How retailers are shifting their AI focus in-store

When the hype around AI in retail started to come to the fore last year, some people were panicked about the impact it would have on jobs, while others were intrigued by the prospect of robots and ChatGPT joining the workforce.

AI is no doubt changing the retail industry, but this revolutionary tech is not yet being used in the way that many thought or perhaps feared. While many retailers use AI as chatbot customer assistants, warehouses and logistics automation, or for agile demand forecasting, more retailers are implementing AI tech in-store.

Sainsbury’s is the latest retailer to announce an AI partnership with Microsoft, which is set to put “the power of AI” into colleagues’ hands and drive greater efficiency, thus improving store operations.

Retail Week looks at the retailers that have already embarked on their in-store AI journey and considers if more retailers should be exploring AI in bricks-and-mortar sites.

Customer experience is key

Physical stores have experienced a comeback post-Covid as retailers invest more and more into bricks and mortar and customers seek out better shopping experiences. With AI now imperative to the retail industry, AlixPartners managing director Brian Kalms believes that while AI is being leveraged in-store to help the customer and facilitate store labour, in the short-term most investment will likely go towards improving products and inventory.

“Better ranging, better pricing, better merchandising and better optimisation of deliveries,” he says. “It’s about using tech to make the store’s life easier, but not necessarily in the store itself.”

Retail Week data and insights director Lisa Byfield-Green says retailers are starting to use AI in stores where “inspiration and experience are top priority”.

She says: “AI gives retailers the opportunity to showcase something new and exciting, to personalise experiences and go beyond reality to make the store come to life. Putting AI tools into the hands of store staff empowers them to be more productive and to improve the customer experience.”

Byfield-Green points to such examples as Adidas using AI for store design to reduce clutter and create more attractive displays, Ralph Lauren rolling out AI inventory management globally to improve efficiency, and Nike’s Paris flagship featuring an AI-powered audiovisual installation to promote the Air Max Pulse sneaker. 

In the UK, c-store specialist Co-op has introduced AI technology at self-checkouts to combat rising in-store crime, while The Fragrance Shop’s Oxford Street flagship launched the UK’s first-ever AI fragrance creation machine.

Just today, kitchen supplier Howdens, collaborating with Microsoft, launched a new AI tool dubbed ‘Chip’ to provide “practical advice” to tradespeople. Chip can only be used within the Howdens Trade App for now, but chief customer officer David Sturdee says there’s “huge opportunity” for AI to be used by Howden employees at its depots in the future.

Better data insights

Across the board, in-store AI is being used for a variety of use cases, whether to benefit the customer, employees or the retailer as a whole.

Kalms says that while there is a buzz around increased in-store personalisation, most shoppers just want to see stores operating efficiently. He agrees that in-store AI is an important investment, but believes retailers should focus on a different aspect of the business first:

“Better customer data insights feeds everything else,” he says.

“If you have a better understanding of how to maximise sales to existing customers or the opportunity to grow your customer base and you’re able to do that through a better understanding of customer behaviour because of the data that you have, that really is the best way to drive both top and bottom line.

“It’s a virtuous circle as it flows all the way down into revenue growth, so I expect that to be the greatest focus and benefit.”

Raft of opportunities

Kalms expects more retailers will announce in-store AI partnerships in the months to come in order to grab the attention of customers, employees and even shareholders and investors who are keen to make sure retailers are making the “best of the technologies available” to them. 

Microsoft general manager of retail and consumer goods Olaf Akkerman says there is a “raft of opportunities” for retailers to partner with Microsoft from “start to finish” on all things from in-store AI to generative AI which helps create text, images and videos.

“We’re seeing great benefits for both employees and customers, so the ability to empower people with the information, regardless of their technical skill, has seen a real shift,” he says.

“That’s why we now see such rapid adoption. For the first time, you don’t need to be an IT expert to make the most of this information.” 

As AI becomes more commonplace and easier to use in operations, retailers should be thinking about how they’re getting the best out of AI, whether that be in-store, through the supply chain or online.