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NRF Big Show: Where Will AI Be Most Transformative for Retail?
At a session at the NRF 2024: Retail’s Big Show, Amy Eschliman, managing director of retail at Google Cloud, predicted that generative AI (GenAI) could be as disruptive as the arrival of the internet or mobile phones.
“These massive transformations are nothing new to retail — the internet is a great example, it changed the way we shop; mobile phones, same thing,” she said. “Now it’s generative AI, which has the capability of transforming everything from the customer experience to the associate experience. It’s got tremendous potential, and it’s a really exciting time for retail because of this technology. It’s about the ability to synthesize and analyze information that we did not have before. The possibilities are really endless.”
AI and GenAI were either the primary topics or at least touched on across all panels at the NRF show, while AI-baked innovations were widely on display on the show floor.
Sucharita Kodali, VP and principal analyst at Forrester, said that “a lot of what is most powerful about AI already exists” in retail, citing recommendation engines, payment fraud protection, store labor optimization, and fulfillment analytics as examples. She said, “These are the tried and true tools that are built on machine learning and, in some cases, deep learning, that have been established and valued over time.”
However, she also said that outside some generated text and chatbots, the most promising benefit of GenAI, citing marketing content, “is one of the less common use cases of AI at retail right now.”
GenAI applications for marketing applications include writing ad headlines, email subject lines, and product descriptions; summarizing customer reviews; and creating images.
Many panelists remained optimistic that AI will tackle repetitive tasks to free up staff to tackle more creative endeavors, including enabling associates to interact more with customers, rather than replace jobs.
FedEx CEO and President Raj Subramaniam said, “I fundamentally believe that this is a pivotal time for e-commerce as we combine the power of AI and machine learning with the capabilities of our physical network to create end-to-end digital solutions and an unparalleled experience for you and your customers.”
Macy’s CFO and COO Adrian Mitchell said the retailer has made a “lot of progress” applying AI to pricing science, continues to experiment with AI-powered personalization and inventory allocation, and is exploring a wide range of “simply automation.”
“What we’ve learned is two things,” said Mitchell of Macy’s AI approach. “Number one, it can definitely make your business simpler. It can help you execute better and help you make better decisions. What we’ve also learned is you have to lean in because retail is a disruptive space. If you stand still, you’re falling behind with their customers, you’re falling behind the competition.”
Discussion Questions
Where are you most interested in seeing how AI, particularly GenAI, can reimagine the retail shopping experience as well as retail’s overall practices? What advice would you have for chains and smaller retailers exploring AI investments?
Poll
Loading …BrainTrust
Shep Hyken
Chief Amazement Officer, Shepard Presentations, LLC
Gwen Morrison
Partner, Candezent & Retail Cities Consultant
While I think AI will be incredibly interesting and will help transform retail in certain ways, I also believe that there is a massive amount of hype around it at present. The challenge lies in finding the use cases that will actually be revolutionary and separating it from those that are mere flights of fantasy. In my view, AI will work best for routined tasks such as writing product descriptions, for analyzing very large datasets and helping with tasks like demand forecasting, and for aiding customers in basics like search and simple queries. It will not replace all retail functions and it will not replace the need for human interaction and knowledge. In many cases, retail remains a very human-centric business and that should not be forgotten.
The technology community has a vested in promoting the tremendous potential benefits of AI. And while most retail executives will agree, AI is a powerful, when you scratch beneath the surface, you hear a lot of the same stuff: Personalization, marketing content, improve store productivity. These are many of the same claims that “big data” made. The fact is, a lot of what happens in-store has a physical component and AI in itself doesn’t solve that. For the last year the headlines have screamed that AI will transform retail – it’s time to start seeing exactly how exactly this is being accomplished. All retailers need to be clear about the specific use cases where AI can be applied in their enterprise. My advice is, start small, conduct projects and learn…expand as warranted, and don’t get caught up in the FOMO.
AI is merely another tool. And there may be places it’s a highly valuable tool. But we aren’t seeing those yet as the marketing of AI remains firmly focused on shoveling out shiny baubles hoping to get a share of a vast gold rush in “research” spending by retailers.
But I have to disagree even before AI appeared on the horizon. Google’s comments clearly show classic online hubris. Yet, 25 years after mainstreaming online shopping it remains less than 20% of US retail (on average — your results will vary).
DID the internet transform the way we shop? Only in small details. Humans shop as we always have — looking for things which are meaningful within our lives, wanting to do so simply and easily, and preferring NOT to have them stolen from our front porches.
So I’ll suggest we shop now as we did in neolithic times — choosing one cave over another, one spear point over another, one area for harvesting camas over another, one plant for making sandals over another… All AI can do is offer a tool which might make that process easier — and also might make that process more mistake prone.
Doug, I love this comment, “AI is merely another tool. And there may be places where it’s a highly valuable tool. But we aren’t seeing those yet as AI marketing remains firmly focused on shoveling out shiny baubles hoping to get a share of a vast gold rush in “research” spending by retailers.” AI will eventually be transformative, but in no way we are imagining today. Much money will be wasted in pseudo-AI until the real thing simply takes over for something we are thinking about.
GenAI should be pointed at fixing the horrific search experience, either online or in store, either of which have been rotten since the dawn of the internet. Get that right then move on to other use cases.
In my opinion, I’m most interested to see how GenAI can enhance the retail shopping experience by personalizing customer interactions. Retailers using AI to create customized ad content, email subjects, and product descriptions could bring a unique touch to each shopper’s journey. I’m also eager to see how AI’s potential to simplify tasks like pricing and inventory management can improve overall retail efficiency. My advice for chains and smaller retailers venturing into AI investments is to start with practical applications like automating routine tasks and enhancing customer engagement. It’s crucial to embrace AI’s potential for simplicity and better decision-making, ensuring a dynamic approach to stay competitive and meet evolving customer expectations in the retail industry.
AI is not a new concept. It is also a very broad concept. From my vantage point, I see a big benefit in inventory management…demand planning of volume driving styles, sales forecasting, allocation and replenishment…all of those practices that require clean data utilized in tailored algorithms which can parse weather patterns, sales trends, etc, etc. Human interaction and judgment will always be required, but can be enhanced with these tools.
I think one overlooked area is in product design. It shows both how it can help shortcut what can sometimes be a lengthy and painful iterative process, and also how GenAI is most powerful when combined with human evaluation, feedback, and decision-making.
You can’t ignore the possibilities AI offers retailers. Managing data to track preferences, both individual and overall customer trends, is powerful to help manage inventories, logistics, and more. Creating customized/personalized experiences through spot-on recommendations is easier and less expensive than ever. Marketing messages will become more tailored and personalized. And there is more. This is not hype. This is reality, and savvy retailers, big and small, are able to take advantage of this at a cost that is affordable.
The most compelling use case for AI is in providing front-line teams with access to product information, inventory data, and customer service information at the point of interaction with the customer. AI, along with Natural Language, will give them access to information through a headset or handheld device without requiring them to type or take their attention away from the customer while they manipulate their searches to try to get to the information the customer is requesting.
AI is one of the most powerful tools to come along in quite some time. It’s a tool. It’s all about speed, efficiency and productivity. I did some work a little while ago with time series pattern recognition. I came to think of it as the ability to be smarter, faster. The ability to be smarter, faster is a big deal and it looks like AI can have a huge role here. The ability to identify best sellers and worst sellers earlier in their life and then manage inventory and on order accordingly should give retailers an edge they desperately need in their quest to improve margins.
AI will also help at the design and development phase. BUT…we don’t need more choices or more inventory. We need better curated assortments and better supply management relative to fluctuating demand. If AI can help curate assortments and reduce overbuying, that’s a huge win for retailers and customers alike.
While there is a lot of hype around AI that it is going to transform businesses and displace employees, it is not a near-term reality. The low hanging fruit is using AI for product descriptions and marketing messaging, which companies are doing today. The more complicated tasks and decisions still need some AI finessing to be trusted.
AI’s biggest benefits in retail include hyper-personalized service, visual search and insights that reduce returns.
AI-driven personalization makes communications more relevant to individual needs, improving engagement and conversions. Visual search makes product discovery easier and more efficient.
Mining data for actionable insights can improve assortment decisions and minimize returns, especially in apparel.
NRF 2024 seemed to be powered by AI, as this innovation is a retail mega-trend. Retailers of all sizes need a plan to apply AI to improve the customer experience, operations and margins.
Is AI a tool to do the things we do better and faster, or is it truly a disruptive technology like the internet or mobile communications? I choose the latter. If it is a disruptive technology, any of us would be hard-pressed to determine where and when the disruption will come.
It seems to me that we often think of new technologies as tools for what we know and do. If one puts themselves back decades and realistically looks at new technologies that have come onto the scene, One would necessarily admit that they could never do what we do with mobile phones or the internet today. True AI (whatever it may be) will take us in directions we never imagined, nor can we talk about with certainty.
There is no doubt that AI is transformative and will have a massive impact in retail, it will reduce the amount of manual tasks currently done by associates, it will improve decision making by providing better more informative data and speed up operations. The most likely areas to really benefit are Supply Chain, marketing and customer service. Some talk about helping store staff, not sure how that is going to work, everyone is jumping on the hype cycle and claiming they use AI for all sorts of things, some may be valid but ask the questions before you buy.
AI and GenAI will continue to become embedded in various tasks and capabilities for retail (as well as other industries). The power of the machine-human interface by itself can drive tremendous improvements and goes beyond the few examples mentioned earlier. GenAI brings the ability to manage large data sets, vector searches, multimodal engagement with images, text and video, and accessing unstructured data- and categorizing it for you. The opportunities are huge and retailers have already started down this path. Retail is still risk averse and change averse and will take some time to adopt GenAI- but all the major retailers have taken notice, formed innovation units and continue to explore the business value and use cases. Smaller retailers must follow or even take the lead to stay in the same game. The GenAI revolution is not hype but foundational for the next generation of retail technology. New tech advances are being made every month from new reinforced transformers to retrieval augmented generation systems. GenAI will be everywhere and will be embedded in a myriad of applications over time. We are at the dawn of a retail tech renaissance and theres plenty more to come.
Well said @Aannda, GenAI possesses the capacity to handle vast data sets, conduct vector searches, engage with various media formats (images, text, video), and efficiently manage and categorize unstructured data. Embracing GenAI in retail demands a cultural shift towards openness to change.
At the end of the day, consumers will determine the success of AI. Specifically, how will it enhance the shopping process. Focus on the customer & determine when, how & where AI can make a difference. Note the recent use by Amazon to capture the potentially hundreds, if not thousands of customer reviews, to present a “cliff notes” product evaluation – simple yet effective. Retailers need to do more of the same.
I’m intrigued to witness how GenAI revolutionizes the retail landscape by managing vast data sets, conducting vector searches, and engaging with multimodal content—be it images, text, or video. Its capability to access and categorize unstructured data adds a layer of sophistication. This fusion of advanced analytics and human creativity holds tremendous potential for reshaping the retail experience.
For both chains and smaller retailers venturing into AI investments, consider these key pieces of advice-start small, identify pain points, collaborate with experts, data quality matters, prioritize customer experience, stay compliant and ethical, employee training, iterate based on feedback, monitor ROI and stay informed. By approaching AI investments strategically and thoughtfully, both chains and smaller retailers can unlock the potential benefits of this transformative technology while mitigating potential challenges.
The theme I picked up on is transparency. The more retailers and brands can see and react to what is happening with regard to where inventory is and how consumers are behaving in real time, the more efficient organizations can be. AI will become a robust tool for these types of optimizations and more.
Will Gen AI be as disruptive as the Internet? Be a completely new channel. No. At least not in the short to mid-term. But will it make people more efficient? Yes. In the short term for generating content. Copy. Images. Video. Even more interesting will be Gen AI layered on top of more traditional Predictive AI. But there are still very few retailers with the right data set to take full advantage of the promise of AI. Especially for back end operational use cases. There’s a lot of work to be done.
For smaller retailers or retail chains exploring AI investments, the key is focusing on where AI can deliver the most ROI as aligned with business goals. For example, if the retailer is looking to drive efficiencies, then it can leverage AI algorithms to optimize pricing strategies based on an analysis of market dynamics, competitor pricing, demand elasticity, and other factors to dynamically adjust prices in real-time. If the goal is to enhance the customer experience, then AI can be used to implement visual search capabilities that allow customers to search for products using images rather than text. By analyzing visual features and patterns, AI algorithms can accurately identify products, styles, and colors, helping customers find what they’re looking for more quickly and easily.