Blog
December 19, 2018
According to the latest study by the Capgemini Research Institute, 2018 marked a breakthrough for artificial intelligence (AI) in retail. Retailers have moved from AI hype to reality. Capgemini Research Institute calculated a $300 billion potential for retailers who scale and expand their current AI applications. Most retailers are focusing their AI efforts on sales and marketing, even though AI use cases are possible along the entire value chain. The new study shows a path to concrete growth opportunities for retail superstars, namely how unleashing AI across functions offers a multi-billion dollar opportunity. This is based on an analysis of 400 global retailers implementing AI use cases at various stages of maturity, a group that generates 23% of global retail sales. The study also included a comprehensive analysis of public data from the world’s 250 largest retailers by revenue. Comparing this data with 2017 equivalents, it provides a series of reality checks that not only show how far AI has come in terms of concrete returns, but also how much value it can deliver when retailers begin to favor less complex implementations and diversify their focus. Key findings from the report include:1. More than a quarter (28%) of retailers are now using AI: Research shows a significant increase in AI implementations since 17% in 2017 and a sevenfold increase since 2016. AI promotes job creation with few losses. 71% of retailers say that AI is creating jobs today, with more than two-thirds (68%) of those jobs being higher-level positions. Today, 75% say that AI has not replaced any jobs in their organization to date. Those who said jobs were cut report a reduction of 25% or less.3. The impact of AI is leading to fewer customer complaints and higher sales. Retailers are now remarkably focused on how AI will impact customer relationships and sales. While expectations have declined since 2017, the report finds that 98% of respondents who use AI in customer-facing functions expect customer complaints to decrease by up to 15%, while 99% expect AI to increase sales by up to 15%. This marks a significant change from 2017, when respondents reported widely varying expectations ranging from zero to more than 15% and “don’t know.” In both business cases, none of the respondents reported that they were unable to quantify the benefits of AI. To calculate the clear opportunities for future growth, such as the expected benefits and feasibility of implementation, the Capgemini Research Institute analyzed 43 use cases for AI. Multibillion dollars in future savings are currently available to only a minority of retail companies. According to the report, retailers could save up to $300 billion in the future by scaling AI implementations across the entire value chain. However, a review of all active AI implementations showed that only 1% were working on either a multi-site or full implementation. The lack of focus on simple, customer-centric implementations and thus a lack of scalability is likely due to retailers focusing on more complex projects with higher returns. Retailers using AI were eight times more likely to be working on highly complex projects than on “quick win” projects that are more easily scalable. There is also a lack of focus on user-friendliness in implementations to date: the driving forces behind current AI implementations are cost (62%) and ROI (59%), while customer satisfaction (10%) and known customer pain points (7%) are significantly lower priorities. Enormous potential for AI is evident in the operational area. Only 26% of today’s AI use cases are operationally focused, but these were among the most profitable in terms of cost return. Examples include the use of AI for procurement tasks (average ROI of 7.9%), the application of algorithms to detect shoplifting (7.9%), and the optimization of supply chain route plans (7.6%). A transformed and supercharged supply chain, for example, offers a significant operational opportunity, as it is an area where AI can achieve greater efficiency. Retailers have become more realistic about their level of AI readiness; in 2018, companies have adopted more realistic expectations about their readiness to deploy AI. Those who claim to have the skills necessary to implement AI have now fallen from 78% in 2017 to 53%. More than eight in ten retailers in 2017 were confident that their data ecosystem was prepared for AI implementation, and today that number has fallen to 55%. Finally, the number of organizations claiming to have a roadmap for AI deployment has fallen from 81% in 2017 to just 36% today. AI supports retailers in product data definition, enables further development of market access, and allows for more accurate predictions of customer behavior. All of this accelerates growth opportunities and brings retailers closer to their customers every day. #retailtech #ai #ml #consumabledata #capgemini #retail #scale