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Monday, May 27, 2019

Why Traditional Retailers Must Adopt AI Innovation

The North America retail market is an example of incumbent disruption and slow-moving, executive responses to technology-fueled change. The world's largest consumer-driven economy is likely a precursor to market shifts that will impact retailers across the globe.

Clearly, prior success with traditional retailer business models is no indication of the potential for future performance. The emergence of eCommerce giants such as Amazon and eBay from the mid-1990s has created a long-term challenge for most old-school retailers.

Many legacy in-store retailers 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 such as 'click and collect'.

While this has improved the customer experience, it has not prevented the disruption of traditional retailers, with multiple large-scale insolvencies -- including Toys R Us and Sears. Therefore, the surviving retail CxOs must further adapt their business models in order to compete and prosper.

Start by following the market leaders. There's already momentum behind leveraging the tools that the leading eCommerce pioneers have used to such great effect, primarily Artificial Intelligence (AI).

Retail AI Market Development

Chatbots are one example of retail AI in action. The global number of successful retail chatbot interactions will reach 22 billion by 2023 -- that's up from an estimated 2.6 billion in 2019.

According to the latest worldwide market study by Juniper Research, chatbot use by retailers will enable effective automated customer interactions for retailers.

This innovation can deliver high-quality user experiences in a low-resource way, boosting customer retention and satisfaction whilst also reducing operating costs. A crucial enabler of this will be improvements in Natural Language Processing (NLP), which will dramatically reduce the failure rate of chatbot interactions, by making them more natural and valuable for customers.


Juniper analysts anticipate that retailers who do not adopt chatbots will likely experience challenges from more technologically-adept disruptors, who will use chatbots as an extension to the crucial omnichannel retail experience.

The study also found that chatbots leveraged for customer service have a strong potential to reduce costs -- with deployments realizing annual savings for retailers of $439 million globally by 2023, up from just $7 million in 2019.

These potential savings will act as a key ‘pull’ factor, given the margin pressure that many retailers are presently feeling. "By embracing automated customer service with chatbots, retailers can act in a more flexible and efficient way. The wider retail market means that chatbots are no longer a luxury, they are essential," said Nick Maynard, senior analyst at Juniper Research.

Outlook for AI-Driven Retail Innovation

Meanwhile, retail sales resulting from chatbot-based interactions will reach $112 billion by 2023 -- that's up from $7.3 billion in 2019; representing an annual growth rate of 98 percent.

However, the research found these sales will largely be a result of migration from other channels, rather than a new revenue stream. Accordingly, Juniper emphasized that while retailers must adopt chatbots for ease of use, their ROI will come from efficiencies, rather than new growth.