Retailers Pin Hopes on AI to Increase Sales, Decrease Returns

In today’s competitive eCommerce landscape, brands and retailers are constantly looking for ways to stand out and attract consumers while reducing costly returns. Artificial intelligence (AI), of course, has emerged as a topic of conversation as well as a powerful tool that can help brands achieve both of these goals.

Leveraging AI to Enhance Customer Experiences

Earlier this week, Karen Webster discussed how AI can help brands and retailers close the gap between the digital and the physical world, rather than targeting the metaverse (another topical conversation), using Tonal and Peloton as examples.

“ Tonal and Peloton may both be the victims of a change in post-pandemic consumer fitness preferences, but their technology makes it possible for a consumer to have an immersive fitness experience wherever they are in the world,” Webster said. “Apps and streaming tech make it possible for consumers to shop live with influencers and to bring shoppers and sales associates together, live, to review merchandise and buy it without being in a store. At the same time, innovations in AI allow brands to deliver personalized offers or recommendations in context and in real time to consumers as they are browsing a site so they can make more sales.”

Comparing enhanced experiences in the physical world with investments in the metaverse, is the metaverse “juice really worth the squeeze?” Long story short, Webster says “no” — time and energy spent in the real world is more likely to see a return on investment.

See also: How Facebook Turned the Metaverse Into a Buzzword

By leveraging AI technologies, brands have an opportunity to create personalized shopping experiences for consumers while also increasing customer purchase intent and minimizing the risk of returns through personalized product recommendations, virtual try-ons, chatbots for customer service and predictive analytics for inventory management.

Personalized Offers and Recommendations

One way that brands can use AI to drive sales is by analyzing consumer data — such as search history, purchase history, and browsing behavior — to offer up personalized product recommendations to consumers.

For example, if a consumer has been searching for a pair of running shoes, an AI-powered system can recommend a specific pair of shoes based on their previous purchases, preferred brands, and other relevant data. This level of personalization can help consumers find products that match their preferences and increase the likelihood of a purchase.

Brands and retailers can also do this by picking some low hanging fruit — by tagging products attributes according to terms consumers actually search for. Lily AI , for example, has partnered with companies like thredUP and has reported a 15% increase in sell-through rates with a 2% conversion rate lift for customers who have purchased more than two times through enriched product data. These are easy steps that can lead to significant improvements in customer engagement and sales.

Virtual Try-On

Another way that brands can use AI to increase purchase orders and reduce returns is by offering virtual try-on features for products such as apparel, eyewear and cosmetics. AI-powered virtual try-on technology allows consumers to see how a product will look on them before making a purchase, reducing the risk of disappointment and returns.

Snap, the parent company of Snapchat, is looking to lead the charge in augmented reality. With its recent rollout of AR Enterprise Services (ARES), the camera company is creating a wider adoption of AR by enabling businesses to integrate Snap’s AR technology into their own apps, websites and physical locations, the company said in a Thursday (March 23) press release .

See also: Snap Helps Businesses Integrate Augmented Reality into Stores

Snap has collaborated with various companies, such as eyewear vendor Goodr, fashion brand Princess Polly, and Mongolian producer Gobi Cashmere. Snap claims that these retailers have experienced higher conversion rates, increased product engagement, and reduced return rates. Cartier , Prada , and Nike are among the other brands that have partnered with Snapchat to use augmented reality technology to improve the retail experience. At Nike by Williamsburg , for instance, Snapchat’s AR Mirror allowed customers to try on products virtually and unlock exclusive back-to-school discounts.

Chatbots for Customer Service

Brands can also use AI-powered chatbots to answer common questions and provide guidance to consumers during the shopping process.

Instacart, the online grocery delivery platform, has announced a partnership with OpenAI to develop an Ask Instacart feature. This feature is expected to launch later this year and will allow customers to ask questions related to budget, health, nutrition, and preparation time while creating their grocery lists.

Instacart spokesperson has said that the Ask Instacart feature was the result of an internal team initiative aimed at exploring how new tools, such as ChatGPT, could enhance the platform’s ability to meet customer requests. The team wanted to understand the potential of such tools in better serving customer needs.

The Shop app by Shopify now includes ChatGPT integration, similar to the Ask Instacart feature. Customers can use prompts to find the products they want through this new feature.

See also: Shopify, Coca Cola Harness the Power of ChatGPT

Predictive Analytics for Inventory Management

Finally, brands can use AI-powered predictive analytics to optimize inventory management and reduce the risk of overstocking or understocking. By analyzing consumer data and sales trends, predictive analytics algorithms can forecast demand for specific products, allowing brands to adjust inventory levels accordingly.

With a wide-reaching network comprising of approximately 4,700 Walmart stores and 600 Sam’s Clubs across the United States, a workforce of roughly 1.6 million people and extensive data resources, Walmart has secured a notable edge in leveraging the capabilities of AI to enhance the shopping experiences of its customers.

Anshu Bhardwaj, Walmart’s senior vice president of tech strategy and commercialization, has stated that the company’s approach to AI revolves around using technology and machine learning to enrich the experience of both customers and employees across its expansive business landscape.

Bhardwaj said Sam’s Club uses its membership model to collect vast quantities of data on customers’ search queries, purchasing patterns and preferences. This enables the retailer to enhance its shopping experience by leveraging the “breadcrumbs” that customers leave behind, providing valuable insights into their likes and requirements.

Sam’s Club monitors an inventory of approximately 6,000 items stocked on shelves that span across its warehouse-style stores, with an average size of 136,000 square feet, to ensure the availability of desired products. To achieve this, the retailer has implemented an innovative solution — using floor scrubbers.

These machines clean the floors while simultaneously capturing real-time images of every product present. Each store is equipped with a scrubber, which has inventory intelligence towers that capture over 20 million images of products on shelves every day.

“What this means is that I can distinguish Kellogg’s Froot Loops from Kellogg’s Frosted Flakes and the depth in which they’re stocked on the shelves,” said Bhardwaj. “And if you think about a shelf, it doesn’t always have items in the front. They could be stacked in the back, and then there are shadows as well.”

Despite this, after receiving some training, the algorithms are capable of accurately identifying various brands and their placement on shelves while considering factors such as light intensity and shelf depth. This has resulted in an accuracy rate of more than 95%. When a product inventory drops below a specific level, the system generates an automated alert to the stock room to ensure that the product remains in stock.

Moreover, the AI-based system can determine the most effective action to take when a product is out of stock in the stock room but scheduled to arrive on the same day. In such cases, the algorithm directs the associate to take the product directly to the sales floor instead of the stock room. Bhardwaj stated that since its introduction last year, this approach has increased employee productivity by 15%.

As AI gains more prominence and becomes increasingly prevalent in our daily lives, brands and retailers are presented with a dual challenge: integrating AI into their customer experience to differentiate themselves and ensuring that the effort is worthwhile. By harnessing the power of AI, brands and retailers can avail themselves of numerous opportunities to enhance the customer experience, boost purchase intent and conversions, minimize returns, optimize inventory management, and mitigate the risks of overstocking or understocking.