AI adoption in retail increases seven-fold
AI adoption in retail

AI adoption in retail increases seven-fold

Over a quarter of retailers have deployed AI to date. This is according to Capgemini’s Research Institute’s latest AI in retail report. The research found a 17 percent increase in AI deployments from 2017, and a seven-fold increase from 2016, when just four percent of retailers had adopted AI technology. This is compared to 28 percent today.

The findings show widespread enthusiasm in the sector for AI technology. However, despite this growth, just one percent of retailers have scaled AI adoption across the value chain.

AI opportunities in retail exceed $300 billion if companies are able to scale and expand the scope of their existing deployments.

The UK is leading the way when it comes to AI penetration, with 39 percent of retailers already working with AI – well ahead of the 29 percent in Germany and 25 percent in the US.

Unsurprisingly, online-only retailers are outdoing their brick and mortar peers, 68 percent of pure-play online retailers have implemented AI, compared to 30 percent of omni-channel and 10 percent of physical stores.

What are the benefits?

Of those employing AI in the UK, 96 percent benefitted from a reduction in customer complaints, whilst all such retailers experienced an increase in product sales and services.

UK supermarket chain Morrisons has deployed AI to analyse different data sets (such as weather patterns, and public holidays) to predict demand down to individual store level. Their shelf gap was reduced by 30 percent as a result.

Despite these promising results, under 10 percent of retailers worldwide expect enhanced customers satisfaction from using AI technology, and a reduction in customer complaints.

Three-quarters of retailers surveyed revealed that AI has not replaced any jobs at their organisation so far. Those that have seen job loses put the number at 25 or lower.

Meanwhile, 71 percent of retailers says AI is creating jobs today, with over two-thirds (68 percent) at a senior level.

The next steps

Just one percent of retailers have deployed AI in a multi-site or full-scale implementation capacity. According to Capgemini, retailers stand to save over $300 billion in the future if they scale AI applications across the value chain.

The current lack of scaling is caused by a focus on more complex, higher-return projects. Retailers deploying AI were eight times more likely to be working on high-complexity projects than quick win projects that are easier to scale.

Deployments to date have also lacked a focus on customer usability: the driving forces behind current AI implementations are cost (62 percent) and ROI (59 percent), while customer experience (10 percent) and known customer pain points (seven percent) are significantly lower priorities.

Standout examples included using AI for procurement task, applying image detection led algorithms for detecting in-store pilferage, and optimizing supply chain route plans – all of which averaged nearly eight percent ROI.

The report found that a transformed and super-charged supply chain, for example, offers a significant operational opportunity, as it is one area where AI can bring greater efficiency.

As the realities of AI have revealed themselves, companies in 2018 have 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 percent in 2017 to 53 percent today.

More than eight out of ten retailers in 2017 were confident that their data ecosystem for implementing AI was prepared. Today this figure has dropped to 55 percent.

Finally, those organizations claiming to have a roadmap for AI deployment have dropped from 81 percent in 2017 to just 36 percent today.

Kees Jacobs, Vice President, Global Consumer Products and Retail Sector at Capgemini said:

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 organizations 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.”

Internet of Business says

Comparing this data to 2017 equivalents, Capgemini’s report delivers a series of reality checks that not only show how far AI has come in terms of concrete returns, but how much value it can deliver if retailers begin to prioritise less complex deployments, and diversify their focus.

The benefits are increasingly clear to see, and the technology more mature. However, retailers are aware they need to get their house in order if they are to reap these rewards.

Regardless of their capabilities, AI deployments can only be successful if they are fed with reliable, good quality data.

At its best, AI can enhance both customer and employee experiences in the retail space.

Scan & go checkout free shopping is finding favour at Sainsbury’s and Co-op, while Amazon Go’s more advanced solution looks set to roll out to as many as 3,000 stores worldwide.

With the rapid advance of AI further threatening high street stores still stumbling from consumer preferences for online shopping, it’s no surprise that the likes of Marks & Spencer are establishing data academies to up-skill their workforce secure their place in the digital-first future of retail.