Surviving the Retail Apocalypse

Stephen DeAngelis

February 19, 2019

By now, most people are aware of the spate of retailer bankruptcies and store closures referred to in the press as the Retail Apocalypse. “For years now,” writes Ryan Lester, Director of Customer Engagement Technologies at LogMeIn, “traditional retail stores have been under attack. Consumers love the convenience and selection of shopping online, leaving brick-and-mortar stores to be dubbed a dying breed. In fact, over 3,800 stores closed in the US in 2018 alone and we saw some of our most cherished and longstanding retail brands close doors forever.”[1] The principal cause of the apocalypse is the rise of ecommerce. There are other causes as well (such as overbuilding, unsustainable debt burdens, etc.). Some analysts wonder if any traditional retailers will survive. “When I look at the near future for retailing,” writes Walter Loeb (@walterfloeb), a former retail executive and former director of the National Retail Federation (NRF), “I worry.”[2] He continues, “There are no radical changes in the industry. Innovation is developing very slowly, but the young customer demands more. … Boards of directors have to act; there is need to step it up and test more new ideas. No doubt some will fail, but just the effort to add something new lead to more consumer attention.”

Artificial Intelligence to the rescue

Loeb does see some hope on the horizon. He explains, “Several studies have shown that Artificial Intelligence (AI) can sift through data quickly. With sophisticated algorithms, it can anticipate customer demand and improve inventory management across both stores and on-line.” He is not alone in his assessment. The staff at Material Handling & Logistics magazine report, “A new survey finds that 85% of retail and 79% of consumer products companies surveyed plan to be using intelligent automation for supply chain planning by 2021.”[3] They add, “79% of retail and consumer products companies surveyed expect to be using intelligent automation for customer intelligence by 2021. Retail and consumer products executives surveyed project that intelligent automation capabilities could help increase annual revenue growth by up to 10 percent.”

Analysts from Capgemini assert, “If artificial intelligence was effectively used in the retail industry, the technology could stand to save companies more than $300 billion. … But companies are not — or are not yet capable of — capitalizing on the opportunity. While over a quarter of retailers are currently using AI (a seven-fold increase from 2016), less than 1% are ready to scale and deploy with the efficiency necessary to hit such levels of cost-saving.”[4] The AI savings discussed by the Capgemini analysts are an accumulation of the savings that can be found throughout the retail supply chain. Hans Thalbauer (@HansThalbauer), Senior Vice President of digital supply chain and industry 4.0 for SAP, notes, “[An intelligent supply chain can improve] all business processes required for the selling of products: design, planning, engineering, manufacturing, logistics, warehouse management, transportation and customer service.”[5]

Michelle Cheng (@mbcheng15) notes, “Artificial intelligence is making its way into the retail industry in a big way.”[6] She discusses several examples of how AI is changing retail. Some examples, like autonomous delivery vehicles, are outside the store. Other examples, like cashierless check-out and intelligent shelf management affect in-store operations. Lester believes the greatest AI impact will take place in the store and will initiate “a retail rebirth.” He explains, “Consumers still want to shop in-stores, they just want to shop in a different way. … Consumers want choice. There are some purchases they prefer to do online and other they would rather touch and feel before swiping their credit card. Having a strong combination of both will help companies cater to all their customers in a multi-channel way. And it’s this combination that will disrupt the retail industry as we know it. … AI is playing a pivotal role in stores today … by acting as an assistant for store employees — helping them provide a better overall experience.”

Concluding thoughts

Dan O’Shea reports a recent Forrester study concluded, “Fifty-eight percent of U.S. retail sales will be digitally impacted by 2023, meaning those sales either will occur online or may occur in-store but be influenced by digital technologies.”[7] Retailers should draw three implications from that conclusion. First, survival requires retailers to master omnichannel operations. Second, retailers need to leverage the data being created by digital sales. Finally, retailers need to invest in artificial intelligent platforms that can analyze all that data and provide decision-makers with actionable insights. For example, the Enterra Enterprise Cognitive System™ (AILA®), can help companies with inventory management, planogram layouts, intelligent shelf management as well as myriad other challenges facing today’s retailers. As noted above, analysts also believe AI can be leveraged to personalize the consumer experience. The Enterra Shopper Marketing and Consumer Insights Intelligence System™ can leverage all types of consumer data to provide high-dimensional consumer, retailer, and marketing insights.

Artificial intelligence is not a silver bullet; but, it is a valuable tool all retailers need to leverage if they are going to survive the retail apocalypse. Luq Niazi (@LuqNiazi), global managing director for IBM consumer industries, notes, “The changing landscape across today’s retail and consumer industries has resulted in a rapid rise of emerging technologies, especially when it comes to automation and artificial intelligence. Retail is one of the sectors to already implement and invest in cognitive and AI technologies, resulting in new and unexpected offerings for consumers and shoppers around the world.”[8]

Footnotes
[1] Ryan Lester, “How AI is assisting the comeback of brick & mortar retail,” Retail Dive, 9 January 2019.
[2] Walter Loeb, “2019 Will Be Tough For Retailers,” Forbes, 2 January 2019.
[3] Staff, “Coming AI Revolution in Retail, Consumer Products,” Material Handling & Logistics, 17 January 2019.
[4] Staff, “Artificial intelligence has potential to save retail companies $300 billion,” Consultancy.eu, 14 January 2019.
[5] Hans Thalbauer, “The Digital Era Has Arrived, and Supply Chains Must Adjust,” SupplyChainBrain, 13 December 2018.
[6] Michelle Cheng, “5 Fascinating Ways Artificial Intelligence Is Changing the Retail Industry,” Inc., 13 November 2018.
[7] Dan O’Shea, “58% of retail sales will be influenced by digital by 2023,” Retail Dive, 2 January 2019.
[8] MH&L staff, op. cit.