Artifical Intelligence (AI) is now being used to transform businesses, meaning companies are better positioned to provide consumers with the experience that they both demand and expect. But despite the respite the rise of the machine presents staff, conversations regarding automation are often littered with fear over the potential loss of jobs. This shouldn‘t be the case, instead, businesses and staff need to recognise the introduction of AI as the start of a new era where staff can ‘work smart‘ and become increasingly effective.
Technology advancements now enable machines to make billions of automated every-day decisions in real time, reducing the risk of human error or bias. This ensures that decisions are made objectively and in real time to produce the best possible results at minimal cost. As a direct result, this kind of technological management will typically free up floor staff time as data analytical and decsion making responsibility is overtaken. But this doesn‘t mean that staff are no longer needed – quite the opposite. This kind of technology is designed to work alongside people to enhance performance, rather than to overtake manpower. To that effect, the deployment of automation should work to refocus shop floor staff to hone in on customer experience enhancement.
With more time being centred around serving the customer and ensuring that their experience is everything they demand and want, businesses will soon see a rise in consumer loyalty and return visits. This, in turn, will boost revenue as consumer spend increases. This efficent way of working also enables staff to focus on decison making around the customer experience. For example, shop floor staff may need training in product knowledge or customer interaction, or it may be that consumer feedback indicates that a certain way of selling is much prefered to another.
A specific practical example of how AI works in retail is with price optimisation. In today’s industry, low prices have become somewhat expected and often act as the competitive edge, with retail giants, like Amazon and Primark, able to slash margins to win customers. But for smaller retailers who can‘t afford to walk on the margin tightrope, head office decision makers need to consider how best to optimise pricing across channels to ensure the business is both profitable while keeping new and existing customers satisfied. Retailers also need to recognise that strategic price reductions are needed continuously, offering items that perhaps arent selling well at a cheaper cost to help shift stock, or placing a promotion on a new product to generate inital sales is far more profitable than traditional end of season sales and kneejerk reactions to external factors, such as a change in the weather.
Businesses used to dictate shopping patterns, but the advent of price comparison websites, sophisticated ecommerce platforms, and smartphones enabling on-the-go purchases have put consumers fully in control of the relationship. For instance, our recent research found that 36% of shoppers check the price of an item online when in store to see if it is cheaper elsewhere.
As a result, seasonal shopping does not follow the pattern it once did, and changing consumer behaviour – combined with customer expectations for discounts – is causing some serious profitability and margin erosion challenges, which can no longer be ignored.
With pricing held as an important driver for consumer engagement and interest, this task is no easy feat. For example, 79% of global shoppers claimed that they are disappointed when a discounted item has sold out, while over half feel let down when the colour they want is not available in the sale. To add to this, 81% of shoppers are disappointed if their size isn’t available at the discounted rate, so a reduction in price can often result in unintended consequences – namely, unhappy customers.
By analysing the connection between customer demand, price changes and business stategy, companies, and retailers, can better align pricing for each and every item, every season. To this point, the business is also able to holistically determine when pricing can be maintained at full rates, so consumers are not left expecting sale pricing continually and products don’t lose value.
Other aspects, such as, sales and competitor pricing are then automated into operational systems. This will ensure that customers won’t be left dissappointed, and AI metrics can be used to inform stock availability verus demand to ensure customers can get the items they desire. The impact of getting pricing correct and optimised is huge, with fashion retailers witnessing an improvement in profits by 5% and increased revenue of up to 15%.
The recognition for a need to optimise pricing is by no means a new concept, and retailers have attempted to automate these strategic decisions in the past, with minimal success. But thanks to the advancements made within the AI space, AI can now learn, adapt and respond to market dynamics automatically, including external factors that may affect pricing – and consumer expectation of pricing – such as the weather, or Bank Holidays. Artifical intelligent technology is much more sophisticated today and can respond in real time, across all available channels, meaning that true pricing optisation is achieveable for retailers.
By ensuring that pricing is automatically optimised, staff are able to focus on delivering the customer experience that consumers have grown to expect. The demand for better experience has boomed in recent years as consumer buying journeys become more complex, and invlove numerous channels, before they make the final purchase. This means that retailers must provide every consumer with the upmost experience, as each and every single touchpoint will impact whether that shopper goes on to purchase.
And this is where the real pay-off comes into play, as experience wins the heart of consumers, and those that have had a positive experience will remain loyal to the brand and possibly spread the word.
In a landscape that is fiercely competitive, to remain profitable businesses need to ensure that margins are maintained whilst meeting and exceeding the demands of customers to maximise their lifetime value. Simply sticking a ‘sale’ sign up in-store or marketing discounts online is no longer sufficient; for the winners, AI driven decisions will become the cornerstone for building a more profitable future.
Prof. Dr. Michael Feindt, Founder and Chief Scientific Officer at Blue Yonder
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