How will AI shape retail in 2017?

In a year of uncertainty and unpredictability, change strangely remained our only constant in 2016. 

Against a backdrop of unexpected political events – the outcome of the Brexit referendum, the election of Donald Trump and the Italy constitutional reform vote, for example – and an unsettled global economy, technological innovation has been developing at a dizzying pace. Nowhere has this been more notable than in the retail sector.

Convenience is king

Customer demand for convenience is driving change. Our Unfaithful Consumer research found that 55 percent of consumers see it as the most important factor when it comes to deciding where, and how, to shop. With the help of truly disruptive new technology, the focus in 2016 was on making the entire shopping experience more convenient for the consumer.

Across the Atlantic, Amazon ended the year on an innovative high as it announced the launch of its first checkout-free Amazon Go store in Seattle. This integration of NFC technology in-store illustrates how retailers can deliver omnichannel in a seamless way.

Closer to home, in our Digital Innovations Retail Report we honoured retailers such as Starbucks who have led the way for convenience with their Order & Pay mobile service. Grocers have been experimenting too, with Tesco trialling RFID robots for inventory and stocktaking purposes.

 Delivery speed was a core focus, particularly in the takeaway industry. Just Eat took a (mechanical) step forward in December when it trialled its first Starship robot delivery in Greenwich, and we recognised Deliveroo for its fresh approach to delivery.

Brands know they need to put innovation at the core of their growth strategy. So will 2017 be the watershed year when cutting edge experimentation really goes mainstream?

The machines are learning

In 2017, Artificial Intelligence (AI) will continue to move beyond simple multiple choice questions into the next-generation territory of natural language. AI systems will be able to not only analyse data but make predictions, and this has vast implications across the retail industry – both on-and-offline. Tailored customer shopping experiences will become increasingly elaborate this year as brands use AI platforms to analyse shopping data and create personalised experiences. Online, AI technology is set to replace the traditionally time-consuming A/B split testing on the journey to optimisation. Italian lingerie company Cosabella, for example, is already using AI to rapidly test alternative options for its website design.   

High street shops including Marks & Spencer and Dune are already experimenting.  They have installed in-store technology that tracks customers’ movements from the emissions released when their smartphones are searching for Wifi networks. The theory is this will help them understand the paths their customers take, enabling them to adapt the in-store layout accordingly to maximise the time spent in-store.  This is further proof that on-and-offline channels shouldn’t be seen in isolation: retailers can use technology to enhance the bricks and mortar experience.

There is also huge potential in e-commerce to monitor and adapt to the customer’s real-time behaviour and personalise the experience. Of course this raises questions around privacy and ethics. For retailers, having a microscopic view of their customers’ activity is gold dust. But customers are understandably wary of feeling ‘spied on’, so the right balance needs to be struck between a genuinely enhanced experience, and intrusion.

Voice-activated search is a key trend which will continue to grow this year. The potential for transforming the way consumers browse, select and buy products is huge. Customers are already embracing the convenience it brings – 20 percent of Google searches on Android-powered handsets in America are input by voice. An increasing number of households around the world now have their own personal Alexa assistants – it’s estimated that the worldwide sales of Amazon Echo doubled from 2015 to 2016.

The integration of natural conversation into the shopping experience has the potential to be truly revolutionary. Machines are becoming scarily accurate at understanding human language – with speech recognition word error rates as low as 8 percent. With tech giants Amazon, Android and Google leading the way in development, 2017 will be an important year for the evolution of voice-activated search.

E-commerce comes to the high street

Over the past couple of years there’s been a trend of pure-plays moving into the showroom arena. Online womenswear brand Finery, for example, opened six concessions in John Lewis, and Dyson opened its first UK high street store on Oxford Street last summer.

This is proof how, far from being made redundant by e-commerce, bricks and mortar stores still have an important role to play as a physical touchpoint for retailers. Physical shops will always have the advantage over ecommerce of being able to offer customers to see and touch products and human customer service – so it’s unsurprising pure-plays are seeing the value of experimenting on the high street.

What will set high street stores apart this year is the experience they can offer. Customers can now shop anywhere at anytime, so retailers need to give them a reason to leave their sofas and hit the high street. It’s clear that technology can be an important part of enhancing the in-store experience, but good old-fashioned customer service is also crucial. With our research finding that 57 percent of customers will go elsewhere if they receive bad service, this is an area retailer can’t afford to neglect.

If there’s one thing that 2016 taught us, it’s that fledgling innovation has been well and truly catapulted into the mainstream. The key focus for any retailer is providing a convenient, personalised experience that encourages customers to return. From manufacturing and logistics all the way through the consumer shopping journey, innovation has the potential to transform retail beyond recognition this year.