The retail business isn’t getting any easier—companies need to be everywhere, do everything, and cater to everyone. Far from being a technology that will further complicate your operations or steal your job, artificial intelligence and its data analysis capabilities can help you accomplish these goals and make your work easier.
Retail is more complex than ever, and it’s evolving at a rapid pace. The speed with which technology is changing how you run your business can feel stressful, particularly alongside the many other challenges retailers face. An omnichannel business with an increasingly complicated consumer means you need to be able to pivot quickly while managing an infinite number of moving parts.
Product, supply chain, and people—corporate and frontline employees alike—all need a high level of attention. And with the cost of doing business outpacing actual revenue increases, you also have to be more efficient in every area of operations. You have to reduce turnover, deal with shrink, and get more productivity out of fewer people. And when the market changes, you have to act. Fast.
It’s truly a juggling act.
The question, then, is how to prioritize your limited resources to address these competing challenges.
Fortunately, AI is well positioned to help you solve several of them. Investing in tools that support your capacity for data analytics will make your business more efficient, more proactive, and better prepared for the inevitable shifts that come your way.
4 Ways AI Can Help Retailers
Getting technology and people aligned is the key to future success. You can’t have one without the other. Technology can handle volume, while people can anticipate changes a machine can’t (yet) see.
In the retail business, this means that retailers can see how the business is changing. They know that leverage has shifted from the retailer to the customer, who wants to shop however they want with access to ancillary services like curbside pickup, free shipping, and easy returns. Artificial intelligence presents an opportunity to help them make those changes most efficiently.
Retailers have oceans of data—so much data that it’s impossible for people to interpret all of it. AI, on the other hand, can analyze your data to extract actionable insights in minutes, and can update those insights as the market, the consumer, and the environment change.
This technology is sure to become even more powerful in coming years, but it can make an impact today.
So what applications should retailers focus on to get the most benefit? Where should they utilize AI to reduce risk and maximize ROI?
The answer will be different for each retailer depending on how they structure their business. But some key opportunities exist that can help everyone.
Assortment Planning
Seven years ago, when I was serving as the Interim CEO of a fashion retailer and the business was emerging from bankruptcy, I realized that if we improved our ability to buy the right products up front, we would increase sales and decrease markdowns. We hired a firm to provide us with insights from proven customer panels and saw immediate results.
High-scoring customer panels are accurate at predicting trends, buying patterns, and successful products. Feeding customer panel data to AI allows for even more nuanced insights. AI can predict purchasing behavior on a product level, a customer segment level, a regional level, and a brand level, which provide you with the data you need to make buying decisions that have a significant impact on your ROI.
Inventory Management
Those who run a fleet of stores are likely familiar with the experience of traveling from location to location only to find out that Store A doesn’t have enough Smalls while store B doesn’t have enough Larges. The demographics of each store’s surrounding area are a big determinant of what sells, but this data is often opaque.
With access to large swathes of sales data, AI can identify purchasing behaviors and customer profiles for individual stores. Management, then, can make accurate predictions about what inventory will sell at each location and allocate the appropriate product mix from the beginning. Rather than relying on standard size or color packs, with optimized inventory, stores will see fewer items go to clearance, increased margins, and sales that would not have otherwise existed.
Return Analytics
Free shipping and free returns seem to have become the standard customer expectation since Amazon made these programs a paid membership perk. But therein lies the problem—free shipping isn’t free, for the customer or the retailer. Implementing these programs requires a consideration of what you can afford.
This information can be bolstered by an analysis of what your customers actually want. AI can review return behavior to suggest the right program threshold. It can determine whether a free shipping program would increase sales or simply add financial stress to your e-commerce business—meaning a paid return program would, counterintuitively, be the best course of action. It can give you the data you need to support informed decision-making, which prevents you from following trends that will hurt, rather than help, your business.
Pain Point Identification
Customer pain points are a source of frequent discussion at any retailer. Understanding which pain points truly make a difference is critical to making changes that have a big impact. Taking guesswork out of the equation will allow for quick action that increases sales and customer loyalty.
Here, again, is where AI can support your knowledge. After reviewing purchase and return data, AI can identify whether your customers are having significant issues with fit or finding the quality of products from one vendor unacceptable, prompting you to readjust your sizing profile or remove a vendor from your rotation. Knowing which pain points are the highest priority prevents you from trying to boil the ocean and focus your efforts on strategies with high ROI.
AI Will Help Your Business Thrive
At Getzler Henrich & Associates, our industry specialization and individual touch means we’ve watched the retail business change, and change, and change again. We’ve seen that the companies that adopt new technologies with an eye toward efficiency and supporting the highly knowledgeable people they employ reap significant benefits, while those that resist change struggle. Fixing the balance sheet is one part of a holistic solution; performance improvement, restructuring, and identifying how best to adopt new tools round out the strategy for making your business thrive.