Is AI changing the way we shop?

Imagine the old days of spending hours searching for the right glasses frame in your local optical stores. Now, with Lenskart’s AI-powered virtual try-on, you can easily try on different styles from home using your smartphone or computer camera. In June 2023, Bata, a popular footwear retailer in India, launched an AI-powered video analytics solution. This app aimed to boost in-store sales by improving visual merchandising and retail management. “We recently launched the 1st in-country visual merchandising app powered by artificial intelligence,” posted Abhinav Sharan, head of retail marketing and visual merchandising at Bata India on LinkedIn.

Let’s be honest. Haven’t our shopping experiences changed? Remember the days of waiting in queue at the local grocery store to pick up items and then again to pay the bill? Today, customers have a much smoother experience thanks to interactive touchscreen menus. With this technology, they can easily place their orders and pay in-store without needing staff assistance. This shift puts customers in control, leading to increased sales, lower operational costs, and more opportunities for staff to focus on delivering exceptional customer service.

AI has transformed the retail sector, offering personalised recommendations, improved inventory management, and better customer service. According to Fortune Business Insights, the global AI in retail market was valued at USD 7.14 billion in 2023 and is projected to reach USD 85.07 billion by 2032, with a CAGR of 31.8% during 2024-2032.

In an interview, Kumar Rajagopalan, CEO of the Retailers Association of India, highlighted the transformative potential of AI in the retail industry. He said that retailers who adeptly harness AI technologies will emerge as the “clear winners” in the market. Rajagopalan also noted the widespread adoption of AI within the retail sector, attributing it to the significant opportunities it offers to enhance service accuracy and overall performance.

One area in retail, where AI has significantly impacted is providing personalised shopping experiences by tracking online behaviour, purchase history, and social media activity (also known as sentimental analysis). Chatbots and virtual assistants offer personalised assistance, answering questions and providing product recommendations.

Sephora showcases how AI enhances customer experience by offering virtual makeup try-ons and personalized skincare recommendations. This technology not only enhances the shopping experience but also helps customers make informed purchasing decisions.

“Retailers are using AI algorithms to analyse vast amounts of customer data, which enables them to offer tailor-made product recommendations, increase engagement and stimulate sales. Dynamic pricing systems adjust prices in real time, based on factors such as demand and price competition, optimising revenue and profitability. In addition, AI chatbots are providing round-the-clock customer support, answering questions and facilitating transactions in an efficient manner. At the same time, applications for AI are focusing on optimising operations, improving quality control and enhancing supply chain management in the manufacturing sector. In order to ensure higher quality and reduce waste, quality control systems use machine learning for product inspection of defects,” said Heta Desai Baandal, Managing Director, Sociomark.

AI has indeed revolutionised the manufacturing industry. For example, Amazon utilises an intelligent robotic system to streamline the fulfillment process by moving individual products before packaging. Similarly, Walmart uses AI for demand forecasting and supply chain optimization. This involves using AI algorithms to predict future demand and align it with supply, ensuring optimal inventory levels and efficient logistics.

Today, AI algorithms can predict equipment failures and maintenance needs based on data, reducing downtime and saving costs for manufacturers. They also analyse supplier performance data, helping to improve quality, reduce costs, and optimise the supply chain.

Though Baandal praises how AI driven quality control improves the accuracy of product inspection, ensures higher standards and reduces defects, he also mentioned retailers should focus on data security and compliance, invest in interoperable AI platforms that can seamlessly integrate with their existing infrastructure, and provide training programmes to train existing staff in AI technologies. “It is crucial to build a culture of trust and transparency in the adoption of AI, focusing on its role as an enhancement of people’s capacity instead of replacing jobs. Retailers can also help overcome implementation difficulties and unlock the full potential of AI in their operations by working with AI vendors and seeking partnerships with educational institutions,” he said.