Established retailers are using AI and automation to streamline tasks and enhance customer experience, bringing the whole industry under pressure to become hi-tech

From manufacturing to last-mile delivery, retail giants and startups are using AI and robotics to automate various parts of the chain. Experts believe that players across the retail ecosystem need to adapt to using AI to stay relevant.

Corporations across industries are scrambling to adapt and integrate AI into their products, and the retail sector is no exception. In the last five years, retail AI startups that address retailer’s AI needs ended up raising around $2.67 billion.

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For traditional retail giants, leveraging AI means coming close to the competition from e-commerce behemoths like Amazon and Alibaba. Both of these online giants leverage big data and sophisticated AI algorithms to transform their retail space.

Alibaba has turned over 1 million mom-and-pop stores across China into AI-backed smart stores. These smart shops can predict surges in demand for goods and analyze traffic using heat sensor data. Amazon too is working on expanding its range of cashier-less Amazon Go stores.

Besides global competition, the need for adapting to an AI strategy can be observed at the rate at which traditional US retailers are shutting down. As per the data from CB Insights, Radioshack, Aerosoles, and Toys R Us filed for bankruptcy in 2017. In the year 2018, Sears, Brookstone, Mattress Firm, Nine West, Claire’s, and Remington Outdoor faced bankruptcies. This year, Diesel, Payless, Charlotte Russe, and Gymboree have joined their ranks.

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While these shutdowns have been shocking, it is also observed that retailers are still not able to identify that not adopting innovative technologies like AI is getting them to this state.  CB Insights analysis in 2018 of over 1,600 publicly traded US retailers’ earnings calls shows that only nine of 50 companies are discussing an AI strategy. While some e-commerce players   have started using AI and robotics to transform the retail space, most of the traditional retailers are yet to develop an AI strategy. With recent advancements in AI and automation, that include computer vision-based cashier-less stores, a high number of retailers in the coming years will be forced to improve their AI game.

AI is proving to be a powerful tool for deciding how to design better products. Last year, Tommy Hilfiger announced that they collaborated with IBM and the Fashion Institute of Technology on a project called ‘Reimagine Retail,’ to leverage AI to understand customer sentiment around their products and design. Various start-ups are working on making such artificial intelligence-driven development available to other companies.

Manufacturing jobs are being outsourced to countries where labor costs are cheaper. However, dropping industrial robot costs mean bringing the manufacturing bases back to the site of demand. To meet the ever-shifting consumer demands, retailers are using robots with computer vision to assemble products like apparel and footwear. However, countries with cheaper labor are not far behind. Tian Yuan Garments, the Chinese t-shirt manufacturer that produces garments for brands including Reebok, Adidas, and Armani, plans to use automated ‘Sewbots’ to make World’s first fully automated t-shirt production line.

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At warehouses too, robots are collaborating with humans. With more people shopping for products online, a significant pressure on centers to fulfill a huge volume of orders has led to usage of robots. While the bots are still less-than-perfect at picking, gripping, and handling items in unstructured environments, startups addressing some of these challenges and coming up with solutions.

Despite the development of AI-based solutions, a handful of traditional brands are effectively implementing AI strategies to drive business efficiency. To address the issues, smaller startups too are seizing the opportunity.

In the coming years, retailers may increasingly compete, not just with each other, but also the tech companies for AI startups and talent, as artificial intelligence continues to spread across the retail ecosystem.

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