AI opens doors, but gives retailers headaches about knowledge
Innovation
Artificial intelligence (AI) is expected to become very valuable in estimating consumer purchasing behavior and making product recommendations, among other things. This is evident from research by ABN AMRO into how Dutch retailers view AI, which AI applications they attribute potential to and already use and what challenges they see in doing so.
AI is currently a hotly debated topic that is increasingly affecting various sectors, including retail. AI technologies enable machines to learn from data and perform tasks more efficiently that previously required human instruction or action. They cover a wide range of methods of which machine learning and deep learning are important applications.
Big impact through AI
The recent introduction of generative, low-threshold AI applications such as Chat, GPT, Bing Chat and Google Bard makes it clear that AI can have far-reaching social and economic implications. According to experts, this groundbreaking technology can bring about changes similar to those that followed the introduction of the power grid and computers. The new technology can help to organize production and logistics processes differently and more efficiently, to develop new, currently unthinkable products and to make marketing messages more personal and targeted. Thus, it can provide competitive advantages and save costs.
A growing number of companies, including in retail, are therefore investing in AI. However, it is expected that it will take some time before the technology is widely applied, just as it was with the introduction of online. It also took a while for online to be applicable to the majority of the sector. In addition, not every possible application will survive in the future according to Gartner’s Hype Cycle.
AI research among retailers
ABN AMRO has conducted extensive research into the experiences and perceptions of Dutch retailers with regard to the use of AI. In collaboration with Q&A Insights Consultancy, 73 retailers from three revenue categories were surveyed, including twenty retailers with a turnover greater than 1 billion euros. The retailers come from various subsectors such as Food, Fashion, Shoes and Sports and the subsector Do-it-yourself, Garden, Animal and Living. We also looked at the size of their online turnover.
According to the retailers, the most valuable AI application is predicting the demand for products. No less than 96 percent of retailers find this application (very) valuable for their organization. And 91 percent find making product recommendations in the web shop a (very) valuable application for their company.
At the moment, AI is already most often used by the respondents for making these product recommendations in the web shop and for using chatbots and virtual assistants for customer contact. Both applications are already used by a quarter of the respondents. In addition, predicting the demand for products with the help of AI is applied by almost a quarter.
In the end, just over half of the retailers surveyed say they are already working with AI in some way. The other half not yet, but three in ten of all respondents expect to be operational with AI within 1 to 2 years. By not getting started with AI in time, a backlog can be made. However, no respondent indicates that they will never do anything with AI. The main reason for not being operational (even) faster with AI is that retailers have many other priorities that require attention in the short and medium term. The lack of suitable staff is also an important argument.
No threat, but above all opportunity
Only 6 percent of retailers see AI as a (serious) threat to the organization. Among retailers with the largest turnover, this is 15 percent. The fact that AI could eventually be used more easily by consumers and partly base their choices on this, is only seen by 14 percent as a (serious) threat. Retailers do not see AI as a threat, but mainly as an opportunity.
There is a lot of positivism around AI, but the necessary skills to start with AI in the company are seen as a problem by many retailers: 10 percent of retailers say they do not have the knowledge and skills to roll out AI themselves and 62 percent say that this is insufficient and / or will be a challenge. Attracting skilled staff with the right knowledge and skills is a big problem here and the battle for talent will be fierce. That is why more than half of retailers say that in the future they will work with an AI knowledge partner to be able to implement this in their own organization at all.
This recommendation certainly applies to the smaller retailers because they are expected to have more difficulty in acquiring such knowledge and skills. In addition, they have less data to build advanced models. If smaller retailers are unable to attract good people through their corporate culture or to enter into cooperation with third parties, they will have to distinguish themselves in a different way by, for example, unique products, their local market position and the strong personal connection with their customers. The power of community retail and powerful storytelling can make that distinction.
Learn More
Read the full report ‘Artificial intelligence opens doors but gives retailers headaches about knowledge’ (Dutch only).
