Three myths about AI in Retail
Artificial Intelligence capability has developed dramatically over the last couple of years and its adoption across retail has never been greater. When market conditions are as volatile as they are today, AI’s ability to identify a change in trend and quickly react delivers significant outperformance in comparison to human power alone. This cutting-edge technology can be leveraged by retailers to transform their businesses into leaner, more agile entities. Despite these benefits, many are still wary of AI and its capabilities.
There are a number of myths around AI – here we will discuss three key misconceptions and illustrate the huge operational and performance advantages available.
Myth 1: AI is a fad
When AI technology was first discussed, there was a feeling in the industry that it could be a trend that comes and goes and that it wasn’t worth investing time and money in. However, AI has dramatic value to add across at least three of the main retail architecture pillars: pricing, planning, and forecasting & replenishment.
Within pricing, AI is being used to automate the calculation of price elasticity. AI can consider large data sets of numerous variables such as time of year, market price, and store location to deliver an accurate output instantly.
Within planning, AI is being used to recommend strategy, populate assortments and automate reporting.
Within forecasting and replenishment, AI is being used to deliver accurate forecasts which can account for granular product and space hierarchy variations.
Myth 2: AI replaces the need for human skills
AI in its current form is not a replacement for the human workforce. Its purpose is to provide the human user with a smarter answer that they can then use to drive more accurate decisions. AI can quickly process masses of data and get to a single output in a way that humans can’t. However, human expertise is needed not only to feed this technology with high-quality data but also to provide initial validation of its outputs against expected results. Then there is the critical element: humans can base decisions on a vastly more rigorous set of data analytics.
Myth 3: AI is a stand-alone solution
Whilst AI capabilities are impressive, AI isn’t a magic box you “plug” in one day, and the next you’re a smarter, leaner business. It is a data-driven component - the more high-quality data you have, the bigger the opportunity AI is. Another key factor is change culture. To effectively leverage AI and reap the benefits of this technology, the workforce must be educated to trust and work with the AI output rather than always believing that they know better and overwrite the value.
At TPC we have experience implementing AI systems into numerous retailers, we find that human knowledge driven by AI analysis is the ultimate combination for success.