Artificial intelligence has potential to save retail companies $300 billion

If artificial intelligence (AI) was effectively used in the retail industry, the technology could stand to save companies more than $300 billion, according to research by global consultancy Capgemini.

“AI is completely in a disruptive league of its own – it’s the one to rule them all, in the Tolkienian sense. It lets you accomplish really exciting things with other technologies,” Paul Clarke, CTO of UK online grocery retailer Ocado said in an interview with AI Business. 

But companies are not – or are not yet capable of – capitalising on the opportunity. While over a quarter of retailers are currently using AI (a seven-fold increase from 2016), less than 1% are ready to scale and deploy with the efficiency necessary to hit such levels of cost-saving. The study, 'Retail superstars: How unleashing AI across functions offers a multi-billion dollar opportunity’ examined 400 international retailers using AI in differing stages of sophistication. This group brings in 23% of the global retail market’s revenue.

The trend so far seems to be using the technology for more complex tasks and projects, giving the customer the robotic cold shoulder. AI implementation is so far focused predominantly on cost (62%) and expected return on investment (59%) rather than on anything related to customer usability. This, despite clear evidence that retailers believe AI will greatly improve customer experience (98% said they expected to see a decline in customer complaints, and 99% expected a rise in sales). Again, issues of scalability and deployment arise. 

“When we first started working with the AI technology, I thought I was getting the Jeopardy champion right out of the box [but] it didn’t know everything,” Cal Bouchard, senior director of e-commerce at The North Face said. “You have to teach it about your consumer and your products. That was a lot of work. I underestimated that.” 

This underestimation is not a rarity, and as a result retailers’ confidence in their readiness for AI has dropped, from 78% in 2017 to 53% today. Organisations claiming to have a 'roadmap' for AI deployment has also fallen, from 81% in 2017 to 36%. Altogether this is not necessarily a negative – retailers are simply more self-aware, meaning that when AI is put into practice, its chances of success are higher.

AI will certainly be useful in supply chains as well – even, according to the study, “transformed efficiency.” But as of now it also poses an issue. “In the next year, one off the biggest AI and automation challenges … will be the failure of supply chains (especially in the last mile) to keep up with improved efficiencies enabled by AI,” John Gikopoulos, global head of artificial intelligence and automation at Infosys Consulting, wrote in his recent piece for Consultancy.uk. 

To boost AI value in the here-and-now, the Capgemini study contends retailers should treat AI as a “strategic imperative” while simultaneously focusing on “quick wins,” such as using the technology in chat boxes or on existing websites.

Related: European retailers are facing growing competition in fresh food segment.