Our CEO, Greg Petro, sat down with Robin Lewis and Shelley Kohan of the Robin Report and Ramona Dunlap, Assistant Professor at FIT Business Management for a candid conversation on Artificial Intelligence (AI) and its implementation and effects on the retail industry. Focusing on the technological advancements and the challenges faced in integrating AI, their conversation provided valuable perspectives on how AI is reshaping operations from inventory management to customer engagement, offering a glimpse into the future of retailing.
The Retail AI Tsunami
In the early nineties, the retail industry experienced what can only be described as an AI tsunami—a term used to emphasize the immense, yet often subtle, impact like that of a real tsunami. During the 90’s, the internet began to reshape how businesses and consumers interacted, thanks to the widespread adoption of dial-up modems. Fast forward to 2020, and we find over 350 million smart devices in the hands of American consumers alone, illustrating a radical shift in personal technology use over the last 40 years.
These technological advances coincide with significant shifts in business and consumer behaviors. Many companies, unfortunately, found themselves unprepared for such rapid changes, swept up by the tide without a plan for the future. However, what's clear is that change is inevitable, and the pace of change is not slowing down—it's accelerating. Today, consumers access a wealth of information through their mobile devices, making informed decisions about pricing and product choices in real time. This shift has also been influenced by major global events, like the 2008 financial crisis and the more recent global pandemic, which are continuing to shape consumer behavior and market dynamics.
In this ever-changing environment, businesses—particularly retailers and brands—must understand how to adapt their business models and product offerings. The key to navigating this complex landscape is leveraging the power of computational models and generative AI. These technologies help gather and analyze vast amounts of data and enable businesses to better understand consumer patterns and preferences.
As we look to the future, the analogy of an exercise regimen is apt. Just as individuals set fitness goals and outline strategies to achieve a healthy lifestyle, businesses must also plan strategically while managing daily tactical decisions. Here, technology plays a crucial role by assisting in the "blocking and tackling" — the routine yet critical tasks — allowing businesses to focus on higher-level strategic thinking.
Managing AI Fears
It’s rather common for fear to be the initial reaction when someone brings up integrating AI into their everyday processes. Fears of job loss, fears of displacement, fears of ethical concerns, and ultimately, fears of change management come to mind. However, adopting a fearful stance when facing new technological opportunities may not be the most productive approach.
To address these concerns constructively, it’s beneficial to zoom out and consider how these technologies, particularly AI, can enhance our capabilities rather than diminish them. For instance, consider the potential applications of AI in customer service. Generative AI, which relies on historical data patterns, could revolutionize how customer feedback is managed, elevating the ability to serve customers more efficiently and effectively.
Take, for example, the creative applications of AI that some might fear could replace human ingenuity. AI can generate works of art by emulating the styles of great masters like Leonardo da Vinci. However, it's crucial to recognize that these technologies do not replace the creative spark of human artists; instead, they expand the possibilities available to them. AI can produce variations of an artwork much faster than a human could, but the original concept—the vision and creativity—remain uniquely human attributes. This perspective shifts the narrative from “AI as a threat” to “AI as a powerful tool that extends our capabilities”. By embracing AI, we can harness its potential to handle repetitive and data-intensive tasks, allowing us to focus on more strategic, creative, and interpersonal aspects of retail management.
Rather than fearing its implications, retail leadership must adopt a proactive stance toward AI to understand its potential benefits. First Insight recently released a report that uncovers the noteworthy perception differences on AI in retail between CEOs and their management teams. The C-suite needs to lead the AI charge, ensuring that the integration of technology enhances overall business operations rather than delegating its management to a single individual, which could lead to underwhelming outcomes.
Future of Retail: Speed Equals Agility
Over the next three to five years, the success of retailers will hinge on their ability to deeply understand their customer base and rapidly develop products that meet these evolving needs. In this era, speed and agility are not just advantageous; they are critical.
The pandemic taught us the importance of agility—when physical stores shut down, businesses had to pivot quickly to survive without traditional in-person interactions. This nimbleness, if maintained, paired with the ability to move faster than competitors, will differentiate successful brands from the rest. However, this shouldn't be mistaken for mere reactivity. The future belongs to those who operate in an anticipatory mode—predicting customer needs and trends rather than simply reacting to them.
Profitability will be even more important and remain top of mind for retailers in the future. Supply chain efficiencies will remain crucial, but the real competitive edge will lie in anticipatory business models. Brands that excel in predicting future trends and customer behaviors will likely emerge as the winners, regardless of their current size. Whether it’s a drinkware company scaling from $74 million to $750 million in a sheer matter of years via a TikTok trend, or a smaller entity aiming for incremental growth, success will lie in the ability to anticipate rather than react.
This approach allows companies to leverage AI to augment human skills and creativity, not replace it. While humans are undoubtedly capable of handling complexity, the speed at which decisions must be made in today’s retail environment can be a significant competitive advantage. Retailers who are embracing AI, are enhancing their decision-making processes, adapting to consumer needs more swiftly, and are undoubtedly thriving in this era of continuous change.
First Insight allows retailers and brands to keep a pulse on their customers with actionable voice of customer data and the power of AI. See how you can maximize your margins, optimize your promotional strategy, and keep your customer at the center. Connect with one of our experts and we can show you how First Insight's Retail Decision Platform can help you create better products and experiences to power your business.
