Three Ways AI Could Impact Retail in 2018 and Beyond

 2017 was an exciting year for the retail world. From Amazon’s purchase of Whole Foods to growth of voice-controlled devices like the Google Home and Amazon Echo, many major industry changes that occurred this year sparked a transformation in the way consumers shop.

It’s early still, but 2018 appears to be following a similar path towards innovation — particularly as artificial intelligence (AI) technology evolves and improves over time. AI has the potential to facilitate better customer experiences through machine learning, voice processing, augmented reality, and more.

And these advancements in AI are more than just a fad. Gartner predicts that 85 percent of customer interaction in retail will be managed by AI by 2020, and 30 percent of all companies will employ AI to augment at least one of their primary sales processes within the same time period.

Let’s take a look at the areas in which AI will likely have the biggest impact in 2018 and beyond.

 Order Replenishment

AI technology has the power to predict a consumer’s shopping behavior based on his or her previous orders and automatically replenish regularly purchased items. This could be anything from toothpaste to paper towel to groceries.

Automatic replenishment is already in its early stages thanks to smart devices like the Amazon Echo and Amazon Dash Buttons. With these innovative tools, consumers can queue up orders for replenishment using voice-controlled technology or the click of a button. But in the near future, this technology will become the norm, removing the burden on consumers to make these decisions about regular purchases each month or week.

And with more machines placing automatic orders on behalf of customers, retailers can better predict demand and thus improve supply chain efficiency. More efficient supply chains means lower storage costs for retailers and faster and cheaper shipping for customers.

 In-Store Experiences

Another trend likely to hit the retail world within the next few years is augmented reality (AR), which is technology that superimposes computer-generated images on a user’s view of the real world. AR will likely play a role in further personalizing the customer experience in-store.

Using AR technology, retailers could offer customers the ability to try on clothing virtually. Not only would this allow customers to try on more items than just what retailers offer in-store, but it also would mean that retailers could spend less money investing in inventory up-front and rely on drop-shipping to deliver the products to customers.

Improvements to the in-store experience will be key for retailers looking to gain a competitive edge in the years to come as ecommerce becomes the norm. AR offers a way for retailers to do just that. However, the key for success with AR will be ensuring that it offers long-term value beyond the immediate cool-factor.

Virtual Inventory Assortment Planning

Lastly, AI can improve virtual inventory assortment planning. Thanks to drop-shipping capabilities, retailers no longer need to invest in more physical inventory to expand their product assortments. Instead, they can offer a wider selection digitally and enlist the brand or supplier to ship products directly to the end consumer.

However, the key to success with drop-shipping is for retailers to only add products consistent with their brand images. The wrong products will fail to drive more revenue, and will likely confuse customers. But choosing the right products to add to virtual inventories is easier said than done. Manually searching through hundreds of thousands of SKUs to determine exactly what customers want to buy is costly and time consuming.

That’s where AI comes in. AI-influenced algorithms can determine the best possible products to add to a retailer’s inventory by analyzing the product assortments of competing retailers and relevant brands, and then comparing those products to the demographics and shopping history of that retailer’s customers.

As AI-based retail technologies continue to improve, don’t wait to invest in the tools necessary to set yourself up for success. Many of the technologies that will likely gain traction in 2018 require brands to have drop-shipping capabilities in place. Learn more about how CommerceHub can help you facilitate an effective drop-shipping strategy today.