KEY POINTS

  • Digitally native retailers are setting new standards for the customer journey by creating highly curated experiences through the use of artificial intelligence (AI). This has enabled them to increasingly dominate the retail market at the expense of legacy firms by catering to consumers' desire to interact with mobile apps and websites as they would with an in-store sales representative.
  • By mimicking the use of AI among e-commerce pureplays, brick-and-mortars can implement similar levels of personalization, helping to create successful online arms of their own, while also potentially boosting in-store sales. Retailers that have implemented personalization strategies see sales gains of 6-10%, at a rate two to three times faster than other retailers, according to a report by Boston Consulting Group (BCG). AI can be used to provide personalized websites, tailored product recommendations, more relevant product search results, as well as immediate and useful customer service.
  • However, there are several barriers to AI adoption that may make implementation difficult. By and large, these hurdles stem from a general unpreparedness of legacy retailers' systems and organizational structures to handle the huge troves of data AI solutions need to be effective. They include outdated storage systems, data usability issues, shortage of analytical talent, and lack of direction.
  • For many retailers, successfully leveraging AI will require partnering with third parties. There are two main approaches to implementing AI solutions for retailers: in-house or via a third-party provider. Because of the barriers mentioned, employing an in-house strategy can be extremely costly and difficult. This has led to the rise of AI commerce startups, which are highly specialized in various applications of AI in retail, and can provide a more cost-effective approach to overhauling the customer experience.

Introduction

Digitally native retailers like Amazon are setting new standards for the customer journey by creating highly curated experiences that combine the personal feel of in-store shopping with the convenience of online portals. This has enabled them to increasingly dominate the retail market at the expense of legacy firms by catering to consumers' desire to interact with mobile apps and websites as they would with an in-store sales representative.

These personalized online experiences are powered by artificial intelligence (AI), or the ability of computers to parse data in a contextual manner to provide requested information, supply analysis, or trigger an event based on their findings. This is what allows websites to recommend products [...]