3 Reasons Why Retailers and Brands Should Invest in AI

By Guru Hariharan, CEO and Founder of CommerceIQ

Retail has had a wild ride over the past three years. After ecommerce sales surged during COVID lockdowns, in-store sales surged as shoppers returned to stores. More recently, persistent inflation has meant rising input costs for brands and retailers as shoppers increasingly stretch their budgets. To align with this new reality and prepare for the possibility of a recession, retailers and brands have shifted their focus from sales growth to profit and efficiency.

AI promises more efficient retail operations that can boost profit at a time when growth may be harder to achieve. In fact, retail is exiting the novelty phase of AI and entering an actionable phase that is already yielding compelling returns. The secret sauce is data. Consider Walmart’s investment in smart fulfillment centers or Amazon’s investment in computer vision and tracking tools that streamline checkout. Both of these investments yield a treasure trove of data that AI can use to improve the business.

Some of the greatest applications of AI are in the backend of retail management, especially within ecommerce. Here are three reasons why retailers and brands should invest in AI to compete in today’s economic environment.

Reduce costs: The benefits of AI are possible because of all the data these platforms can collect and analyze. They use this data to prevent lapses in inventory, reduce time to fulfillment, and optimize workflows. For instance, AI tools can better predict when an item will go out of stock and order more before shoppers find empty shelves. For brands, AI can also optimize online ad spend within a retail media platform while still effectively reaching target shoppers. While the upfront capital investment and learning curve may be significant, AI tools in ecommerce and retail pay for themselves quickly. They are far more efficient than a person performing the same tasks, which ultimately reduces costs and improves profits for brands and retailers alike.

Save time: Whether it’s flagging never ending inventory issues on the shelf or submitting tickets to have unauthorized 3P resellers removed online, Many tasks within retail ecommerce are necessary but mundane, requiring the full-time attention of multiple employees. AI is positioned to handle these tasks with an always-on approach so that people only need to manage edge cases. This frees up time for team members to be more productive elsewhere. At the same time, a robust, AI-enabled retail ecommerce management (REM) platform should connect data from across organizational information silos, making it faster to track related metrics in tandem, identify underlying problems in the business, and determine the best path forward to grow sales.

Generate ecommerce insights: Since ecommerce yields such a wealth of data by default, AI tools are well-suited to analyze online trends in shopper demand, the supply chain, retail media, and competitor insights on a SKU-by-SKU basis. With high competition in a concentrated retail landscape, AI and machine learning can provide insight into integral KPIs that impact a brand’s overall market share. Managers equipped with AI tools should have all the resources they need to instantly analyze any part of their business. For instance, AI can help indicate how a brand’s product content is performing on major retailers based on sentiment, product description, images, reviews – and suggest or automate content improvements. AI tools can even recommend actions (beyond basic, routine tasks) that are likely to maximize revenue, profit, market share, or any other metric of interest in real time. AI can even take action in pursuit of these goals on its own, like automating content changes to optimize performance, or tweaking things like ad spend and order frequency to minimize inefficiency. Iterative AI tools also learn from the output of these decisions and use the new data to improve their decision-making process, increasing accuracy for the future. With the economy in turmoil, an iterative, always-on approach ensures that retailers and brands are always responding effectively to the current environment.

The Future of Retail

With the advent of so many AI tools in the marketplace, this diverse range of technologies shows real promise to revolutionize how brands and retailers track key metrics and take action to optimize their business. Retailers and brands that choose not to invest in these tools risk being at a competitive disadvantage. This competitive pressure will likely spur adoption, scaling the industry even further and encouraging the development of more AI capabilities. As the advancement of AI chat tools like OpenAI’s ChatGPT reveals, we are now in the stage where a self-reinforcing cycle of growing scale and capabilities is causing AI to grow exponentially. Supply chain operations and backend management will be streamlined and take up less energy and time from retailers. At the same time, the actionable data that AI unlocks means that retail will become more focused on market share as retailers and brands strive to outperform the competition. AI will also allow more time spent on strategic initiatives like product launches and improving the shopping experience. The day-to-day roles of retail ecommerce management may be hard to recognize by yesterday’s standards in several years’ time. The future is just getting started.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.