Challenges and Advantages of AI in the Retail Industry

AI in the retail industry promises improved efficiencies, lower costs, and improved customer experiences.

ai in the retail industry

Artificial intelligence, also known as machine learning, has begun to emerge as a viable technology in the retail sector. The actual definition of artificial intelligence (AI) is broad, but the term essentially refers to the ability of computers to improve their performance without being explicitly programmed to to do so. In other words, the software system could be said to be “learning” on its own as it is used for a given task.

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Sophisticated retailers are already taking a hard look at the challenges and advantages of AI in the retail industry. Tom Meehan, CFI, delves into the topic in a recent article for the April 2018 issue of LPM Online. From the article:

Like all technology, machine learning has some fundamental challenges. One problem in a retail environment is that data is often too vague to translate directly into machine learning. Another problem is that the people who create algorithms often don’t have clean data to work with, or don’t fully understand which data is most important.

Retail analytics companies are slow to hire retail executives who understand retail intimately. What they do have is some very smart people who do the math and build a model, and another smart group of folks who can tell the story behind it to sell it. But often neither of these groups actually understand the problem. For example, a common sales pitch promotes using AI to find return fraud. In this case, the software could be looking for deviation of normal activities. But without knowing what variables are used to determine the likelihood of fraud, the asset protection team using the system won’t know if the system is really learning to find fraud or doing simple outlier detection. I am not suggesting one is better than the other, just emphasizing that we should know the difference.

Meehan goes on to discuss other elements of AI in the retail industry, especially those areas in which the technology is currently making the biggest difference, such as in self-checkout and video analytics. Learn more about the topic, including AI’s one “fatal flaw,” in “Artificial Intelligence in Retail.”

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