AI and the Retail Store of the Future

It’s no secret that brick-and-mortar retailers are struggling. More consumers are shopping online and the trend is expected to increase. In fact, a 2017 study by Square and Mercury Analytics showed that 80 percent of Americans have made an online purchase within the past month. While the days of the physical store may seem numbered, AI has the power to reverse this trend and help bring retailers into the 21st century.


One of the most immediate and far-reaching benefits of using AI involves extracting value from data. Retailers have access to an abundance of consumer and behavioral information. However, a study by McKinsey found that about two-thirds of this data isn’t utilized due to a lack of data-processing procedures, appropriate technology and analytic talent. Implementing AI would allow retailers to use the mountains of data available to them to predict what consumers might buy next and focus their resources accordingly.

Understanding Clients

AI can also give retailers better insight into the minds of their clients. Natural language processing (NLP) is already being used to make chatbots more personable and intelligent. With real-time access to customer inquiries and language, developers can train NLP algorithms to better understand human language and, in turn, meet the needs of their clients. Zendesk reports that 40 percent of customers switch to a competitor because of their reputation for great customer service.

Pattern Identification

NLP can also help make meaningful connections between data that might otherwise go undetected. Consumer buying trends would be easier to identify, recommendations would become more intuitive (backed by data) and overall customer satisfaction would also increase. It could even help retailers identify previously unknown customer segments.

In-Store Assistance

Several big-box retailers are currently testing AI-powered technology in their stores. Target has armed its sales associates with hand-held POS systems that can track inventory in real-time across the company, arrange for shipping and take customer payments, making the shopping experience more streamlined and efficient. Lowe’s is currently using its brand name LoweBots (AI robots) in the Bay Area. These robots can answer customer questions, help clients locate items throughout the store and track shopping patterns, which can be re-applied to AI algorithms to improve company business decisions.


AI-based facial recognition software is already being used in some stores to track specific user activity. While some customers may not be thrilled about this level of surveillance, there are also less intrusive methods of observing customer behavior like floor-level cameras, which can track how long customers spend in a specific area of a store. They can also estimate gender and age based on video of shoes. This technology could have significant implications for inventory management and marketing strategies.

Customized Experience

The ability to provide a truly customized shopping experience is arguably the most significant benefit of AI. With aggregated data from sources like social media and online profiles, retailers can create product recommendations that really reflect the personal interests and tastes of the customers. AI would also allow retailers to crowdsource customer orders to gauge the overall reaction of clients to specific items and the potential popularity of these items.

If brick-and-mortar stores are to compete with big-box stores, successfully combining the physical with the digital is essential. According to the Boston Consulting Group (BCG), retailers who implement AI see a 6 percent to 10 percent boost in sales, which is two to three times faster than average. In order to remain competitive in this new world of e-commerce, traditional stores must adapt and take advantage of the latest advances in AI to secure their place in the future of retail.

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