Introduction
AI technologies are transforming the dynamics of the retail landscape by allowing businesses to personalize shopping experiences, improve supply chain efficiency, and get valuable insights through data analysis. According to Skyquest, AI utilization in the retail market is valued at $5.59 billion in 2022 and is expected to elevate from $7.42 billion in 2023 to $71.23 billion by 2031.
Looking at the statistics, AI will revolutionize the retail industry, providing unparalleled convenience to elevate customer experiences, optimize operations, and accelerate growth. Talking about EMEA regions’ adoption of AI, the brands are going headfirst into the new tech, embracing all it has to offer.
“A recent PWC Report stated that artificial intelligence’s potential impact on the retail, wholesale, food services, and consumer goods industries in the Middle East could be US $23 billion by 2030.”
– Source: PwC
Keeping that number in mind, I would go ahead and talk about the transformative effects that AI brings to the retail industry.
Personalization and Customer Experience
Customers currently expect personalized experiences that cater to their needs, so advanced technologies like AI combined with an omnichannel approach help personalize the retail shopping experience. AI assists retailers in offering such levels of personalization by delivering tailored product recommendations, personalized marketing messages, and customized shopping experiences by analyzing huge amounts of customer data, online chatters, browsing patterns, behavioral insights, and social media presence.
AI leverages different algorithms and monitors customer behavior, purchase history, and browsing patterns to recommend products to each customer they are interested in. Offering this level of personalization can lead to increased customer satisfaction and conversion rates. For example, leading European retailer Zalando uses Gen AI and proprietary data to provide a better conversational and contextual shopping experience. There is another example from the retail giant Nike using AI as transformative technology. Nike Fit app leverages AI to scan the shopper’s foot size and then recommend products to elevate the shopping experience and reduce returns. Nike also uses the athletes’ insights in product design to craft innovative designs that improve comfort, performance, and experience.
Chatbots and Virtual Assistants
A major transformation is being seen in the implementation of AI chatbots or virtual assistants, which are transforming customer service and enhancing satisfaction. These chatbots can manage a wide array of customer queries related to products, offer personalized product recommendations, and offer quick information related to order status, tracking, etc. The main advantage of leveraging an AI-powered virtual assistant is that it reduces customer support costs and improves customers’ shopping experience, freeing retailers to focus on more complex issues. In the Middle East, Majid Al Futtaim, a leading retail conglomerate, has partnered up with I.AM+ and implemented AI powered voice assistant platform named Omega to enhance customer service across its shopping malls and retail outlets.
Optimizing Operations
The key to enhancing customer experience is streamlining backend operations, and what better way to do this than by leveraging AI? From inventory management to demand forecasting, AI assists retailers in streamlining their operations, reducing costs, and enhancing efficiency. Retail fast fashion industry leaders like Zara leverage AI forecasting to revamp their strategies by effectively monitoring, controlling, and collecting data throughout the process, i.e., from design to shipping. Retailers can analyze the data to figure out the successful and inefficient areas and develop effective forecasts.
Let’s understand in brief how AI assists in inventory management and demand forecasting.
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Inventory Management
Retailers must avoid stockouts and overstocking situations to efficiently manage inventory and reduce costs. AI analyzes historical data, seasonal trends, and external factors to predict demand patterns, allowing retailers to maintain optimum inventory levels. This approach results in controlled costs and improved cash flow. For instance, British retailer Tesco uses AI to optimize its inventory management, reducing waste and ensuring product availability. Understand how Zara optimized their inventory management using AI. They partnered with Tyco to embed microchips in their clothing security tags that enable real-time inventory tracking and updates. Further, with RFID tags, the in-house developed Just-In-telligent (JIT system) supply chain system, and other sophisticated logistics systems, they monitor inventory, optimize supplier performance, and improve transportation.
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Demand Forecasting
Precise demand forecasting is essential for maintaining effective supply chain management. AI, through predictive analytics, analyzes multiple variables, such as sales data, market trends, and economic indicators, to generate accurate demand forecasts. With this data, retailers can make well-informed decisions related to purchasing, production, and logistics. Zara, the leading fashion brand, is using AI to bring operational excellence and refine its forecasting strategies with the help of AI. They collaborated with Jetlore, an AI-powered platform to analyze and predict customer behavior. It follows the granular details of structured predictive attributes, including size, fit, color, pattern, and style, to make informed strategic decisions. Using AI and other technologies, Zara is able to ensure that all the popular items are available and suggest designing new styles based on their customer behavior. Now, their TAT (Turn Around Time) for new designs is just one week compared to the industry average of three to six months. They’re the real fast fashion brand navigating the future.
Application of GenAI
Apart from implementing AI in the above-mentioned processes, companies have made some major advances in implementing GenAI to enhance customer shopping experiences and allow them to make correct purchasing decisions.
Amazon has recently introduced their diffuse to choose a novel GenAI model wherein customers can insert the product they are looking to purchase to a location stimuli where they can get a proper idea of how the product will look and make better decisions.
ASOS, a leading online fast-fashion and cosmetic retailer, has integrated the GenAI-powered visual search functionality into its shopping platform. It enables shoppers to upload images of the products they like, and using the GenAI system, it finds a similar match available on its platform with personalized offers. Artificial intelligence and image recognition technology empower shoppers to find their desired products and buy them online to enhance the overall customer experience (CX).
Google has also introduced a new feature where customers can circle around the product they want to buy. This will save time, offer better prices for the same product, and elevate their shopping experience. Apart from this, GenAI by Google can do a lot more, like editing images and videos in real time, summarizing emails, etc.
7-Eleven, a convenience store chain uses GenAI in a futuristic way to enhance customer interaction with products and respective information. It initiated digital shelves in its LDCC store in Seoul, which are equipped with motion-sensing cameras that detect customer movements as they browse and display detailed information about the products they are interested in. The GenAI-powered implementation helps provide timely and detailed product information and collects customer insights to further analyze customer behavior for personalized product recommendations.
BestBuy, the multinational consumer electronics retailer has been at the forefront of adopting digital transformation and has leveraged Generative AI to optimize its customer care process. This helped them improve customer care agent efficiency and satisfaction. Interestingly, they use GenAI and natural language processing to summarize customer calls. This reduces the time between calls and enables customer care agents to focus entirely on the customer. This Gen AI-driven customer care process helped them lower costs, boost agent satisfaction, and increase digital sales revenue by 31% of domestic sales.
Let’s move on to AI’s current trends and statistics in EMEA retail.
AI in EMEA Retail
AI adoption in the retail industry varies from region to region, with Europe leading in AI implementation and innovation. We have highlighted some key statistics and trends in AI usage in the retail industry across these regions.
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Europe
Europe has been the flagbearer in the EMEA region regarding AI utilization. According to RetailWeek, many retailers like Ocado Group and Charlotte Tilbury use AI to optimize their supply chain and customer experience. According to Graphical Research, AI utilization in the European retail market exceeded $500 million in 2020 and is expected to grow at a CAGR of 30% between 2021 and 2027.
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Middle East
Middle East is set to become the leader in leveraging AI by accruing 2% of the total global benefits of AI by 2030, amounting to $320 billion. According to McKinsey’s report, AI adoption, amounting to approx 75%, is highest amongst the retail and consumer packaged goods sector as compared to other sectors in the GCC. Also, during a recent forum held in Dubai, multiple leading experts in the retail sector underlined the impact of AI in transforming retail productivity.
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Africa
African retailers have gained significant momentum in recent years due to the accelerated rate of AI implementation in their businesses. The continent’s expanding digital infrastructure and increasing internet availability are accelerating the chances of AI-driven innovations in Africa’s retail sector. According to Statista, the AI market in Africa is expected to increase by 28.34% between 2024 and 2030.
Conclusion
All in all, it is undeniable that AI is and will continue to play a crucial and essential role in the retail transformation in the EMEA regions and worldwide. From improving customer experience (CX) to optimizing operations, AI is significantly changing the retail industry. Retailers in EMEA regions are increasingly adopting AI to gain a competitive edge, achieve sustainable growth, and deliver exceptional customer experiences. Hence, looking at the scenario, it seems implementing AI in retail business is a strategic imperative for retailers looking to thrive in the digital age.
As the role of AI is expanding in the digital transformation of the retail industry, I’m here to discuss the further implementation and integration of various technology means to facilitate more innovative and productive uses. Stay tuned to learn and talk about the optimized use of AI with capabilities to enhance operation, experience, and application for the future of the retail industry in the EMEA region. At Krish, we help brands with our strategy and consulting expertise to prepare strategic moves to pace up the journey on their digital transformation roadmaps.
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Fuelled by a relentless drive for digital innovation, Naresh Sambhawani is at the forefront of crafting transformative experiences within the dynamic realm of digital agencies. With a knack for pushing boundaries and leveraging emerging technologies, he specializes in creating captivating brand narratives that resonate deeply with audiences.
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