Artificial intelligence enables big box retailers to create hybrid physical-digital environments – and this could be exactly what physical retailers need to compete with e-commerce.
E-commerce has not been favorable to big box retailers. Since Borders Bookstore realized it could no longer compete in 2011 and closed its 399 stores, there has been a steady stream of iconic stores that have closed.
Over the past decade, e-commerce victims have included Toys “R” Us, the Sports Authority, and Pier 1 Imports, to name a few. For a long time, it seemed that big box retailers faced an inevitable descent into obscurity and irrelevance.
However, AI tools are starting to level the playing field, giving big box retailers a chance for survival.
Big box stores often feel at a disadvantage. Online stores are open 24 hours a day, making it easy for consumers to compare prices. Plus, people who shop online can easily search for products, see related and recommended items, and then have it delivered to their homes in days or even hours without having to lift heavy boxes or navigate their way through. crowded aisles.
In many ways, however, AI offers retailers the ability to fight back.
Perhaps the biggest challenge retailers faced was the physical limitations they faced. In an online environment, changing prices can be done with a single click of the keyboard. In a physical environment, a simple price change requires an inventory manager to find the item and replace all price tags.
Changing prices, a tool that physical retailers could use to compete, was simply prohibitively expensive, considering the manpower involved and the sheer volume of items in a store.
However, AI tools are part of an ongoing digital revolution in retail stores. The physical store introduces digital technology, which allows it to compete, in many ways, with its competition online.
There are a few technological elements that are helping bring digital transformation to physical locations.
Electronic department labels (ESL) are essentially digital price tags. Some simply display a price, while others contain product details and have space for messaging. ESLs can be updated from a central location, allowing pricing managers to change their point-of-sale and on-shelf pricing at the same time.
Computer vision is another AI-based technology that is making its way into stores. Essentially, these systems recognize the items on the shelf. It can be used to track stocks on display or track items placed in a shopping cart.
Beacons that use ultra-wideband frequencies for geo-positioning are also deployed to track items on the shelves. Real-time data can be used by AI systems as it guides consumers through their purchases.
Shopping in stores has real advantages over e-commerce. Customers can view the item they are purchasing, ask a seller questions, and take their purchases home without having to wait for a delivery.
Yet the benefits of in-store shopping are often overshadowed by e-commerce. Here are five ways AI tools create an in-store shopping experience that rivals the benefits of online stores, while preserving the physical retail shopping journey.
Profit optimization. Ecommerce sites use price optimization techniques to entice customers. They can create special offers for member customers or change prices in an instant to compete with other retailers.
By using ESLs, retailers also have much of this capacity. When connected to an AI-powered price optimization tool, retailers can track competitor prices and make adjustments at any time. Prices are clearly labeled on ESLs and will be scanned correctly at checkout.
As retailers progress, they can introduce loyalty pricing features, which can appear on a customer’s phone as they walk past items, or even show up when the ESL recognizes a customer. loyal.
Stock rotation. AI tools can track inventory levels and use that information to help stores transform their inventory more efficiently. Physical grocery stores, for example, can use inventory rotation tools to move items that are approaching their expiration or expiration date. Stores may offer discounts on these merchandise, allowing them to sell inventory before it deteriorates.
Inventory turnover tools can also be used to ensure merchandise is always available, increasing the price – and profit margin – on high-demand merchandise.
Clearance items. Seasonal merchandise or models about to be replaced present a big challenge for retailers, who often throw everything in a trash can and try to sell it at a discount. However, this eats away at profits and weakens the retailer.
Using AI, retailers can accurately identify the price at which an older item will sell. Rather than practically giving away merchandise, AI helps retailers stay competitive while weeding out unwanted merchandise.
24/7 availability. Supermarkets can turn to AI tools to offer their customers 24/7 availability. Computer vision has evolved to the point where it can track individuals as they walk through the store and identify the items they have picked up while shopping.
Computer vision allows retailers to operate unmanned stores. The technology can track every item placed in the cart and integrate with automatic checkouts so customers can buy whatever they need, any time of the day or night.
Search for products. Ultra-wideband technology is used to track items inside and is able to guide consumers within 12 inches of an item. Powered by AI, it can be deployed by retailers in a number of ways.
First, consumers can search for products, which makes it easier for them to find what they are looking for. Second, it can be used to guide them to recommended items. If consumers put a camera in their shopping cart, for example, it can guide them to camera cases.
At Walmart Inc., computer vision tools track product inventory and availability, and smart cameras locate abandoned and empty shopping carts in the store. Cameras follow the number of customers in the queue and the number of open checkouts. When needed, the system alerts human employees to open additional registers.
Costco Wholesale Corp. uses machine learning to help him determine how many baked goods to prepare each day at his bakery. The system uses a demand forecasting algorithm, which ensures that they have the correct number of fresh produce available each day.
By transforming their stores into hybrid physical-digital environments, big box retailers have the opportunity to create a shopping experience that captures the ease and convenience of online shopping with the tactile and real experience of walking through a store. . This could be exactly what they need to bring customers back to their stores.
Pini Mandel is co-founder and CEO of Quicklizard, an AI-powered price optimization platform.