How AI in Retail is Transforming the Industry

Do you want to learn more about how AI is being used in retail? Read ahead to learn about how it can change the game for retail businesses around the world.

Although everyone likes to say that running a business is all about bringing joy to our customers or solving a major bugbear, no retailer can survive without achieving profitability.

It’s a frustrating reality, but we’ve all got to harness the power of productivity while mastering customer retention to make our businesses shine.

Now, if you’re a Chief Marketing Officer, you’re probably trying to navigate the minefield of returns, how you can target your audience to achieve maximum ROI, and how you can free up your staff to work on complex issues without tainting the customer experience.

That’s a lot to consider and trying to strike the right balance can feel totally overwhelming- and it shouldn’t. 

Before I joined Smarter.ai, I founded my own fashion label – Lilly’s Rails. Between 2013 and 2018, I led a team of 30 people and created several collections that were stocked wholesale in more than 40 South African Boutiques.

Although I often wished that I had the gravitas of Miranda Priestly when she was confidently commenting on the importance of cerulean in The Devil Wear’s Prada, I typically felt like her hapless junior assistant Andy Sachs just trying to keep my head above water in an uber-competitive industry.

Don’t get me wrong, I loved every minute of the experience.

However, I would spend hours trawling through competitor information, analyzing customer profiles, and trying to predict how many units of each style I should produce. What’s more, I had several pain points when it came to dealing with late orders and returns, as it was near-impossible to get maximum visibility between my CTM and the boutiques I sold to. If that wasn’t tricky enough, I would attempt to answer every customer query manually, which significantly ate into the time that I could spend designing, marketing, and growing my business.

If you’ve been there, I well and truly salute you. 

AI in retail

Enter: The Light In the Dark

Back when I had my label I thought I knew about data; and I did, but I wasn’t harnessing it in the in-depth way required to truly compete with the big brands. 

If I only knew what I do now, many of my issues would have disappeared in a flash. I could easily pinpoint which pesky customers would return products before they made a purchase. I could have easily categorized images to improve site navigation without palming it off on a poor colleague. And I could have used chatbots to answer queries quickly and effectively without engaging any staff (or me) whatsoever…

It’s worth noting that the solutions to these oh-so-common retail issues aren’t complex or out of reach for any business. They just require you to get ahead of the game and use some simple machine learning solutions that take the guesswork out of things.

The answer? Artificial intelligence.

Not only does artificial intelligence keep your business ahead of the curve in a world increasingly reliant on technology, but it offers data-driven insights that enable you to make important decisions with confidence.

I mean, I can assure you that Kim K isn’t running several successful businesses (including the $3.2 billion dollar-valued SKIMS!) without a helping hand from personalized marketing, automation, and a cheeky algorithm that forecasts sales.

As returns have become a $550 billion issue for retailers and businesses are expected to swallow these losses, SMEs need to get creative if they want to stay competitive without impacting their bottom line.

So, are you ready to explore how AI can help you produce the insights that’ll take your retail business to the next level?

I thought so.

The Importance of AI in Retail

Now that I've introduced myself and have (hopefully!) piqued your interest on the AI front, let's dive into how machine learning solutions can transform your retail business.

  Example of returns AI

AI in the Fashion Industry Helps Retailers Tackle the Dreaded Returns Problem

Believe it or not, the global market for AI in retail is set to explode from $5 billion to over $31 billion between 2021 and 2028. So, if you’ve not forayed into the AI world yet, now is a mighty fine time to do so.

Not only will it keep you on the front foot when it comes to technological innovations and improvements in the industry, but you won’t get left behind when your competitors inevitably jump on the bandwagon.

You may have already seen the importance of online automation, supply chain tracking, and new market trends that emerged during the global pandemic, and customers certainly won’t be going back now that they’ve had that sweet taste of convenience.

However, with increased online sales comes an almost unprecedented number of returns, and customers are expecting far more than they used to when it comes to buying multiples and handing back what doesn’t work.

You probably already know that 92% of customers are more likely to return to a store with a generous return policy. It’s unfortunate, but that’s the way the cookie crumbles and you can’t just remove free returns without losing a significant number of potential customers.

Yet, with e-commerce store returns making up 33% of purchases and brick-and-mortar returns just 10%, it’s clear that something needs to be done to allow e-commerce retailers to compete and protect their bottom line.

Tackling the problem from ground-zero

One of the major benefits of using AI in retail is being able to tackle a problem before it even starts. If you can use machine learning technology to make excellent recommendations while a customer is browsing, you'll be flying.

If you’re wondering how this is done, let me quickly fill you in.

Nifty software like Fit Analytics improves the customer experience by scouring through enormous sets of big data to give customers over 250 million size recommendations a month to boost conversions and reduce returns.

Add in online pop-ups that offer alternative sizing for different products in real-time, and you can quash any issues that arise with size discrepancies across the industry. Realistically, when a pair of jeans from Uniqlo runs 5 inches larger than a pair of similar jeans from Gap, it’s easy to see why the use of this technology is being adopted by SMEs to reduce returns from vanity sizing.

Furthermore, using AI to assess consumer buying behavior is a major advantage when it comes to predicting returns before they happen. Fraudulent purchasers and the ever-present issue of wardrobing can really hit a retailer’s bottom line, and by using AI insights to assess purchase history and weed out serial offenders, you can see who’s worth marketing to and who deserves to have their account suspended. Hats off to ASOS for paving the way on that one.

It’s been said that tracking serial returners through artificial intelligence and data science has helped retailers reduce return dollars by 8% and reduce shrink by 13%, which is seriously impressive.

Increasing ROI with automation

There’s much to be said about predictive insights, but you shouldn’t sleep on returns automation either.

It’s no secret that checking returns for lipstick smears, foundation marks, or serious rips is a full-time job, and large retailers are now making use of disposition engines to check returns.

Now, this is a seriously wonderful thing, as it reduces inefficiencies in the returns chain, reduces the need for human checking (goodbye manual earmarking!), and allows large volumes of returns to be processed without a company suffering huge losses.

If a product can be resold, these algorithms can even determine how and where to sell returned items to get the best profits possible while reducing the number of touches along the chain.

Although this process is still in its infancy for smaller businesses, it should eventually free up your workers to focus on driving customer retention and improving market share. Oh, and it’s way easier to scale than the human-based method too!

Talk about a win-win.


The Power of Image Tagging and Link-Selling

Now that I've touched on the returns issue, I thought I'd briefly talk about the importance of accurate image tagging.

Say your customer types “green dress” into your search bar. I can safely say that they’re not going to be happy if they’re met with brown shoes, men’s blazers, and a bright pink jumpsuit. It sounds ridiculous, but it happens.

Tagging photos is seriously time-consuming though, and individually adding keywords or ALT text to every picture on your site could take years to accomplish. And don’t forget that you’ll always be updating stock, adding new collections to your site, and trying to capture organic traffic with a fantastic user experience and strong SEO.

Oh, and did I mention that buyers now expect to see 8 or more images of products before they can purchase with confidence?

Yep, really.

To save yourself the headache, it’s worth investing in simple AI software that automatically categorizes images. There are several excellent apps on Shopify like AI SEO and AI Image Tagger that remove human inconsistencies, improve your business workflows, increase conversion rates, and ensure that every image is accurately presented to your customers.

Not only will using AI help remove irrelevant tags that weaken SEO performance, but optimized images prove to Google that your site is a pleasant place to be, resulting in plenty of organic traffic, more potential sales, and better rankings.


The Beauty of Chatbots

If I had access to chatbots when I was running my retail business, I would have been a very happy camper.

It’s been shown that up to 91% of customers are keen to shop with businesses that offered personalized recommendations, and AI chatbots are making a huge difference when it comes to driving sales and keeping customers happy.

Levi’s is a great example of this, as it has recently created a Virtual Stylist on its Facebook Messenger which allows customers to find the best jeans for their body shape by answering short questions based on size and desired fit.

If your customers aren't sure what to purchase, you can also use AI chatbots to recommend outfits based on images that your customers upload. Not only does this build trust in your brand, but it's a major help when it comes to link selling.

In addition to increasing revenue, chatbots are one of the best ways to get customer queries answered quickly and effectively.

Having a human customer service team is a must for complicated issues, but as chatbots can improve response turnaround times by up to 500% and reduce customer service costs by 66%, it’s easy to see why they’re becoming one of the best retention strategies for SMEs.

A final word on the importance of AI in Retail

As you can see, AI promises to be your secret weapon when it comes to tackling returns, retaining customers, and making your site user-friendly.

It’s not a magic bullet (you’ll still need plenty of marketing prowess to make the magic happen!), but machine learning technology is an affordable and efficient way to tackle issues in the retail industry that have even large corporations scratching their heads.

So, although I’m slightly biased, I recommend striking while the iron’s hot to increase your ROI, better connect with your customers, and make your day-to-day operations way easier.

We love to see it.



12 July 2022


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