AI in retail: what are the benefits?

AI is set to transform the way retail is run. From helping you to retain customers to staying ahead of emerging trends, here’s how AI will change the retail industry.

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Artificial intelligence is transforming the way multiple industries operate, and the retail sector is no exception to this trend. Although a digital transformation has been taking place in the retail industry for years – particularly as thousands turned to online shopping during the pandemic – AI is driving even more innovation.

Customers are demanding, more than ever, highly personalised experiences that take them to the right product or service. According to a survey by Capgemini, 76% of consumers expect companies to understand their needs and expectations but only 49% believe that retailers are actually doing that. Therefore, any tool that can help businesses create a bespoke interaction is poised to make a huge difference.

Here’s how that’s happening and how your retail business can hop aboard the AI bandwagon.

What is AI in retail?

AI in retail refers to the use of automation, data, and technologies like machine learning algorithms to produce highly personalised shopping experiences for consumers. Importantly, it can be used to enhance consumer experiences in both physical and digital stores, which means AI is not just reserved for ecommerce sites.

In practice, it uses behavioural analytics and customer data to glean valuable insights about different market demographics and ensure the customer journey is as smooth as possible. For instance, businesses can employ AI-driven chatbots to give shoppers a personalised recommendation or dynamic pricing based on user behaviour on the site, purchase history, and any other relevant data.

Did you know?

More than 53% of retailers said they would focus AI investment on their warehousing and distribution divisions, while 46.9% said they were keen to improve their buying and merchandising through the use of AI.

What does AI in retail look like?

AI in retail is so much more than just customer service chatbots that pop up on a page as you browse. Here’s a couple of exciting ways in which AI is being used for retail solutions:

  • Inventory management → AI can help better forecast demand for your products and services. By accessing large piles of data, AI can mine insights from your marketplace, consumer behaviour and competitor research to understand where the industry is heading. Better forecasting can translate into more strategic marketing and merchandising.
  • Adaptive homepages → thanks to AI, mobile and digital homepages are recognising customers and customising their e-retail experience to reflect their current context and previous purchases. For example, if it’s the summer and your customer previously looked for sun dresses, it’s likely the homepage will display your newest summer collection. This hyper-personalises the customer experience, boosting customer retention.
  • Dynamic outreach → with AI, guesswork is over. Thanks to advanced CRM and marketing systems, you can better understand customer behaviour and preferences to deliver proactive and personalised outbound marketing. Data-backed outreach campaigns are therefore less likely to end up in a customer’s junk mail and lead to conversions.
  • Interactive chat → bots use AI and machine learning to interact with customers, answer common questions and point them in the right direction to find helpful answers. In turn, these bots collect valuable customer data that can be used to inform future business decisions. The best part? All of this is being done by AI, freeing your customer service representatives to invest their time in essential human interactions rather than mundane and repetitive tasks.
  • Guided discovery → when customers head to Google to look for a specific product, it’s likely they want to spend as little time as possible searching. AI can help with this as automated assistants narrow down the selection of products by recommending the right selection that responds to shoppers’ needs, preferences, and fits.
  • Responsive R&D → deep learning algorithms collect and interpret customer feedback and sentiment to help identify gaps in the market and back new product research with data. Are your customers more interested in sustainable packaging? Do your customers want products that are not yet offered by your business or the competition? AI can help answer these questions with data and tell you where you should invest time and resources to make informed decisions about your next steps.
Retail has always been seen as a ‘traditional’ industry but with AI, that perception is bound to change. AI has the potential to continue to revolutionise the way retailers operate. From personalised recommendations to inventory management and customer service, it has the potential to transform both the online and offline shopping experience.

Theo Paphitis on the future of AI in retail

Benefits of AI in the Retail Industry

It’s completely normal to feel slightly sceptical about integrating AI into your retail operations but there’s enough benefits to convince you it’s worth it. Here are a few to consider:

✔️ Optimise resource use → through advanced data gathering that keeps track of your inventory, AI can easily help you stay on top of trends that affect your demand and supply. This can contribute towards optimising your resource allocation so that you can respond to consumer demand in the most personalised way possible.

✔️Get rid of cumbersome mundane tasks → no one wants to come into the office just to do the same repetitive task they did the day before. Machine learning and AI help with that. They automate mundane tasks, making business processes less error-prone and freeing your team from tedious tasks. Instead, everyone can better invest their time in tasks that require human interaction and creativity which contribute more significantly to your bottom line.

✔️ Helps filter the data noise → faced with a hefty mountain of information from supply chains to stores to consumers, retailers need to filter through the noise so they can translate the data into useful insights. AI’s ability to process data at breakneck speeds therefore helps you climb – rather than be crushed– under that mountain of data and understand consumer trends.

✔️ Boosts customer satisfaction → AI-powered tools like chatbots and virtual assistants allow retailers to engage with customers in real-time. The better trained your chatbots are, the more personalised experience they will offer your customers, helping them find the answers they’re looking for. This also boosts customer retention, which never hurts any business.

✔️ Can help you stay ahead of the curve → with a plethora of innovative competitors providing shoppers with immersive shopping experiences, traditional retailers need to engage customers in a personalised and relevant manner. By integrating AI, you can come up with new innovative approaches to streamlining the customer journey, grabbing the attention of new users.

✔️ Provide personalised customer service for customers → a report by Salesforce found that 64% of consumers expect personalised offers from retailers, and 52% are likely to switch brands if they don’t receive personalised communications. Thankfully, AI can rise to this challenge as its ability to process piles of data and understand consumer behaviour can help you tailor your offerings to cater to individual needs.

5 Examples of AI in Retail

Retail industry giants are already experimenting with AI, resulting in new creative ways of engaging customers. From beauty to clothing, here are some examples of how AI is increasingly claiming a spot in the retail industry.

💅 Sephora helps everyone find their right shade of makeup → anyone who’s ever tried foundation or concealer knows the complication of finding the right shade. As a response, Sephora is making use of their Colour IQ and Lip IQ technology which scans a customer’s face and provides personalised recommendations according to skin tone. This helps boost consumer’s confidence in their purchasing decisions.

🧥 North Face finds you the right coat for the right occasion → North Face uses IBM Watson’s cognitive computing technology to ask customers questions that will lead them to their perfect coat. Through personalised recommendations, customers can rest assured that their coat selection will be the right choice for their activities.

🛍️ Amazon eliminates cashiers with AI → through its revolutionary Amazon Go store, customers can simply walk into a store, pick up their items, and just walk out without having to go through a cashier. The technology scans the items they selected and later charges their Amazon account.

🎨 Uniqlo can read minds with AI → as futuristic as it sounds, in select Uniqlo stores customers can use AI-powered UMood kiosks that measure their reactions to different colours and styles to find the right outfit match. Customers don’t even need to press anything on a screen – the technology’s neurotransmitters are enough to measure their response to the suggested products, colours, and styles.

👚 H&M uses AI to keep popular items stocked → many retailers like H&M rely on staying on top of trends to be successful. H&M stays ahead of the curve as it uses AI to analyse store receipts and returns to evaluate purchases at each store. The algorithm then helps the fashion retail giant to know what items to promote and stock in certain locations.


AI is positioned to transform the retail industry. Whether it’s hyper-personalising customer experiences, using artificial intelligence in your marketing, or helping your inventory stay ahead of purchasing trends, integrating the technology into your retail solutions is definitely a sound strategy. The exciting part is that we’re just scratching the surface. As the technology gets smarter, so will retail strategies.

Written by:
Fernanda is a Mexican-born Startups Writer. Specialising in the Marketing & Finding Customers pillar, she’s always on the lookout for how startups can leverage tools, software, and insights to help solidify their brand, retain clients, and find new areas for growth. Having grown up in Mexico City and Abu Dhabi, Fernanda is passionate about how businesses can adapt to new challenges in different economic environments to grow and find creative ways to engage with new and existing customers. With a background in journalism, politics, and international relations, Fernanda has written for a multitude of online magazines about topics ranging from Latin American politics to how businesses can retain staff during a recession. She is currently strengthening her journalistic muscle by studying for a part-time multimedia journalism degree from the National Council of Training for Journalists (NCTJ).

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