Artificial intelligence is expected to impact every industry under the sun, including retail. In order to offer personalised services to customers future retailers are embracing technology like AI in a new way. So much so that retailers’ spend on AI is pegged to touch $7.3 billion per annum in next four years.
A new study from Juniper Research has found that global retailer spending on AI will reach $7.3 billion per annum by 2022, up from an estimated $2 billion in 2018, as retailers target new avenues to increase personalisation of the customer experience.
The new research, AI in Retail: Disruption, Analysis and Opportunities: 2018-2022, found that retailers will heavily invest in AI tools that allow them to differentiate and improve the services they offer customers. These range from automated marketing platforms that generate tailored, timely offers, to chatbots that provide instant customer service.
Juniper’s latest research found that spending will be strongest in customer service and sentiment analytics, where AI can be applied to understand customer reaction to the products purchased and the service received. This will prove to be a key tool for retailers seeking to improve their customer experience.
So what are the scopes of AI in retail and what are the spends would go in?
The report says 54% of the money would go for customer service and sentiment analytics. This involves understanding the customers and how they perceive a brand and, and how to develop a deeper connect with the customers. Another 30% money would go for AI based automated marketing. The rest 16% will be spent on demand forecasting, say Juniper Research.
Juniper predicted that retailers will use AI insights to design and target new product ranges, as well as to create promotional offers. Research author Nick Maynard added: “Retailers are looking to replicate the success of Amazon in making AI a core part of their operations, with retailers increasingly turning to solutions such as AI-optimised pricing and discounting, as well as demand forecasting.’
The research found that AI-backed demand forecasting is increasingly becoming a key tool for retailers. With the advent of specific days for shopping, such as the Black Friday phenomena, understanding customer demand and correctly planning based on this is more important than ever.
Juniper argued that retailers must invest in this area in order to stay competitive, particularly in low-margin retail segments. It noted that the cost of AI tools, currently uneconomical for many players, will drop by 8% over the next 4 years, helping realise a 300% increase in software spend.