Artificial intelligence (AI) is intelligence exhibited by machines. AI, still science fiction for most of us, is now becoming a daunting reality in the retail sector. Although we have learned machines (e.g. robots) for some time now, connecting them with the internet may accelerate digital disruption. Digital disruption occurs because unmet needs in the market and in our societies can be addressed through digital means 1.
What does Artificial Intelligence means for retailers?
“Artificial intelligence is the key to the future of online retail, providing a crucial way to help shoppers find what they want” suggests Isabell Fraser business and property reporter at The Telegraph. It is about consumers using voice commands using their smartphones to order products from retailers.
The opportunity that the Internet of Things (IOT) may offer Bricks and Mortar retailers was previously discussed in this blog (Retail and the Internet of Things). The IOT allows any machine with an on/off switch to be connected to the internet. “The IOT is very closely related to Artificial Intelligence (AI). In fact, IOT would not be very powerful without AI” commented Douglas Green in Quora. According to Mark Jaffe, CEO of Prelert, the realization of IOT depends on being able to gain the insights hidden in the vast and growing seas of data available.
Since current approaches don’t scale to IOT volumes, the future realization of IOT’s promise is dependent on machine learning to find the patterns, correlations and anomalies that have the potential of enabling improvements in almost every facet of our daily lives.
Customers of retailers may therefore, in the near future, command any household appliance to function at their convenience.
Not long from now…
Imagine this, not long from now – Mary asks her washing machine (she named it Alice) with the following voice command: “Alice, add 2 kilogram washing powder to the shopping list”. Alice, an AI device, is also part of the IOT. Alice has recognized Mary’s voice command and added washing powder to Mary’s online shopping list which is instantly send to her local grocery retailer. Later the same day, a drone delivered the groceries, also the washing powder that was ordered by Alice.
Allright, we’re not there yet. Two of the most common uses of AI in retail are around visual search, offering shoppers items that are similar to a picture they like and have uploaded, and for personalized recommendations report Leslie Hook and Lindsay Whipp in The Financial Times.
AI inside the physical shop
AI also creates opportunities inside a store. Bricks and mortar retailers hope that AI could draw customers back to their physical stores. Leslie Hook and Lindsay Whipp quoted Michael Klein, head of industry strategy for Adobe Marketing Cloud saying that “merchandising needs to become entertainment”, pointing to digitally enabled experiences such as virtual makeovers or home furnishing demos.
Experts writing in The Future Of Shopping report talk about the impact the “fourth industrial revolution” – a merging of physical, digital and biological technologies – on shopping.
The report, co-authored London marketing agency Holition forecasts the following:
- Virtual reality (VR) headsets that gauge your mood in the lighting and atmosphere of a simulated store.
- Immersive virtual experiences involving products, such as visiting a cocoa farm to watch beans being picked and processed to make chocolate.
- AI assistants that know your interests and tastes better than you do and can pre-empt purchases. For instance, shortly before a seaside holiday they might show you a range of swimwear.
- Holographic fashion shows held in unusual locations.
Wow! There are seemingly unlimited opportunities for retailers, household appliance manufacturers and cloud computing companies applying AI. Or will the digital disruption that AI cause too big to handle?
The other side of Artificial Intelligence
The AI story unfortunately has an eerie side.
Jerry Kaplan2 introduced AI in his book with the following warning: “Recent advances in robotics, perception, and machine learning, propelled by accelerated improvement in computer technology, are enabling a new generation of systems that rivals or exceed human capabilities. These developments are likely to usher in a new age of unprecedented prosperity and leisure, but the transition may be protracted and brutal”. Kaplan foresees that without adjustments to economic systems and regulatory policies, there may be an extended period of social upheaval…
Kaplan’s concerns are shared by Bill Gates reports The Washington Post. Gates said: “First the machines will do a lot of jobs for us and not be super intelligent. That should be positive if we manage it well. A few decades after that though the intelligence is strong enough to be a concern”. Stephan Hawkin, although totally dependent on AI, bluntly suggests that AI could bring an end to mankind. Retailers, however, do need mankind to stay in business…
Retailers that choose to ignore AI may not escape from the digital disruptions it causes. Digital disruptors innovate rapidly, and then use their innovations to gain market share and scale. This happens far faster than challengers still clinging to predominantly physical business models can cope with1.
Retailers will have to decide where and when Artificial Intelligence has the potential to replace human intelligence. Cost and scale will drive these decisions. Future decisions about AI by retailers will probably be about the ethics of using the technology and the effect it may have on society.
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1Bradley, J., Loucks, J., Macaulay, J., Noronha, A. and Wade, M. 2015. Digital Vortex: How Digital Disruption Is Redefining Industries, ©Global Center for Digital Business Transformation.
2Kaplan, J. 2015. Humans need not apply: A guide to wealth and work in the age of artificial intelligence, Yale University Press.