How Artificial Intelligence Affects the Retail Industry

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Updated: Mar 28, 2022
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It may seem as though the retail industry is dying, with various retailers closing, many stores like Toys R Us, JCPenney, and Sears for example. But, the retail industry is actually only growing. Artificial intelligence could be to blame for this seemingly sudden change in the retail industry. Businesses today have made a choice to accept artificial intelligence, or to deny it, and there are clear consequences for this decision. Artificial intelligence affects many parts of a retail business including sales, customer relations and marketing of a business, delivery methods, and payment methods.

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Artificial intelligence has grown spectacularly in the past decade and will continue to change and reinvent the retail industry towards a more technological and efficient future.

Artificial intelligence (AI) is used in retail in many different ways. AI is used to to comprehend and respond to certain types of language, to go through big amounts of data to problem solve, to go through various algorithms and process them, execute decisions or even predictions surrounding the world of retail, and it can even learn from its experiences. Currently, the biggest way that artificial intelligence is being seen being used in the retail industry is through algorithms in which the AI can learn itself. Each one of these algorithms usually have a one, specific purpose or goal, such as recommending what products are best for each consumer for example, and it goes through massive amounts of data, and processes it to be able to do that. The AI can then read from the outputs and reevaluate the algorithm for an experience that is better the next time. Artificial intelligence has had lots of impacts in different kinds of businesses, but AI will affect retail heavily in the coming years.

“Seeing the number of big retail chains that are closing stores (think Sears and Payless) may support a surface-level impression that retail is dying out, but that could not be further from the truth.” (Chandran, n.d.).

Artificial intelligence is the reason that it may seem that the retail industry is dying out, these stores that are “failing” and only dying because artificial intelligence is weeding out companies that are not equipped enough for the digital age in retail where artificial intelligence is behind it all. According to Chandran (n.d.), today’s retail consumer wants to maintain convenience and efficiency, but also stay up to date with the latest trends. In the graph below, it is shown how retailers around the world identified the main areas that artificial intelligence has the potential to impact meaningfully. The graph shows that retailers today have high hopes for artificial intelligence and positive impacts on their businesses in the future, so much so that they are acknowledging the areas that have the most potential to make a big impact on the industry. Some examples of the areas with the highest potential according to retailers are cost savings, increased productivity, increased revenue, more informed business decision making, and faster resolutions of business problems (Chandran, n.d.). This shows that businesses are recognizing the importance of artificial intelligence, and the potential and probable success that could be granted by investing in AI for the future.

Artificial intelligence has many different effects on the retail industry, especially the sales. Various stores around the world have tried to incorporate artificial intelligence into their store to drive up sales. One particular way is by having a humanoid robot in the store to help customers. One particular humanoid robot is named “Pepper.” “Pepper” is very popular in Japan where it is used for customer service and as a representative. (Fagella, 2018). The idea of a humanized robot is still a very new idea and very new to people, and Glaser (2017) found that SoftBank (the creators of the robot) had been waiting to bring this “Pepper” robot to the American market for months, and they finally released them into select California retail stores in Palo Alto and Santa Monica. This impressive robot was helping with customer service, wielding a tablet on its chest to help customers and it can also give directions or find out the price of an item (Glaser, 2017). This new concept of a robot in a retail store for helping customers could also be a way to encourage customers away from online shopping and into physical stores. In Palo Alto and Santa Monica, “Pepper” was documented to have increased foot traffic by seventy percent, and fifty percent of sales in Santa Monica were attributed to this robot (Fagella, 2018).

Whether or not this success of the humanized robots arounds the world like Pepper are attributed to the fact that it is new and interesting technology that people want to see, the success is still something to marvel at for retail store owners. Of course there are other types of robots that are not humanized and as advanced as Pepper. There are other robots utilizing artificial intelligence that also have the capability to improve sales. For example, the home improvement retailer, Lowe’s, has worked with artificial intelligence programs before and have launched an in-store autonomous robot that helped customers named the “LoweBot”. It was a pilot program meaning that it was a test to see how it would do in actual stores, the robot turned out to be very helpful with sales by detecting sales patterns and it also kept inventory of the store in real-time. This robot turned out so successful that the information it kept and sales patterns that it analyzed guided business decisions for Lowe’s (“Software For Hardware: How Artificial Intelligence Is Helping Lowe’s Customers,” 2018).

These artificial intelligence robots like “Pepper” and the “LoweBot” are just scraping the surface as to what could come of different artificial intelligence robots designed for improving sales in retail stores. Antonio (2018) notices that from the suppliers side of sales, it can be difficult for many reasons. One example is price optimization, knowing how much of a discount, if at all, should be applied. Well, an artificial intelligence algorithm could figure out what the best discount rate should be for a proposal to ensure that the business is making money effectively by looking at specific features of past deals that were positive or negative (Antonio, 2018). Sales reps are always in  between three priorities on any given deal: the customer’s satisfaction and the value that they are getting, the speed in which they close the deal, and the best price for the company. Nobody can effectively balance these three priorities on their own keeping in mind the different variables ??“ and it is especially difficult for newer workers in sales who are just starting their careers in sales (Mallick, 2018).

Price optimization by artificial intelligence could help to save time, take stress off of the sales representatives, and find the best price beneficial for the company and the customer. In sales, businesses could wrongfully be spending lots of money selling to customers that will not buy again, when there is artificial intelligence algorithms that determines how much more likely it is that people that will buy again from the business, or buy a better version of something from that business, otherwise known as upselling (Antonio, 2018). Integrating advanced analytics within a businesses system can help create buyer personas that are more likely willing to invest in the business. Artificial intelligence can be used to analyze the buyer’s journey and make upselling more personalized. AI will also be able to detect which customers have a hefty bank account and are capable of paying a fair amount on the customer’s service offerings (Ubaid, 2018).

Also, according to Hudson (2018), sales in retail are the whole industry, sales are what keep companies running, and artificial intelligence have the potential to boost sales. Artificial intelligence in retail can learn about customers, their preferences and their behavior to get to know them. Recently, it can also get to know customers so well that it knows what they need and when they need it. When AI is capable of coming up with this information, there are lots of benefits that can be obtained immediately for the business cash flow and the general experience. It can get the customer to buy more. If AI knows what they need before they do and issues them a coupon for a given product, this will trigger them to buy an additional item which they did not come for while generating extra revenue for the business (Hudson, 2018). Artificial intelligence has not only changed shopping in retail stores, but it also has impacted the retail e-commerce market. In the graph below, retail e-commerce sales have gradually gone up in the past years partially due to artificial intelligence.

This growth and increase of sales is only project to keep rising in the future and this is due to artificial intelligence because AI could help with enhancing the sales cycle, by tailoring the customer’s problem-solving solutions and creating a stronger sales message that reaches consumers at the right time on the right platform, effectively improving sales for a business (Novoseltseva, 2018). Overall, sales could be argued to be the most affected by artificial intelligence for many reasons. Firstly, there are humanized products of artificial intelligence like “Pepper” the humanoid robot that helps customers in retail stores and has proven so far to increase foot traffic and sales. Secondly, there are other artificial intelligence products like the autonomous robot in Lowe’s that impacted how Lowe’s looked at its sales and guided various sales business decisions. Also, because of the various analytics and algorithms used to figure out what the customer wants, how to get the customer to buy from that particular business, or how to get that customer to buy more from that particular business. Lastly, there is the aspect of how artificial intelligence can affect the retail business through e-commerce and how this AI is projected to improve sales a considerable amount. While sales is important for a business, marketing and customer relations is also crucial. AI has also had many interventions with marketing and customer relations.

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How Artificial Intelligence Affects the Retail Industry. (2019, May 16). Retrieved from