Avanade Research: Retailers Betting Big On AI, Yet Struggling to Get Ready

At the recent NRF (National Retail Federation) Big Show in New York held last weekend, Avanade showcased some of the best in retail AI innovation.

Avanade highlighted the challenges facing retailers in the AI race for survival, competitive advantage, and market share through enhanced customer experiences. While the arrival of Microsoft’s new retail AI solutions will address many industry struggles, Avanade’s latest research exposes significant roadblocks to retailers’ AI adoption, particularly surrounding the absence of responsible AI guidelines and inadequate employee training.

Retailers are fully aware that they must embrace AI, driven by increasing customer expectations. Avanade’s research reveals that almost 90 per cent of retailers believe their customers are ready for AI-driven interactions and processes. They also acknowledge the transformative potential of their data when combined with AI, leading to data and analytics platforms being their top investment priority for 2024. However, the challenge for many lies in implementing strategic measures to support front-line workers and drive actionable insights from AI.

Therefore, Microsoft’s new AI solutions were a piece of welcome news and sets a new standard for industry-specific generative AI and data capabilities. These include:

• Copilot template for store operations on Azure OpenAI Service
• Copilot template for personalised shopping on Azure OpenAI Service
• Retail data solutions in Microsoft Fabric

Key findings from Avanade’s AI Readiness Report include:

• Optimistic Outlook, Unprepared Reality: 94 per cent of retailers express confidence in their ability to harness AI benefits faster than their competitors. However, only half of them have implemented strategic measures for managing human resources, workforce planning and training—actions that are essential for driving operational efficiency as retailers scale up the adoption of generative AI technologies.
• Customer Expectations vs. Reality: While retailers believe their customers are ready for AI (85 per cent which was above the average across all industries) – the report also reveals that across all industries almost all (98 per cent) leaders agree that significant support will be required to onboard/train employees to use generative AI tools, with 50 per cent indicating that this training effort will demand substantial support.
• Governance Gaps: Only half of retailers report having implemented a complete set of guidelines and policies to ensure the responsible use of AI, highlighting a critical need for a robust and scalable governance framework. This is of paramount importance, considering the responsibility that comes with using AI ethically. A misstep in this regard could prove severe, especially given the growing concerns from consumers as to how AI is being used.

At NRF, Avanade shared these and other retail-specific AI readiness insights with clients and attendees to help prepare them to harness AI and drive competitive advantage. Avanade also showcased a cutting-edge array of AI retail demos that will redefine the future of retail.

Demo highlights include generative AI-powered shopping experiences, smart devices and AI video analytics to enhance store operations, AI-based solutions for in-store employees and much more. The showcase also spotlighted an intelligent AI-infused commerce platform enabling transactions anywhere and a proprietary generative AI retail data platform.

“With these solutions, Microsoft is offering something genuinely bold and new – AI capabilities that are specifically built to address precise industry pain points,” said Corine Vives, Avanade’s global retail and consumer goods industry lead. “If retailers believe customers are demanding AI, they have no choice but to deliver it, or shoppers will go elsewhere. It’s not a nice-to-have. Overnight, the expectations and experiences of customers have changed, and retailers must keep up. However, our research shows a significant gap in the readiness of retailers. While they might be confident about how prepared they are, our data highlights big obstacles to overcome. The path to readiness will require concerted efforts from retailers”.

“AI holds transformative potential for Australian retailers, including the opportunity to maximise the power of AI to deliver exceptional customer experiences and drive business growth. Strengthening their AI capabilities will also help retailers address key barriers such as governance gaps, employee training, and evolving customer expectations. With the help of the bold and innovative stack of AI solutions from Microsoft, Australian businesses can unlock a competitive advantage in enhancing the Aussie shopping experience,” said Corinna Reeves, regional products industry lead and integrated GTM lead at Avanade Australia.