Image Generation
Generative image creation tools like Midjourney and DALL-E use AI to create new images from user prompts. The tools, while not quite enterprise ready, are an example of how generative AI, which is trained on large datasets, can create unique content either from text-based prompts or by uploading an image. Here's an image created in DALL-E, a text-to-image AI-model developed by OpenAI.
The image was created from the following prompt: a cute puppy drinking a can of coke in the style of van Gogh.
Image generated by DALL-E
Using AI to create or augment product images is becoming more mainstream. Google recently launched Product Studio, a tool that uses generative AI to enhance and improve product images. With the tool, merchants who sell on Google can change image scenes, remove distracting backgrounds, and increase image resolution.
Vue.ai, a customer experience platform with a suite of features aimed at helping retailers automate various processes, has a tool that uses AI to create on-model images without the actual model. Clothing retailers can use the technology to virtually dress models in their products, avoiding the need for costly photo shoots. Vue.ai’s clients include LEVI’s, ThredUp, and Hanes.
Image source: Vue.ai
AI eCommerce Personalization
AI-enabled tools make it possible for retailers like Walmart to personalize customer shopping journeys across online touchpoints like apps, websites, and email. Personalization comes in a variety of forms including customized product recommendations, buying experiences (where I might see a different home page design than you see based on my past behavior, location, and demographics), and marketing messages.
We see personalization at work whenever we log into Amazon and our home page shows products we’ve browsed in the past, products we might like (based on past purchases and behavior) and features like “Buy Again” which show us replenishable products we’ve purchased in the past like energy bars, vitamins, and batteries.
Walmart is an example of an AI in eCommerce case study. This traditional retailer uses AI to personalize recommendations to customers in store and online. They have a proprietary platform that analyzes customer data including browsing behavior, purchase history, and demographics to make relevant product suggestions, tailor content, and create personalized offers.
AI is also being used in eCommerce to personalize marketing messages, tailor shopping experiences to different user segments, and create customized e-merchandising experiences (showing different images to different shoppers based on their unique preferences and aesthetics).
AI for supply chain optimization
AI is being used by retailers to optimize every facet of supply chain management. Predictive analytics, which is a type of AI that uses machine learning (ML) to forecast potential outcomes, is incredibly good at predicting product demand. It uses this information to automate the process of stock replenishment by forecasting demand and submitting order requests when stock is low.
AI tools can also plan the distribution of items across warehouses and physical stores based on demand within a given store location. This ensures retailers have adequate inventory to satisfy demand without holding too much surplus merchandise.
AI-enabled logistics platforms help retailers streamline the fulfillment process by using ML algorithms to analyze shipping routes and make real-time adjustments based on weather conditions, traffic, and whatever else might impact delivery times.
There are other ways that AI is helping streamline the logistics process including predicting return rates for products and automating the returns process. And robots—powered by AI—are being used by companies like Amazon and Associated Foods to pick, pack, and sort warehouse items.
AI for customer service in eCommerce
AI helps retailers provide better service to eCommerce customers in some very futuristic and exciting ways. AI-powered chatbots and virtual assistants literally speak with customers, providing 24/7 support. They’re available to answer customer inquiries at all hours (robots don’t need sleep). They can also handle multiple customer queries at once and handle different languages, making them ideal for serving customers in different geographic locations and markets.
AI-powered “intelligent” search engines help shoppers by suggesting similar products, auto-completing queries using ML to predict what a shopper is most likely to search for, and directing customers to appropriate content so they can successfully self-serve (e.g., find answers to common questions like shipping and returns policies).
AI-supported customer service models help human agents serve customers better by routing inquiries to the most appropriate agent, retrieving a customer's history based on historical data, and helping agents find the right information more quickly.
Retailers like Walgreens are using AI to proactively provide better customer service. For example, Walgreens uses AI to track the spread of the flu and alert customers in affected areas so they can be aware of the outbreak (and stock up on flu-related items). Sephora has AI-enabled technology that scans customers' faces in stores and matches them with the right shade of blush or concealer.
Unlocking business growth with AI
AI, in its many iterations, is reshaping the way retailers operate and engage with customers. The future of retail is AI-infused and we're here to help you navigate whatever new innovations and challenges come with it.
Dive deeper into the world of AI by downloading our Marketer's Guide to AI. It's packed with information including an overview of AI tools, use cases, ethical considerations, and our take on what's coming next for AI and businesses.