Artificial intelligence often brings to mind thoughts of self-driving cars and science fiction. But some of the most practical advancements in AI are happening within the retail industry. The innovative technology offers forward-thinking retailers a significant competitive advantage, should they be willing to invest – and it seems as though they are. According to Gartner, 30% of companies will employ AI to augment at least one of their primary sales processes by 2020. And for good reason; Forbes says US retailers have the potential to see a 60% increase in net margin and 0.5-1% annual productivity growth.

How It Works

Artificial intelligence automates decisions through algorithms informed by large datasets. In the case of retail, these datasets refer to specific sales and customer data. Using this data in conjunction with machine learning algorithms, AI systems provide complex and in-depth information about a company, its customers, and inventory that brands need to succeed in the current market. According to a McKinsey study, retail supply chain operations that are using data and analytics to improve merchandising including pricing, assortment, and placement optimization are seeing a 16% increase in operating margin improvement.

With machine learning, retailers can unlock the full potential of customer data and put it into practice in a variety of ways.

Activity Detection

Much like how e-commerce brands monitor shoppers’ online path to purchase, brick-and-mortar retailers are using video sensing devices to track shoppers’ movement and behavior patterns. Some retailers are even employing facial-recognition technology to identify individual shoppers and return customers. Disney is using facial recognition technology to read viewers’ faces as they watch a movie; they’ve already used it for Star Wars: The Force Awakens and Jungle Book. Over time, this data can offer retailers valuable insights that can improve and personalize the shopping experience.


Retailers are experimenting with robots throughout the retail supply chain. While robots have become more common in warehouses and distribution centers, they are now being brought to the forefront of stores to interact with customers. Lowe’s is one earlier adopter of this technology. The home improvement chain recently introduced LoweBots in the San Francisco Bay area. These machines are capable of answering customer questions in a variety of languages, locating items, managing inventory, and tracking consumer shopping patterns – all of which allows Lowe’s to make smarter business decisions that improve their bottom line.

Omnichannel Services

As the shopping experience becomes more integrated, AI offers consumers the ability to seamlessly switch across a multitude of sales channels. Farfetch, an online marketplace for luxury items uses AI to improve supply chain visibility. By linking their online inventories with those of their physical stores, AI allows them to deliver services like click-and-collect and in-store returns. Neiman Marcus launched an AI-driven mobile app called “Snap. Find. Shop” that allows customers to use their phones to take pictures of items they like. Using that image for reference, the app displays similar items from the store’s inventory.

Artificial intelligence is closing the gap from retail insights to action. It’s the key to improving business decisions and internal operations while deepening customer relationships.


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