Ever since ChatGPT was released back in November 2022, the world hasn’t been able to stop talking about artificial intelligence.

Which is probably why this is not the first time you read a blog post about AI, and it definitely won’t be your last.

When it comes to the retail experience, what is AI’s role?

The fact of the matter is that artificial intelligence has actually been around for nearly 70 years. And its presence within the retail space is nothing new.

But most of us have been operating with the impression that AI would only really have an impact on operations behind the scenes.

With the emergence of tools like ChatGPT, we have come to realize that there is a world where AI can actually find its way to the forefront and start interacting with customers.

This is where the real conversation about AI happens – are we witnessing a moment in history where customers will increasingly start interacting with robots in situations they traditionally interacted with humans?

It's worth reflecting on how customers will respond to this – and we will be doing exactly that in this blog post.

First, let’s cover some basics.

What is AI?

Artificial intelligence refers to the idea of a computer performing tasks that traditionally require human intelligence.

AI goes back all the way to the 1950s, when a computer independently learned how to play checkers. By being given the ability to remember each game it had played (learning from data), this computer program was able to take ‘practice makes perfect’ to the next level.

And just like that, the idea of a computer having the ability to master a task simply through endless hours of practice and learning from historical data was born.

But, AI lives on a spectrum, what does that mean?

Weak AI: A computer mastering the game of checkers is the perfect example of weak artificial intelligence, because its limits are bounded and there is only one task to accomplish: to mimic a human playing checkers.

Strong AI: Thanks to sci-fi movies and the emergence of strong AI tools like ChatGPT, we are now exposed to the boundless possibilities of AI. Because not only is strong AI able to mimic a human playing checkers, it is able to learn and think like a human.

Strong AI refers to the version of AI most people talk about – it is the version of artificial intelligence that we suspect will change our lives and the way we do business. It does more than a singular task really well – strong AI takes an amount of data that is humanly impossible to visualize and learns how to use it to perform a variety of tasks.

Artificial Intelligence vs. Automation

You might be thinking to yourself: Is there a difference between weak AI and automation?

Although these two are often confused with one another, there are significant differences between the two.

The best way to identify an automated task is the idea of ‘if this then that’.

This is ever present in our daily lives and in business, if you have a meeting scheduled at noon, then your calendar will remind you of it 10 minutes before or your email marketing tool will automatically send that email you scheduled to the select group of people you chose.

Let’s take another example, Ikeono’s after hours text message to customers that contact you outside of business hours is an automation. It is a predefined action that happens when a criteria is met, which in this case is when a customer reaches out outside of business hours.

Weak AI is just as much present in our daily lives, it is what Spotify uses to recommend songs for you, it’s what Waze uses to predict traffic and estimate your time of arrival and what your email provider uses to filter spam emails.

How can AI be integrated in retail?

Big box retailers like Lowe’s, Amazon, and Wal-Mart are already using artificial intelligence to change the way they do business.

Let’s take a look at the ways AI has shaped retail positively (mostly) shaped retail.

Inventory Management

Among the many hurdles that the pandemic brought on for retailers, inventory management stands out the most.

This is where we believe AI can really shine.

In areas such as producing item descriptions for your eCommerce shop or even taking forecasting to a whole new level.

While forecasting is not new, the power of AI allows retailers to have a better understanding of market conditions and competitor pricing. It can help with discounting strategies and even predict fluctuations in demand.

How is this possible?

AI is a double-edged sword, in order to benefit from it, data needs to be shared and that would include you as well.

Enhancing Online Shopping Experience

Data shows that consumers are more open to AI-based tools that enhance their shopping experience.

What does this mean? Customers will appreciate getting product recommendations as they navigate your website, or getting personalized deals.

The hesitancy around AI comes into play when it replaces interactions customers traditionally have with humans.

Let’s take a moment and look at a real-life example: Lowe’s Lowebot.

Nearly 8 years ago Lowe’s introduced a robot that roamed the aisles to help customers answer their questions. Customers are able to interact with the robot either verbally or by typing.

One can argue that this is an efficient and accessible way to do customer service but one survey found that 95% of consumers actually did not want to interact with a robot in store or online.

At the end of the day, introducing Lowebot has worked out for Lowe’s, so much so that they are now introducing security bots.

But the real question is: would this have worked for an independent local business?

Introducing robots can work for a chain like Lowe’s given its size and complexity. Filling up such a large floor plan with employees is not an easy feat, so while a robot is a significant investment, it has the potential to bring a large enough return on investment for a company as large as Lowe’s.

When it comes to an independent retailer, the return on investment is simply not there. Not only financially, but introducing a robot or any form of computerized customer service takes away the very thing most customers enjoy and why they walk into your store – that personal and human interaction.

Yes, robotic assistance can align with the operational needs of a large corporation like Lowe's, but it won’t be as practical or suitable for independent retailers.

Customer Communication

Digital customer interactions are where artificial intelligence will begin having direct communication with your customers.

We are seeing more and more web-based chat-bots using AI to filter through a customer’s initial questions, and leaving the ability to interact with a real human as the last resort.

What do customers think of this?

Data shows that 7 in 10 consumers in the U.S. have interacted with an AI-based chatbot and 77% of them have reported to prefer interacting with a human being and found the interaction with the AI-based chatbot quite frustrating.

In another study by Survey Monkey, this time 90% of consumers reported that they prefer to get customer service from a human rather than a chatbot.

Why? Because they felt like their needs were understood better by a human, they were less frustrated, and that they got a more thorough answer to their questions.

The 10% that preferred interacting with the chatbot reported that it was because of better availability, speed, and access to more accurate information.

Take the most recent Air Canada case as an example. A chatbot gave the wrong information to a passenger looking for information about documents that are required for a bereavement refund.

This sounds like a straightforward question that a chatbot should be able to handle, right?

In this case, the chatbot did not, which led to the passenger suing the airline after they declined to give him the bereavement refund. Air Canada claims that the chatbot is a separate entity of its own and that it cannot claim responsibility.

As expected, this leaves us in a gray zone with artificial intelligence.

At Ikeono, we are optimistic with the introduction of artificial intelligence in customer service, however we still believe that it’s best to keep the functionalities behind the scenes.

Ikeono’s text-based web chat gives retailers the best of both worlds. Customers have a way of asking questions via your website, but they are also not tied to their computers and know that they will receive a text message from a human as soon as possible.

And if they ever reach out outside of business hours, then they will receive an automated message telling them know when you will be able to answer their questions.

The Drawbacks of AI in Retail

Data lives at the forefront of artificial intelligence. More specifically, data quality, volume, and accessibility.

It’s All About the Data

Being wary about your sales data and your customer’s data should be top of mind when it comes to implementing new tools in your business that incorporate AI.

In order to do what it promises to do, artificial intelligence relies on learning from and gaining access to your customer’s data.

The interesting thing about artificial intelligence is that it relies and is trained on a combination of data sources, including massive public datasets. While privacy laws still need to change and evolve to protect individuals, it’s important to note that personal information such as names, addresses and phone numbers are being collected.

Not only that, but using AI-powered tools to communicate with your customers might give them the impression that their preferences and behaviors are being monitored without their consent.

AI tools can be a great addition to your ecosystem, but it’s important to remember that even if you’re comfortable with AI, all your customers might not be.

You Get What You Give

In addition to data tracking and accessibility, retailers must consider data quality.

This might be the most important and the biggest challenge when implementing AI.

The success of any tool that uses artificial intelligence relies heavily on the data it uses to make decisions. Think about it – how accurate is the data in your point-of-sale? The way you categorized your inventory or maybe even something as simple as your customers' omni-channel purchase history.

Retailers use a myriad of systems and maintaining data integrity can be a real challenge.

Before implementing a tool where the main benefit comes from its AI capabilities, retailers must prioritize initiatives that enhance data quality.

In the long run, having clean data will always be an investment that will benefit your business, especially as competition and consumer expectations evolve in the ever-changing world of retail and e-commerce.

The Online vs. In-Store Experience

Why have we focused so much on AI behind the scenes and AI in the front of the house?

This is because the relationship between a business and a customer is sacred in retail.

Especially in a brick and mortar setting, business owners are able to connect with customers in a way that they never would when the customer is checking out their business on their small screen devices.

As a retailer, think about your own shopping experiences – when you are online shopping, getting a recommendation for a product that you might like after spending 10-15 minutes on a website sounds nice, right? Nothing feels out of the ordinary. As a consumer, you are already having a digital experience, so there isn’t a human factor being taken away.

Now, when you make the effort to show up physically in a retail store, there is and continues to be an expectation for human interaction.

This is what we believe everyone fears the most.

While Lowe’s Lowebot might be successful and a shiny glimpse of the future, adoption is actually much slower and we don’t think retailers and customers alike are ready to lose that human touch.

With the emergence of eCommerce in the last two decades, it has become more and more clear that independent retailers are backbone institutions within a community – they have a lot more personality than big box retailers.

With artificial intelligence, what you gain in efficiency, you end up losing in personality.

Ikeono’s Take on AI

As we covered some of AI’s successes for big box retailers, the question remains, how will independent and local businesses use AI?

We have to agree with the National Retail Federation’s take, we are in a wait-and-see mode. And we believe our customers are too.

On one hand we know that artificial intelligence is an important tool that we are all going to have to learn to use.

How AI Is Shaping Retail in 2024: Exploring Both Sides of the Debate