Use of AI in the Retail Industry

Hello everyone, in this article, we will try to talk about the use of artificial intelligence in the retail sector and how artificial intelligence will affect our lives shortly.

From yesterday to today, there have been many innovations that have transformed and developed technology worldwide. Cell phones, computers, and the internet are among the innovations that we use perhaps hundreds of times a day and make our lives easier. If these innovations, which have a deep-rooted place in our lives, were to disappear completely, we would fall into a void, and artificial intelligence has reached exactly such a position in today's technological age.

According to Statista, the international value of artificial intelligence reached 428 billion dollars in 2022, 515 billion dollars in 2023, and 620 billion dollars in 2024. While this figure is expected to exceed 735 billion dollars in 2025, it is predicted to reach 2 trillion dollars by 2030. 

Artificial intelligence, which is constantly developing rapidly, first entered our lives with more limited communication methods, especially in written communication format. It developed in a very short time and started to facilitate our lives visually and auditorily, visualizing what we have in mind in seconds with a few prompts. Considering that we are using a very limited part of artificial intelligence even in its current form, it would not be wrong to say that technological developments shortly will reach much different dimensions.

We now consult artificial intelligence for most of the things we used to ask search engines, and we use artificial intelligence to determine how to adopt an affordable travel route, what to wear to our best friend's engagement party, or what gift to buy for our brother on his birthday. Because with artificial intelligence, we can access the information that we would reach several times with search engines with a single prompt. This not only saves us time but also allows us to achieve more efficient results by allowing us to filter our search. For example, when I type in the search engine what to wear to my best friend's engagement party, I observe that the content on the blog pages of different brands and paid sponsored brand names come up.

                         

                                                                            Source, Google

When I send a similar query to ChatGPT, I can find dresses in many different colors and models, as well as links to the sites where I can buy them. While I need to review 5-10 different blog posts and sites to create this list of dresses with search engines, I can get completely different dress suggestions from 5 different brands by typing a simple prompt like “My best friend is getting engaged in April, what can I wear? ”, I can get completely different dress suggestions from 5 different brands. Then, by continuing to talk about the color and dress model I like, I can find and buy the most suitable dress for myself in as little as 10 minutes.

                                 

                                                                         Source, ChatGPT

As a different example, let's take a scenario where I am buying a birthday present for my brother. When I directly send the prompt I typed into the search engine to the AI, I get paid ads from sites like Temu, Swarovski, and Trendyol's blog post on this topic.

                     

                                                                           Source, Google

Although Thinkbuddy provides me with a list of sites and content to get ideas about what to buy my brother, when I send the same query to Thinkbuddy, I get a much more detailed list. Then, by filtering through this list, such as my budget and my brother's interests, I can narrow down what gift to buy for my brother to a smaller circle, and I can quickly order my gift by accessing the site links.

                     

                                                                          Source, Thinkbuddy

In addition to the use of individual artificial intelligence in our daily lives, the use of sectoral artificial intelligence has also increased considerably in the past 2-3 years. It is used in many sectors in different ways, from booking reservations to customer service; from offering personalized product or content recommendations based on users' past behavior to early diagnosis of diseases by analyzing medical images. In the rest of this article, we will discuss the use of artificial intelligence in retail sectors in more detail and with real-life examples.

Using Artificial Intelligence in Real Time

The retail sector is one of the leading sectors that adopt important technological innovations in the use of artificial intelligence. Especially when we examine the development and innovations in the last 5 years, the developments to be experienced in the next 5 years are even more exciting. So what are these innovations? Cashless stores, fast troubleshooting chatbots, voice assistants, artificial intelligence-supported demand forecasts, and robot-supported operations... Let's examine in more detail with real-life examples:

1. Personalized Shopping Experience

Artificial intelligence has paved the way for consumer-oriented behavior and personalized shopping experiences. We can now virtually try on the product we are thinking of buying, and get recommendations according to our skin type and body shape in a very short time. Many brands have quickly started to adapt AI-driven technologies to their businesses to improve customer loyalty. According to research by McKinsey, personalization can reduce customer acquisition costs by up to 50%, increase revenue by 5% to 15% and marketing ROI by up to 30%, and improve customer outcomes. 

Let's detail some examples of brands that offer personalized recommendations using artificial intelligence:

- Amazon's AI-powered personalized system enables users to make more sales by offering recommendations compiled quickly based on the user's previous purchases, reviews, and search history. With Amazon Personalize, smart user segmentation is created to prioritize customers' individual needs. By analyzing previous purchases or search history, the algorithm offers suggestions in many areas, from the most suitable sizes for the customer to style suggestions. Moreover, while doing this, it takes into account that sizes may change over time. For example, let's say you bought clothes for your 1-year-old niece. After a while, when you search for an outfit for your nephew again, Amazon's artificial intelligence-supported algorithm offers clothing suggestions, taking into account that your nephew has grown over time.

- The Nike By You platform collects data from app users, such as color preferences, favorite activities, and shoe sizes, to create highly personalized experiences for customers. On this platform, you can create and purchase your dream shoe in as little as 15 minutes. The data collected through the app is used by Nike to decide which sneakers to stock in which stores and what direction the company will take in the future. 

                             

                                                                        Source, Nike By You

- Bershka's 'Custom Lab' and H&M's 'Creator Studio' are examples of platforms that allow customers to create personalized products according to their wishes. These applications strengthen the bond with customers and encourage on-demand production, enabling brands to adopt a strategy in line with their sustainability goals. When we enter the platform, we first need to choose the product we want to customize, and then we can quickly purchase the products we have designed by making choices such as color and pattern. As an example, I am doing a test in Bershka's Custom Lab. I started designing the T-shirt I chose with 'Reflective', one of the design ideas offered by the platform. If you wish, you can continue with Ford, Hello Kitty-themed options, or just the option to add text. 

                                   

                                                                            Source, Bershka

Afterwards, I can proceed to the purchasing stage by selecting the color, pattern, and the place where I want to position the pattern from the section that opens. In as little as 10 minutes, I can create and purchase the product I designed myself. 

                   

                                                                               Source, Bershka

- Marks & Spencer is using artificial intelligence as a style consultant to boost online sales. Using a testing system developed with artificial intelligence to access information such as customers' body shape and style preferences, M&S offers personalized product recommendations based on the information it gains. The brand, which aims to make online shopping more attractive, achieved a 41% profit increase and 9.4% sales increase last year with this application.

2. Virtual Trial and Augmented Reality Experiences

- Virtual trial, which adds a whole new dimension to the customer experience, has been adopted by many brands and facilitates the online shopping process. A study by Shopify reveals that consumers' virtual interaction with products leads to a 94% higher conversion rate.

- Another study found that 61% of consumers are more likely to shop with a brand that uses advanced technologies, while more than half (55%) say they are more likely to engage with products from brands that offer personalized recommendations tailored to their needs.

- Nike is a brand that brings a whole new dimension to virtual shoe-fitting technology. Saying that 60% of individuals wear ill-fitting shoes and hundreds of thousands buy the wrong size every year, Nike scans customers' feet with a smartphone camera and offers exact shoe size recommendations to prevent this problem. With this technology, the brand aims to minimize return rates and increase customer satisfaction.

                                                                             Source, urdesign

- Amazon uses a virtual try-on feature for the shoe experience. Although this feature cannot provide meaningful results in terms of size, it allows options such as color and model to be seen in practice.

                                                                             Source, Amazon

- Likewise, with Flo's “see it on your feet” application, you can try the shoes you are thinking of buying on your feet with the help of the rear camera.

- With a similar application, Atasun Optik allows you to see the model that will best suit your face shape among dozens of sunglasses.

- IKEA offers people the chance to see how the furniture they plan to buy will look in their home or office space before they buy it. IKEA Place allows people to choose the color and size of the furniture according to its harmony in the room.

                                                         

                                                                               Source, IKEA

- Beauty brands such as Flormar, Loreal Paris, and Sephora are brands that allow you to virtually try on the makeup products you are curious about, either on your face in real-time or on the model of your choice. In this way, users can test lipstick or foundation colors on their faces, and complete their shopping by identifying the option that suits their skin tone, even when shopping online.

3. Product Reviews and Evaluation

- Hepsiburada uses a technology that objectively summarizes the comments written by customers on the product they have purchased with artificial intelligence. These responses, based on ChatGPT, objectively guide other users who want to buy the same product to offer a better shopping experience. For example, when I examine a product of Yataş, we can see that the comments of 1053 people who made a purchase were summarized in a paragraph with artificial intelligence. With this application, potential customers who will make a purchase can easily have an idea about the product without reading thousands of customer reviews that have already purchased.

                                                             

                                                                        Source, Hepsiburada

In addition, Hepsiburada uses a ChatGPT integration that encourages users to comment. In this integration, based on the words that users who have already purchased the product frequently use in their comments, keyword suggestions are presented for new purchasers to use in their comments. Users who will share their experience about the product they have purchased can publish these comments prepared with the support of artificial intelligence directly after editing them in their way.

4. Cashless and Smart Stores

Cashless stores and smart cabinets are another innovation in the retail sector that is making the shopping journey easier. Some of the brands pioneering this innovation are as follows:

- Amazon is the pioneer of the cashless and cashierless grocery store model. Called Amazon Go, the store allows customers to log in via an app on their smartphones, and sensors on the shelves automatically track selected products. When customers leave the store after completing their shopping, the products are billed to their credit cards, eliminating the traditional checkout wait.

                                 

                                                                              Source, Midjourney

- Walmart uses FoxBot forklifts, an AI-powered autonomous robot, in its distribution centers. FoxBot works efficiently and carefully, from determining pallet locations to sensitive load handling, reducing the risk of product damage associated with manual forklift operations. In this way, Walmart increases operational efficiency and gains the opportunity to collect and analyze data more easily with autonomous technology.

5. Chatbots and Voice Assistants

- H&M's AI-powered chatbot offers quick solutions to the problems we experience when shopping online or in physical stores. To try out the chatbot, I asked for information about the return process and it informed me how many days and under what conditions I could return my purchases.

                                                                                     Source, H&M

- Another example is Zara's Artificial Intelligence Virtual Assistant. We can resolve our questions with AI live support without the need to reach customer service on many issues such as orders, returns, account management and gift cards.

                                                                            Source, Zara

6. Supply Chain and Logistics Innovations

- Zara is a brand that has successfully integrated artificial intelligence into almost all of its processes. This use of AI extends to the entire supply chain and inventory management. Key elements of its strategy include the Just-In-telligent supply chain system, RFID tagging, real-time analytics, and machine learning.

With these technologies, Zara can identify products with high demand in a very short time and start developing new product strategies on alternatives, while it can quickly identify products with low sales rates and remove them from sale. In this way, the brand achieves an increase in efficiency by adapting to rapidly changing market trends with little effort. With this use of artificial intelligence, Zara minimizes inventory costs and shortens delivery times in addition to increasing delivery accuracy. 

- Looking to improve how it sources and stocks its products to better meet the wants and needs of its customers, Nike acquired artificial intelligence startup Celect to help it increase its predictive analytics power. Celect provides insights from retail data to help companies organize their inventory and see cost/benefit analysis. The acquisition aligns with Nike's strategy to increase direct-to-consumer sales across various distribution channels, such as its mobile app and website.

Bonus: 

With Kolors Virtual Try-On, a free clothing try-on application, you can see any model of clothing you want on any person you want in seconds. To do this, you first need to enter the website and add a clear image of the person you want to see the outfit on to the first box. 

In step 2, we continue by adding a clear image of the outfit. As an example, I am trying on a black dress I like by Jennifer Aniston: 

As you can see above, I achieve the result I want very efficiently within 1 minute. You can try on the clothes you wonder how they will look on you with this application, and you can prevent the problem of spending long periods in the cabin.

In this article, we aimed to show you examples of artificial intelligence use cases in the retail sector. I hope it was a productive article. For more artificial intelligence articles, you can visit our AI Blog page. If you don't know how to integrate artificial intelligence into your business and want to start somewhere, you can contact our teams here. See you in new articles!