Can AI re­in­vig­or­ate re­tail? CMS and Re­tail Eco­nom­ics re­port in­vest­ig­ates

26 February 2019

At a glance:

  • AI could encourage footfall - Two-thirds of shoppers would be encouraged to visit a physical store if they could check real-time product availability. 80% of organisations believe AI has the potential to increase customer loyalty.
  • Consumer trust is critical - Only one in five consumers trust retailers and consumer companies to responsibly handle their sensitive data. 66% of organisations believe they will require roles managing data ethics.
  • Consumers display reticence towards certain types of AI - Only one in six consumers feel comfortable with the idea of AI powered in-home delivery, and 42% of shoppers forecast that drone deliveries will never become mainstream.
  • Age is a key factor - Nearly 40% of 18 to 24-year olds expressed high levels of comfort with chatbots. Only 24% of over-65s held this view.
  • AI skills gap exposed - Nearly 60% of organisations feel they lack the specialised skills required to roll out new AI technology. Three-quarters of organisations believe they will plug this gap through external suppliers, however 38% think they will develop AI capabilities in-house.

New research by international law firm CMS, in partnership with Retail Economics, shows brands and retailers believe Artificial Intelligence (AI) will give rise to significant opportunities to optimise supply chains (63% of respondents), reduce costs (53%) and create more meaningful relationships with customers (47%). Target areas of investment included sales and marketing (66%); warehouse, distribution and logistics (53%); and buying and merchandise (47%).

The report ‘Disruption 2.0…here we go again’ explores AI technologies in the customer journey, the challenges of implementing AI, and the consumer attitudes that will ultimately shape its future. The research contains responses from 2,047 nationally representative households throughout the UK and 33 large multiple retailers and consumer brands companies, focusing on five different stages of the customer journey from awareness through to returns and support services. 

CMS partner Matthew Bennett comments: “Perhaps having learnt the lesson of failing to adapt quickly to emerging internet technology the first time around, many retailers and brands have been early adopters of AI relative to other industries. This report collects the views of companies as well as consumers on both the current applications of AI in the sector as well as the next wave of disruption. Some fascinating themes arise, notably around trust and ethics, a generational divide amongst consumers, AI skills shortages within organisations, and significant legal and regulatory hurdles.

“Whether delivering direct into fridges or using biometric data, AI-powered business models require heightened levels of trust. Our survey shows that consumer trust in retailers and consumer brands is low. However, we were pleased to see that organisations understand that AI ethics must be a key area of focus for them.

“The complex patchwork of rules governing the use of AI can be a minefield to navigate. Where AI involves automated decision making or profiling there are regulatory hurdles to clear under GDPR, and other AI-technologies such as dynamic pricing fall within the realm of competition law.”

Richard Lim, CEO, Retail Economics adds: “Technology is at the very heart of disruption in the retail industry, driving a period of unprecedented change. Seismic shifts within the consumer and retail industries are being exacerbated by AI integration at every step of the customer journey.

“Retailers are acutely aware of potential AI-derived cost savings, increased productivity and efficiencies. This is evidenced by 85% of retailers who think that AI-powered data analytics will enable more sophisticated targeting of customers.

“The next decade will witness digitally-fuelled change at unprecedented pace. The proliferation of AI-related technologies, applications and sentiments from both a consumer and retailer/brand perspective is likely to lead to a retail world that will be almost unrecognisable within a generation.”

Key areas addressed in this report include:

DOWNLOAD FULL REPORT HERE

Can AI boost footfall?

The use of AI and robots to remotely check stock levels has been flagged as one area of opportunity for retailers, according to the CMS report. Over half of retailers and consumer brands surveyed believe that AI-driven, real-time inventory management systems would have a significant impact on demand planning, automatic stock replenishment and stock rotation. Similarly, two-thirds of shoppers would be encouraged to visit a physical store if they could check real-time product availability.

How important are trust & ethics?

Many new AI-powered business models require high-levels of consumer trust, for example use of biometric data, or AI-powered home delivery. However, according to the report, consumer trust in retailers’ and consumer brands’ ability to effectively manage personal data is low. Only one in five consumers trust retailers and consumer companies to responsibly handle their sensitive data.

However, the report shows that most organisations acknowledge that AI ethics must be a focus for them – 66% of organisations surveyed believe they will require roles managing data ethics.

Are consumers wary of AI?

The survey shows that brands and retailers may be overestimating consumer confidence in AI technologies. While almost 60% of businesses would trust fully automated AI-driven marketing campaigns to deliver meaningful content to their customers, only 45% of customers believe personalised adverts displayed to them are relevant.

When asked for views on the future of in-home delivery, businesses were far more bullish than consumers on its prospects. A third of businesses believed shoppers would trust it - only one in six consumers agreed.

Is age a factor in attitudes towards AI?

The report alludes to a generational divide in consumer attitudes towards AI in the retail setting.

When asked about the use of chatbots, 40% of 18 to 24-year olds expressed high levels of comfort versus only 24% of over 65s. A similar divide was revealed when surveyed about cashier-less systems. It was found that 18 to 24-year olds were more than twice as likely to choose a cashier-less payment mode over those aged between 55 and 64.

Virtual Reality and 3D printers low on organisations’ agenda

Nearly 70% of organisations polled said that virtual assistants would be one of the most disruptive AI-related technologies for the sector, followed by 59.4% who said the internet of things would be. Perhaps surprisingly, virtual reality, 3D printers, and drones despite their media interest, were low on companies’ radars.

Barriers to AI adoption

A lack of specialised skills was cited as the principle challenge for businesses in rolling out AI technologies. Nearly 60% of organisations felt that they lack the specialised AI skills required to implement emerging AI technologies.

Legal and regulatory barriers were also identified as one of the most significant obstacles to adoption. These include the GDPR aspects of automated decision making and AI profiling, as well as the competition law aspects of personalised dynamic pricing.