AI for Retail
I have been attending a few events within the retail sector and a lot of touched on artificial intelligence. Knowing Jo and his background, I wanted him to share his thoughts and luckily enough it was an area he was heavily involved in already.
Have a read of what Jo had to say and don’t forget to follow him on LinkedIn.
The impending market entry by Amazon into the Australian market and deep price discounting strategies from challenger brands are sending shock waves in most boardrooms.
The battle to win-back and retain customers continues to intensify with most traditional retailers in Australia actively participating in price wars to remain competitive. These myopic ‘red ocean’ strategies are knee-jerk reactions to stimulate short-term sales momentum, however, eroding long-term profitability.
Pricing is not just about pricing. Customers don’t evaluate pricing in isolation; other factors such as product range, store environment and seamless omni-channels strongly influence value perception.
Amazon has succeeded in establishing a low-price reputation and becoming a default search destination for thousands of products, without actually offering the lowest prices.
Leverage artificial intelligence to differentiate in a crowded market
Savvy organisations like Google, Facebook, Walmart and Alibaba get it. They are future proofing their businesses from competitive threats by building unique capabilities in artificial intelligence (AI) and big data analytics – ‘blue ocean’ strategies that are hard to replicate. Such bold investments enable them to develop new products, create new markets, build customer loyalty and build trusted brands.
The most common type of AI currently used in the market is called supervised learning. This type of AI involves inputting data (A) to quickly generate some simple response (B). Underpinning this A to B relationship is deep learning technology that leverages neural networks to mimic how the human brain works to make decisions.
Stimulate demand by anticipating customer purchases
Enterprises that engage with their existing customers are poised to grow revenue by proactively cross-selling complementing products. These organisations understand what individual customers want when they buy, where they purchase and how they consume their products and services.
Retailers that leverage big data analytics will build deeper and personal relationships with their existing customers by meeting specific customer needs on time.
From an operational standpoint, retailers and suppliers can leverage AI to manage inventory (demand forecasting), particularly for untested price points or promotions. For example, supermarkets can forecast demand more accurately at store level to avoid out of stock or overstocking when they run half-price promotions. Based on my estimations, the Australian retail landscape could reduce value leakage by up to $20 billion by forecasting demand more accurately.
Customers want personalised offers and experiences
The battle for customers is shifting towards the invisible dark world – where retailers are applying stealth (below the line) targeted marketing strategies to mitigate strong competitive threats, to increase customer loyalty, basket penetration and store traffic. Most of the internet up until today has been about more options. Now with machine learning, it’s not about everything, it’s about the perfect product just for me.
Coupling AI with big data analytics enables your organization to fundamentally shift from a one-to-many (segmentation) marketing approach, towards a more personalised pricing approach that drives value perception and maximises the willingness to pay for products and services.
AI enables your organisation to augment and personalise products to meet evolving customer needs. AI leverages existing customer loyalty data to better understand customer purchasing habits, product preferences and how customers interact with different product features.
Loyalty that lasts
Modern shoppers (predominantly young singles and couples) are becoming more ‘promiscuous’. They are proactively switching retailers, products, brands and in worst case scenarios exiting the market universe. To extend customer lifetimes, leading supermarkets are paying a premium for customer loyalty by offering meaningful offers to their most trusted customers via reward/loyalty programs.
The virtual assistant (AI) cherry picks the right deals for customers, consequently, saving them both time and money. The accuracy and relevance of personalised offers tend to improve over time driven by the continuous feedback loop inherent within AI.
If you don’t have AI in your plan in the next three years, you’re going to be out of business. You snooze you lose – that’s reality. Although the upfront costs to build AI capabilities are deterring, retailers that endure short-term pain and make bold investments now will gain long-term market leadership.
My name is Jo. I am the ‘commercial guy 👔 with a social heart ❤️ ’…
I am passionate about building and transforming your business. I create value by creating new products and executing customer-centric pricing strategies. I engage and motivate teams to deliver outcomes.
Please follow me if you enjoyed my article.
Thanks, Jo, I look forward to seeing more of your articles on AI within retail.
Keep on keepin’ on,