News • 03.01.2019

Retailers moved from AI hype to reality in 2018

Significant opportunities for value chain efficiency

Brain and computer motherboard; copyright: panthermedia.net / christian lagerek...
Source: panthermedia.net / christian lagerek

A new study from the Capgemini Research Institute has dispelled some of the mystique around AI’s value to retail businesses and revealed a path to tangible growth opportunities. Capgemini calculates a 300 billion+ dollar opportunity for those retail companies that are able to scale and expand the scope of their existing deployments.

The study, “Retail superstars: How unleashing AI across functions offers a multi-billion dollar opportunity”, looked at 400 global retailers that are implementing AI use cases at different stages of maturity – a group that represents 23 percent of the global retail market by revenue. The study further included an extensive analysis of public data from the world’s largest 250 retailers, by revenue.

Comparing this data to 2017 equivalents, it delivers a series of reality checks that not only show how far AI has come in terms of concrete returns, but how much value it can deliver if retailers begin to prioritize less complex deployments, and diversify their focus.

AI in action

Over a quarter (28 percent) of retailers are deploying AI today. The research finds a significant increase of AI deployments from 2017 (17 percent), and a seven-fold increase from 2016 (4 percent).

AI fuels some job creation

71 percent of retailers say AI is creating jobs today, with over two-thirds (68 percent) of the jobs being at a senior level (coordinator level or above). Meanwhile, 75 percent declared that AI has not replaced any jobs in their organization so far.

Lower customer complaints, higher sales

Retailers are now remarkably aligned on the impact AI is likely to have on customer relations and sales: While expectations have declined from 2017, nevertheless, the report finds that 98 percent of respondents using AI in customer-facing functions expect the number of customer complaints to reduce by up to 15 percent, while 99 percent expect AI to increase sales by up to 15 percent.

Opportunities for future growth

According to the report, retailers can save as much as 300 billion+ dollars in the future by scaling AI deployments across the entire value chain. However, when reviewing all the active AI deployments, just 1 percent were shown to be working on either at multi-site or full-scale implementation.

This lack of scalability is likely caused by retailers focusing on more complex, higher-return projects. Retailers deploying AI were 8 times more likely to be working on high-complexity projects than ‘quick win’ projects that are easier to scale.

Deployments to date have also lacked a focus on customer usability: the driving forces behind current AI implementations are cost (62 percent) and ROI (59 percent), while customer experience (10 percent) and known customer pain points (7 percent) are significantly lower priorities.

Only 26 percent of AI use cases today are operations focused, but these were among the most profitable in terms of cost returns. Standout examples included using AI for procurement tasks, applying image detection led algorithms for detecting in-store pilferage and optimizing supply chain route plans.

As the realities of AI have revealed themselves, companies in 2018 have adopted more realistic expectations regarding their preparedness for it. Kees Jacobs, Vice President, Global Consumer Products and Retail Sector at Capgemini said, “Our research shows a clear imbalance of organizations prioritizing cost, data and ROI when deploying AI, with only a small minority considering the customer pain points also. These two factors need to be given equal weighting if long-term AI growth, with all of the benefits it brings, is to be achieved.”

Source: Capgemini Research Institute

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