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TECHNOLOGY

CSA Exclusive: PwC sees two-pronged AI disruption in retail

BY Dan Berthiaume

Retailers of all types and sizes are responding to the impact of AI, but not in the same way.

Chain Store Age recently spoke with Steve Barr, consumer markets leader at professional services firm PricewaterhouseCoopers (PwC), about how AI is reshaping the retail landscape. Barr cited some statistics from a recent study PwC did on retail CEO attitudes toward AI that demonstrate widespread industry interest.

Study results indicate 62% of retail CEOs feel AI will have a wider impact on the world than the Internet revolution, and almost 80% agree AI will significantly change the way they do business.

According to Barr, AI is already causing transformation across the retail enterprise, but some retailers are further ahead in the innovation curve than others.

“Retail is in an interesting time,” said Barr. “Legacy retailers are seeing transformation through AI and analytics and are looking at the quality of data being generated and how they will use it.”

Meanwhile, Barr said online and omnichannel retail startups may employ as many as 100 data scientists within their organization, while established retailers may have recently begun looking for their first data scientist hires.

“There is such a wide dispersal of capability respective to data analytics and AI,” commented Barr. “For digital disruptors, AI and data analytics are core and fundamental to what they do. Legacy retailers recognize the value, but are just beginning to implement. There is no one great answer as to how AI is disrupting retail.”

As an example of the disparity in retailers’ AI and data analytics capabilities, Barr described the range of sophistication in targeting promotions to customers.

“The high-performing retailers are curating very specific and targeted opportunities for regions, markets and stores,” said Barr. “The best are targeting to the customer level. They’re on their own maturity curve – some retailers are curating offerings around weather, buying habits, or social media commentary.”

In contrast, Barr said other retail organizations have not evolved their AI-based targeting capabilities to this level.

“Legacy retailers make customer recommendations based on trends at the regional or merchandise level,” said Barr.

One major issue legacy retailers have with using AI and data analytics to perform pinpoint targeting is their supply chains are not designed to support narrow offerings.

“Legacy retailers built their supply chain and operational models in an environment not driven by deep data and analytics,” said Barr.

However, newer startups developed their supply chain and operational infrastructures in the modern, data-driven retail climate.

“Digital disruptors built their model around ‘eaches,’” explained Barr. “Individual pieces can be curated for narrow offerings. There is capacity within the organization for substantial data and analytics that can be delivered to the customer.”

Right now, Barr said direct-to-consumer retailers can offer the most individually curated offerings based on AI and data analytics. However, even the disruptors are heading for a paradigm shift.

“The next evolution will get it one step closer to the store,” said Barr. “Retailers will modify their store offerings and adapt them according to the data.”

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