What is AI and what does it mean for retail? | DMA

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What is AI and what does it mean for retail?


Think of artificial intelligence, and it might bring to mind the terrifying, single-minded killer android in The Terminator. Or you might recall virtual reality nightmare, The Matrix, where machines enslave hapless humans without even telling them.

As we continue to make rapid technological advances, compelling and unsettling sci-fi movies like these take on ever more relevance today.

We fret – with good reason – that devious machines will steal our jobs, take over the world, and blend in so cleverly, we won’t be able to tell who’s human anymore. And with Stephen Hawking, Elon Musk and Bill Gates all expressing misgivings about AI, it seems there’s plenty to panic about.

While we work on tempering these apocalyptic anxieties, AI also has less sinister, practical applications that have already been rolled out effectively in the retail domain.

The beginnings of AI

The idea of intelligent machines has been around since the 1950s, when computer scientist, code breaker and mathematician extraordinaire, Alan Turing, pondered whether a machine could think.

His pioneering parameter of intelligence was this: engage someone in conversation with a machine. If the machine was able to fool the human into thinking they were communicating with another person, then it could be classed as intelligent.

On the back of Turing’s work, German computer scientist Joseph Weizenbaum developed the world’s first chatbot, ELIZA, in 1966. ELIZA was a programme designed to mimic a therapist, asking open-ended questions that created the illusion of a real-life interaction with a patient.

Whizz forward several decades and we meet exhibit A: the modern-day chatbot.


Think of today’s bot as a personal assistant that’s always ready to recommend products, process orders, share updates, offer assistance, relay local promotions and facilitate discovery. They sneakily gather lots of data about customers, too, so they can provide the most relevant, personal service.

Chatbots are built into a retailer’s website or app. You’ll also find them hanging out in messaging apps like WhatsApp and Facebook Messenger; more popular than social media, these platforms offer brands precious access to their customers.

Now when hunger hits, there’s no need to click away from Facebook (heaven forbid), as fast food companies such as Pizza Hut and Taco Bell have invested in automated ordering on messaging platforms.

While some chatbot responses are currently limited by their programming, with the help of artificial intelligence, they can now understand more and more; each conversation lets them learn to give better future responses.

Intelligence-led customer services

Speaking of having better conversations, the retail industry might want to take note of Cogito. This 10-year-old, Boston-based software company is revolutionising the way customer services reps interact with customers.

Using behavioural science through AI and machine learning, Cogito is able to improve phone calls in real time. It does this by evaluating hundreds of subtle voice signals; it can then provide an instant report of how well the call is going based on levels of empathy, energy, interruption and participation.

This type of intelligent call monitoring has the potential to transform call centres, improving productivity among staff and ramping up customer satisfaction.

Voice user interfaces

You’re probably familiar with the likes of Apple’s Siri, Google Now and Amazon Alexa, the voice-powered personal assistants (VUIs) that answer simple queries.

Since speaking is nearly four times faster than typing, VUIs are highly convenient. So it’s no surprise that ComScore predicts that 50% of all searches will be performed by voice by 2020.

The potential here is, again, vast. If voice interfaces are capable of learning more advanced skills using AI, then in future they should be able to order goods – taxis, food, clothes – and arrange delivery from a single command.

And let’s not forget advertising revenues. It may be some time before paid voice search becomes a reality, but it’s inevitable given our increasing reliance on VUIs.

Virtual reality

With the help of virtual reality (VR), you can sit among society’s most stylish at London Fashion Week, or find yourself at a national park on the other side of the world.

Many retailers such as Topshop and M&S have already dabbled with VR, but it hasn’t widely caught on yet. One barrier to adoption is that many consumers are still sceptical that they really need it. Plus, only a tiny proportion of PCs are capable of supporting it.

Shoppable VR, however, could feasibly take off. Using an inexpensive headset along with a smartphone, people will not only see and experience products but they could choose and buy them, too.

Augmented reality

Unless you’ve been living underwater for the past year, you’ll have played, or at least come across, Pokémon Go, the augmented reality (AR) game that captured the imagination of 40 million gamers across the world.

VR’s arguably more charismatic sibling, AR augments our existing world by overlaying images, text, graphics, etc. Retailers like Uniqlo, Ikea and Converse have all adopted it, allowing customers to ‘wear’ various garments or see how their living rooms would look with a particular sofa. ASOS uses AR to let people shop directly from a magazine ad.

As AR gets more sophisticated, bricks and mortar stores have the chance to truly elevate their offering. We could see localised offers, product info and similar items simply by pointing our phones at merchandise.

With so much potential to personalise in-store shopping, customers will feel compelled to continue visiting physical shops for an enriched experience that can’t be matched online.

READ MORE: 6 retail trends you’ll want to master in 2018

In the end, there’re two ways to perceive the unstoppable tide of AI: either we look at it as a scary, intimidating force that robs us of our jobs and our privacy. Or we can see it as a valuable tool, helping us to work more efficiently and improve the shopping experience.

Retail has much to gain from smart machines; as long as we don’t let them become too clever…

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