2019 could be the year that retail fully embraces artificial intelligence, according to new research by Capgemini.

Retail is currently undergoing a transformation and 2018 has undoubtedly been a challenging year. Several well-known chains have entered administration, with many more reducing their number of physical stores. Retailers closed nearly 2,700 shops in the UK first half of the year alone, resulting in thousands of job losses.

In what has been described by some as the “death of the high street”, many brick and mortar stores are looking to new technology in order to compete with the choice and convenience e-commerce has to offer.

The answer to this could lie in part with AI. However, although there has been hype surrounding AI’s potential to improve sales and customer experience, the research suggests that retailers are now finally putting this potential into practice.

From using big data to improve customer recommendations to augmented reality to assist with trying on clothes, and even making it easier to track and manage stock, research increasingly suggests that those who are willing to embrace new technology look likely to survive in the new retail environment, whereas those who don’t may fall by the wayside.

How AI in retail is shaping future success

The study, “Retail superstars: How unleashing AI across functions offers a multi-billion dollar opportunity”, looked at 400 global retailers that are implementing AI use cases. It found that 28% of retailers are deploying AI today, a significant increase from 17% in 2017 and just 4% in 2016.

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This suggests that many retailers are now waking up to this potential. Spanish clothes retailer Zara is looking to AI in retail to compete in the world of fast fashion through the launch of an augmented reality app across 120 of its stores. Customers will be able to use their smartphones to see mannequins moving around while wearing clothing available to buy.

According to Forbes, H&M is also using AI to analyse returns, receipts and loyalty card data to tailor the merchandise for each store.

Tesco is also investing in the technology in order to compete with online grocers, from customer-facing apps to using machine learning for delivery van routing.

Although a common fear surrounding AI is its link to job loss, the research has found that the technology could in fact create jobs, particularly significant in a sector that has seen many jobs lost over the course of the year, with an estimated 85,000 jobs lost from store closures as of November.

71% of retailers say AI is creating jobs today, with over two-thirds of the jobs being at a senior level. Meanwhile, 75% declared that AI has not replaced any jobs in their organisation so far. Those who did say jobs have been cut put the number at 25 or lower.

Another major benefit to AI is in customer service. A trend that has emerged from the difficulties faced by retailers is the need to offer a unique experience not offered by e-commerce in order to ensure that customers keep shopping in-store. 98% of respondents using AI in customer-facing functions expect the number of customer complaints to reduce by up to 15%, while 99% expect AI to increase sales by up to 15%.

Moving forward, the study also revealed the huge potential of AI deployment in the future. According to the report, retailers could save as much as $300bn by scaling AI deployments across their entire value chain. In other words, behind-the-scene uses such as using AI for procurement tasks, using image detection-led algorithms to stop theft and optimising supply chain route plans could help save money.

However, currently just 1% were shown to be working on implementing AI in retail at this scale, suggesting that although progress has been made, retailers must do more to reap the full benefits.

In 2018, companies also adopted more realistic expectations regarding their preparedness for it. Those claiming that they have the skills needed to implement AI have now dropped from 78% in 2017 to 53% today.

Kees Jacobs, Vice President, Global Consumer Products and Retail Sector at Capgemini said that the benefits of AI in retail are starting to be realised:

“For global retailers, it appears reality has kicked in regarding AI, both in terms of what the technology can achieve and what they need to do to get there. Of course, deploying and scaling will be the next big objective, but retailers should be wary not to chase ROI figures without also considering the customer experience.

“Our research shows a clear imbalance of organisations prioritising cost, data and ROI when deploying AI, with only a small minority considering the customer pain points also. These two factors need to be given equal weighting if long-term AI growth, with all of the benefits it brings, is to be achieved.”