Technology & software

AI to be Increase Profits and Reduce Food Waste

AI adoption will grow in 2024 as more retailers turn to the technology to boost promotions, increase profits, and reduce food waste, according to Tommi Vilkamo, Director of RELEX Solutions, provider of unified supply chain and retail planning solutions.

“2023 has been a ground-breaking year for the world of AI across the retail sector,” said Vilkamo. “In 2024, retailers must use AI with intent, in order to prioritise measurable value, enhance customer experience and empower their employees for it to be a guaranteed winning investment. We expect more retailers to properly embrace AI in the year ahead.”

According to a survey by Forrester Consulting, 54% of retail marketers now use AI-driven personalisation across channels to drive growth in their business. Retailers face being left behind if they don’t also join the AI race.

Variations in Retail AI Use

“We expect retailers to adopt AI for use in a variety of ways,” said Vilkamo. “Commonly, AI co-pilots will be used to assist retail professionals in everything they do, and various AI systems provide personalised recommendations and assistance for customers.”

“However, most uses are unknown and will come to light in 2024, including forecasting solutions which better supply chains and pricing, improve promotional performance and assortment, and allow for better space planning.”

AI profits

AI and Retail Jobs

Some observers are wary that AI will dominate roles and affect physical jobs, putting retail staff at risk. However, in 2024 it will likely be the creative sector that feels the brunt of the AI’s impact rather than the retail industry. AI represents an opportunity rather than a threat for most retail professionals and workers.

Regulatory impact on AI in retail

The regulatory landscape for AI solutions will likely become tighter and more complex to navigate in 2024. New incoming regulations are set to affect retailers adopting AI in a range of ways. Retailers and AI providers alike should allocate time and resources to achieve regulatory compliance. Start-up AI providers in particular with less experience in compliance procedures will be tested.

The European Union announced a provisional agreement on an AI Act and it will impact some of the AI use cases, especially the ones impacting people directly such as AI usage in customer loyalty programs. Also, the EU’s NIS2 Directive will pose requirements to retailers, including but not limited to their AI systems, so that the security of critical supply chains is not compromised.

AI and ML will Reshape the Retail Processes in Different Ways

Vilkamo continued, “Two types of AI are reshaping various processes in the retail industry in different ways.

“The first is specialised AI, which performs narrowly defined tasks on an elevated scale, including machine learning used in demand forecasting and optimization of consumer goods value chains. These solutions enable retailers to boost sales, reduce waste, and to try out and examine various scenarios. Heading into 2024, specialised AI is becoming a requirement for leading retailers who want to stay competitive.”

“The second is retail-specialised variants of general-purpose AI systems like ChatGPT, which assist retail professionals by boosting productivity and creativity and improving decision-making processes.”

A study on ChatGPT-4’s impact on consultants at the Boston Consulting Group reported a 12%increase in task completion rate, a 25%improvement in completion speed, and a 40% enhancement in quality. Overall, retail professionals could achieve a similar improvement in performance by adopting these new tools.

Vilkalmo concluded, “AI uptake will continue to grow across the retail sector in 2024, as retailers use it to reduce food waste, improve the performance of promotions and grow revenue and profit as well.”

“Forecasting and planning solutions allow retailers to automate their supply chain by cutting out manual processes and allowing retail workers to focus on essential tasks, improving productivity.”