Before talking about prospects for AI in the retail and CG sector, let’s first look at some macro trends triggered by Covid-19, that point at a tectonic shift in the contours and operating model of this industry.
1. Buying has shifted from physical stores to the online world and this is not likely to be a temporary trend but most likely a permanent one. Statista predicts that global e-commerce sales is expected to touch $6.5 trillion by 2023 which is staggering especially when the first documented online sale happened just 25 years ago in 1994.
2. Not just pre-Covid online buyers increasing their online buy by 45% as per a recent BCG study, the same report also suggests that a staggering 20+% of buyers are first time online buyers.
3. The overnight changes in shopping behaviors is also reflected in the trend that the number of online categories per user has increased from 4 to 6 in the last few months
4. All of the above is not just in urban cities but a phenomenon even in Tier2 and Tier 3 cities of India. Myntra sees a 86% increase in customers from Tier2 and Tier3 cities and as per Unicommerce data, Tier3 cities clocked a 53% increase in online buying. Unicommerce further predicts that the unique number of online shoppers annually in tier-II and beyond cities to go up to 170 million over the next three years from the current 50 million.
This not only means new untapped opportunities for retail and CG companies but also an urgent need to rewire existing operating models and innovate new business models.
Enter Artificial Intelligence! – Arguably the next big transformation in technology that is going to touch lives the world over. In the next few paragraphs, I will zoom in only on the retail and CG industry and how companies in this sector can leverage this to their advantage.
The following are the Top 4 use cases based on the ROI that these can deliver back to businesses:
A peek into the consumer’s mind
Consumers need help from businesses in a diverse set of topics (what to buy, how to use, is this right for me, where is my order, etc) and they demand this help anytime and anywhere. Businesses, on the other hand, have a limited view of what those consumer needs are and often they don’t know what they don’t know about their consumers. AI, with models developed and pre-trained on the retail domain, gives businesses the ability to engage their consumers 24/7 and from these 1:1 interactions with real consumers, AI-based Analytics can surface out those new consumer needs at scale – could result in new product introduction ideas, new market identification or even small tweaks in existing campaigns to generate better results.
As mentioned earlier, retail businesses now face a deluge of first-time shoppers who are trying to purchase their favorite products and services online and they need a sort of virtual concierge service that can help them discover the right products from the vast assortment available in the online catalog. AI-based solutions can do that as long as these solutions are vertical specific (often category-specific) and understand the business’s overall domain ontology. Brands who have tried this have seen a growth in online conversions by more than 10% and also discovered new insights about their consumers helping them to adjust their product portfolio as well as the online customer experience in different channels.
Virtual Brand expert
As an example from the personal care category, think of the last time you went to a store to buy your personal care products. You were at the aisle and a brand expert approached you, understood your needs, and more importantly answered your product questions around which face cream is the best for you. Today, you go to that same store and there is a high chance that those brand experts are not there or are in limited numbers, thanks to the work-from-home policy adopted by the retail business. When you visit the online shop now, that helps you in answering all your questions? And without your questions being answered will you take a risk and buy? That is yet another opportunity for retail and CG companies to tap into, using AI, have their virtual brand expert available online, and at the fingertips of their consumers that can answer all questions regarding products and services. In the process, the retail business will also learn about what questions consumers have about their products and accordingly propagate this learning to their store associates and customer service agents for better customer service.
Means to automate burgeoning call volumes and save costs
This is the use case that is most widely adopted already by retail businesses around the world. It is a fact that 50%-60% of all incoming calls from consumers are regarding repetitive transactional questions such as “where is my order”, “how to return” etc and AI offers the capability to automate these questions resulting in savings of up to 25% in customer service operations cost.
To conclude, AI offers game-changing potential for retail and consumer good companies when it comes to understanding the emerging and diverse needs of their consumers. And whoever acts and delivers on these consumer needs faster will emerge as the new winners in the new normal. Early adopters have been in fashion, personal care, and wellness but I do see a rapid adoption coming very soon from the rest of the categories such as luxury and electronics.