Discover genius ways AI is revolutionising department stores

Many department stores are adopting new technology to better their businesses. One of the most popular ways is by implementing artificial intelligence. AI systems gather information and data from a variety of channels to predict customers’ behaviours and need with the aim of improving some aspect of the business. Artificial intelligence is used for many different purposes such as stocking shelves according to what they predict customers will buy most often or recommending products based on customers’ previous purchases. In this article, we’ll be going over a few of these benefits in detail.

What is artificial intelligence?

Artificial intelligence – also known as AI – was a term coined in 1956 by John McCarthy to describe the ability of computers to perform tasks that were historically only possible through the efforts of ‘intelligent’ humans. It is used by many industries to automate work and increase efficiency. For example, AI can be used to scan photos or videos for inappropriate content.

The main concept behind AI is machine learning. This refers to algorithms that allow computer programs to improve through the repeated experience without human intervention. Most modern-day AIs (e.g., IBM Watson) learn from data but can also be programmed with certain functions that allow them to do specific tasks that may require human intelligence (e.g., interpreting speech). These functions are written in computer code and can be changed as needed.

What is artificial intelligence used for?

Businesses have been taking advantage of AI in areas ranging from stock management to customer engagement. In the retail industry, major department stores such as Nordstrom’s use machine learning to predict which products customers will buy so they can move them closer to the front of the store. Other companies, such as Walmart and Target, use AI to automate the management of inventory while Macy’s uses it to scan items for counterfeit products.

In 2020, nearly 60% of retailers said they planned to use artificial intelligence for their pricing strategies by the end of 2021.

Forbes – Personalizing Price With AI: How Walmart, Kroger Do It – September 2021

There are many other uses for artificial intelligence in the retail industry including product recommendations based on previous purchases, chatbots that can interact with customers directly via social media platforms or messenger, virtual assistants able to answer customer questions, and robots that can perform physical tasks such as vacuuming or grocery shopping.

AI in the retail industry department store examples and use cases
AI in the retail industry

Benefits of AI in retail

The retail industry’s digital transformation has been underway for years. It has boosted productivity, efficiency, and accuracy across the board of retail organisations, thanks in large part to advanced data and predictive analytics technologies that are assisting businesses in making data-driven business decisions.

Aside from the business intelligence and rapidity these technologies may provide, the digital transformation in retail is primarily about separating successful firms from failing ones. AI in retail can provide a variety of benefits, but here are four primary ones that businesses should consider:

1. Engagement

With competitors adopting innovative new solutions for engaging customers, traditional retailers are beginning to adopt AI as a means of engaging clients in a personalised and relevant manner that is distinctive and exciting.

2. Understanding

To keep consumers interested, businesses must set themselves apart and offer them unique, tailored services and experiences. Rather than reacting to change, retailers are leading with innovation by using predictive analytics to gain greater understandings of their markets.

3. Insight

Faced with a deluge of information from all corners of their business – from supply chains to stores to customers – retailers need to be able to sift through the noise to arrive at insights from these disparate and high-volume data sources.

AI makes tracking traditional KPIs like internal foot traffic, dwell time, and conversion rates easy while opening the door to new KPIs like uncontested dwell time (how long a customer spends in-store without being approached by an associate). 

4. Flexibility

To serve a wider variety of client demands that are moving from conventional to specialised, companies must reconsider their standard supply chain in favour of adaptable and flexible ecosystems that can quickly react to buyers’ changing behaviours. AI is making it easier to adopt flexible inventory and ordering practices that predict demand rather than react to it.

How AI is revolutionising department stores

Many retail companies are beginning to implement machine learning and AI into their business operations to increase sales, decrease costs, and improve customer experiences. 

1. Increasing sales

On average, companies that implement AI into their business report a 5% increase in earnings – often through increased sales. One of the main reasons for this jump in revenue is that stores can accurately predict what items customers will buy, allowing them to move these products closer to the front of the store. This strategy decreases time spent roaming through aisles looking for specific products and can also decrease the number of stockouts since departments are stocked according to what machines predict customers want.

Nordstrom – a luxury department store chain – has implemented this strategy to great effect. In 2016, the company’s earnings increased by 30% after implementing an AI system that suggested more intelligent store layouts. Customers are greeted by more of the products they love the second they walk in the door, leading to far greater conversion rates. Systems like this are made possible by AI-powered analytics systems like Alteriee Mind which use customer data to identify high-value items.

The same systems can also be used to price items according to real-time demand. These intelligent pricing models allow department stores (and other retailers) to seamlessly adapt to changing markets.

2. Decreasing costs

Using machine learning not only increases sales but also decreases operational costs. It allows employees to focus on value-added activities rather than repetitive tasks that AI could perform more efficiently. Implementing this technology reduces human errors and saves money while increasing efficiency, which makes businesses run more smoothly.

One area where AI has the power to drastically reduce operational costs is analytics. In the past, department stores would need to hire market research firms to collect and analyse customer data to inform their decisions. This practice is both time-consuming and costly. Now, systems like Alertiee Mind allow collection and analysis to be completed in-house on a real-time basis. Easy-to-use dashboards and intuitive controls allow retailers to get the most out of their data without needing to defer to experts.

Alertiee Mind

Boost and manage in-store customer’s attributes, average expenditure, smart signage, targeted sales, product placement.

AI is also revolutionising the way retailers approach stocking and purchasing. While these processes were typically done on a supply and demand basis, AI has opened the doors for predictive behaviours. AI systems notice transaction patterns and retailers can use these to predict when certain products will likely sell out. This allows retailers to exert resources to purchase and stock only when it’s necessary.

3. Improving customer experience

One of the main benefits of adopting AI is improving the experience of department store shoppers.

One of the most direct ways that AI is improving the experiences of department store customers is by making their shopping journey easier by improving information accessibility. Luxury department store Neiman Marcus recently introduced a service called ‘Snap. Find. Shop.‘ based on IBM Watson. Using the Neiman Marcus app, shoppers can take a photo of any product they see while out and about and instantly be connected to a Neiman Marcus location that carries it. This removes the hassle of searching through endless lists of products until the correct one comes up.

In another example, Macy’s recently introduced ‘On Call‘ – an in-store AI chatbot that can answer customers’ questions while they shop. When a customer has a question about a product, they simply ask the chatbot – using either text or speech – and that chatbot responds. In addition, the chatbot can direct customers to any item in any Macy’s location.

AI is also improving customers’ experiences through its ability to predict desires. One futuristic example of this is Uniqlo’s UMOOD system. This AI-powered technology displays a series of products to shoppers while they wear an electrode headset that measures their responses. Using this data, the system makes recommendations for products that it believes they’ll love. If the electrodes seem too invasive, other technologies (like Alertiee Mind) can infer customer preferences using past purchases and visual inputs (i.e., facial expressions and movement patterns). 

One final area where AI is impacting customer experiences is in the delivery of tailored marketing materials. Using AI customer attribute detection systems like Alertiee Mind, departments stores can identify and store key customer attributes like age, sex, and preferences. These data points can be fed into recommendation algorithms to automatically generate marketing materials and rewards that appeal to customers as individuals. 

Is an AI analytics system right for you?

AI can be used in many ways to improve the customer experience. The improvements are vast and include better information accessibility, more efficient operational costs, decreased errors, improved predictions of customers’ needs or desires based on past purchases or visual inputs like facial expressions and movement patterns. AI is revolutionising department stores by improving the shopping journey both online and at brick-and-mortar locations. 

Further Reading

If you enjoyed this post: Discover genius ways AI is revolutionising department stores, be sure to check out our recent IoT and AI pilot with Adnams here: AI and IoT for retailers how physical stores can enhance customer experience

Proven benefits of Alertiee technology

Alertiee will help you realise missing sales opportunities, stores’ performance based on conversion rate, and stores’ sales hotspots areas.

We support and guide you through how you best convert both inside and outside traffic opportunities by supplying you with options around service risks and how to serve your existing and potential new customers best.

Alertiee will help you to provide a harmonious customer experience across your omnichannel business. Our technology enables customer experience, marketing and retail teams to close the gap between customers’ digital experience and their physical experience.

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Sahand Malek