AI in Retail: Beyond The Hype and Into Reality for Store Operations.
The Top 10 AI use cases that Retail Operators at every level told us would transform their daily work. AI for Retail Operations is...
Love them or loathe them, one of the greatest growth stories of the last 10 years has been the rise of mobile apps, built using Agile methodologies. Such processes, which constantly optimize these products to meet our needs and desires, explain their explosive success, and they have changed the way we communicate, our daily habits, and the way we share. More fundamentally, they’ve shifted the relationship that we have with our internal selves.
Such social tools are starting to encroach on retail in three ways. Firstly, in the relationships with customers who spend a significant amount of their day on them and expect everything to be as easy. Secondly, as tools to manage and engage their employees. Finally, as potential retail competitors themselves – something that has been developing in China for the past five years and more recently in the US.
So what lessons should retailers take from the biggest business growth story of the last decade? What pitfalls should we learn from it to take into account?
There are three areas that lie at the very heart of what makes large social media and mobile giants successful, and are now expected as default by consumers. If an offering falls short of these new deal-breaking technology standards, brands can end up bleeding market share to in-tune competitors or failing to get off the ground early on.
Instagram is about following, Facebook is about friends, Twitter is about re-tweeting, and all are about liking. In every one of the main social media tools, it is both easy, intuitive, and rewarding to figure out the basics of what you need to do to grow yourself on these platforms. Through this simple structure, creativity, discipline, and ingenuity are rewarded with short bursts of dopamine, peer status, and money if you manage to cross the follower threshold into ‘micro-influencer’. In a few years, influencers have created mini-industries for themselves by providing highly rewarding and easily accessible content and communities. With the rise of social commerce, individual influencers are becoming storefronts in the palm of everyone’s hand.
But it’s not just relevant to the customer-facing part of your business: you should be taking it as seriously for your back office. Whilst simplicity and convenience have transformed the shopping experience for your consumer, retail managers are still stuck with poor UI, or worse, no technology at all. Many still find themselves drowning in multiple spreadsheets and reports, and hundreds of varied tasks per week to get done. Whilst it may be tempting to think that customer experience is solely an issue for the storefront and shop floor, there is a wealth of untapped opportunity to digitize and simplify management and supply chain. The power of simplicity is a focused view of success for everyone, that they know to continuously improve towards.
I got off my Peloton this morning 1,247th out of 12,428 people (humble brag: my first time in the top 10%!), achieving 375 kJ versus my personal best of 370 kJ. I was ecstatic.
Competition and reward done in the right way can be incredibly motivating. What these social media tools have learned is that competition for competition’s sake isn’t appropriate. Competition needs to be relevant, reward needs to feel deserved and genuine.
As well as motivating users to strive, gamification can actually improve real-world problem solving as well. When humans are given a pure logic problem to solve, a huge proportion gets it wrong. However, if the exact same problem is positioned as a real-world scenario, then the inverse happens and most people get it right. Gamifying problems within a social context or narrative means that almost anyone can become a self-taught strategic problem solver. Whereas there are few who can get their head around chess or cryptic crosswords, millions from all walks of life do so within Call of Duty or Minecraft. Transforming cryptic BI data and insights into a compulsive and social game could be – quite literally – game-changing for your sales and KPIs.
The challenge retail has often had on this is two-fold. Firstly, a lack of fair ways to judge competition. When comparing just last year LFL performance, there can be so many different factors that impact sales: a change in local competition, weather, a pandemic! It is often felt that being in the right place at the right time is what gets rewarded, rather than whether someone’s actions drove results. Both leadership and managers have told us that they feel that reward goes to the best performing stores, and not necessarily the best performing managers. Secondly, the rewards don’t feel genuine, often because they come through a corporate program that lacks human interaction.
Amazon, Facebook, Netflix, and Google run thousands of experiments a year. Using test paradigms like A/B testing, they will rapidly experiment with 1-2% of their user base to see how a change hypothesis impacts key metrics, quickly stopping what doesn’t work and rapidly scaling what does. The importance of the data isn’t in the act of capturing it, but how the data can prove or disprove proposed ideas and plans and ensure that the whole company learns from and replicates success. These companies have become successful so quickly by creating the most sophisticated and efficient experiment engines in the world. At its very essence, they ensure they get it right almost all the time, versus competitors who navigate on gut and a 50:50 chance of making the right decision.
For most retailers the idea of running one new project a quarter is scary. But introducing this kind of experimentation isn’t an option – it’s a necessity to compete with the digital companies encroaching on the retail space.
Thankfully, the move to Agile is actually more rapid and undisruptive than most think. It’s an ongoing process rather than a standalone one, gradually becoming adopted day-to-day with little training needed. With the same time and resource that a retailer might put towards a quarterly review, they could be on their way to becoming an Agile retailer and market leader.
While it’s easy to think that Agile methodologies might just have been an operational way to develop the most successful platforms, it loses sight of the fact that Agile was also a crucial factor in their strategy. By having a process which is continuously re-evaluating audiences and then rapidly designing product to adapt to change, Agile allows adopters to deliver the highest quality product, with lean resources, and get it to market before their competitors.
Agile B2C technology companies have paved the way for the growth formula of the future, mixing simplicity, gamification, and rapid experimentation to continuously and sustainably build innovation for the future. When rapid progress is made there will always be unforeseen issues to iron out, but these innovations remain transformational and have set a new standard for consumers that they also demand from retailers. Those who do not keep up will lose out to those that are already using Agile to deliver to these needs.