In their efforts to eliminate marketing misfires in the aisles, more retailers are investing in ways to physically connect with their customers within their stores. From cooler doors that recognize a face to dressing room mirrors that can dim the lights, retailers are investing in artificial intelligence (AI) for one key purpose: to accurately anticipate customer behavior at scale.
This was a theme recently of the National Retail Federation's Big Show in New York. Specifically, retailers are using AI, facial recognition and other advanced technologies for their physical tracking capabilities, to make better sense of the factors that influence shopper purchase decisions in real time. Shoppers benefit when retailers use these insights to redesign their stores and shopper experiences.
Amazon Go represents the beginning of this movement, using tracking technology to register what its shoppers pick up or put back on the shelf. Similarly, retailers are testing facial recognition to better understand how shoppers interact with merchandise, technology and displays.
The net result is that AI is mainstreaming, and producing points of data whose depth of detail enables unprecedented levels of shopper comprehension. The test is whether the technology will produce shopper loyalty.
3.4 BILLION VOTES OF CONFIDENCE
All this in-depth physical tracking is being blended with traditional shopper research, like purchase data, and therefore entering the store innovation plans of more retailers.
The retail industry is estimated to have invested $3.4 billion in artificial intelligence in 2018, outpacing all other industries, according to International Data Corporation (IDC).
Those retail investments are simply following the compounding availability of data, produced from smartphones, GPS and other computerized sources, which have dramatically elevated what AI can do.
For example, while traditional sales database systems track individual product purchases, AI parlays sets of purchase data into patterns and trends with the speed and accuracy unattainable by humans. Machine learning systems can correlate the data to identify specific habits, such as whether a shopper avoids red meat but buys organic chicken on a weekly basis.
Now expand that to scale: A national supermarket chain could use geographic data sets to predict how much organic chicken its shoppers will want across its network of stores, and manage its inventory accordingly. More importantly, rather than just promote chicken to these shoppers, the merchant can promote complementary items — rice, organic carrots, herbs or a baster.
WALGREENS, KROGER AND GUESS GET SMART WITH DATA
But how does this change the store, and the shopping experience? This is what shoppers can expect.
1. Advertising that opens doors. At Walgreens, AI may give new meaning to the concept of brisk sales. The drug store chain is testing a network of “smart” displays that embeds cameras, sensors and digital screens in its cooler doors, all to help marketers tailor ads for different types of shoppers, according to The Wall Street Journal.
The cooler doors work like billboards, displaying ads targeted for approaching consumers based on estimated age, gender and the weather, among other variables. A teenage boy, for example, could see different ads than his mother. Using face-detection software, the technology can distinguish which items a shopper looks at and handles, helping advertisers determine if their promotions work.
Nestlé, MillerCoors and Conagra Brands are among roughly 15 companies looking to test the platform, made by Cooler Screens in Chicago. Meanwhile, Walgreens plans to expand the pilot to five stores in San Francisco, as well as to Manhattan and Seattle, by the end of January.
2. Suggestions that reflect your tastes. At Ralph Lauren's flagship store in Manhattan, smart mirrors recognize the items shoppers enter the fitting room with and show them on the screen, then share other available sizes and colors as well as complementary items. They also adjust lighting to the shopper’s preference and can alert a salesperson to come to the fitting room. These mirrors spare the shopper repeat trips to the floor (for that different size) while helping the store make smarter merchandising decisions.
Similarly, the clothing chain Guess plans to pilot a store with Alibaba in China that's outfitted with smart mirrors, smart racks and AI-enabled fitting rooms. The collaborative data gathered via mirrors and racks could enable Guess to monitor traffic patterns and product interest, to make more spot-on recommendations to shoppers, which in turn improves efficiency.
"Every item is enabled with Bluetooth low-energy chips, RFID and motion sensors, which enable all of our inventory to be tracked and analyzed," Edward Park, senior vice president at Guess North America, told gatherers at the National Retail Federation’s Big Show in New York recently.
3. More meaningful shelf life. The supermarket chain Kroger is partnering with Microsoft to make shopping hyper-personal, down to the product level. The team is testing stores capable of visually flagging items on shoppers' lists at the shelf, so they can find what they need, take advantage of a personal offer and breeze through the store faster.
The system, in 92 Kroger locations, promises to customize the in-store grocery experience by matching the items shoppers enter on their app-enabled Kroger shopping lists to those on the store’s digitized shelves. When the shopper (identified through the app) approaches one of the items, a pre-selected personalized icon flashes.
The digital displays also can update prices dynamically and show tailored advertising - Microsoft's artificial intelligence can predict a shopper’s age and gender, to more accurately customize ads to specific customers. The shelves also help store employees more quickly fulfill curbside pickup orders.
NOTHING ARTIFICIAL ABOUT THE PRICE
Combined, these three smart endeavors add up to one highly important fourth benefit: smarter pricing.
When retailers can more narrowly determine which promotions work, they can adjust the timing and placement and target shoppers accordingly. Customers who tend to consider but opt against a splurge item, such as ice cream or organic chicken, may be surprised with a specially offered, reduced price.
All of which would result in more efficiencies, or lower operating costs, for retailers. Ideally, those savings would be rolled right back into more technology and services to make the shopping trip more enjoyable and, importantly, entice shoppers to return.
Put another way, the more accurate measure of customer loyalty will continue to derive from understanding the factors behind their purchases. Artificial intelligence is the door to that reality.