Study: Retailers Moved From AI Hype To Reality In 2018, But Are Yet To Seize Multi-Billion Dollar Opportunity
New research has found that while most retailers are focusing their AI efforts on sales and marketing, there is a huge opportunity to unleash it across the entire value chain.
The Capgemini study, Retail superstars: How unleashing AI across functions offers a multi-billion dollar opportunity, looked at 400 global retailers that are implementing AI use cases at different stages of maturity – a group that represents 23 per cent of the global retail market by revenue.
The study also included an extensive analysis of public data from the world’s largest 250 retailers by revenue.
Comparing this data to 2017 equivalents, it delivers a series of reality checks that not only show how far AI has come in terms of concrete returns, but how much value it can deliver if retailers begin to prioritise less complex deployments, and diversify their focus.
According to the study, 28 per cent of retailers are deploying AI today – a significant increase from 2017 (17 per cent) and a seven-fold increase from 2016 (4 per cent).
The study also found that 71 per cent of retailers say AI is creating jobs today, with 68 per cent of the jobs being at a senior level (coordinator level or above).
Meanwhile, 75 per cent declared that AI has not replaced any jobs in their organisation so far. Those who did say jobs have been cut put the number at 25 or lower.
The study found that retailers are now remarkably aligned on the impact AI is likely to have on customer relations and sales.
While expectations have declined from 2017, nevertheless, the report showed that 98 per cent of respondents using AI in customer-facing functions expect the number of customer complaints to reduce by up to 15 per cent, while 99 per cent expect AI to increase sales by up to 15 per cent.
This marks a significant change from 2017, where respondents gave widely contrasting expectations from zero, to more than 15 per cent, to “don’t know”. In both business cases, zero respondents reported that they could not quantify AI’s benefit.
In order to calculate the clear opportunities for future growth, such as the benefits expected and the feasibility of implementation, the Capgemini Research Institute analysed 43 working use cases for AI.
According to the report, retailers can save as much as $300 billion in the future by scaling AI deployments across the entire value chain.
However, when reviewing all the active AI deployments, just one per cent were shown to be working on either at multi-site or full-scale implementation.
This lack of scalability is likely caused by retailers focusing on more complex, higher-return projects, according to the report.
Retailers deploying AI were eight times more likely to be working on high-complexity projects than ‘quick win’ projects that are easier to scale.
Deployments to date have also lacked a focus on customer usability: the driving forces behind current AI implementations are cost (62 per cent) and ROI (59 per cent), while customer experience (10 per cent) and known customer pain points (seven per cent) are significantly lower priorities.
The study found that only 26 per cent of AI use cases today are operations-focused, but these were among the most profitable in terms of cost returns.
Standout examples included using AI for procurement tasks (averaging 7.9 per cent ROI), applying image detection led algorithms for detecting in-store pilferage (7.9 per cent) and optimising supply chain route plans (7.6 per cent).
As the realities of AI have revealed themselves, the research revealed that companies in 2018 have adopted more realistic expectations regarding their preparedness for it.
Those claiming that they have the skills needed to implement AI have now dropped from 78 per cent in 2017 to 53 per cent today.
More than eight out of ten retailers in 2017 were confident that their data ecosystem for implementing AI was prepared, and today this figure has dropped to 55 per cent.
Finally, those organisations claiming to have a roadmap for AI deployment have dropped from 81 per cent in 2017 to just 36 per cent today.
Kees Jacobs, vice president of global consumer products and retail sector at Capgemini, said: “For global retailers, it appears reality has kicked in regarding AI, both in terms of what the technology can achieve and what they need to do to get there.
“Of course, deploying and scaling will be the next big objective, but retailers should be wary not to chase ROI figures without also considering the customer experience.
“Our research shows a clear imbalance of organisations prioritising cost, data and ROI when deploying AI, with only a small minority considering the customer pain points also.
“These two factors need to be given equal weighting if long-term AI growth, with all of the benefits it brings, is to be achieved.”
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