Making an impact in 20-AI-teen

Disruptive technology is the name of the game in the fourth industrial revolution, and Artificial Intelligence (AI) continues to be at the forefront of advances across many industries. For example, healthcare has benefitted from new cancer detection methods by analyzing high resolution images; scientists have also been working on the AI inside humanoid robots like Sophia, whose many applications include customer service and companionship for the elderly. But in 2018, it is retail that is the industry most ripe for disruption by AI, and here’s why.

artificial-trends-header.png

AI moved beyond the hype

While we traditionally view disruption as a sudden, “bolt from the blue” force, ripping up markets and destroying the major traditional players, the disruption caused by AI is likely to have a more gradual effect. AI has now moved beyond hype and is recognized to deliver real business value to operations. Automated decisions need to be implemented comprehensively throughout the business. AI’s impact on the retail market will be largely shaped by how the traditional supermarkets and major retailers react to AI and how they can leverage value from the technology.

Price optimization for competitive advantage

We have reached a point in the development of the technology where most national retailers already recognize that AI will come to form a key part of their business technology platform moving into 2018 and beyond. It may enable the biggest retailers to cement their positions as the market leaders, optimizing their supply chains to reduce costs and automate pricing decisions to reflect customer demand and improve revenue. For example, fashion retailers have to react on fast collection cycles and short-term trends, and must manage the markdown process as efficiently as possible. AI will help them to balance stock and pricing on each article in order to maximize their margins. It may also give the new market entrants or retail start-ups the technology they need to act with more agility, as well as out-maneuver the bigger players. It is how retailers use AI (and the insights and benefits it can bring) to their best advantage that will cause the real disruption to the industry.

Supply chain optimization = happier customers!

The retailers who recognize that they can use AI to significantly improve the customer experience and product availability, by accurately predicting customer demand, will make significant strides in 2018 to delivering real value to the customer. It is not just the retailer that will be able to take advantage of the disruption caused by AI and automation. In 2018, organizations further down the supply chain, such as consumer packaged goods producers and manufacturers, will use AI to optimize their operations and processes.

With access to the right data from retailers, these suppliers will be able to shift their business models towards a demand-driven supply chain, where they only produce the goods and raw material that are required. This could significantly reduce waste, help retailers to meet their social sustainability goals and support the retail supply chain to operate more efficiently.

New geographical markets will start to adopt AI

As it stands, the main beneficiaries of AI in the retail market have been large, traditional retailers headquartered in the northern hemisphere, with the capital and resources to invest in the technology. However, in 2018 we may start to see retailers in nations such as Brazil, Russia, India and China look to adopt AI-driven customer demand prediction solutions to improve the experience for their consumers. Using AI and automation will enable retailers in these countries to leapfrog existing technology and avoid the issues with legacy systems that many retailers struggle with. Moving straight to advanced, AI solutions to provide (among other things) algorithmic pricing, will remove the necessity for an intermediate step that has hindered adoption for the established retailers in Europe and North America. With this roadblock removed, we may see these retailers grow significantly in size, and eventually challenge the Northern Hemisphere incumbents for market share in their own territories.

In an unquestionably competitive and volatile global market, and as retailers enter the so-called Golden Quarter, it is time for decision makers to think about their performance into 2018. It is time to evaluate processes and understand where efficiencies can be gained. The case for AI is only going to grow stronger, and will be an important solution in helping retailers to protect future profitability.

Prof. Dr. Michael Feindt Prof. Dr. Michael Feindt

is the mind behind Blue Yonder. In the course of his many years of scientific research activity at CERN, he developed the NeuroBayes algorithm. Michael Feindt is a professor at the Karlsruhe Institute of Technology (KIT), Germany, and a lecturer at the Data Science Academy.