Generative AI in Retail Series
Verneek
Mar 22, 2023
With all the buzz around Generative AI, everyone is wondering which parts of the economy have the highest potential for disruption. We believe that under-digitized and under-optimized industries are the ripest for seeing the slingshot effects of this breakthrough moment in AI. Although fintech, e-commerce, and media are touted as the likely Generative AI early winners, we believe that retail is the industry set up for the most impactful consumer-facing implementations of this breakthrough moment in AI, and in particular food and pharmacy retail. Here are a few key reasons:
Technology Lag Is The Feature, not the Bug!
Although the retail industry is considered a lagger in technology adoption, we believe that will play to its advantage. By not being burdened with expensive legacy AI software with multi-year commitments, retail will be able to skip generations of technologies and adopt the easier to implement and low-burden Generative AI solutions. The effect we see is similar to adoption of communication services where the emerging nations did not need to build infrastructure for landlines and could jump all the way to cellular lines, with its widespread usage on par with the United States. So we see the retail industry being able to jump all the way to adopting breakthrough Generative AI technologies faster than any other industries with no legacy barriers to entry.
True Case of Augmented Intelligence (AI)!
AI has been notorious for automating away jobs, however, we actually believe in the true power of AI being Augmented Intelligence, enabling any worker to get more productive and accurate in their daily jobs. As a proof point, we see that Generative AI in retail is seeing immediate viral adoption and support by in-store workers, making it a perfect showcase of Augmented Intelligence. The in-store workers have been overwhelmed by having been on the front lines of the COVID-19 pandemic, and now stretched thinly by labor shortages and having to deal with answering the questions of every new visitor –each with their own unique idiosyncrasies and special needs. Unlike other professions that feel threatened by AI as a job eliminator, the in-store retail workers have welcomed Generative AI as a technology that can only make their day to day jobs much easier.
Ease of Implementation
Retail locations are so outdated that they often need major revamp to accommodate newer technologies, requiring bespoke integrations and development to fit into existing HW/SW. This has been one of the biggest hurdles for bringing new technologies to retail. With enterprise-ready Generative AI products being incredibly easy to integrate, and the digital twins of stores available in the public domain, consumer-facing products can be up and running in the matter of a few days, and fully implemented solutions can be deployed widely in an enterprise within a few weeks. This speed to impact is very attractive to CFOs anxious to demonstrate positive ROI quickly, given the traditionally slow top-line growth for retailers.
Richness of Data
The barcode and scanner adoption in the 70’s and 80’s, Category Management in the 90’s, and more recently the Shopper Marketing and advanced Product Information Management (PIM) systems needed for omnichannel are all combined to create a strong foundation of rich data to unlock the tremendous power of Generative AI applications. Furthermore, accurate product images, attributes, ingredients, and efforts such as SmartLabel, have further digitized the data in any retail operation.
On top of it, the wild card that has made retail prime for generative AI disruption is actually the COVID-19 pandemic, having forced a majority of retailers to digitize their product assortments to make them available Online.
The Most Neglected Consumer Profile is In-store Shopper
Overtime, the in-store shopping trip has slowly grown more and more burdensome, without much efforts for replicating efficiencies and conveniences of e-commerce. Let’s look at grocery shopping for instance, where inflation, food allergies, special diets, product proliferation, and confusing nutritional messaging, are combined to create multiple and oftentimes conflicting shopping constraints. Unlike other industries such as air travel or hospitality where technology has transformed the consumer experience, grocery shopping is frozen in time. Other than the frontend scanners distributed decades ago, the grocery shopping experience is very similar to that of the 1930’s. In the last few decades, shopping in stores has taken a back seat to Online innovation as retailers invest more on convenience of search and discovery in e-commerce. On the other hand, although the scientific understanding on the importance of food, nutrition, and wellness has grown tremendously over the years, it has been in isolation from shopping, which has only led to a confused shopper base as they balance shopping for wellness on a budget.
