Retailers cannot afford to ignore AI's competitive edge

This article was first published in Nikkei Asia.

In a challenging economic environment, shoppers are increasingly adopting value-seeking behaviors and looking for convenient, relevant and seamless retail experiences across a greater range of online and offline touchpoints. From retailer apps, connected TVs, smart devices and social media to physical stores, events and trade shows, consumers are actively adapting their shopping habits, switching brands, trying new digital shopping methods, and opting for private-label brands.

The challenge for retailers in this new environment? Proactively adapting to these changes and meeting consumer expectations for greater value and choice.

The solution? Leveraging Artificial Intelligence responsibly.

Several recent surveys underscore the retail industry's commitment to AI adoption and its impact as we continue to see the sweeping benefits on business outcomes — be it inventory optimization, trend prediction or smart personalization. But while the case for AI in helping retailers gain a competitive edge is clear, there continue to be challenges hindering its widespread adoption.

Retailers remain uncertain about the return on investment of undertaking large-scale overhauls across their businesses. That's where experimenting and taking small steps with AI interventions, as well as working with the right technology partner to solve specific issues, can help retailers achieve favorable outcomes.

Integrating AI-powered personal shopping assistants, for example, has been shown to deliver encouraging results. Be it ecommerce giants or luxury brands, these retailers are analyzing historical shopping data to offer shoppers personalized product recommendations and offers, curate apparel that fits flawlessly and re-create in-store experiences for a hyperpersonalized virtual storefront.

Similarly, customer service with AI integration is enabling brands to address a multitude of queries in a short time, directly elevating efficiencies, while delivering swift resolution, saving consumers time. This elevated customer experience, combined with increased shopper satisfaction, when delivered consistently, without doubt, directly impacts business revenue.

AI transforms data into actionable insights that can optimize promotions, allocate resources and help retailers adapt swiftly to the ever-evolving consumer landscape and expectations. Similarly, high data quality is essential for ensuring that generative AI models can perform at a high standard, which is a prerequisite to harnessing generative AI's potential to drive innovation, enhance customer experiences and gain a competitive edge.

This is why retailers must ensure that they are investing in organizing and analyzing their data to enhance existing offerings, curate new solutions and make informed business decisions. Having said that, while AI thrives on data, retailers fear leaks and breaches, and for the right reasons, because data privacy continues to be a concern among shoppers. Moreover, AI solutions deployed at scale still lack stability and can produce misleading or inaccurate outputs.

This lack of trust and stability poses a challenge for retailers aiming to fully embrace AI as a trusted helper. Creating responsible and transparent guardrails around AI adoption — and implementing robust security measures like secure data pipelines, encryption and access controls — are therefore essential, as is transparent communication to consumers about data usage. Retailers who leverage data-backed decisions and embrace AI tools in their functioning will continue to outpace the rest.

As retailers navigate evolving employee expectations and changing skill requirements, upskilling teams and fostering AI literacy are now vital. This also serves as an important area for busting the myth that AI will replace people, because automating routine tasks liberates employees to focus on more meaningful aspects of their roles, while allowing employers to allocate resources efficiently. Companies should prioritize developing workplace-specific search tools that use knowledge models for more relevant results and integrating Gen AI solutions to assist employees in performing their roles more effectively, directly boosting productivity.

AI represents an evident shift, demanding relearning and adjustment. The cost and budget restrictions, coupled with risk aversion for the widespread organizational transformation it needs — be it overhauling legacy systems, workforce shifts or skilling requirements — can significantly hinder the adoption and implementation of AI technologies within a company. Balancing innovation with operational stability allows companies to gradually integrate AI technologies, while maintaining the reliability and continuity of their operations. This approach helps mitigate risks, manage costs and ensure that the workforce can adapt to new technologies without disrupting the overall business.

With the retail battleground no longer confined to brick-and-mortar stores or e-commerce platforms, and as Asian shoppers cautiously, yet eagerly, embrace AI-driven experiences, retailers must view AI as an intrinsic part of their business strategy. AI is a crucial ally to business which, when harnessed responsibly and transparently, can enable retailers to reshape strategies, win consumer loyalty, thrive amid competition and create a blueprint for future success.