Commentary
Can AI save brick-and-mortar retailers?
Madhu Mathihalli, Passage AI CTO and co-founder, is looking forward to a technology-powered future. Why? Personalized experiences, engaging store associates and short return lines.
November 23, 2018
By Madhu Mathihalli, CTO and co-founder at Passage AI
With the recent closing of Toys 'R' Us, the retail apocalypse has claimed another brick-and-mortar victim. The years 2016 and 2017 gave us dozens of retail bankruptcies, including Radio Shack, Gymboree, Sports Authority and The Limited. More are at risk, such as iconic brands Sears and J.C. Penney. More than 10,000 retail stores have shuttered as American shoppers shift their buying online, leaving malls across America facing an identity crisis.
Over the last 10 years, e-commerce sales grew significantly faster than in-store retail. That trend should only continue as Amazon, the e-commerce behemoth, gains ground on new fronts such as grocery and pharmacy. Furthermore, when shoppers enter physical stores, they are armed with smartphones with access to digital options — and more information than ever before. Shopper expectations are changing and have raised the bar for retailers. Data shows that customers want to know more about the products they use. One study found that 74 percent of shoppers turn to the internet to seek out answers when they don’t find the information they’re looking for on the label. For now, e-commerce retailers are often better at meeting those expectations.
So, what can brick-and-mortar retailers do to reinvigorate their presence and drive shoppers to their stores?
The real future of retail is the fusion of physical and digital — not either or. In reality, physical stores may be suffering some setbacks, but they are not in danger of extinction. In 2020, more than 80 percent of U.S. retail sales will still happen in a store. Even Amazon sees value in a physical store presence as evidenced by the launch of Amazon Go. This is where Walmart has an advantage as the dominant presence for in-store retail. Both companies clearly understand that the future will blend these two worlds, and both are making moves to come out on top.
Making stores more experiential
One idea that has gained traction to increase foot traffic is that physical stores can be more experiential— a place to go not just to make a simple purchase, but a personalized, engaging opportunity to discover and try new products before buying. This goes beyond the simple tasting tables at Costco. AI and other technologies are already in play to create a store consumers want to visit. One example of this phenomenon is Sephora. The beauty retailer is using both AI and augmented reality (AR) technology to create innovative in-store experiences.
Relying on a home-grown Innovation Lab, Sephora customers can use new technology to virtually try-on makeup with AR or find a matching foundation with AI. These personalized shopping experiences are why Sephora is thriving, while many mall-based retailers are struggling.
Offering a better in-store experience with AI-powered bots
Anyone who’s shopped in a department store recently knows how challenging it can be to find an available sales associate. It is now possible for AI-powered bots to return items, find items in a store, function as personal assistants and enable checkout. These bots are also advanced enough to understand customer sentiment and adjust the process to improve the interaction. Regardless of the need, AI-powered bots can extend the on-site workforce while offering a positive in-store experience.
Unlike most sales associates, a bot can know an enormous amount of information about every product, and as result, provide better recommendations. The bot can guide you to an item and provide additional information, beyond what’s on the shelf, such as reading product reviews to a customer and recommending the best option based on actual data. Imagine using an AI-powered bot to “Complete the Look” at your favorite clothing retailer. A customer can stand in front of a mirror with one item, such as a blouse, sweater or skirt, and ask for recommendations to pair with the possible purchase. Or a customer able to upload a photo and asking a bot for a similar but less expensive option. Tasks like these are easy for a bot, but hard hard to scale with humans.
The most well-known example of an in-store bot capable of these functions is SoftBank’s Pepper — being piloted by retailers across the world. SoftBank claims that in one pilot deployment where Pepper worked a single week in customer service, the retailer experienced a 70 percent increase in foot traffic. Another location reported a 13 percent increase in revenue and 6x sales boost for a featured product.
Improve life for store associates, which allows for more customer engagement
While this can be overlooked, store associates often get stuck in repetitive, time-intensive tasks like restocking. AI-powered bots can take on the "behind the scenes" mundane tasks, freeing up helpful store associates to engage in higher impact interactions with shoppers.
One obvious example of this is product returns. Processing a return often takes undue amounts of time as it involves not only validating the receipt but also quality of the product, then categorizing it for back-room processing (whether it goes back on the shelf or to the vendor/distribution center). An AI-powered bot can scan the receipt and using image processing perform an initial evaluation of the product before guiding the user to place the product in a pre-assigned locker. This not only streamlines the entire return process, but it also makes the experience easy and customized to the consumer while freeing up the store associate to help in-store shoppers with new purchases.
Personalized experiences, engaging store associates and short return lines may seem too good to be true, but brick-and-mortar retailers know that they must make real changes to recapture the market — and minds of today’s shoppers. I, for one, look forward to this technology-powered future.
