Market Scan
Carpe Diem Global Partners recently interviewed a number of retail sector operating executives from predominantly national retailers at scale with revenues of $5 billion or greater, to seek their views on how Artificial Intelligence (AI) is being used to impact retail store performance.
As retailers explore the potential of AI, their journeys vary widely, from early adoption to advanced applications. Here’s a high-level look at where they stand in their AI implementation and the ways they’re leveraging AI to enhance store performance and customer experience.
Executive Summary
Survey completed in July ‘24 – October ‘24 by Jamie Farnham, and Jeff DeFazio.
As retailers explore the potential of AI, their journeys vary widely, from early adoption to advanced applications. Here’s a high-level look at where they stand in their AI implementation and the ways they’re leveraging AI to enhance store performance and customer experience.
Early AI Exploration and Testing Phases
Our discussions with executives indicated that a number of retailers are in the initial stages of exploring AI. They’ve engaged in trials and discussions around potential applications, particularly in marketing and digital customer experience (CX) data mining but have yet to adopt AI tools in stores. Challenges in affordability, implementation, and ease of use have been primary barriers. One retailer, for example, is considering integrating platforms like Sigma with Snowflake for enhanced data analytics but is still in the funding and planning phases.
Similarly, Another retailer has yet to make significant inroads with AI, while one of its direct competitors, another retailer, is exploring tools like Courso to report SKU-specific anomalies for operational improvements. Other retailers, such as this clothing retailer, are starting to examine AI’s potential for productivity and sizing decisions, particularly in merchandising and stock allocation.
AI in Customer Insights and Internal Operations
Other retailers are focusing on AI for customer segmentation, loyalty program management, and targeted communications. Company D, a specialty retailer, has developed an algorithm that helps identify popular items among its 30,000 SKUs based on web and Google rankings. This content-based AI strategy helps prioritize the best listings and optimize site traffic. Another executive indicated that his business uses predictive tools to identify key customer touchpoints, enhancing customer engagement at major partner stores with national footprints.
AI in Store Operations and Performance Optimization
Some retailers are experimenting with AI tools specifically tailored to improve store performance. One important test by a national retailer is set to evaluate AI-driven traffic counters to track customer buying habits and in-store movement. This data could inform better store layouts, promotions, and customer engagement strategies. AI-based tools that predict customer conversion rates, visit frequency, and purchase tendencies are being trialed in several stores, aiming to help retailers make data-driven decisions on inventory, replenishment, and labor forecasting.
Advanced AI Implementation for Content
Generation and Customer Experience
Retailers at the forefront of AI are deploying AI extensively. These businesses utilize AI to generate web content, manage customer reviews, and predict in-store conversion rates and labor needs by analyzing foot traffic patterns and peak hours. AI is also used in real-time inventory management, automating replenishment based on trends and demand, allowing stores to maintain optimal stock levels and improve the overall shopping experience.
Future AI Strategies and Training
As these retailers evolve their AI capabilities, they’re investing in talent and building AI task forces to guide future applications. For instance, one retailer recently hired a new CIO, initiated an AI task force, and is focusing on training teams in AI fundamentals to prepare for more extensive adoption.
In summary, AI adoption among retailers spans from foundational exploration and strategic testing to robust implementations enhancing customer experience and operational efficiency. From chatbots and customer segmentation to predictive replenishment and loss prevention, AI’s potential to reshape retail operations is significant. For many, this journey is only beginning, with promising paths ahead in predictive analytics, customer insights, and operational automation.
Jeff DeFazio
Managing Partner
These market insights from Carpe Diem Global Partners are gathered from the firm’s extensive client work leading Board, CEO, CXO, and CHRO executive search engagements for public and private multinational companies. For deeper, custom insights, contact Jeff DeFazio at Jdefazio@carpediempartners.com or Jamie Farnham jfarnham@carpediempartners.com.
Jamie Farnham
Partner