Artificial intelligence Part 8: specific industry impacts - retail sector

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The retail industry has managed several significant disruptions, particularly with technology, over many decades. Retail in this definition, spans both the physical and digital environments with multiple different segments and collectively has the highest overall level of employment. The impact of AI occurs differently across the segments as discussed below -

E-commerce and digital retail

Disruption caused by AI is most advanced in this segment of retail -

• Merchanidising and product curation: AI is already used online to determine what products are shown, to which potential purchasers at what price and in which order. The human merchandiser role that once required deep product knowledge and market intuition is being replaced by AI. The result is buying teams are being reduced in headcount.
• Pricing and promotions: AI can operate dynamic pricing in real timer across millions of stock keeping units (SKUs) based on demand, competitor pricing and inventory levels. The pricing analyst role has been largely automated.
• Demand forecasting and inventory management: this is a large team function traditionally in retail requiring significant human judgement (which sometimes was unsuccessful with some product lines), however now AI is a dominant force. Inventory planners are increasingly deployed to exception management only.
• Product descriptions, copywriting and promotional content: once the function of large copy teams for catalogues, AI now generates product listings at scale for example, at Amazon, ACOS and Zalando. 
• Customer service: Tier 1 customer service in e-commerce had become largely automated with chatbots and AI agents now capable of handling item returns, order queries, and complaints at scale. Human agents are increasingly handling ecalated issues only.
• Searches and recommendations: the entire discovery layer of e-commerce is AI-driven thus reducing the need for manual curation teams.

Physical Retail - Shops, boutiques bricks and mortar stores

The physical retail segment has a much stronger protective layer being the embodied, social experience of shopping and the overall 'retail therapy' of personal service, expertise and the physical handling of possible items for purchase. Luxury retail, specialist retailers together with experience-led formats have led to an investment in more knowledgeable human staff. Consumers expect such interaction, expertise and better service. Retailers whom do not offer higher level services for more expensive products often find public criticism including negative consumer ratings online are the result. Nonetheless there is AI intrusion and pressure in this segment -

• Checkout and payment: the increasing use of self-checkout from stores and the replacement of human checkout counters has been the proverbial thin-edge-of-the-wedge for the past two decades. For example, Amazon Go and similar checkout models eliminate checkout operator roles entirely. This process started in gocery stores but has expanded across a large part of the retail industry however not without some caveats - staff are needed to supervise and monitor self-checkout store sections, increased surveillance for fraud and theft has become essential and human operator checkout aisles have needed to be retained in smaller form. 
• Stock management and replenishment: computer operated vision and AI inventory systems can detect shelf gaps and product depletion thus triggering replenishment action without human stock checkers. Warehouse stock picking has increasingly become robotic.
• Loss prevention: AI camera systems are increasindly replacing human loss prevention officers for monitoring and surveillance in-store. Human response to any alerts however remains essential.
• In-store customer assistance: customer assistance where genuinely helpful product knowledge  roles are needed means there positions are much more protected from AI encroachment. Generic customer greeting roles are much less so.
• Visual merchandising: AI tools can optimise store layouts using foot traffic data and correction with sales information. This reduces the creative and analytical work of visual merchandisers.

Grocery and Fast Moving Consumer Goods (FMCG) Retail

Grocery and fast moving consumer goods is another segment when AI operates removing more of the operational back office roles. For now it cannot do the physical work of storage, presentation and despatch however systems operation is custom made for AI.

• Category management: the analytical heavy lifting that category planners (planogram design, range rationalisation, promotion assessment and evaluation) are all in the process of being automated.
• Supply chain coordination: AI optimises routing, supplier ordering and waste reduction. The impact is the reduction of operational planning team headcount.
• Fresh food management: AI waste reduction tools are already deployed in major supermarkets. This is a direct threat to manual stock management roles but not to actual physical movement of materials.

A further post in this blog will cover other aspects of the retail industry where AI is impacting marketing, advertising and retail fashion.