How is AI Used in Retail Business?

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AI in retail

Shopping is rapidly moving in a more intelligent and customer-oriented direction: retailers strive to provide ever-enticing and personalized offers to keep ahead of the competition.The pandemic played its part as well — as businesses were forced to find innovative ways to offer goods and services without a physical presence. Artificial Intelligence (AI) technologies such as facial recognition, product visual search, and emotion tracking all help retailers identify what customers might want.

In this article, you’ll learn about AI is in retail and what it will take to adopt AI solutions for your business.

Artificial Intelligence in Retail

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Hard Facts about Artificial Intelligence in Retail:

  • The market for global AI in retail is expected to rise from $5 billion to more than $31 billion between 2021 and 2028 (Fortune Business Insights)
  • Gartner forecasts that AI solutions will help increase customer satisfaction by 25% by 2023 in most organizations
  • The adoption of AI in retail and consumer products industries is expected to leap from 40% of companies currently using AI to more than 80% in the next three years (IBM Corporation Study)

Shopping has become an almost effortless activity thanks to AI solutions. Let’s take, for instance, a feature such as a product visual search. You see a celebrity’s fabulous outfit and want to try it on. Just take a picture of the outfit, upload it into a tool, see if it suits you, and in a split second you’ll be directed to the very online store where you can purchase.

A StyleMatch app by Asos has a catalog of more than 80,000 items from a range of brands with a feature that enables customers to find matching apparel. Or you can visit a virtual fitting room to see if an item really works for you. The visual search option has become a must-have AI solution for retail, and obviously, giants like Amazon, Google, and Ikea, have successfully integrated it into their customer experience.

Another example of AI in retail game-changers is Amazon’s ‘Just Walk Out’ stores. These are physical stores without cashiers and queues, where customers just pick up the items and, after leaving a shop, receive a payment bill by email.

AI solutions have revolutionized the retail industry and our shopping habits in general. It’s hard to imagine how some retailers might cope without integrating AI solutions into their business.

AI in Retail: Actual Solutions To Improve Your Business

AI and ML solutions in retail are changing the shopping experience, making it more personalized, easier, and faster. Admittedly, technology can’t quite provide customers with the same personal touch and empathy as humans — but give it time!

Artificial intelligence also helps retailers to improve their supply chain efficiency and automation processes.

Now, let’s look at use cases of AI solutions in retail.

AI Solutions in Retail

AI Solutions in Retail

  • In-store assistance

    In-store AI solutions, such as chatbots, have a number of functions. They primarily help customers find я таproducts and check their availability, make orders or pre-orders, track packaging, and answer customers’ questions. By analyzing customer purchase history, chatbots, guided by this data, can send notifications with personalized offers to specifically selected customers.

    Tommy Hilfiger launched an AI chatbot to inform clients about the latest collections and to answer customer queries. Another excellent example of artificial intelligence in retail is Lowebot, a robot by Lowe’s, that actually physically assists customers in the stores.This friendly assistant helps guide customers around and locate items.

    AI solutions with facial recognition capable of tracking a customer’s emotions could provide insights into a buyer’s journey. They also help identify VIP clients and assist with other services to provide personalized recommendations. And, on top of that, they can also be used to detect shoplifting and abuse of staff in physical stores.

  • Dynamic price optimization and prediction

    Retailers apply AI solutions to respond flexibly to market forces and gain edge over competitors by price positioning products strategically. Solutions with AI and Analytics engines use historical data, margin requirements, global pricing indexes, basket comparison charts, and regional and global trends to optimize marketing strategy.

    eBay uses AI to improve how we understand user intent and provide the best prices for buyers and sellers.

  • Visual Search

    Visual search AI solutions for retail allow customers to find the item they need by uploading a picture description. The technology searches for a perfect match based on provided data. When using visual search, it analyzes the color, form, and model and other differentiating features.

    The online retailer Boohoo announced that its conversion rate improved to over 100% after implementing their visual search feature.

  • Voice search

    Voice search technology allows transcribing voice in text to start the search. This AI solution works well in retail, especially in conjunction with other marketing approaches. Customers use voice to search for an item, but are more likely to buy it (and more quickly!) if a chatbot assistant is available to provide additional information.

    H&M and Google have launched the H&M Home Stylist voice app, which gives recommendations on how to create stylish rooms. After a series of questions, the app uses Google Assistant to offer personal styling recommendations, mood boards, and inspiration right inside a linked smartphone.

  • Virtual fitting rooms

    Nearly 30% of items ordered online are returned – especially items of clothing, as customers find they do not fit or suit them as they expected. Retailers have been racking their brains to solve this problem. There is no need to reinvent the wheel for the fashion industry; AI solutions for retail, such as virtual fitting rooms, do exist. It’s predicted that the global virtual fitting room market will grow from $3 million in 2019 to $6.5 million by 2025.

    Walmart has acquired Zeekit Fitting Room, which allows integration of the platform with existing online stores. With that technology, the customer is able to see how the clothes look on the model (and they have plenty of options to vary the model to get different perspectives).

  • Customer Satisfaction Tracking

    According to Harvard professor Gerald Zaltman, 95% of purchase decisions are made unconsciously, driven by our emotions. So retail AI solutions are working on reading the client’s feelings and providing optimal price options, observing how the client interacts with goods and ads.

    Affectiva uses emotion AI to analyze how people interact with video ads and assess their success. The technology itself captures the micro and macro facial reactions of a viewer and provides insights to improve the company marketing strategy.

  • Product Categorization

    The site search engine is usually the first instrument with which customers interact. To provide a better customer experience, the system should work quickly and accurately 一 and product categorization is all about these requirements.

    Online retailer uses AI in retail to classify more than mln of products, sorting them into categories in the most suitable places on the website. The tags that the instrument uses for classifying products help the client find what they’re searching for.

Check out the other examples of AI solutions for retail.

Benefits of AI in Retail

Benefits of AI in Retail

Benefits of Implementing AI in Retail

Zara, the world-renowned apparel retailer, generated 254$ million in net sales in Q2 2020. Zara attributes a significant chunk of their growing success in the industry to their continually developing use of AI in multiple customer and supply chain management operations.

Here’s a summary of a few of the benefits of implementing AI in retail:

  1. Automation in optimizing routine tasks. AI can successfully replace in-person workers with duties like picking and packing. Workers are able to spend more time on tasks solving more complex customer problems.
  2. AI predicts clients’ demands and preferences 一 customer satisfaction is growing. By analyzing previous client behavior, AI may forecast consumer behavior patterns. In addition, AI can help to connect potential clients with the best deals and offers that are likely to suit their preferences. And when businesses meet customer’s needs more closely, they are more likely to succeed!
  3. Supply Chain optimization for cost reduction. AI can calculate the demand for certain products in astore, give insights into buying patterns, and find the optimal route to supply chain optimization. So, implementing AI can also reduce costs.
  4. AI provides better data security services.Data security is crucial for any business because companies keep vast amounts of information on their customers. Nowadays, AI technologies identify atypical activity in the system very fast, unlike human administrators.
  5. AI solutions help companies reduce their carbon footprint. AI solutions, such as smart shelves by Kroger Edge technology, allow businesses to move away from using printed price tags and cardboard promos.

AI Solutions in Retail: Risks

Naturally, artificial intelligence in retail has its pitfalls, and we should consider the drawbacks and try to work around them when implementing AI into our business.

Cybersecurity breaches. The use of artificial intelligence for cybersecurity has its pros and cons. AI solutions improve security, but at the same time, such solutions can make it easier for cybercriminals to attack the system.

Potential AI bias. In analyzing clients’ data, algorithms can enforce biases, like making prices higher for different genders or races, even if it’s not a part of their algorithm. Here we may remember a famous Apple case when its credit card provided more minor credits to women than to men; even though gender wasn’t a part of its algorithm 一 it became a scandal!

Appropriateness and sensitivity of client’s data. Appropriateness issues are mainly about the usage of emotion tracking. For example, retailers use AI solutions to monitor clients’ emotions and then create personalized offers. On the surface this sounds fine, but in some cases technology might make inappropriate assumptions – as the nuances of human emotion and expression are arguably highly complex – and, for instance, recommend antidepressant medication to a client who looks sad or happens to indicate repeated signs of depression in their facial expressions.

Usually, people don’t mind the sharing of personal information while doing regular shopping, but, still, the sensitivity of customers’ data plays an important role when we are talking about more sensitive/delicate purchases, larger investments and more personal service interactions. In such cases, people prefer not to provide certain personal information, so these subtle areas of customer behavior must be factored into any AI considerations.

Things to Consider When Implementing AI in Retail.

When adopting AI in your business, the standard approach is as follows:

  1. Prepare the data. Artificial intelligence solutions in retail are based on data. If the provided data is not complete and correct for AI-specific datasets, organizations must develop a thorough understanding of the data involved. Companies need good comprehensive metadata libraries.
  2. Choose the right technology. Tailor your business goals with AI implementation strategy goals. It would help you determine the right technology and hire an appropriate provider or build an in-house solution.
  3. Understand ethical issues. Biased and intrusive AIs are one such example. To combat this, businesses need to ensure that privacy and data security are at the forefront of any initiative.
  4. Educate your managers. The key to correct implementation of this step is to improve the skills of existing employees, increase information sharing and technical literacy in all areas, and find the right partners. Your priority should be to rapidly build essential in-house expertise to collaborate with delivery partners, manage outcomes, and scale across the organization.
  5. Keep your system up! Your work doesn’t end after the AI solution has been implemented and launched. Keep going: test the solution, offer advice and support, and, if necessary, make improvements.

Case Study: What Does it Take to Adopt AI Solutions in Retail?

Now let’s see how AI in retail is implemented in practice. A client ー a global management consulting firm ー has developed a retail network management system that needed improvements. The company required an ML-powered retail data warehouse solution with built-in data analytics tools that determine prices and promo ideas for products at stores.

The solution for their business objective is an ML-powered retail data warehouse with three modules: an assortment tool, pricing tool, and promo analytics.

The Assortment Tool ー an ML-based module ー helps identify the best places for the items in the shop. The user can pick a shop, products and shelf parameters, and group products, and the modulе will determine which physical locations may increase the sales of the item.

The pricing tool makes a competitive comparison and overview of target economics. The managers may adjust pricing by managing settings.

The promo analytics tool helps to plan promotions. This instrument analyzes budgets that were spent on previous promos and predicts costs of future campaigns. In addition, this tool analyzes places and opportunities for posting ads by searching magazines, TV, and the Internet.

As a result, all the client code is moved to a specific area. The product is standardized, making it easier to onboard and support new clients.


As we may observe, shopping habits are changing: clients are more demanding, and the market is more competitive. AI solutions for retail are a must-have for businesses to survive. Deep understanding and the prediction of customer needs convert into client satisfaction and, as a result, bring revenue growth. Implement a suitable AI for retail initiative if you haven’t already done so and boost your sales with it.