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Monday, May 06, 2019

Why Savvy Retailers Adopted Artificial Intelligence

The emergence of online shopping created a significant disruption for traditional retailers. Some have met this challenge by attempting to offer a compelling omnichannel experience, where the physical retail and online channels merge through the use of solutions that benefit busy shoppers.

While this approach has improved the overall customer experience, more retailers must embrace a digital transformation agenda. They can further adapt their business models in the face of forward-thinking competition. And, that's now driving the momentum to leverage Artificial Intelligence (AI).

Retail AI Market Development

According to the latest worldwide market study by Juniper Research, global spending by retailers on AI services will reach $12 billion by 2023 -- that's up from an estimated $3.6 billion in 2019. Juniper expects over 325,000 retailers to adopt AI technology over the forecast period.

According to the study findings, AI use by retailers will unlock efficiencies across back-office operations. Advanced analytics employed in functions, such as demand forecasting and automated marketing, will make retailers more agile and improve profit margins.

Juniper forecasts that retailers will face an AI adoption race, where AI-equipped retailers -- which have adopted systems as early movers -- will displace slower moving retailers, by offering superior service at optimized price points.


Furthermore, the use of machine learning in demand forecasting will prove to be a key market for AI vendors, with associated service revenues reaching $3 billion by 2023 -- that's up from $760 million in 2019.

The analyst claimed that demand forecasting will be essential to enable an effective omnichannel experience and drive higher margins. This will mean the number of retailers using AI-enabled demand forecasting will more than triple between 2019 and 2023.

"With the rise of collect-in-store and one-off events such as Black Friday, understanding demand and supply chains are more crucial than ever with AI playing the central role," said Nick Maynard, senior analyst at Juniper Research.

Outlook for Retailer AI Application Growth

The research also found that smart checkout applications, powered by AI technologies such as computer vision, will have a role in the convenience area -- leading to annual transaction volumes of over 1.4 billion by 2023, compared with just 42 million in 2019.

While Amazon is currently highly visible with its 'Go' in-store retail model, China is forecast to be the primary driver of future growth. This prediction reflects the rapidly advancing Chinese market, as well as the backlash Amazon has had recently due to its cashless payments model.