AI is not a new phenomenon, yet retailers are at different stages of implementation with some having leveraged AI long ago in the supply chain, whereas others are still finding their feet with the tech
The innovative tech is used in a variety of ways. The Co-op uses AI at self-checkout to spot retail crime, Adidas uses it for store design and to reduce clutter, while Dunelm is planning to deploy generative AI to improve the online customer experience.
Despite a constant stream of news on AI investment, there are still many retailers facing obstacles to AI due to cost, insufficient systems and lack of data.
In a new report from Retail Economics and SymphonyAI, shared exclusively with Retail Week, retailer surveys, consumer insights and an audit of the top 200 global retailers were conducted to discover areas where AI is lacking and ways to improve.
Retail Economics senior consultant Nicholas Found says that AI needs to be “executed in the right way” and spread across most areas of the business.
“The most immediate benefits are being felt across merchandise and marketing functions, where targeted campaigns and recommendations can drive consideration and loyalty,” he explains.
“However, retailers that can integrate AI across business functions are seeing broader benefits such as reduced waste, improved forecasting and smoother operations.”
Retail Week delves into the data to find out what’s inhibiting retailers from getting the best out of AI.
Barriers to adoption
The research showed that sustainability and waste management is currently the business area where AI is having the least impact, mainly due to “comprehensive integration” throughout supply chains.
Yet, those using AI for sustainability are seeing monetary benefits.
“Profitability and sustainability are mutually reinforcing,” Found said. “Large retailers investing in technology that drives operational efficiency have been able to benefit from strong profit growth and reduce carbon intensity.”
In fact, the top 25 retailers with the fastest growth in profit have seen the most carbon reduced as total pre-tax profit grew 354.2% over five years while their carbon intensity has declined to -11.2%.
While AI in sustainability and waste management lags behind merchandising and marketing, demand performance, workforce productivity and store and space, retailers still face barriers when looking to adopt AI across any business function.
Using AI for data quality and availability was identified as a top barrier across many retail functions, which spells trouble as Found explained that “AI is only as good as the data it’s built on”.
“Many retailers struggle because their data is siloed, outdated, or inconsistent, meaning they can’t drive effective data inputs to generate reliable output,” he says.
“It’s like trying to run a Ferrari on diesel. You can have the keys to a technically high-performance product, but it won’t run without the right inputs.”
Another challenge for retailers is integrating AI with existing systems. Weaving this tech across all business areas is expensive and time-consuming, not to mention that many old systems can be inflexible.
The third largest barrier is the lack of skills and experts in AI, with the report adding that retailers are struggling to fill roles that combine retail and AI knowledge.
Some employees may also be threatened by the use of AI for automation as “cultural resistance” was highlighted as a main blockade to adoption.
Overcoming obstacles
Rising above these challenges may prove tough, but the report has established ways for retailers to start prioritising AI across all functions.
Data is at the heart of AI integration, and retailers are urged to invest in “structured, accessible data” to get insights for personalisation, demand forecasting and supply chain optimisation.
Having a strong digital core and agile methods to keep improving will also make it easier for retailers to keep up with the evolution of AI over the next few years.
“Regularly assessing AI effectiveness, incorporating feedback, and keeping up with innovations ensures AI investments deliver long-term value,” Found said.
“Embedding a mindset of continuous improvement helps retailers stay ahead of competitors and respond to new challenges with resilience.”
To really futureproof operations, Found adds that retailers need to upskill teams, keep employees informed and drive a culture of “continuous improvement”.
“Retailers that don’t keep up with the latest technology risk losing market share to agile competitors that do.
“The key is not just adopting AI, but doing so strategically. Retailers need a roadmap that builds a strong digital core, reinvents ways of working, and fosters a culture of agility to realise the full potential.”
With a talent gap in areas such as machine learning, data science, and AI ethics, he sees “cross-functional AI literacy programmes” and collaboration between data scientists, business analysts and retail managers as a way to help AI become actionable in business.
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