What the Retail Industry Has Wrong About AI: Executive Brief

Contributed by Eric Wilson, CCO, Movista

There is a formidable iceberg in retail that has existed since the dawn of commerce: negative customer experience. Retail teams try to steer clear from it with varying success, but a minefield of smaller icebergs—supply chain delays, labor shortages, and omnichannel logistics to name a few—are complicating the maneuver. Thankfully, there is a lighthouse in the distance that is guiding retail teams through the tumultuous waters.

Artificial intelligence is pushing the boundaries of retail work by unlocking new levels of efficiency and accuracy. Previously time-consuming and error-prone tasks such as inventory management become profoundly simple (and cost-effective) with AI technology. It should come as no surprise, then, that the global market for AI in retail is projected to reach a staggering $17.1 billion by 2028, compared to just $2.9 billion in 2021.

Retail teams are leveraging AI for a variety of use cases, but the biggest one by far has been customer experience (CX):

• In a 2017 survey, 55% of North American retailer respondents indicated that their top AI priority is to optimize customer experience.
• A 2018 survey revealed that 74% of AI use cases in retail serve customer-facing projects while only 16% serve operations.
• A 2020 MIT Technology Review Insights survey focusing on the consumer goods industry found the same trend: the top AI use-case priority was customer care at 48%.

This heightened focus on customer experience makes sense at the surface level considering that customers ultimately drive retail success, but there’s more to the story than that: CX is just the tip of the iceberg; beneath the water lies the much bigger operational challenge of retail execution and workforce management.

Teams who leverage AI solely to enhance CX risk crashing into the submerged importance of behind-the-scenes execution. While CX is a critical component to retail success, if you can’t get the right products on the right shelves at the right time, priced and positioned correctly, day in and day out, no amount of AI will save your ship from sinking.

We explore this issue in much greater depth in our recent whitepaper, “Artificial Intelligence in Retail: The Emerging Role of AI in Store Execution” (which you can download and read here), but if you’re short on time, I’ve put together an executive brief below.

Retail execution and workforce management present significant growth opportunities for retail teams

• Only 18% of retail organizations report fulfillment accuracy rates of 95% or higher (surprisingly, poor shelf replenishment practices are mostly to blame, not supply chain shortages).
• Holding excess inventory (which is becoming a common occurrence due to hasty out-of-stock reactions) results in a 32% increase in annual costs.
• More than 50% of CPG product categories fail to meet planogram compliance at the shelf level (leading to untold quantities of compliance penalties).  
• Retail stores lose upwards of one trillion dollars annually from out-of-stocks (much of which is preventable).
• Some grocers spend upwards of $10 million annually on price-changing labor alone (traditional store labor can be costly and cumbersome).

If you want to leverage AI to improve CX, start with operations. Consistent and flawless in-store execution lays the foundation for great customer experience.

• It is estimated that leveraging AI to optimize the supply chain, alone, could save retailers $340 billion annually. When you go beyond supply chain and take into account the full operational spectrum, from back door to store floor, merchandisers to brand reps, the value only grows.
• Image recognition AI (also known as Photo AI) can save retail teams an estimated 33% in time spent on inventory management, according to internal Movista data.  

Operational AI is not a panacea. Retail teams should also optimize their existing operations independent of AI to avoid amplifying any inefficiencies.

• When combined with the right retail execution and workforce management software, AI can conservatively lead to an 8% improvement in on-shelf availability (OSA), 5% increase in sales, and 10% improvement in compliance.

When you're ready to learn more about the emerging role of artificial intelligence in retail, download our free industry report here.

About the Author

Eric Wilson, Chief Customer Officer (CCO) at Movista, has 20+ years of leadership experience in businesses ranging from tech startups to global SaaS organizations. His experience includes serving as COO for Verian, General Manager North America for Basware, and General Manager Supply Chain for GEP. Eric is an expert in creating a strategic vision, assembling and leading cross-functional organizations, and profitably driving business transformation and growth in domestic and global organizations.

Connect with Eric on LinkedIn