How Artificial Intelligence is Transforming the Retail Industry

How Artificial Intelligence is Transforming the Retail Industry

The central themes unveiled at the recent CES 2019 in Las Vegas this month were of course 5G networks and artificial intelligence (AI). Along with virtual reality (VR), augmented reality (AR), machine learning (ML) and the internet of things (IoT).

AI refers to a computer’s ability to make decisions and think like humans and ML also falls under the category of AI. However, ML refers to a computer’s ability to learn logical rules by continuously updating its understanding of the rules by observing human reactions. VR fully immerses the user in an artificial environment with sensory stimuli, AR adds a digital component to enhance the live view of the real world, typically usually used with smartphone, tablet, PC and connected glasses cameras.

These technologies are paving the way for innovation in the retail sector and retailers will have access to clear, accurate forecasting by combining and processing millions of customer data points. This data can then be used to build significant connections between customer behaviours and external influences to create more personalization, better customer service and cost saving opportunities. The use of AI in retail is proposing that retail companies can save as much as $340 billion if they expand into this realm. E-commerce is continuing to increase in its popularity with consumers and brick and mortar shops will need to drive innovation to stay relevant.

Even if your business is not involved in the retail sector, many of these examples are being customized and optimized for a myriad of other industries.

Retail Solutions

A year ago, Amazon opened a cashierless store called Amazon Go, leading the way in changing the way customers shop. The store requires many cameras with machine vision and deep-learning algorithms to watch a customers’ every more. The cameras know every product and can tell when someone picks up or puts anything down so that they can accurately charge the customers card. Amazon now has nine Go shops and other companies like Mighty AI, Walmart, Microsoft and Lenovo are also incorporating this technology.

Amazon Go Store's are Cashierless

Conversely, a start-up company Caper wants to make AI powered shopping more accessible. They created weight sensitive shopping carts with sensors and screens that can identify what customers put into their carts. The screens provide interactive maps around the store, lead customers to promotions, and allow customers to pay directly from the cart. This form of AI shopping experience is more manageable to implement across already existing supermarkets.


Price Optimization & Promotions

Smart Shelf offers shelf-mounted cameras and content aware digital shelving systems that collect visual data about customers. Using machine learning, the software can classify the gender of the customer and other data to adapt the digital signage to give them the best offer for their demographic. Smart Shelf also determines what the customers look at and reach for. This type of facial identification can be utilized amongst many other industries, such as employee recognition for heightened security in bank locations and other public locations. Smart shelves also have the capability to work with apps on customers’ phones. For example, sensors can detect the consumer that is approaching and can display a deal on the same product they purchased last week.

Ahold Delhaize, a Dutch international retailer has opened two cashier-less stores wherein the shoppers can use a ‘tap and go card’ to tap the labels on the shelves to pay for the products. The integration of AI and near-field communication (NFC) tags connect to mobile devices that can also read the tags on its store shelves.


Perfitly, a play on words of ‘Perfectly’, wants to help retailers minimize returns and enhance consumer experience. The augmented reality experience gives customers the ability to create virtual avatars based on their measurements so that they can try on different sizes of clothing from different online retailers. The company is also working on a system that will enable the customers to take two photos of themselves on their phones, front and back, and use them to create their own avatars. The system will use machine learning to identify measurements and the correct sizes and shapes of the virtual avatars. Then, users will be able to use the same avatar across online retailers who partner with Perfitly.

Ikea, the Swedish furniture manufacturer, integrated VR in their stores to create a virtual kitchen experience. Users can use their app (and a HTC Vive headset) to explore different kitchen settings by changing colours, materials, perspective and design solutions.

Inventory Management

With the increase in e-Commerce competition, retailers are using AI and machine learning to keep their inventories well stocked. They can determine and predict the precise levels of inventory needed to meet customers’ needs and minimize overhead costs.

Nike is taking advantage of the data collected from their online shoppers with their new concept store called Nike by Melrose, as they use the data of online purchases to keep track of regional shopping data. The store is always stocked up with the most popular shoes and apparel of the consumers in the surrounding West Hollywood area.

Nike on Melrose store

Personalization of Recommended Products

Amazon’s online marketplace has an incredible recommendation engine that propels 55% of its sales. The engine takes into account the buyers’ search history, purchased products and the purchasing behaviours of similar customers. These machine learning algorithms help Amazon better predict inventory demand, make simpler seasonal and trend-based supply decisions. You can also utilize Amazon Web Services’ product recommendation engines for your business, based on methods that have worked for Amazon.

Advanced Analytics - Build your sales with engine recommendations

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Shopping Assistants

North Face, an outdoor clothing retailer, has adopted artificial intelligence technology in developing their app called “Shop with IBM Watson”. Users speak into their phones to talk to Watson, an AI system from IBM. The virtual assistant goes through a series of questions that learns about your needs and preferences to offer you the most appropriate products.


Lowe’s, a home improvement retailer, partnered with Google Tango’s AR technology to create a superior shopping experience for customers navigating the store. Customers can create a personal shopping list and then let the app direct them to their purchases based on most efficient path, which is the first of its kind in the industry.

Lowe’s has also set up a virtual reality experience where customers can learn how to tile a shower. Using a VR headset with a controller in each hand, they are guided on how to complete the project. The 10-20 minute experience increases the chances of consumers remembering the process and encourages them to pursue hands on projects.


IBM surveyed 1,900 retail and consumer product representatives in 23 countries to establish how AI will alter the retail sector. (1) Supply chain planning and (2) demand forecasting were the top contenders, followed by (3) customer intelligence, (4) marketing, advertising and campaign management, (5) store operations, (6) pricing and promotion.

Another bonus of AI is root cause analysis, which recognizesd the cause for liabilities within an existing system, it is one of the main areas that can be gainfully automated. Machine learning systems are able to paint a precise picture of what goes wrong, findings such as incomplete data or lapses in communication, and identify where each of these failures happened along the supply chain.

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