Respondents delved into a range of AI topics, top use cases, biggest challenges, infrastructure investment initiatives and deployment models
Jan 09, 2024The retail and consumer packaged goods (CPG) sectors this year are poised to be at the forefront to harness the power of artificial intelligence (AI) that enhances operational efficiency, and elevates customer and employee experiences, all while driving growth.
That is the conclusion of NVIDIA’s inaugural “State of AI in Retail and CPG” published Jan. 9 that highlights insights into the state of AI adoption in retail, its impact on revenue and costs and the emerging trends shaping the future of the industry.
“From embracing generative AI to crafting a comprehensive omnichannel approach, the survey reveals retailers’ unanimous belief in the disruptive power of AI, accompanied by a steadfast dedication to bolstering investments in AI infrastructure over the next 18 months, said Cynthia Countouris, director of product marketing for Retail, CPG and QSR at NVIDIA.
Uses of AI
With more than 400 industry professionals responding, including C-suite, general managers and individual contributors, the survey delved into a range of AI topics, top use cases, biggest challenges, infrastructure investment initiatives and deployment models.
Respondents stated they are actively considering how AI can help them meet evolving customer preferences, address labor shortages, and drive sustainability efforts. AI has already proved to be a game-changer for retailers, with 69 percent reporting an increase in annual revenue attributed to AI adoption, according to the report.
Additionally, 72 percent of retailers using AI experienced a decrease in operating costs.
The top five current AI uses were as follows:
- Personalized customer recommendations
- Store analytics and insights
- Loss prevention and asset protection
- Augmented reality experiences
- Automated marketing content generation.
Targeting Shrinking
Retailers revealed that AI addressed major challenges like shrinkage that has cost industries $112 billion. This particular use case gained even more prominence among C-suite executives, with 54 percent ranking it one of their AI applications, highlighting the importance of enhancing security and asset protection strategies.
Countouris noted that an AI-powered shrinkage and security solution can detect anomalies in shopper behavior, track items removed from shelves and notify retailers if shoppers bypass checkout lanes. It is capable of integrated license plate recognition and cross-camera object tracking, alongside other capabilities that support effective asset protection and real-time response to theft attempts
“Lastly, it can manage multiple security systems with a single view, helping teams coordinate a quick and consistent response providing notifications to store security operations and law enforcement based on the retailer’s business rules,” said Countouris. “Collectively, these capabilities can minimize and mitigate shrinkage and organized retail crime, fostering a more secure store experience for both consumers and employees.”
Retailers are planning to move past security issues with AI, targeting its use to transform the customer experiences—using generative AI that will enhance marketing and content generation, as well as making investments to expand the infrastructure of generative AI.
Moving Past Security
The use of mobile applications to converge the digital and physical shopping experience is a priority for 2024.
While retailers are actively implementing AI and exploring generative AI, they are investing in AI infrastructure. Areas being targeted include challenges related to inadequate technology and lack of AI talent, ensuring data privacy and protection in generative AI adoption, exploring the potential of the Metaverse for consumer engagement and operational efficiency while leveraging AI for brick-and-mortar stores to provide convenience and personalized customer experiences.
“Our survey shows that 70 percent of retailers are feeling most optimistic about the ecommerce opportunity when it comes to the channel with the biggest opportunity for revenue growth in the upcoming year,” said Countouris. “Using these findings, we predict that the use case with the largest future impact will be a digital use case: personalized customer recommendations.”
How Much Being Invested?
Retailers recognize the potential of generative AI to revolutionize various aspects of their operations and are committed to harnessing the power of generative AI to create personalized, engaging, and efficient customer journeys.
For 2023, AI investment was comparatively conservative with only 21 percent reporting investing more than $30 million. Going forward, 64 percent indicated that they intended to expand their AI infrastructure investments in the upcoming 18 months, with 34 percent planning on increasing investments by more than 15 percent.
This commitment reflects the industry’s recognition of the technology’s potential to enhance operational efficiency, reduce costs, elevate customer experiences and drive growth.
“If done correctly, retailers can enhance the customer experience, increase customer loyalty, ultimately driving sales growth and staying competitive in a highly dynamic market,” said Countouris.
Retail Use Cases
NVIDIA discovered that Generative AI prominently emerged in several of the top AI use cases for retail. The use cases ranged from multimodal shopping advisors for personalized product recommendations; adaptive advertising, promotions, and pricing; product tagging and cataloging; identification of similar and complementary products as well as deployment of brand avatars for automated customer service.
As a result, retailers recognized the transformative potential of generative AI with 86 percent expressing a desire to use it to enhance customer experiences. Respondents acknowledged that incorporating AI into business practices and solutions could revolutionize customer engagement, optimize marketing strategies, and streamline operational processes.
Countouris noted companies plan on achieving this in two key ways.
“The first is by deploying generative AI-powered shopping advisors that offer personalized product recommendations, tailored conversation styles, visual product displays, and the ability to visualize recommended products in customers' own environments,” she said. “\Additionally, they will implement customer service chatbots capable of efficiently addressing inquiries and routing complex ones to human agents. Both initiatives will improve and customize service, resulting in informed decision-making for consumers.
Omni Channel Uses
To stay competitive, respondents indicated the importance of an omnichannel approach that integrates numerous online and offline channels to provide consumers with a consistent experience.
The results showed that ecommerce was the most used channel, with 79 percent of retailers actively participating. Mobile applications gained traction as well, with over half of retailers using them to bridge the gap between digital and physical shopping experiences.
Despite the rise in digital shopping, 30 percent of respondents say physical stores have the biggest revenue growth opportunity (ranked second beyond ecommerce) and remain the channel with the most AI use cases for retailers.
2024 Plans
“While there are many AI use cases that retailers are investing in for brick-and-mortar stores, the one that garnered the highest adoption rate (of 53 percent) was store analytics and insights,” said Countouris.
Given the emphasis on intelligent stores and their central role in the omnichannel experience, use cases such as store analytics and loss prevention will continue to be critical investments.
“AI analytics encompassed within this use case include queue analytics, shopper occupancy, dwell time and trajectory, heat mapping of the customer journey, proximity, line crossing, and regions of interest,” said Countouris. “Stores can use this information to optimize staffing, enhance store merchandising and layout, and improve customer experience to maximize sales.
Key Takeaways
- Retailers reported a 69 percent increase in annual revenue attributed to AI adoption
- Just under a third responded that physical stores have the biggest revenue growth opportunity in the next year
