Retail Technology: Artificial Intelligence Generative AI: what it means for retail?

Mathew

Partner at Lewis Silkin Ireland, examines the issue of generative AI and identifies the opportunities and risks for retailers and consumers.

ISAAC Asimov, the futurist / sci-fi writer, once remarked: “You don’t need to predict a future. You just need to create one – a good future, a useful future. Better to predict a good future than to make a bad one.”

It would be hard to disagree. We are all capable of imagining our version of a ‘good future’ and life-enhancing conveniences that might, one day, be deliverable through technological advancement. While some of those imaginings may seem out of reach based on today’s technology, others may feel within touching distance. Aspiration is certainly a compelling catalyst for innovation and for innovation to succeed, it generally needs to deliver more than just good purpose. Although usefulness lies at the heart of all good innovation - and this essential element is no less important when contemplating the promise of a world enhanced by Artificial Intelligence (AI) - it is only where those innovations make qualitative improvements to our lives that we really enter the realm of the ‘good future’.

Generative AI is increasingly looked at as a powerful tool with the potential to revolutionise the retail industry and customer experience. By ‘generative AI’, we mean algorithms that can be used to create new content, including audio, code, images, text, simulations and videos. Importantly, AI-generated content is intended to resemble human-generated content, in that it appears authentic and human-like. How does this happen? Generative AI tools are, effectively, ‘trained’ on vast amounts of electronically accessible data. Once the data has been gathered, the tool then analyses it by means of its algorithms, looking for key patterns and connected relationships. It is a learning process that involves the continuous fine-tuning of parameters, as it improves its ability to simulate human-generated content. The more content generated, the more sophisticated and convincing the AI tool outputs become. Today, these tools are still in their infancy, but the expectation is that over the next decade or so, the content-generating potential and power of these tools will take generative AI to unimaginable levels of sophistication.

This article looks at some of the opportunities presented by generative AI to both retailers and consumers. It also looks at some of the associated risks.

The opportunities

Let’s first look at some of the opportunities for retailers and consumers:

Product design and innovation:

When one thinks about it, there is limitless scope for generative AI tools being used in the design and innovation of new products, based on a detailed analysis of customer preferences and market trends. Generative AI algorithms have the potential to feed into the evolution of product design, either proposing new or ‘tweaking’ existing designs that resonate with consumer preferences. This technology can also be used to facilitate greater opportunities for product customisation.

AI offers exciting opportunities for retailers and consumers alike. Image from rawpixel.com.

Inventory management and demand forecasting: Generative AI algorithms can analyse historic sales data, market trends or interpret weather forecasts (for example, anticipating severe cold or high temperature periods), or be used to analyse shipping and logistical constraints and a host of other influencing factors to optimise inventory management and demand forecasting. By accurately predicting consumer demand, retailers can avoid stock shortages or excess inventory and generate less waste, resulting in cost savings, greater profitability and improved customer satisfaction.

Personalised marketing: Personalisation is crucial in today’s retail landscape and generative AI can analyse customer data and generate personalised marketing content through product recommendations, tailored advertisements and personalised offerings. One particular area of enhancement is in the area of enhanced product visualisation. AI algorithms have the potential to create stunning images and videos, helping retailers showcase products in the most compelling way.

Virtualised shopping assistants:

The personalisation experience can be further augmented through the use of virtual (human-like) shopping assistants to provide personalised recommendations and guidance. The purpose is to better understand customer preferences and help them navigate through product catalogues, all of which are designed to improve the shopping experience.

Environmental sustainability:

Generative AI can significantly minimise material waste and carbon emissions associated with a traditional product development process. This process enables retailers to iterate and refine product designs digitally, leading to more eco-friendly manufacturing processes. In addition, through optimised inventory management, transportation and associated carbon emissions can be further minimised.

Fraud detection and prevention:

Generative AI can be utilised to detect and prevent fraudulent activities in retail, such as credit card fraud or identity theft. AI algorithms can analyse patterns, detect anomalies and flag suspicious transactions, enabling retailers to take proactive measures to manage their customers' information and protect their businesses.

The risks

Let’s look at some of the risks for retailers and consumers:

Ethical concerns:

Generative AI raises ethical concerns related to the creation and use of artificially generated content. Is it real? Is it truthful? Can it be trusted? Retailers, therefore, need to ensure that the generated content is neither misleading nor deceptive. Moreover, consumers may have concerns about their personal data being